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Lord Peston: Before speaking to Amendment No. 41, which is grouped with Amendment No. 40, may I make a comment on Amendment No. 40? I hope the noble Earl will not accuse me of arrogance, but I had assumed the word "economic" includes "financial", and therefore the amendment is not necessary. I was not listening as closely as I should have been when he mentioned the 1976 IMF crisis--I believe I am right in thinking he was referring to that--but it is an interesting question whether, under this heading, that would count as "extreme economic circumstances". I also cannot remember whether the noble Lord, Lord Taverne, was Financial Secretary at the time.
Lord Taverne: It was 1968, when we thought Armageddon was upon us because the Germans would not revalue.
Lord Peston: What I remember most clearly, as an adviser to Ministers in 1976, is that there was no panic at that time. It compared favourably with Black Wednesday and the debacle of the noble Earl's right honourable friend Mr. Lamont. Although we did not like it at the time, the situation was completely under control, if I remember rightly, even though there were certain bitter pills to be swallowed. But that is just en passant. My noble friend will say whether he agrees with me that "economic" includes "financial", but that is certainly my view.
On my amendment, I do not believe that I am engaged in mischief-making. I have been sitting here wondering whether I am just making a bit of mischief. I have been trying to think to myself what circumstances we could have in mind that would be regarded as "extreme economic circumstances". The ones that would most bother me, but curiously would not be ones on which I would expect the Bank to be overruled, would be if we suddenly plunged into a major depression of the kind that Keynesian economics was invented to remove. However, given more recent developments, the world is quite capable of plunging back into those depressions, but I cannot believe that the Monetary Policy Committee in those circumstances would have to be overruled in order to engage in intelligent monetary policy. My judgment is that it would probably do that without being overruled.
If I were asked to reply to the question, "What do you mean by extreme economic circumstances?", I am not at all sure what I could answer that would satisfy me. I thought therefore, "My noble friend is on the payroll. It is not my job to answer these questions; he is paid to answer them, and he has a lot of very sophisticated advisers. They would not have allowed the Bill to be drafted unless they knew the answer to the question". Therefore, although I am still a little worried that I am making mischief--which I would never do given my great loyalty to the present Government--I thought I would plod on a little bit just in case my noble friend can enlighten me. I assure him that neither now nor subsequently would I dream of dividing on an issue of this kind.
Lord Taverne: I am a little puzzled by this clause. First, I suspect it will not be a clause that will last very long, because it will probably have to be removed if we join European monetary union. I hope there will not be any dramatic crisis of this kind before then, and therefore I suspect this is rather an academic clause. However, what puzzles me is the fact that it has a reference to the order taking the form of a statutory instrument. Legislation, even in the form of a statutory instrument, is a most inappropriate way of dealing with monetary management by the Treasury. Although this goes rather against the grain of trying to seek greater parliamentary accountability for the Treasury, I would have thought the last thing one wants to do is to have these kinds of directions enshrined in statutory form of one kind or another, which makes the whole process much more rigid. I would much rather see this take the form of a public statement by the Treasury which could be debated, rather than a statutory instrument, which will create all sorts of difficulties.
6 p.m.
Lord McIntosh of Haringey: Let me deal first with Amendment No. 40, and reassure the noble Earl that my noble friend Lord Peston is entirely right. I am advised, at least as far as the Treasury is concerned, that "extreme economic circumstances" in this sense would incorporate extreme financial circumstances. In the example that he gave of the collapse of Asian economies, if that were to cause the collapse of the financial services industry in this country that could be an extreme economic circumstance.
I should be careful about saying that sort of thing, because the nature of extreme economic circumstances is that we cannot predict them and we cannot define them. That is why the Economic Secretary to the Treasury replied, in response to the question about the intervention of the IMF, "That is an interesting question". I suppose I should have said that it is an interesting question. However, there is no doubt that the collapse of the financial services industry in this country would have an economic effect which could produce extreme economic circumstances and could, under certain circumstances, trigger this clause. The noble Lord need have no fear that financial economic circumstances would be ignored for the purposes of Clause 19.
My noble friend Lord Peston is not making mischief with his amendment. He is technically wrong in the sense that the order that is called for is a legal instrument and is therefore not the right place to set out the factual circumstances which, in the Treasury's view, would justify the making of the order. However, I cannot conceive of any circumstances in which the Government would wish to be, or get away with being, silent about the nature of the extreme circumstances and why it would be in the public interest to give directions.
Turning to the point made by the noble Lord, Lord Taverne, the Government might well do so by introducing the order. The order itself will be very simple. It is not complicated or technical. It seeks parliamentary approval for what is a very important step. Parliament has justifiably been very twitchy recently about making sure that parliamentary approval is sought for major policy changes. I myself have been under a misguided attack for seeming to breach that principle.
I can give my noble friend the assurance that the Government would be keen to make such a statement in the unfortunate event that the use of this power was ever contemplated. I can give the noble Lord, Lord Taverne, the assurance that the way in which that would be done would be by the statement which would accompany the order that is provided for in Clause 19. The two go together.
Lord Peston: Before the noble Earl, Lord Home, says what he is going to do, may I follow on from what the noble Lord, Lord Taverne, said? It was in my notes to raise a similar point and I am glad that he has raised it instead.
Anything like this clause disappears when we go into European monetary union. Again, as somebody who favours that move, my concern is that the Maastricht Treaty contains nothing corresponding to such a clause. However, if economic policy is to evolve in Europe after Maastricht and we are to be part of that--and I put that conditionally despite my own views on what we ought to do--someone, somewhere, will have to have the equivalent of that clause because we cannot believe that Europe will never be hit by an economic and/or financial crisis that would not require an ability to intervene beyond what a central bank might be willing to do.
I want to thank the noble Lord for reminding us that it has to go. I also want to add the point, with which I hope he will agree, that in due course we have to evolve something of that kind in Europe.
The Earl of Home: I think I shall have to look through my old university notes, going back longer than I care to remember. I seem to remember being lectured by Sir Roy Harrod to the effect that the economy and finance were different. If I find that my notes were accurate we can return to the matter on Report.
I accept that this is a temporary clause and that it is hoped that the economy will not be influenced by some dire disasters from over the water. On that basis, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Earl of Home moved Amendment No. 42:
The noble Earl said: We have talked about "extreme economic circumstances", though I am not quite sure what they are. In moving Amendment No. 42, I shall speak also to Amendments Nos. 43 and 44, which cover the eventuality of a crisis blowing up when Parliament is in recess. As drafted, the government of the day could perfectly properly act rapidly by issuing an order under Clause 19(1). It is anticipated that that order would lapse after 28 days unless Parliament is recalled and approves the order.
We have been told that the circumstances would have to be extreme and the country potentially in dire economic straits. I know and accept that it is difficult to recall Parliament in a great hurry, but as we are here talking about a major emergency and given the gravity of the situation, it must be right that, as soon as it is physically possible to recall Parliament, the Government should explain the reasons for overriding the Monetary Policy Committee's decisions.
As drafted, there is nothing to stop a government issuing a further order followed by yet further orders until such time as Parliament might resume naturally anyway. As drafted, we could have three months' worth of continuing orders between the end of July and the beginning of November. While the amendments do not necessarily stop the issuance of further orders, albeit on a fortnightly basis, they do at least indicate to any government that Parliament really should be recalled if a crisis turns out to be ongoing. It must be right therefore that Parliament should have a chance to debate and consider an order and to make a positive approval of it at the earliest possible opportunity. I beg to move.
Page 9, line 17, leave out ("28") and insert ("14").
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