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Lord Howell of Guildford: My Lords, I hesitate to intervene in the debate as I did not have the privilege of taking part in the Committee. However, I am moved by the shrewd and perceptive scepticism of the noble Lord, Lord Bruce of Donington, to remark on the amendments. I have great sympathy with the thoughts behind the amendment tabled by the noble Lord, Lord Barnett. Indeed, I have great sympathy with many of his views on subjects in economic and other fields. However, from outside the Committee, I must offer the view that there is a fatal flaw in the intention.

I understand that the noble Lord, Lord Barnett, is trying to introduce an element of balance into an utterly unscientific area where many economists claim all kinds of precision which does not exist. The noble Lord seeks to avoid the kind of zealotry and pursuit of one particular branch of objective policy which in the end turns to dust and proves to the outside world what it knew already--that economists do not understand much about the relationship between the economy and the real world.

The flaw is that government objectives are never clear. I am not making a party point--I refer to any government. Their objectives are never clear and, what is more, they change rapidly, even from day to day and certainly from week to week and month to month. In this case, one is asking for a link with something that is broadly identifiable; price stability. However, as was said by the noble Lord, Lord Bruce, nowadays even that

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is an amorphous subject. In America, the CPI is revised frequently in radical ways and no one knows precisely what prices are doing. One is seeking to link a vaguely identifiable objective with something which is much more amorphous and ephemeral; that is, the set of government objectives.

If your Lordships think I am speaking in too many generalities, let us take today, this moment, now, when there is total confusion about whether the British economy is growing or shrinking. No one knows which sectors, in so far as one can divide the modern economy into sectors, are performing in which ways. It is believed that there is something called the "service sector", which is growing rapidly and may be promoting a degree of inflation. It is believed that there is something called the "manufacturing sector", which is alleged to be shrinking in the face of the high pound. But as no one understands how nowadays one can dissect and disaggregate services from manufacturing, or what a service is, or what a manufacturer is--they are sectors and concepts which belong to a past age and not to the age of the information intensive economy--it is hard to conclude from such general observations what is happening.

No doubt the distinguished members of the monetary policy committee are in the same dilemma as the rest of us. Indeed, it appears that recently they were at sixes and sevens about which way to go. Some say, "We must look at what we believe to be the monetary conditions. They lead us to the view that the monetary situation is loose. Heaven knows, if it is the Government's objective--and we have no idea whether it is or not--one day to put us into the EMU the pound will drop like a stone and inflation will go through the roof. We have been taught by the Bundesbank to think two years ahead in setting monetary targets and in thinking about short-term interest rates and therefore we must put interest rates up". That is one line of thought.

The other group apparently say, "Wait a minute, we don't know that the pound is going to fall. All we see is increasing difficulties in the manufacturing sector, increasing pressures on the economy and definite signs that overheating has finished and that the economy should be going into a downturn. We will look very silly, won't we, if we are found to be putting up short-term interest rates when we should be putting them down." Presumably, that is the kind of debate that has occurred among the price stability gurus who comprise the monetary policy committee.

If they were asked to link such considerations to the Government's policy they would be not less confused but even more confused because they would not have the slightest idea what the Government's policies are at this moment either in relation to growth or employment. In the longer term, it is like motherhood and apple pie. We are all in favour of people being employed, although even the concept of employment is dissolving because we do not know what the nature of work is in a modern society. In many societies, including this one, many people in future will not be in the old-fashioned sense employed. Therefore, it may not be that the objective of policy should be employment; it should be gainful,

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dignified work and status and usefulness. Many people are writing books saying that the whole idea of employment belongs to an industrial age that has passed.

To return from that diversion, even if we knew what employment was, and even if we knew how to define growth,--indeed, only in the past fortnight the Office for National Statistics has issued elaborate new details of how to measure GNP and GDP because it is beginning to believe that the old-fashioned measures do not reflect what is happening in the economy--to ask the monetary authority, the independent Bank of England experts, to link their struggle with the vagaries of monetary policy to the even more amorphous and uncertain tasks of trying to define government policy and objectives in relation to growth, which we are not sure about, and employment, which turns out to be an outdated concept, is asking a hell of a lot. In fact, it is asking them to do something which turns a very difficult task, and one which is currently dividing them and leaving them uncertain, into an impossible task.

