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4.28 pm

Mr. Peter Lilley (Hitchin and Harpenden): The handling and contents of the Bill reflect four of the Government's most worrying characteristics. The first is their contempt for the parliamentary process. The Chancellor could not be bothered to wait to inform the House of what the Prime Minister described as


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    and instead announced it when the House was not sitting. Nor does he even deign to introduce the Bill himself--a Bill that hands away his most important responsibility. He will not even speak at his own abdication.

Secondly, the principal components of the Bill show a cavalier disregard for assurances given a few months before the election. On 7 February 1997, the Chancellor said the following about giving the bank independence:


    "I believe that any consideration of whether to give the Bank operational responsibility for setting interest rates must be preceded by two steps",

one of which is that


    "the Bank must demonstrate a successful track record in its advice and build greater credibility."

Mr. Ross Cranston (Dudley, North): Will the right hon. Gentleman give way?

Mr. Lilley: I will in a second, but I thought that the Chancellor might want to intervene and explain what track record was established in the first four days of this Parliament that enabled him to set aside an assurance given authoritatively to the British people not long before the general election, but perhaps the hon. Gentleman can give me information that the Chancellor seems reluctant to give the House.

Mr. Cranston: Can the right hon. Gentleman tell the House what the Conservative party, if returned to government, would do about the Bill? Would it repeal it?

Mr. Lilley: I can tell the hon. Gentleman in detail my position on the principle, and I will tell him my response to that and all such questions, which I have given previously: we will never give a knee-jerk commitment from the Dispatch Box to repeal decisions taken by the Government until we prepare our manifesto. We shall not get into the position that the Labour party did by endlessly promising to repeal things and then not doing so.

Mr. Geraint Davies (Croydon, Central): Does the right hon. Gentleman agree with the former Chancellor, Norman Lamont, that the Conservative party should agree with its principle, and should go ahead and support the Government?

Mr. Lilley: I shall explain that in two minutes with great clarity, if the hon. Gentleman will allow me to complete my point.

Mr. Darling: Will the right hon. Gentleman give way?

Mr. Lilley: All right.

Mr. Darling: It would help the House if the right hon. Gentleman would confirm a point. Do I take it from his answer a moment ago that he is saying that the Conservative party will not, therefore, campaign to repeal the Bill if it is enacted?

Mr. Lilley: The hon. Gentleman has heard me say before, and will hear me say again, that we will give no knee-jerk commitments to repeal Bills passed by the House, even if we oppose them. Shortly before the next general election, we shall consider which measures the

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Government have undertaken that we can afford to repeal, amend or retain, and we shall do so then, not piecemeal during this Parliament. That is the sensible and responsible thing to do.

The other aspect of the Bill is the establishment of a "super-SIB", and that too is in flat contradiction of statements by the Chief Secretary, as I exposed earlier. He had previously said that the creation of a super-regulator would not do, and he actually had the cheek to say that he was fulfilling a promise by bringing all the regulators together in one.

The third weakness of the Government exemplified by the Bill is their penchant for making glib, headline- grabbing statements and announcements without thinking through the substance first. They announced the Bank's quasi-independence, then decided to deprive it of responsibility for banking regulation, nearly precipitating the Governor's resignation. They have also had to chop and change their inflationary target and its form, and the Bill is littered with consequences that, manifestly, the Government have not thought through, as I shall explain.

Finally, the Bill is yet another example of the Government's desire to remove power from the House and from elected representatives and give it away to appointed officials. They want to escape the blame for difficult decisions, and they want to remove any influence from Labour Back Benchers, whose demands for higher spending and laxer policy have wrecked every previous Labour Government.

That brings me directly--

Mr. Steve McCabe (Birmingham, Hall Green) rose--

Mr. Lilley: If I may make some progress, the hon. Gentleman may find that I answer the question that he has been prompted to ask.

That brings me to the central issue of the role, accountability and independence of the Bank and of the Chancellor of the Exchequer. I shall explain where we stand on that issue. Conservatives have always been the enemies of inflation, because inflation harms the poor and the weak. Moreover, we have realised for far longer than Labour Members that inflation is essentially a monetary phenomenon. We have always believed that the Bank of England, through interest rate and funding policy, plays a key role in controlling inflation.

As long ago as 1977, in the seminal work--which I know the Chancellor has committed to memory--"The Right Approach to the Economy", the party said that we favoured a more independent role for the Bank of England. A range of views were held then--and have been held since--about how much and what sort of independence the Bank should be given. We spelled out in practice the type of independence that we thought right in the final years of our Administration.

The right hon. Gentleman may wish to remind me that, in November 1988, the then Chancellor, now Lord Lawson, drew up his specific proposal for giving the Bank operational independence. Although I was a very junior Minister at the time, I had some responsibility for banks, and I was therefore the only Minister consulted about the proposal before it went to the Prime Minister. The view that I expressed then to the Chancellor is that which I hold

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now: the proposal has obvious attractions in reinforcing the battle against inflation, but it is difficult to square it with our system of parliamentary government.

It is right to give the Bank the independence and the authority--which we did subsequently--to offer the sort of advice that Chancellors cannot easily refuse by publicising its views and its minutes, by making its inflation report independent of the Treasury, and so on. We have done that effectively.

However, controlling inflation by interest policy is a technical matter that cannot simply be handed over to a group of experts. It involves considerable discretion, and that discretion affects people's livelihoods, their jobs, the value of their savings, the viability of their businesses and the burden of their debts. Such matters are absolutely central to the whole political debate, and they are crucial to the electorate. Whoever takes those decisions must be answerable to the House, and, through us, to the voters. Someone must carry the can--and that person should be the Chancellor.

Mr. Malcolm Bruce: The right hon. Gentleman described the Bank of England's decision to put up interest rates last week as a "kick in the guts". The inflation figures were released today. Who does he think was right? What would he have done, and how would he have justified his actions?

Mr. Lilley: I certainly would not have introduced the sort of Budget that, in light of the Bank of England's statements, made increases in interest rates inevitable if the Chancellor failed to take the Bank's advice.

Mr. Darling: The right hon. Gentleman seems to have moved from the position where he appreciated the attractions of Lord Lawson's memorandum to the then Prime Minister. He has said that, because of what he regards as parliamentary sovereignty, he cannot support the principle of giving operational responsibility to the Bank of England. How does he square that view with the commitment he gave a few moments ago that he will have to wait and see if it works? If he opposes the move on principle, surely the answer must be beyond doubt--as it is for him on Europe.

Mr. Lilley: The right hon. Gentleman keeps trying to make policies on principle without telling us what the principles are. Accountability is very important. The Chancellor should accept responsibility for important matters such as people's jobs, and the value of their savings and their debts. We cannot accept his attempt to try to escape the blame for taking difficult decisions.

Whatever the views on either side of the House about delegating the Chancellor's responsibilities to an independent Bank, the Conservatives cannot support a Bill that transfers those powers to a Bank that has been made deliberately less independent.

The Monetary Policy Committee that will set interest rates will have nine members. No fewer than seven of those will be appointed by the Chancellor, and even the other two will be appointed by the governor


Moreover, they will be appointed for just three years. Members of the Bank's court will have their term reduced to three years. No other central Bank in the world, to my knowledge, has its directors appointed for a term of office shorter than the life of the Government who appoint them.

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I am not suggesting that the worthy men and women appointed to the monetary policy committee and the court will all take instructions from the Chancellor.


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