Previous SectionIndexHome Page


Clause 14

Publication of statements about decisions

Mr. Mitchell: I beg to move amendment No. 30, in page 5, line 41, at end insert


'and an estimate of its effect on inflation, economic growth, employment and the exchange rate.'.

Mr. Deputy Speaker: With this, it will be convenient to discuss the following amendments: No. 36, in page 6, line 2, after 'markets', insert


', act to restrict or control credit, or require deposits to be made with the Bank by lending institutions.'.

No. 37, in page 6, line 9, after 'markets', insert


'acting to restrict or control credit, or requiring deposits to be made with the Bank by lending institutions.'.

No. 38, in clause 15, page 6, line 23, after 'meeting', insert


'together with the economic analysis on which any decisions taken at the meeting were based.'.

No. 39, in page 6, line 27, after 'markets', insert


'act to restrict or control credit, or require deposits to be made with the Bank by lending institutions.'.

No. 16, in page 6, line 41, after 'record', insert


'the principal views expressed by individual members and'.

No. 40, in page 6, line 42, after second 'of', insert


', and the case put forward by,'.

22 Jan 1998 : Column 1213

No. 22, in schedule 3, page 23, line 2, at end insert


'and, if he exercises his right to speak, his views shall be recorded in any minutes published under section 15'.

Mr. Mitchell: I continue to build my campaign for the support and affection of northern Members.

This group includes two categories of amendments. The first category comprises amendments Nos. 30, 38 and 40, which require the Monetary Policy Committee and the Bank to tell us their views, the basis of their decisions and dissent, and the prospectus that will arise from their decisions. We want them to justify those views in terms of their expectations so that they can be questioned and discussed.

I do not believe in the wisdom of bankers and monetary experts. It seems to be a kind of Gadarene wisdom. One has only to watch City commentators on television; they appear on every channel whenever there is a change, or prospect of a change, in interest rates and all chant the same nonsense. They return unabashed the following week when their forecast has been proved wrong and say the opposite with equal confidence. That is not wisdom; it is a lemming-like philosophy.

I want bankers to learn on the job and justify what they do. Amendment No. 30 would require them to tell us what they think will result from their decisions. Let us have it spelt out so that we can judge it and assess whether they were accurate or wrong. Amendment No. 38 would require bankers to give the economic analysis on which their decisions were based and say why those decisions were taken. Amendment No. 40 requires bankers to give their individual views.

Those requirements are simple and straightforward. If the views are based on consideration and thought, those concerned will not be afraid to tell us what they are, so that we can judge them for ourselves. It is a process of popular education and of education for the Bank as well. After we set up Select Committees, it was noticeable how much more effective ministerial replies and defence of policy were. I hope to get the same from the Bank.

The remaining amendments, Nos. 36, 37 and 39, deal with a major problem in our economy: how we control credit. Over the years, there has been a shift away from managing the economy by direct control. Labour's post-war triumph was based largely on direct control of capital, labour and investment. When the Conservatives came to power in 1951, they shifted the balance by using interest rates as a financial stimulus. In the 1950s, interest rates became more important in economic management and generally went up. In 1972, continuing the process of relaxation, the Conservative Government introduced measures which effectively abolished the regulator and led to the first huge credit bubble.

In the 1980s, the process of removing controls continued. The corset was swept away until we were left managing the economy only by interest rates, which led to even bigger fluctuations than before. It was boom-and-bust fluctuation; credit bubbles were allowed to form and asset prices increased. Because house prices were increasing, people could borrow more. Asset prices increased further because more money was in circulation, until suddenly the Government had to act. They did so in 1990 by joining the exchange rate mechanism. The economy was deflated and the bubble was pricked.

22 Jan 1998 : Column 1214

It is ridiculous to manage the economy in a boom and bust way. However, it is implicit in our inability to manage credit rather than just use interest rates to squeeze credit and check credit booms. I want other requirements to be introduced. The Monetary Policy Committee could suggest other methods of controlling credit. For instance, it could limit the percentage of house value that would be lent in a mortgage. The Bank of England could require any lending institution to ask for deposits. Interest rates could be charged on those deposits and the deposits required could be varied according to the nature of the loan granted by an institution. It would be possible to overfund or underfund the public sector borrowing requirement.

