PROCEEDINGS OF THE COMMITTEE RELATING TO THE REPORT
Paragraph 19 read, as follows:
The primary objective of monetary policy in the euro-area,
stated in the Maastricht Treaty, is price stability. The ECB has
defined this as being the "yearonyear increase
in the Harmonised Index of Consumer Prices (HICP) for the euro
area of below 2%" over the medium term. The CEPS argued that
this was vague on two accounts: no lower boundary is stated, and
the timeframe referred to in the phrase "medium term"
is not determined. Additionally, Mr Forder cautioned that the
ECB's "exclusive primary focus on inflation", together
with a desire to gain credibility, may lead it to set an "excessively
counter-inflationary" monetary policy. In order to achieve
price stability, the ECB has adopted a "twin pillar"
approach: the first pillar refers to broad money supply growth
(M3), which has a reference value of 4.5 per cent annual growth;
the second pillar consists of a broadlybased assessment
of the outlook for price developments and the risks to price stability
in the euro area, which Mr Barty described as a "very sensible,
pragmatic" approach to monetary policy. Professor Buiter
was critical of the need to target money supply, however, believing
that the ECB had decided to use this target out of "nostalgia"
for the Bundesbank. Instead, he preferred that the ECB should
"dethrone the monetary reference value and come out of the
closet with their inflation target". While admitting there
were some difficulties with the money supply pillar of monetary
policy, Commissioner Solbes said that it was "very useful"
and had been used by the ECB in its policy assessment.
An Amendment made.
Another Amendment proposed, in line 17, at the end,
to add the words "The ECB's asymmetrical inflation target
carries risks of a bias towards deflation. Adoption of a symmetrical
target would clarify the Bank's objectives, while reducing this
risk and adding clarity to the relationship between the two pillars,
which refer to money supply growth and a broadly-based assessment
of the outlook for price stability.".—(Mr James
Plaskitt.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 3 | Noes, 7
|
| Mr Michael Fallon | Mr Nigel Beard
|
| Mr James Plaskitt | Mrs Liz Blackman
|
| Mr David Ruffley | Mr Jim Cousins
|
| Mr Edward Davey
|
| Mr David Kidney
|
| Mr Brian Sedgemore
|
| Sir Teddy Taylor
|
Paragraph, as amended, agreed to.
Paragraph 20 read and agreed to.
Paragraph 21 read, as follows:
In the first eighteen months of Stage Three of
EMU, euro-area inflation has remained stable, an achievement for
which the ECB can take some credit. However, there exists a broad
consensus that the ECB's communications with the financial markets
and the presentation of its policy actions could be improved.
While the differences between the structure of the ECB and the
Monetary Policy Committee (MPC) of the Bank of England might mean
that it is unrealistic to expect the ECB to adopt the same procedures
used by the MPC to enhance transparency, scope exists to improve
the presentation of information by the ECB and the transparency
of its operations.
Amendments made.
Another Amendment proposed, in line 4, to leave out
from "improved" to the end of the paragraph and
add the words "There is also considerable scope for the
ECB to enhance its transparency and accountability, for instance
by considering publication of more detailed minutes, and of voting,
should that occur in future. The lines of accountability are at
present remote, although it would require a treaty change to strengthen
them to a position more akin to those applying to the Monetary
Policy Committee of the Bank of England in the United Kingdom."—(Mr
James Plaskitt.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 3 | Noes, 7
|
| Mr Michael Fallon | Mr Nigel Beard
|
| Mr James Plaskitt | Mrs Liz Blackman
|
| Mr David Ruffley | Mr Jim Cousins
|
| Mr Edward Davey
|
| Mr David Kidney
|
| Mr Brian Sedgemore
|
| Sir Teddy Taylor
|
Another Amendment proposed, in line 8, at the end,
to add the words "Using broad money supply growth (M3)
as an indicator of price stability, alongside the target of 2
per cent inflation rate or lower, leads to confusion as to which
target the ECB is pursuing at any one time.".—(Mr
Nigel Beard.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 3 | Noes, 7
|
| Mr Nigel Beard | Mrs Liz Blackman
|
| Mr Edward Davey | Mr Jim Cousins
|
| Mr James Plaskitt | Mr Michael Fallon
|
| Mr David Kidney
|
| Mr David Ruffley
|
| Mr Brian Sedgemore
|
| Sir Teddy Taylor
|
Paragraph, as amended, agreed to.
Paragraphs 22 to 25 read and agreed to.
Paragraph 26 read, as follows:
Structural reform has assumed a greater importance
for euro-area member countries because of the loss of monetary
policy independence and the limitations placed on fiscal policy
(see paragraph 28). Professor Buiter was confident that the pace
of structural reform within the euro-area was progressing well.
The Economic Secretary said that progress was being made in the
EU on supply side reform and cited the positive role of the UK
in promoting such policies. The pace of reform, she hoped, would
be "at least maintained and possibly accelerated" following
the Lisbon summit; she argued that the flexibility of the EU economy
was important in order for it to be able to compete globally in
the future. In Germany, we were briefed on the German Government's
plans for tax reform, which are now coming to fruition, although
we were told that further progress in structural reform was required.
The OECD, however, recently noted that "the benefits of product
and capital market integration in facilitating the conduct of
macroeconomic policy may remain limited unless the process of
integration spreads to labour markets". In relation to labour
market flexibility, Business for Sterling said that "only
1.5 per cent of EU citizens even live outside their own country,
despite free movements of persons under the EU Treaties",
and, in oral evidence, witnesses debated the extent to which there
now existed a free market in managerial staff in the EU. Mr Barty
argued that while such microeconomic reforms can increase an economy's
flexibility and its ability to adjust to macroeconomic problems,
it may not necessarily lead to greater convergence or stability,
citing the example of financial market liberalisation. There
are indications that the commencement of Stage Three of EMU has
had an effect on the introduction of structural reform in the
euro-area. For the euro to prosper, the pace of structural reform
must be accelerated.
Amendment proposed, in line 19, after the word "liberalisation",
to insert the words "Evidence taken from witnesses in Germany
did not suggest that significant labour market deregulation was
deliverable. The German Finance Ministry were remarkably reticent
about identifying specific policy measures to be put forward in
pursuit of labour market reform. More revealing was evidence given
by Members of the Bundestag who suggested that trade union resistance
to reform of employment law would prevent meaningful deregulation".—(Mr
David Ruffley.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 4 | Noes, 7
|
| Mr Michael Fallon | Mr Nigel Beard
|
| Mr David Ruffley | Mrs Liz Blackman
|
| Sir Michael Spicer | Mr Jim Cousins
|
| Sir Teddy Taylor | Mr Edward Davey
|
| Mr David Kidney
|
| Mr James Plaskitt
|
| Mr Brian Sedgemore
|
Amendments made.
Another Amendment proposed, in line 20, to leave
out the words "For the euro to prosper, the pace of structural
reform must be accelerated" and add the words "We
agree with the Treasury, who said that the pace of structural
reform in the euro-area should be 'at least maintained and possibly
accelerated'."—(The Chairman.)
Question put, That the Amendment be made.
The Committee divided.
| Ayes, 7 | Noes, 4
|
| Mr Nigel Beard | Mr Michael Fallon
|
| Mrs Liz Blackman | Mr David Ruffley
|
| Mr Jim Cousins | Sir Michael Spicer
|
| Mr Edward Davey | Sir Teddy Taylor
|
| Mr David Kidney |
|
| Mr James Plaskitt |
|
| Mr Brian Sedgemore |
|
|
