Previous SectionIndexHome Page


Mr. Radice: My colleague on the Treasury Committee must have misheard me. I said that there were two issues: competence and independence. I said that those were paramount and that any other issues were extraneous.

Sir Peter Lloyd: I am sorry. I thought that the hon. Gentleman welcomed the chance for candidates to explain why they should be appointed. I accept his explanation and I am sorry that I did not follow his remarks accurately.

Hon. Members and candidates may have nothing to worry about on that score, given the sensible and sensitive members of the Select Committee, particularly under its current chairmanship. What benefit is there, however, in opening the way for future Committees--and other Select Committees, if some hon. Members have their way and the provision is extended throughout the Select Committee system--to behave as some congressional committees are said to behave in the United States? The right way in which to proceed is to extend the public appointment rules drawn up for quangos to all public bodies. If an appointee is unsuitable for any reason, including lack of independence or competence, or is manifestly not up to the job, the Committee and the House have it in their power to call the Government to account and they should certainly do so. Vetting would not make the Monetary Policy Committee any more accountable; if anything, it would make the Chancellor more accountable.

Even if, however, we could devise a system of vetting that avoided all the pitfalls, we should not institute the vetting system called for in the new clause. It is the job of Select Committees to get answers to their questions from the Government, and to throw light on Government policy so that Parliament and the public are better informed. Their job is to probe what has happened, to reveal shortcomings and to make recommendations for improvement. They will do that more single-mindedly if they eschew all direct involvement with Executive decisions, and appointments are one such.

It may not be a very significant point, but why should the Select Committee approve appointments? It would then have an interest, however slight, in seeing its competence justified. It should hold its fire until the appointments--which are better made by the Executive with more information to go on--show cause for criticism or praise because of what the appointees do or fail to do.

Mr. Austin Mitchell (Great Grimsby): I, too, congratulate my hon. Friend the Member for Newark

22 Jan 1998 : Column 1173

(Mrs. Jones). I do so for two reasons. First, after the 1983 election, I was the only Labour Member in a long line right down to London, so it is good to have socialist neighbours all around. Secondly, I congratulate my hon. Friend on her interesting and entertaining speech. She has no need to worry about her future in this House, given her ability to speak like that. Nor should she worry about being the last virgin. I remember Doris Day before she was a virgin. The endless reconstitution of virginity is part of the processes of this place.

I shall speak briefly on this issue because I want to speak at greater length on the official old Labour amendments later. New clause 3 is very much a new Labour issue; indeed, it is so new Labour that it has support from the Opposition, including from the Liberal Democrats, which makes me think that it must have something to do with Europe. I support it because we should have the kind of hearings mentioned in it. I am surprised that the Government have not conceded that, and that a new clause was necessary.

5.15 pm

Such hearings, however, are not enough. As my hon. Friend the Member for North Durham (Mr. Radice) said, the Select Committee will be concerned with competence and independence, but it should also be concerned with a third factor--the appointees' views. I have taken that into account in amendment No. 28. We must accept the fact that appointees to the Monetary Policy Committee are appointed by the person who also appoints members of the Treasury Committee; Labour members of that Committee are, in effect, appointed by the Chancellor of the Exchequer. No man or woman cometh to the Committee except through him, and nobody that he does not want goes on the Committee; we need only witness the fate of my hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott).

One set of Chancellor's appointees will look at another set of Chancellor's appointees. The information that comes out of that process needs to be known more widely because monetary policy is not an exact science. It is no use pretending that there is a judicial body that can approach the issue with independence of mind and say, "Ah yes, we can agree on these matters." Monetary policy is not a science at all; it is a collection of prejudices dressed up in Savile row suits, and the prejudices are different for each member.

I was surprised to read in The Observer that two members of the Monetary Policy Committee do not appear to be British. What central bank of any other European country would appoint foreigners to such a crucial committee? We need to know those appointees' views on monetary policy. I know the views of one of them, who is a Dutch professor, because he gave evidence to, and advised, the Treasury Committee, but I do not know the views of the other appointees. The House needs to know so that we can make our own judgment about them. That should be public information. There needs to be open government so that we know what is going on.

I tabled amendment No. 34 because I want directors appointed on a regional basis. That does not mean that we should follow the example of health authorities, which can appoint people of a certain party political persuasion,

22 Jan 1998 : Column 1174

as the previous Government did on a considerable scale. We want people who come from the regions rather than from the central nexus of finance that dominates the City of London and the directors of the Bank of England.

This country's wealth was first generated in the regions. The north and the midlands are the home of manufacturing industry, which has been badly dealt with by the financial world. In seeking to develop a raunchy economy, it placed a higher premium on investing overseas than on investing in this country; it placed a higher premium on investing in trade and commercial wealth than on manufacturing and industrial wealth. Even now, manufacturing industry is being badly dealt with as a result of the dominance of London. For instance, when measures are taken to increase interest rates, it is usually because of pressures in London.

Inflation pressures are always higher in London because of the number of people and the cost of property there. Pressure on inflation is generated by finance--the high salaries paid in the City of London by financial bodies--and by the loose credit created by finance. That leads to asset and house price inflation, which is always higher in London than in the rest of the country. When that is damped down, it is for London reasons--because the pressures have become too strong in London. The north has not felt the same benefits from expansion, and has not had the same economic stimulus. It has been hit harder than London and the south-east, where the problem has been caused.