I do not necessarily have the perfect means of controlling credit, but the simple measure of rationing credit through interest rates is not the only means. We should look at other ways of controlling credit, not just wash our hands and say that we cannot control it. If we abdicate the responsibility of looking for new methods of managing credit, we inevitably accept that boom and bust will continue. If the Government accept the amendments so that, as well as proposing changes in interest rates and market dealings, the Monetary Policy Committee looks at ways of managing, restricting and controlling credit, we shall have another weapon to deal with the problem. It will be more than one-club golfing.

Other means of dealing with the issue may be more effective and direct, or may be necessary to supplement interest rates. They may also lead to a smaller increase in interest rates than we have had in the past. I want the Monetary Policy Committee to be able to consider those options and recommend them if necessary.

Mr. Heathcoat-Amory: I, too, want the Government to provide and publish more information about their economic policy, particularly their monetary policy, which is why we tabled amendments Nos. 16 and 22. Amendment No. 16 relates to clause 15, which deals with the publication of minutes. The House will recall that my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke) established the procedure for the routine publication of the minutes of the meetings at which interest rates were set. That was a revolutionary advance, because for the first time outside commentators and the markets could see exactly how monetary policy was being set, and how interest rate decisions were being taken.

8 pm

At that time, the minutes described in some detail the views of the main participants. The interest rate was set by the Chancellor of the Exchequer: it was his decision alone, after consulting others and after taking the advice of, in particular, the Governor of the Bank of England. The views of the two main participants, the Chancellor and the Governor, dominated the subsequent minutes.

Our amendment seeks to extend that to include all the main participants, so that the views of every member of the Monetary Policy Committee are minuted. No longer will an individual or institution make the decision: it will be made by all the individuals on the Monetary Policy Committee, by vote if necessary. The views of all members will be just as important as the views of the Chancellor and the Governor were previously.

The Government came into office with a great commitment to openness and transparency, and supported the public's right to know. They followed that up recently

22 Jan 1998 : Column 1215

by publishing a White Paper called "Your Right to Know", in which they described a presumption in favour of openness. We all accept that a good deal of financial and Government information must be confidential. Market-sensitive information can be kept secret, as proposed in the White Paper. However, there is no case whatsoever for keeping secret the views of the members of the Monetary Policy Committee when the minutes are published six weeks later. After all, the Bill provides for their votes to be recorded, so it is a modest step forward to require their main views to be set out in those minutes.

The men and women on the Monetary Policy Committee are not accountable to the House. They will not even be the subject of confirmatory hearings. Therefore, it is important that we, in the outside world, know their views. If a group of individuals on the committee consistently get it right, their reputation will be enhanced, but we are entitled to know if some individuals always get it wrong.

Our proposal also provides a good defence against impropriety. We would have preferred confirmatory hearings to test the views of individuals before they are formally appointed to the committee. That was the opinion of the Treasury Select Committee, but for some mysterious reason the Labour members of that Committee did not back up their views by joining us in the Division Lobby earlier. This proposal is perhaps a poorer substitute, but at least it would salvage something of our earlier intentions if the views of those individuals were made known as they evolve through discussions on the Monetary Policy Committee.

We should extend that proposal to the Treasury representative on the Monetary Policy Committee. They may or may not attend, but they have the right to do so: they will have a voice, but no vote. It is important for the outside world to know of the Treasury's views as expressed at that meeting. We want to know what influence the Treasury has on the committee, what view it has on the direction of the economy and what impact budgetary decisions and fiscal policy have on the committee's deliberations. That can be done only if the minutes record the views of the Treasury representative expressed at that meeting.

There is no conceivable reason why our modest but important request should not be granted. It is entirely in line with the Government's expressed views about the public's right to know. We are not suggesting that the views of those individuals on a change in the interest rate should be made known to the markets immediately. There may be a case for keeping them back for a little while if a decision causes market disturbance, but it should be merely a delay, and not a permanent suppression of the views expressed. That may be particularly important if allegations are made that individuals or a group of members on the committee are biased or prejudiced in their actions. An individual who is usually wrong may be reappointed by the Chancellor because an election is coming up and the individual concerned is always in favour of expansion of the economy and low interest rates, which may help the Government of the day to win another term. The best defence against that is openness and disclosure, so that the world can see whether individuals justify their place on the committee by reason of their competence and record in judging the economy right.

22 Jan 1998 : Column 1216

For those reasons, I seriously urge the Government to give effect to their protestations of belief in openness, and accept these amendments in the spirit in which they are offered.


Next Section

IndexHome Page