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
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 concludedhaving read the report and the evidence quite carefully I understand why it did sothat 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 directorI 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 oclock till this day at One oclock.
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