Examination of witnesses (Questions 360-379
TUESDAY 27 FEBRUARY 2001
THE RT
HON SIR
EDWARD GEORGE,
MR MERVYN
KING, MR
CHARLES BEAN,
DR DEANNE
JULIUS, PROFESSOR
STEPHEN NICKELL
AND MR
IAN PLENDERLEITH
360. So that there is not any truth at all in
the report that external members of the MPC asked for access to
those techniques to assess convergence or not and were rebuffed?
There is no truth in that at all?
(Sir Edward George) Not as far as I am aware. You
must ask the external members because if they ask for access to
techniques and are told, "We do not actually have any techniques",
then I would understand.
361. That is interesting. In the same report,
Governor, the Financial Times quotes a Bank spokesman as
saying in relation to the five economic tests of the Chancellor,
and this is a quote from one of your spokesman, "there are
various bits of technical work going on, developing the tools
that might be useful to do the tests with". Do you recognise
that?
(Sir Edward George) No. I can tell you what is happening
in the Bank, which is what I just told you, which is that we are
monitoring the performance of the euro zone economy all the time
alongside the performance of ours. We look at what is happening
in the individual economies, the extent to which there is divergence
within the euro zone as part of our ongoing business. We are not
developing any special tools as far as I am aware. These are the
chaps who would be directing such activity.
Chairman: Dr DeAnne Julius, I do not
think you are a chap. Is there any truth in this from your point
of view as an external member? You were not rebuffed?
Mr Ruffley
362. I was going to get on to that.
(Dr Julius) The principle, it seems to me, is very
clear, that we external members should have exactly the same access
to any work that is going on in the Bank as the internal members
do where that work might have some relevance to monetary policy
formulation. I have not personally asked for something and been
rebuffed but I understand that there is work going on that I do
not see, and I am sure that is perfectly fine because there are
many things that the Bank does other than make monetary policy.
It is not a black and white issue in my mind. If there is work
going on in issues such as the convergence between economic cycles
then personally I would be interested right now in looking at
that vis-a"-vis the US cycle because, as you have said, the
US is quite a concern for us at the moment. I think that would
have relevance to monetary policy. If there is work going on on
the appropriate eventual potential entry rate I think that would
have a lot of relevance for monetary policy, but I cannot say
that there is work going on that I have asked for that I have
not received.
363. I am interested when you say that it is
not a black or white issue. Is there work that you think might
be going on that you think you might like to see, that you have
intimated you would like to see and you have not been allowed
to see? You have been very helpful so far. You have said it is
not a black and white issue which suggests to me that there is
something more going on. Could you expand on that?
(Dr Julius) What I mean by not being a black and white
issue is that as an external member of the Committee I have no
particular interest, and I do not think it is particularly appropriate,
that I be involved in the whole range of things that a central
bank does, and I do not have time in any case to become involved
in things beyond the monetary policy front.
364. But potentially euro entry has a big impact
on what monetary policy setting does. I think you said so yourself
in your last reply.
(Dr Julius) Certainly some aspects of it would have
an important impact, but I am not in the business of monitoring
the whole range of work that is going on at the Bank of England.
365. We are not suggesting that. We are asking
whether there is work going on that you would like to see. You
said it was not black and white. I am just trying to tease out
what you mean by "it is not black and white".
(Dr Julius) If I were certain that there were something
going on that would be relevant—
366. If you were certain.
(Dr Julius)—I would certainly be saying so at
this Committee if I had not already received satisfaction inside
the Bank.
367. But is there work going on that you would
like to see that you have not yet seen?
(Mr King) Shall I tell you what work is going on?
368. I do not want you to let Dr Julius quite
off the hook yet. Could I ask, Dr Julius, whether there is work
that you would want to see that you have not seen?
(Dr Julius) I am not specifically aware of any.
369. A yes or no would be quite sufficient.
(Dr Julius) Often there is not a yes or no answer.
We have had discussions about the access of the external members
to past work of the Bank and I believe we do have much better
access to that than we did prior to those discussions. It has
to do with the introduction of IT systems and archive items and
so forth. It is in that general context that this issue has arisen,
not in the context of a specific piece of research.
