House of Commons
Thursday 27 June 1996
The House met at half-past Two o'clock
PRAYERS
[Madam Speaker in the Chair]
Oral Answers to Questions
TREASURY
Bank of England
1. Mr. Michael Brown: To ask the Chancellor of the Exchequer what recent representations he has received urging him to make the Bank of England fully independent of Her Majesty's Government. [33405]
The Chief Secretary to the Treasury (Mr. William Waldegrave): The Chancellor has received no such representations recently.
Mr. Brown: In view of that reply, and as the Government have been so successful in reducing interest rates and inflation over the past few years, does my right hon. Friend agree that there is absolutely no need whatsoever for an independent central bank in this country? Further, will he confirm that we are not legally obliged--under our opt-out--to become part of the central banking system of the treaty on European Union under stage 2 of economic and monetary union?
Mr. Waldegrave: On the latter part of my hon. Friend's question, I confirm that he is right.
However, on the former part of my hon. Friend's question, I agree with the Governor of the Bank of England, who said that the present framework gives us a better chance of price stability than at any other time in his professional lifetime. Under the joint leadership of my right hon. and learned Friend the Chancellor and the Governor, to whom I pay tribute, that has been delivered.
Mr. Betts:
The Chancellor has previously said to the House that he does not believe that there will be any constitutional implications as a result of the creation of a single currency. Will the Chief Secretary tell the House whether the transfer of powers from the Government and from the House to an independent European central bank is not a significant constitutional change?
Mr. Waldegrave:
It is odd for the Labour party to lead on this particular matter. The right hon. Member for Dunfermline, East (Mr. Brown)--who, I take it, has gone to Scotland to try to find out what his party's policy is on devolution--recently said:
"The Treasury rather than the Bank of England must continue to set the targets for monetary policy as well as fiscal policy."
27 Jun 1996 : Column 450
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However, at the same time, the right hon. Member for Sedgefield (Mr. Blair) went to Germany. I presume that he was correctly reported by one of the German newspapers under the headline
"The pound can go, says Blair, as he cuddles up to Kohl."
Sir Terence Higgins: Will the Government resist any claims that are made for an independent central bank? I congratulate my right hon. and learned Friend the Chancellor on his recent decision to reduce interest rates, which has been completely vindicated by events. Will he consider a further reduction, combined with explanations to the public--particularly to pensioners and to those on fixed incomes--that, although nominal rates have been cut, real rates and returns on savings are far higher than they ever were, when under a Labour Government they were negative?
Mr. Waldegrave: My right hon. Friend is absolutely right--he remembers that clearly and accurately. What is more, the 20 per cent. rate of tax for savings has, in particular, helped pensioners with savings. My right hon. Friend is right: the Chancellor judged the situation correctly, to the great benefit of the country.
Mr. Malcolm Bruce: Is there not an inconsistency in the Government's position of denying the right of a group of central bankers in London to set interest rates but, as the Chancellor acknowledged in Florence, maintaining that Britain could be a founder member of the monetary union? If that were the case, interest rates would be set by a group of central bankers in Frankfurt. Where is the logic in those two positions?
Mr. Waldegrave: My right hon. and learned Friend the Chancellor said, quite correctly, that, because of his management of the economy, Britain could be in a position to take that decision, if it chose to do so. Thanks to my right hon. Friend the Prime Minister, we can make that decision freely at the appropriate time. The real confusion lies not among the Liberal Democrats--who have always been consistent--but in the Labour party.
I do not know whether the hon. Gentleman knows that one of the real bosses of the Labour party, Mr. John Monks, said recently that it will be the Leader of the Opposition's "destiny" to sign up for the single currency. That is the signal that the Labour party is giving to Europe, but it is not the signal that it is giving to the hon. Member for Bolsover (Mr. Skinner). If, by any mischance, the Labour party gets into power, the hon. Member for Bolsover will be in Opposition then, as he is in Opposition now.
Ministerial Visits (Harborough)
2. Mr. Garnier: To ask the Chancellor of the Exchequer when he next intends to visit Harborough to discuss the effects of his economic policies on the local economy. [33406]
The Paymaster General (Mr. David Heathcoat-Amory): My right hon. and learned Friend has no immediate plans to visit Harborough. However, my hon. Friend's constituency is benefiting from the general
strength of the British economy, with the longest run of low inflation for almost 50 years, steady economic growth and the lowest unemployment figures of any major European country.
Mr. Garnier: On his way to Harborough--I advise him to visit soon--will my right hon. Friend look at the speech by the president of the German BDI, in which he noted that unemployment levels in this country have fallen by 20 per cent. since their height in the 1980s while unemployment in western Germany has increased by 10 per cent. in the same period?
Madam Speaker: Order. The House requires that the supplementary question should follow the substantive question, which in this case is about a visit to Harborough and its local economy.
Mr. Garnier: Precisely, Madam Speaker. When my right hon. Friend visits Harborough to discuss the Government's economic policies, will he draw to the attention of my constituents the quotations from the speech to which I have referred? If my constituents do not know it already, will he remind them that investors from both within and outside the United Kingdom are queuing up to do business and to set up businesses in my constituency? Following his visit to Harborough, will my right hon. Friend draw the appropriate conclusions from the information that he gathers there, for the benefit of the Opposition?
Mr. Heathcoat-Amory: I would love to visit my hon. and learned Friend's constituency. His constituents obviously have a good understanding of the reasons why unemployment has fallen steadily in that area and elsewhere in the past few years. As my hon. and learned Friend hints, it is typical of new Labour that it is about to embrace the German employment pattern at a time when the flaws and deficiencies in that system are beginning to appear. There are now more Germans out of work than at any time since the second world war, whereas unemployment is falling in this country.
Inflation
3. Mr. Booth: To ask the Chancellor of the Exchequer if he will make a statement on the role of his inflation target in securing sustainable growth. [33407]
The Economic Secretary to the Treasury (Mrs. Angela Knight): The inflation target of 2½ per cent. or less is set to deliver permanently low inflation, which is vital for delivering sustainable growth.
Mr. Booth: As those under 50 in this country who pay attention to such things are applauding the fact that, for the first time in their lives, inflation is at its lowest level--2.2 per cent.--and as the Organisation for Economic Co-operation and Development is applauding low inflation around the world, is it not odd that almost the only group that is not applauding the success of our inflation target is those on the Labour Front Benches? Could it be that Labour is the party of high inflation?
Mrs. Knight: My hon. Friend makes a good point about low inflation and the fact that this country is enjoying a long spell of low inflation which brings stability to individuals and companies and helps to create jobs. I agree entirely with my hon. Friend's point about the Labour party. We all know that the Opposition have a vested interest in running down the economy and this country. When Labour was in charge, inflation soared.
Mrs. Helen Jackson: The Exchequer will be aware that all the water and sewerage companies have produced their results for this year. They total £1.8 billion, which is four times the rate of inflation. How can that be fair in an industry which has increased its prices to customers above the rate of inflation every year since privatisation?
Mrs. Knight: The hon. Lady's dislike of privatisation is well known. I remind her that, when her party was in charge and when it was running the then nationalised companies, those companies cost the taxpayer more than £50 million a week. Those companies now contribute £50 million a week to the public purse. They are providing a better service for customers and water industry companies have contributed much-needed investment.
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