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Lord McIntosh of Haringey: I am afraid my answer will be very similar to that which I have already given for the reason that the amendments should have been grouped together. The fundamental answer is that the more objectives are set for the Monetary Policy Committee, the more prospect there is of conflict and the more you are saying to it, "Make up your own mind as between these two and the inter-relationships between them". That may be a proper subject for academic debate in the Monetary Policy Committee but it has something different to do: it has to set short-term interest rates.

There is an additional reason why it would be unsuitable to put this onto the face of the Bill. Of course, the noble Lord, Lord Mackay, is right because he is quoting from an entirely reliable source. We all want a stable and competitive exchange rate over the medium term. Unfortunately, however, the exchange rate does not just depend on UK monetary policy. It depends also on the economic monetary policy of other countries and other factors that are not within the direct control of the Government or the Bank.

In the longer term, the exchange rate depends on the underlying productivity of the economy relative to others. Of course, as recent experience shows, the exchange rate can move in the short term for reasons unrelated either to monetary policy or economic fundamentals. So if that is set as an objective, it is very

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hard to see how the monetary policy could give effect to that objective. I hope the noble Lord will withdraw his amendment.

Lord Mackay of Ardbrecknish: I am not entirely sure the amendment would have been better grouped with Amendment No. 16, because this amendment deals with the question of what do you define as being included in the word "including". I am not entirely sure whether or not the Minister has signalled, in a sort of Pepper v. Hart way that, yes, the Monetary Policy Committee can have a look at other issues, and one of those other issues may be the rate of exchange. He has explained to me quite rightly that the rate of exchange can be quite detached from our own economic policy.

Lord McIntosh of Haringey: I hope there is no question of Pepper v. Hart because I am trying very hard not to say anything new. The wording of the Bill states:

    "Subject to that, to support the economic policy of Her Majesty's Government, including its objectives for growth and employment".

Clearly, therefore, the economic policy of Her Majesty's Government can change from time to time other than in growth and employment, and stable and competitive exchange rates are not of themselves excluded from that further consideration.

Lord Mackay of Ardbrecknish: They are not excluded. I take the caveat that it may be something quite unrelated to what is going on in this country that causes the exchange rate to move up or down. At the moment it is a combination of events.

Lord Barnett: It is something that the noble Lord may not like, but, subject to our being outside of EMU, is a factor in what is happening to the exchange rate, not just interest rates.

Lord Mackay of Ardbrecknish: I accept that. As I have said, there are those outside events and undoubtedly our decision on EMU seems to make our currency more attractive at the moment to some people. Whether that means that our decision not to be in is the right one or not, I do not know. Well, I do know: it is the right one. But whether that is the reason that it is the right one is another matter.

The noble Lord wants to ask his noble friend a question. I had better let him because I am about to withdraw the amendment.

Lord Barnett: I just wanted to ask my noble friend whether I am correct in taking what he said as meaning that the reason the Bill is drafted as it is is to give the Monetary Policy Committee a simple objective, namely price stability, and for it not to be troubled about the Government's economic policy, exchange or anything else. My noble friend may correct himself, but he told us that he does not want to confuse the Monetary Policy Committee; he wants to give it a simple objective, namely price stability. Nothing else.

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I should tell him, incidentally, when we are talking about the Bundesbank, that Tietmeyer does not want a price target; he just wants a monetary target. However, that is an aside.

Lord McIntosh of Haringey: I do not want anything that the Bill does not want. I do not want price stability by itself. The Bill says:

    "To maintain price stability, and subject to that, to support the economic policy of Her Majesty's Government, including its objectives for growth and employment".

That is what the Government think and that is what I believe should be the objectives of the Bank in relation to monetary policy.

Lord Mackay of Ardbrecknish: The Minister has tried to be helpful and I am sure we shall all have an interesting read. He has been clearer than his right honourable and honourable friends in the other place. I hope that will not do him damage at the Ministers' meeting tomorrow. With that, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 11 agreed to.

Clause 12 [Specification of matters relevant to objectives]:

Lord Peston moved Amendment No. 18:

Page 5, line 17, leave out ("may") and insert ("must").

The noble Lord said: In introducing the amendment, let me say to my noble friend that he is being a little modest, which is uncharacteristic of him. Whether it is anything new or not, as far as I am concerned, as a student of these matters, he has thrown an enormous amount of light on a Bill with which I was having great difficulty. I do not want to commit him to any Pepper v. Hart interpretation, but I now understand quite a lot of the Bill that I did not understand before and certainly could not get from the debates in the other place. It is up to him whether he regards that as flattery on my part or, as the noble Lord, Lord Mackay, said, undermining his future career. I am sure that the former is the correct interpretation, again on Pepper v. Hart terms.

Here is an amendment which I hope my noble friend will accept. He has already referred earlier to the "may"/"must" problem, let alone the "shall" problem. In the nearly dozen years that I spent on the Opposition Front Bench--rather less than my noble friend did--this sort of thing used to drive me completely potty. Someone once said to me, "You are a legislator, you ought to understand these things". I replied, "I am not a legislator, I am an economist". However, it appears that I am a legislator simply by agreeing to come to this place.

If I am a legislator, I believe that words ought to mean what they say, and I interpret "may" to mean "may not", I cannot think of the English language if "may" does not imply that the other possibility is "may not". That is why the word "must" is introduced into the language, to

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differ from "may". And yet when I raised it before--and although I do not believe I have raised it with the noble Lord, Lord Mackay, I have certainly raised it with one or two of his noble ministerial friends--they kept saying, "That shows what an idiot you are. 'May' does not mean 'may', it means 'must', and then I would say, "Why then does it not say 'must'?", and then I would get some argument that I never understood.

My view--and this follows very much from what my noble friend has already said--is that the Monetary Policy Committee cannot operate unless the Treasury gives it the answers to the questions in Clause 12. Therefore "may" has to mean "must". Can you imagine the Monetary Policy Committee saying, "Oh dear, Treasury, what does price stability consist of?". "We are not going to tell you. If you don't know we will not tell you", which is the way one sometimes treats one's children. Therefore, the Treasury must, by notice in writing, do these things. It then makes sense that the word "shall" appears a few lines later.

It may well be that the genius of a parliamentary draftsman yet again has written something for my noble friend which he will read out, and we will all nod sagely and pretend we understand it. I can only say that I understand it, within the limits of the language on which this country has based its history, and I think the word should be "must". I beg to move.

Lord Mackay of Ardbrecknish: I shall be brief. I fully accept that I may have erred on this issue before, and it drove me to despair as a Minister. Clarity is everything. I have always thought I knew what "may" meant, and I do not think it means "must". Interestingly enough, subsection (3) reads,

    "Where the Treasury give notice".

Now that implies that there may be circumstances where it does not give notice. I am with the noble Lord, Lord Peston, on this one, and I do not wish my previous convictions to be taken into account.

Lord McIntosh of Haringey: This is one of those occasions where I think I understand it, and if I understand it, then it seems to me anybody can understand it. Now it is a question of whether I can explain it. It does indeed say "may" in Clause 12(1), but Clause 12(2) requires,

    "The Treasury shall specify ... both of the matters",

at least once a year,

    "before the end of the period of 7 days beginning with the day on which this Act comes into force, and at least once in every period of 12 months";

thereafter, in effect. So there is a requirement on the Treasury to do that once a year. There is a power in Clause 12(1) for the Treasury to do it more often if it wants to, and that is why the Bill says "may". The objective of my noble friend in putting down this amendment is achieved by Clause 12(2).

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