Manufacturing is on the international front line and must compete with overseas companies. The rise in interest rates that has inevitably resulted from the London pressures has hit manufacturing harder than any other sector of the economy. It has been clobbered because of inflationary pressures generated by finance in London.

Decisions on interest rates are taken or influenced by the directors of the Bank of England. That is why I want a regional representative who can speak for the regions. We now have a Government who can speak for the north--perhaps too far north for my liking--more effectively than the previous Government. We need a Bank of England that can speak for the regions on jobs, industry, manufacturing, competitiveness, growth and expansion. The problems in the north are more severe, and the Bank should provide the voice of the regions.

Dr. Vincent Cable (Twickenham): The Liberal Democrats support new clause 3 and new clause 1 which, despite its authorship, is a constructive amendment designed to achieve the same thing as new clause 3, but in a slightly different way. We also support amendment No. 34, tabled by the hon. Member for Great Grimsby (Mr. Mitchell), which introduces a regional dimension; that has been overlooked in the debate, but it is important. I add my congratulations to the hon. Member for Newark (Mrs. Jones) on her excellent maiden speech. Our party requires us to study Mr. Gladstone's speeches as part of our political education. The five-hour speech to which she referred was probably one of his shorter ones. He was the gentleman who, more than a century ago, introduced income tax as a temporary measure. This measure is historically as important.

22 Jan 1998 : Column 1175

We support the legislation in principle. It was introduced as a result of a rush of blood to the Chancellor's head, but there is nothing wrong with that.

Mr. Quentin Davies: The hon. Gentleman said that he and his colleagues were brought up to study Mr. Gladstone's speeches. Has he learnt anything from that study? Have the Liberal Democrats relearnt in the 1990s the virtue of financial responsibility, good housekeeping, balanced budgets and lowering taxes?

Dr. Cable: If the hon. Gentleman had read our manifestos, he would realise that we have thoroughly imbibed the thoughts of Mr. Gladstone. Indeed, we hope that the Bill will be followed by a fiscal responsibility Act, of which Mr. Gladstone would have approved.

The legislation was introduced after the Chancellor's sudden rush of blood to the head. The Government have now had eight months to think about it and to listen. We hope that they will now reflect on the detail. It is crucial that the legislation works. The independence of the Bank of England is a good concept, and we agree with it in principle. However, this measure is not guaranteed to work, and whether it does will depend on its design; its design depends critically on credibility. The two key elements of the legislation are designed with credibility in mind. Making the operational management of money supply independent of politics is one element of credibility, and the other is the separating of the regulatory functions from the control of money supply to prevent cross-contamination. Problems that arise from regulation, such as BCCI-type problems, affect the credibility of monetary authorities. It is difficult to legislate to provide credibility, but that is at the heart of the Bill.

The new clauses are designed to address the problem of credibility through the system of appointment. It is fair to say that the Government have been highly responsible and balanced in their appointments; they were not political, and competent people have been chosen. This legislation must survive the test not of years, but of decades. We have no guarantee that future Governments will be as responsible in their selection, and will not choose cronies or incompetents.

It is worth reflecting on the language of the clause that establishes the appointment process. It is couched in broad terms, and states:


There must be several hundreds of thousands of people who could satisfy that clause. It is crucial to build in some control over how that process operates.

The Select Committee process was ably debated by the hon. Member for Norwich, South (Mr. Clarke), and it is worth reflecting on some of the points he made. He dealt with the Chief Secretary's first objection, which was that competent people would be put off if they had to go through a scrutiny process and be exposed to the light of day. In the past few weeks, we have had a good example of that. One of the members of the monetary committee has been subject to an extremely scurrilous campaign in a national newspaper. It would have been much better for her and for the whole process if the issues had been discussed properly through an open, transparent process.

22 Jan 1998 : Column 1176

There is no reason why members of the monetary committee should be protected from public scrutiny; like us, they are well-paid, public figures. Nor should such a process be conducted secretly and covertly. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) has already dealt with the constitutional aspects. Many of the objections raised to new clause 3 and, by implication, to new clause 1, have already been dealt with effectively.

The amendment to provide regional balance tabled by the hon. Member for Great Grimsby is important and has received very little attention. Most of the successful independent banks have relied heavily on regional independence. The directors of the Federal Reserve bank, as opposed to its members, are drawn from the states of the United States and, as a result, have independent constituencies. The Bundesbank council has greater strength owing to the fact that it is drawn from the Lander. There is an argument for a regional dimension in this country. I am surprised that the Government, whose Treasury Front-Bench team is 60 per cent. Scottish, have not spotted the fact that macro-economic policy has a distinct Scottish dimension. The Chief Secretary will know very well that the mechanisms in Scotland, which is an oil economy, are different from those in the rest of the United Kingdom. Interest rates affect Scotland differently from England because the balance of house tenure is different. That aspect should be built into the Bank's considerations, and the hon. Gentleman's proposal is one way in which to do that.

The Liberal Democrats strongly support the basic principle of independence of the Bank of England. We support the concept that the Government have introduced, although we regret that they have not been more flexible over some of the amendments designed to improve the Bill. We shall support the new clause when it is put to a vote.


Next Section

IndexHome Page