370. Okay; you are using words like "specific"
and the rest of it. I understand all that. I am asking, but I
am not going to ask again, the Governor a question now, unless,
Mr King, you would like to comment.
(Mr King) Yes. First of all, as a general point, most
paper that is produced in the Bank I do not see. Any organisation
produces a vast amount of paper. No one person sees it all. What
are we doing in this area? The United Kingdom is a member of the
European system of central banks. The staff of the Bank have to
go—we share it around many staff—to many meetings
to do with the operations of the European system of central banks,
for example, the Economic and Finance Committee which has to discuss
a large number of things to do with convergence of other countries:
are they meeting the budgetary requirements, discussions on the
state of the French, Italian, Irish budgetary positions. The Bank
of England sends a representative to those meetings and briefing
has to be provided on whether or not those countries are actually
meeting the conditions which have been laid down in the Maastricht
Treaty and in the subsequent discussions after that. There is
a good deal of briefing that goes to the staff who go to those
committees. That is the nature of the work that is going on, but
we are not sitting there saying, "What would be a sensible
entry rate into monetary union?" We are not doing work of
that kind. We are not assessing the five economic tests.
371. Could I ask the Governor again—and
I am going to go back to this FT report because they are a fairly
reputable newspaper and they put the quotes from the Bank spokesman:
the spokesman said that the analysis, to which I referred, was
used regularly by Sir Edward George—and this is all in quotes—when
he attended the G10 group of central bankers in Basle, so you
know about it and some members of the MPC know about it and, my
implication, some central bankers in Bonn know about it.
(Sir Edward George) Honestly, Chairman, this is just
total—I cannot comment on this until I see this thing in
context. I go to G10 meetings of central bank governors in Basle
every other month. I chair those meetings. I am briefed upon the
economic situation in the major countries. That is what I have.
If the Bank of England spokesman is referring to that, that is
certainly true. If he is referring, or you assume he is referring,
to specific work which is done in the context of convergence within
Europe, then that is just not true.
Mr Ruffley: It is very helpful to know
that.
Chairman: Says he disappointedly!
Mr Ruffley: I actually think, with respect,
Chairman, that the record, when it is read back, of Dr Julius's
answers will be remarkably revealing.
Mr Beard: Of what?
Mr Ruffley
372. Does the Bank have more specialist monetary
economists than the Treasury?
(Sir Edward George) Oh, I would certainly hope so.
I would be very confident that they do.
373. Given that, have you offered the services
of the specialist monetary economists, of which there are more
in the Bank than in the Treasury, to the Treasury to help them
with the assessment of the five economic tests?
(Sir Edward George) No, but the Treasury know perfectly
well that if they ask us we will help.
374. So you have not made an offer and it has
not been accepted or rejected?
(Sir Edward George) No.
375. Is it the case, Governor, that you think
any of the five economic tests have been met?
(Sir Edward George) I have not made an assessment.
376. Why have you not made an assessment?
(Sir Edward George) Why should I have made an assessment?
377. Because it is probably the single most
important economic issue facing the United Kingdom. It is rather
surprising you say you have not.
(Sir Edward George) I am sure when the time comes
we will be looking at some of these questions, but frankly I do
not believe the time is now. We have quite a lot of other things
to do.
378. Can you explain the reasons why both yourself
and the Chancellor do not believe there should be a commentary
on whether or not the tests are being made? The tests were set
out in October 1997, they are there, they are a matter of record.
Can you take us through why the public should not have a right
to know whether these things are being met?
(Sir Edward George) I think that is a question you
should put to the Chancellor rather than me. I could anticipate
that he made it absolutely plain when he announced this in 1997
that he did not believe that it would be during the lifetime of
the present Parliament. The implication of that was that he would
make his assessment when he thought the time was appropriate in
the next Parliament and that seems to me to be an entirely reasonable
position for him to adopt, but I really think you should talk
to him about it because it is his field, not mine.
379. But you are obviously doing ongoing work
on whether or not convergence is taking place.
(Sir Edward George) We are monitoring—
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