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Regulation of Wet Bikes
Mr. Gareth Thomas accordingly presented a Bill to regulate the use of wet bikes; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 6 February, and to be printed [Bill 79].
Bank of England Bill
[Relevant documents: First Report from the Treasury Committee on accountability of the Bank of England (HC 282) and the minutes of evidence taken before the Treasury Committee on Wednesday 5th November (HC 309).]
Order for Second Reading read.
Mr. Tim Loughton (East Worthing and Shoreham):
On a point of order, Madam Speaker. I should be grateful for some clarification. When, in May, the Chancellor made the statement that gave rise to today's debate, the proposal was billed as one of the most important economic measures since the war. As the measure purports to occasion the abdication of such a major responsibility from the Treasury to the Bank of England, is it in order for the debate to be led not by the Chancellor himself but by the Chief Secretary? Is it not customary for holders of high office at least to be in at their own abdication, even if Opposition Members believe that it is a case of premature abdication?
Madam Speaker:
It is not a matter for me which Minister handles the legislation. There is collective responsibility.
The Chief Secretary to the Treasury (Mr. Alistair Darling):
I am not sure who the hon. Gentleman is, but when I find out I might perhaps deal with the matter.
I beg to move, That the Bill be now read a Second time.
The Bill is a further step in our determination to modernise the British economy and to equip this country for the new global economy of the future. First, it gives the Bank of England operational independence to set interest rates to meet the Government's inflation target. It will do so through the most open, accountable set of procedures of any central bank in the world.
The Bill implements the first stage in our promise to modernise and reform the supervision and regulation of the United Kingdom's financial services industry--it spells the end of self-regulation and sets up the new Financial Services Authority, which will enjoy the confidence of consumers and the industry alike. That will give London and the UK industry as a whole a huge competitive advantage.
Ms Diane Abbott (Hackney, North and Stoke Newington):
Will my right hon. Friend explain how one can modernise the British economy by going back to arrangements that we last saw under Montagu Norman in the 1930s?
Mr. Darling:
If my hon. Friend will bear with me, I shall set out exactly how we do that and how the various parts of the Bill will modernise our procedures and institutions.
The Bill underpins our economic approach, which is to secure long-term stability and the promotion of high and stable levels of growth and employment. It enshrines our
commitment to increased openness and accountability, which, in turn, will lead to the enhanced credibility in monetary policy that the world now demands.
Mr. Llew Smith (Blaenau Gwent)
rose--
Mr. Dafydd Wigley (Caernarfon)
rose--
Mr. Darling:
I shall give way in a moment.
The Bill will provide the stable platform that business and the country need, and it will increase confidence in this country's commitment to low inflation in the future.
I have to give way to one hon. Member at a time, and I think that my hon. Friend the Member for Blaenau Gwent (Mr. Smith) is first.
Mr. Llew Smith:
As we have now passed responsibility for interest rates to the Bank of England, if the rate that the Monetary Policy Committee sets brings about stable prices but creates unemployment, what powers will the Government have? If we join a single currency and hand over even more powers to the European central bank, what powers will the Government have if unemployment rises?
Mr. Darling:
There are two points there. First, we are not joining the single currency this afternoon. That is for another day. Secondly, my hon. Friend must accept that, in the long term, the only way to achieve high and sustainable levels of growth is to ensure price stability and low inflation. I know that some people believe that it is possible to have high inflation and high levels of employment, but I do not accept that.
Our proposals will give us the necessary long-term stability that has eluded us in the past to enable us to have the high levels of growth and the job opportunities that we all want. I think that the right hon. Member for Caernarfon (Mr. Wigley) would like to intervene on the same point.
Mr. Wigley:
I would indeed. The Bill gives overriding priority to maintaining price stability. Growth and employment are subject to that. That differs from the approach in the United States, where the Federal Reserve has inflation, growth and employment as targets of equal importance. The Government should not make employment subsidiary to the control of inflation, which appears to be the god on all occasions.
Mr. Darling:
The right hon. Gentleman is mistaken. Clause 11 shows that the Government's objectives are high levels of growth and employment.
Mr. Wigley:
The Bill says, "subject to that".
Mr. Darling:
The right hon. Gentleman is reading it the wrong way round. The Bank's objective is to maintain price stability, but that is in support of the Government's objectives of growth and employment. It is not possible to have high and sustainable levels of growth, together with the levels of employment that we all want, without ensuring price stability in the first place. We have had to pay a high premium over the years because of the political
Mr. Peter Bottomley (Worthing, West)
rose--
Mr. Darling:
I should like to make some progress and then I shall give way. I shall come back to that point. If the hon. Gentleman can contain himself, I should be happy to let him in shortly.
Low inflation is an essential precondition to achieving the Government's objectives of high and sustainable levels of economic growth and employment. Inflation hits business, discourages investment and, therefore, hits jobs. It is also bad for savers and pensioners. This country has paid a heavy price for successive booms and busts. The previous Government delivered two of the deepest recessions since the war, partly because of their misjudgments. Because of that legacy, our long-term interest rates are higher than they should have been, and higher than those in many of our competitor countries. We know that, business knows that, the whole country knows that.
Mr. Malcolm Bruce (Gordon):
The Government have now agreed in principle on the policy of preparing for entry to monetary union. Given that the Bank can operate short-term interest rates only on the terms that the Chief Secretary has already outlined, what will the Government do to bring about convergence on short-term interest rates before preparing the ground for possible entry?
Mr. Darling:
The thrust of the Government's policy is to achieve stability so that we can have long-term growth and low inflation. That will allow us to compete and converge with other European economies. Regardless of monetary union, the policies outlined by my right hon. Friend the Chancellor in his Budget, coupled with the Bill, will be good for the country and good for business. It happens that it is in the country's long-term interests to ensure stability between ourselves and our competitor countries. The Bill will achieve that.
Mr. Darling:
To stop the hon. Gentleman, I shall certainly give way.
Mr. Bottomley:
I am grateful to the Minister for allowing me to ask a question, rather than to stop me. During the next two or three years--to the middle of this Parliament--does the right hon. Gentleman expect that the major gap between interest rates in the United Kingdom and those in countries planning to be in the first wave of economic and monetary union will stay the same, increase or reduce? Is it simply a matter for the Bank of England, or do the Government estimate that economic and financial considerations will come together to produce a reduction in the interest rate gap?
Mr. Darling:
I am not sure that I follow what the hon. Gentleman is saying. The Government's objective is to ensure that interest rates are as low as possible, but we cannot do that until we take the necessary action to get
We have already seen some of the benefits. Britain's long-term interest rates fell immediately following the Chancellor's announcement of 6 May. Since then, they have remained nearly a full percentage point lower, so we have already seen the gain.
3.46 pm
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