Mr.
Hoban: The bound copy of Hansard will sell well in
Fareham.
[Interruption. ]
The
Chairman: Order. The Committee should let the hon.
Gentleman plough
on.
Mr.
Hoban: I will continue to plough my furrow, under your
guidance Mr. Hood, no matter how lonely it
is. The
financial stability objective forms the basis of one of the more
difficult parts of the Bill. It clearly generated quite a lot
discussion in the Treasury Committee and in our evidence session a week
last Tuesday. We believe it is important that the Bank be given the
objective of financial stability as part of its remit. Part of the
challenge of the past 12 months or so has been to decide who has this
responsibility and how the Bank should play its
role. We
are part way through a period of instability and there must therefore
be some lessons that we can learn that will enable us to prepare for
the future. As I indicated earlier, it is easier to know when we are in
a period of instability than when we are in a period of stability. In
trying to understand what the objective of financial stability actually
is, one needs to consider three questions. First, what does it mean in
practice? Secondly, how does one measure it? The hon. Member for
Northampton, North made that point well. Finally, what tools does the
Bank have to deliver financial stability?
Let me start
with the definitional problem first. I accept that it is a problem. The
hon. Member for South Derbyshire and I had a debate last week about
financial stability and how one defines it. The present Economic
Secretary, in his evidence to the Committee, described
the concept of financial stability as a high-level one. There has been a
debate about the objective. The former Economic Secretary, the hon.
Member for Burnley (Kitty Ussher), when giving evidence to the Treasury
Committee in July, held out the prospect of a bit more definition than
we have in the Bill when she
said: “I
think we will be setting that out legally in the legislation, so the
technical answer to that question will come in October...We will
define it clearly, I presume, in the
legislation.” Clearly
things have changed since she gave the evidence. Not only is she no
longer the Economic Secretary, but we have gone from that tantalising
promise that was held out to us of a definition to what we have in the
Bill, which is:
“An
objective of the Bank shall be to contribute to protecting and
enhancing the stability of the financial systems of the United
Kingdom”. I
am not sure that that is as full a definition as the hon. Lady hoped it
would be, but that is the definition that we
have. The
Treasury Committee concluded—having read the report and the
evidence quite carefully I understand why it did so—that there
is no consensus about what financial stability means. The report is
clear. It sets out the range of definitions of financial stability that
could be used. The Governor defined a period of financial stability
as “a
period during which the payment system worked normally and the ability
of households to mediate their savings into real investment in the
economy at home or abroad operated
normally.” Nigel
Jenkinson, who is the executive director—I see that the Whip
wishes to intervene. I shall not finish this speech this morning. I
will have to continue after the lunch break. I am happy if the usual
channels want us to adjourn at this
point. Further
consideration adjourned.—[Mr.
Blizzard.] Adjourned
accordingly at twenty minutes past Ten o’clock till
this day at One
o’clock.
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