Previous SectionIndexHome Page

Ms Abbott: On the question of accountability and the use of the Treasury Select Committee as a medium, the Bank already gives evidence to the Select Committee several times a year, and it is not expected that it will appear more often. If the Government were serious about making the MPC accountable to Parliament, would they not have made it possible for the Treasury Select Committee to hold confirmatory hearings of the MPC?

Mr. Darling: My hon. Friend will know that the Select Committee has made that recommendation. When I appeared before it last week, I made it clear that the Government have an open mind on the matter, but I also made it clear that I thought that the Committee could discharge its obligations and responsibilities to hold the MPC to account whether or not it had those powers. I do not regard the Committee's having those powers as an essential precondition to its holding the MPC to account.

For the sake of completeness, I said also that, were the House to decide to go down that road, I would find it difficult to see how it could confine confirmatory hearings to simply the MPC. After all, Ministers appoint many people who have influence not only in economic fields, such as the regulators, but in other, sometimes controversial, areas--the head of the Prison Service, for one. We have an open mind on the matter, and the House will need to consider it in due course.

Mr. Giles Radice (North Durham): I thank my right hon. Friend for his favourable response to the Select

11 Nov 1997 : Column 718

Committee report in which we envisage seeing the Governor of the Bank of England--and members of the MPC--a great deal more.

Mr. Austin Mitchell (Great Grimsby): Terrorise them.

Mr. Radice: Terrorism is not necessarily the best way of enhancing accountability.

My right hon. Friend says that it is a question of considering the issue of confirmatory hearings across the board, so would he be prepared to refer it to the Select Committee on Modernisation of the House of Commons?

Mr. Darling: As my hon. Friend knows, I do not have the power to refer the matter to the Modernisation Select Committee, but I undertake to discuss it with my right hon. Friend the Leader of the House.

Sir Michael Spicer (West Worcestershire): Can the Chief Secretary confirm that his definition of an open mind was to say that in Committee he would reject any amendment to provide for a measure such as we have been discussing?

Mr. Darling: I said that I thought that it would be difficult for the Government and the House to come to a concluded view on whether confirmatory hearings would be desirable, not only here but across the board, by the time that the Bill goes to Committee, which, if it achieves Second Reading at 10 pm tonight--I would not want to anticipate anything--will be fairly shortly. I think that my open mind is maintained.

Several hon. Members rose--

Mr. Darling: I shall give way again shortly, but I should like to make some progress.

Before we leave the subject of the Select Committee, the point should be made that the very fact that all the information is published and the discussions are open will in itself create far greater accountability. There is far more interest in these matters than ever before, and that is a direct result of our determination to modernise the decision-making process.

Secondly, I want to spell out the procedure to be followed when the Bank misses its inflation target, because hon. Members have asked me about it.

Mr. Nick Gibb (Bognor Regis and Littlehampton): Will the Chief Secretary give way?

Mr. Darling: I want to develop the theme just a little, and then I will let the hon. Gentleman intervene.

The Chancellor has laid down a new procedure whereby, when the Monetary Policy Committee believes that inflation is more than 1 per cent. higher or lower than the target, the Bank will be required to publish an open letter explaining why the inflation target has failed to be met and what action it intends to take to get back on target. Again, there is a new clarity and transparency.

The Bank must set out why, in its view, the target was missed; what action it has taken; how long it will take to get back on target; and, importantly, how the measures that it proposes are consistent with its monetary policy

11 Nov 1997 : Column 719

objective of price stability and its duty to support the Government's growth and employment objectives. The Monetary Policy Committee will be forced to reveal in public the action that it proposes to take to get back on target. The procedure is open and, therefore, accountable.

Thirdly, there will be increased accountability through reform of the Bank's constitution.

Mr. Peter Lilley (Hitchin and Harpenden) rose--

Mr. Darling: I am looking forward to this, because perhaps, for the first time in six months, the Opposition will tell us whether they oppose the principle of the Bill.

Mr. Lilley: I shall certainly tell the Chief Secretary about that in my speech.

How would the House exercise accountability if we thought that the Bank was proposing to reach its target either too rapidly or too slowly, and how would the Government, if they reached the same conclusion, influence the Bank's decisions?

Mr. Darling: It is nice to know that, if nothing else, the Conservatives are now the champions of the House, which is something that I had not noticed in the past 10 years. The Bank will explain its position in its letter and can be held to account. The Chancellor can respond to what the Bank says, as indeed can the House, through the Treasury Select Committee or, if appropriate, a debate on the Floor of the House.

The very fact that so many people have the opportunity to comment, inside the House and out, brings to bear far greater pressure and influence than have ever existed before. Fundamentally, as the right hon. Gentleman knows, the Chancellor is accountable to the House. If the House believes that the Chancellor is failing, it can make its views known.

Part I gives an enhanced role to the non-executive directors of the Bank, who will ensure that the Bank performs its functions effectively and manages its resources efficiently. There will be a new post for a senior member who will lead the non-executive directors. They will review the Bank's performance, including, under clause 16, the procedures of the Monetary Policy Committee, and publish a report each year.

There are three measures, all new, that add up to far greater accountability than we have ever had before in practice.

Mr. William Cash (Stone): The right hon. Gentleman made much play of accountability and mentioned that we could have a debate on any failings in the system as and when they occur. Given that the Government will ultimately control the questions that lie at the heart of the Bill, does he agree that there is a strong case, if things go awry, for having a free vote in the House?

Mr. Darling: I understand why the hon. Gentleman wants free votes. I was under the impression that he has always exercised the right to a free vote, especially on European matters. He should take the matter up with his Whips, if he is on speaking terms with them.

Part I also makes provision for the Bank's finances, to ensure that they are on a secure foundation for the future. The House is probably aware that the Bank has long been

11 Nov 1997 : Column 720

funded by a voluntary arrangement from the banking sector. We are putting the main features of the existing scheme on a permanent statutory basis. It is therefore appropriate that all those who benefit from price stability and the Bank's role in the financial system should pay--building societies as well as banks.

With the transfer of banking supervision to the new Financial Services Authority, there is an opportunity to look at the overall impact on the financial sector of charges. We want to ensure not only that regulation is effective but that the costs are fully justified. For that reason, we are consulting on the cash ratio deposit scheme during the passage of the Bill. I want to make it clear that the intention is that the overall cost to the financial sector should be no greater than before, and preferably less. Both the Bank of England and the Financial Services Authority will bear down on the costs to the industry, and therefore on the costs that have to be borne by the public.

Part III transfers banking supervision from the Bank of England to the new single regulator, the Financial Services Authority.

Mr. Gibb: Before moving to part III, can the right hon. Gentleman point out where in the Bill there is any mention of the Treasury Select Committee? Are we to rely on its existing powers and the letter from the Chancellor to its Chairman of 6 May?

Mr. Darling: The hon. Gentleman is new to the House. The powers and constitution of Select Committees are a matter for the House, and, quite rightly, not for the Government of the day. The House decides what powers the Treasury Select Committee or any other Select Committee should have.

Part III is the first step of a much wider reform that we promised and is the result of four years of consultation when we were in opposition. As the House knows, the Government are drafting a financial services reform Bill that will finally lay to rest the discredited system of self-regulation and put in place a regulator with clout and with respect at home and throughout the world.

Two weeks ago, we launched the Financial Services Authority, which has taken over from the Securities and Investments Board. Nine existing regulators will be replaced by only one. Yet again, we are delivering on our promises. The previous Government talked about cutting red tape; we are doing it.

Next Section

IndexHome Page