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Lord McIntosh of Haringey: The first and most obvious answer to the noble Lord is that to do that would be the most gross political interference and I cannot imagine that the Opposition would let such an occasion go by without severe censure.
The second answer is that the noble Lord is proposing a very curious management style. In my experience, having spent 30 years in business and therefore being thoroughly qualified as a potential member of the Monetary Policy Committee, if somebody is not performing adequately, we do not tell them to take a cut in pay; we get rid of them. Otherwise we are building up resentment and keeping that resentment in the team, which seems to me to be an undesirable way to approach the matter.
I am not taking the amendment of the noble Lord at face value. But I am taking his speech seriously and I am taking seriously the point that he makes about the open letter and the way in which the Chancellor would react to a letter which indicated that the Monetary Policy Committee had failed to meet its broader targets.
Monetary policy is not the same as selling cars. In particular, getting the specification of a performance- related element right would be tricky. Would it apply immediately the Bank had gone outside its limits and had to write the open letter? Given the time lags involved in setting monetary policy, it might take a year or more for the effects of the Monetary Policy Committee's decisions to be felt, though the letter has to be sent straight away. The current inflation target, through the open letter system, explicitly recognises that, in some circumstances, it may be acceptable to deviate from the target but that the Monetary Policy Committee must be explicit about how it plans to deal with such shocks.
In answer to the noble Lord, that is exactly what the open letter is designed to do. Those circumstances would necessarily be unpredictable and it would be difficult to get right the contract that the noble Lord wishes us to draw up with the members of the Monetary Policy Committee, to make sure that we did not introduce undesirable incentives for monetary policy. We might land up saying, "You will be preserved from having your salary cut provided you get back within three months". It might be that economic conditions in Europe or inflationary conditions in other countries of the world did not make that possible.
I am convinced that the open letter system, with its requirements that the Bank and the Monetary Policy Committee should emphasise not so much what went wrong, but what they are going to do to put it right, is a more effective method than that which is proposed in Amendment No. 13.
Lord Taverne: I hesitate to speak when I have been unavoidably absent from the deliberations of the
Committee. I should just like to say that my fear is that there is too much rigidity in the interpretation of the targets. This amendment underlines that tendency and it would be better to retain some flexibility, as indeed the noble Lord indicated.
Lord Mackay of Ardbrecknish: I am grateful to the Minister for his explanation of the letter, of what he envisaged would be in it and the kind of assurances the Monetary Policy Committee might give. I am sure that the Monetary Policy Committee will be relieved at his vigorous defence of the salaries and positions of its members and equally relieved that I am not going to push it to any kind of Division either here--which I cannot do--or elsewhere when the opportunity arises. I am not sure that losing part of members' salaries would do anything to reinforce what will be a banker's caution, to ensure that they meet this target.
My concern is the one that I expressed at Second Reading: that they will attempt to make it so certain that they meet their target, that they will probably tend on the robust side when it comes to interest rates. The consequences of that for our economy may well be damaging, but that is another issue. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
[Amendments Nos. 31 and 32 not moved.]
Clause 14 [Publication of statements about decisions]:
Lord Mackay of Ardbrecknish moved Amendment No. 33:
The noble Lord said: I beg to move Amendment No. 33 and with it I shall speak also to Amendment No. 34. Clause 14 is about the immediate publication of the decisions of the Monetary Policy Committee. The public have a right to know and it is right that there should be public accountability on the part of the Monetary Policy Committee. This particular clause is not about the minutes of the meeting, to which I will come in a second. That involves Clause 15, to which Amendment No. 34 relates.
Clause 14 concerns decisions that are made in the committee and have to be announced either on the same day--meaning the day after tomorrow, because the Monetary Policy Committee meets this week--or early next week. It refers to the announcements it has to make then, in contrast to the minutes some six weeks hence. The minutes six weeks hence, we know, show the voting preference of the members who take part in any vote on any decision. We saw that in the January meeting, when we saw which five people had voted to keep interest rates the same and which three had voted to raise them.
I may now be running out of time from my months, but I think it is right that in last month's meeting, whose minutes we still do not have--I do not know how it got out--there was an indication which I read about in the papers, that there had been a five-three division as well.
My first amendment would have the effect that, when the Monetary Policy Committee announced in February that interest rates were to remain the same, it should then have stated the voting preference for anybody who took part in the vote. The second amendment relates to the wait of six weeks. Why do we wait, in fact, for a week or two after the next meeting before we read the minutes? I am sure that they are written fairly soon after the first meeting. I hope the noble Lord is not going to say that the Committee, at its subsequent meeting, have to agree to the minutes before they are published? If that is the case, they could be published rather more quickly than in six weeks. Depending on the length of the month, they could be published in five or four weeks--rather more immediately.
I am teasing out from the Minister why it is six weeks. I know he will tell me that that is the way Kenneth Clarke decided it should be. But Kenneth Clarke was dealing with a different kind of meeting. He was dealing with a meeting between himself and the Bank, where he took a full part in the decision-making process on whether or not to increase interest rates and the minutes were then published. That was the first time the minutes of those meetings had been published. When creating a Monetary Policy Committee which is independent, on which the Chancellor does not sit, where the decisions are not made by the Chancellor any more and he is not involved in the making of the decisions, it is worth considering why we should not do the same as that which we did with the "Ken and Eddie Show", as it was called, and wait six weeks.
My two points are these: first of all, in the immediate decision announcement should we not know what the vote was and who did the voting; and, secondly, do we really need to wait six weeks, until after the next meeting, before we read the minutes of the last one? I beg to move.
Lord McIntosh of Haringey: The noble Lord is quite right in saying that I intended to refer back to the "Ken and Eddie Show", not quite in the same terms in which he did but because I must confess that when the "Ken and Eddie Show" had its premier, I was puzzled by this six-week delay. As a complete outsider, and somebody who is used to having the minutes of meetings available immediately afterwards as a normal business procedure, I could not understand why this should be so. I have to say that the argument which I assume Kenneth Clarke and the Governor used at that time still applies today. The meeting is not that different. The reason is that these meetings take place on a monthly basis--they do not need to take place on a monthly basis but they do--and any further information, particularly information about the nature of the votes,
We agree with the process started by Mr. Kenneth Clarke when he made these meetings more open and transparent, and we have extended the openness and transparency by proposing that the voting record should be published, and this, as the noble Lord recognises, has now happened. But the publication of the voting record immediately when the decision was taken might be destabilising, particularly if there is a split decision as there was in January 1998. It might well be that the publication of the voting record in January, taken before the February meeting, might have forced the members of the Monetary Policy Committee into a false sense that they had to be consistent with their previous view, even when their economic and policy judgments could have been otherwise.
The noble Lord has been reading speculation about decisions in February. They are pure speculation and to the best of my knowledge no statement has been made with any authority which breaks the six-week rule which has been set up.
The arguments are the same as they were when this first arose under Kenneth Clarke's Chancellorship. The important point is to ensure that the minutes do not come out before the meeting, or "not more than six weeks after the meeting" is the phrase. This is designed to cope with the vagaries in the calendar, but above all it is designed to make sure that the subsequent meeting of the Monetary Policy Committee takes place without any external or internally-imposed constraints on reaching the right decision. I fear that the noble Lord's amendments would damage that.
Page 6, line 33, at end insert--
("( ) Statements published under this section shall record, in relation to any decision of the Committee, the voting preference of the members who took part in the vote on the decision.").
5 p.m.
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