I hate to part from the noble Lord, Lord Barnett, on these matters, so great is his wisdom and experience but, with great reluctance, I am driven to the view that what is in the Bill is about as good as one can get. It does not mean much in modern conditions. The monetary policy people are in a great state of confusion. That would be added to if they were asked to take more account of these ever-changing and vague concepts of government national economic objectives in a world where national economic objectives as opposed to the broader macro-objectives of the global economy, which is something different, are becoming much more difficult to define. We would be setting our monetary experts an even more difficult task. Therefore, in this case I support the Government against the amendment of the noble Lord, Lord Barnett.

As regards the amendment in the name of my noble friend Lord Mackay, I see what he is trying to do. I understand that in an uncertain and fog-filled world he is trying to distinguish more clearly price stability and to give the independent monetary authority some chance of sticking to that without becoming too diverted by all the other economic policy debates which over the years have excited us and filled us with passion, but in respect of which, thanks to the ill advice of the economic profession, now at its low point in terms of incompetence and failure to interpret the modern world, we have been misled. Only recently has this country begun to escape from the clutches of the national macro-economic policymakers with commendable results which are at last putting us ahead in the world rather than being a passenger and a humiliating laggard.

Lord Newby: My Lords, we are in danger of talking ourselves into a state of complete depression on this subject. The members of the monetary policy committee are portrayed as mariners on a boat in a thick fog with no charts. While nobody in debates off or on the Floor have argued that these matters are easy, I suspect that while they are difficult and complex people dealing with monetary policy and so forth are capable of getting to grips with them.

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I am not sure that I support the thrust of Amendment No. 9; I am even less sure that the wording strengthens the clarity of the Bill. One can argue either that the amendment is stronger than the existing wording of the Bill or vice versa. I believe that the form of words in the amendment does little to advance the cause of the noble Lord, Lord Mackay.

I welcome the amendment of the noble Lords, Lord Peston and Lord Barnett, for its attempt to tilt the balance in terms of consideration of monetary policy towards growth and employment, I wonder whether the word "precondition" has such a different meaning from the concept of "subject to". It seems to me as a layman in these matters that the difference is extremely slight. The clarity which has been sought does not flow from the wording. However, as I agree with the sentiment behind Amendment No. 7, I hope that the Government will be sympathetic towards it. To the extent that it differs from what is in the Bill, it differs in a direction which I support.

I support also Amendment No. 10 in terms of strengthening the degree to which the Monetary Policy Committee is required to look at the national and regional aspects of the consequences of what it does. That thought arose in Committee and on other amendments to the Bill and I hope that the Government will feel able to accept that amendment.

5 p.m.

Lord Davies of Coity: My Lords, I rise primarily to ask the noble Lord, Lord Mackay, for some clarification regarding Amendments Nos. 8 and 9 and the way in which he presented them from the Dispatch Box.

However, before dealing with that I should say that I believe that there will be tremendous problems in evaluating growth, unemployment and questions of price stability. But in establishing an economic policy, that has to be carried out and it seems that the Bill is doing precisely that.

However, I understood from the noble Lord, Lord Mackay, that he wants to remove from line 15 "subject to that". When he moved his amendment, I understood him to say that he wanted to add the words,

"but only insofar as it can do so without prejudice to paragraph (a)".

The written word refers also to the removal of,

"including its objectives for growth and employment".

I did not understand the noble Lord, Lord Mackay, to say precisely that. I am sure that he wants that to be removed. If that is the case and he has inserted into the Bill

"but only insofar as it can do so without prejudice to paragraph (a)",

and he is supporting the economic policy of Her Majesty's Government, what value is there in removing the words, "including its objectives for growth and employment"?

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