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Lord Barnett: My Lords, I warn my noble friend that I shall bear in mind for other occasions the comments that he has just uttered as regards unnecessary words. He said they were not necessary and in this case they could do harm. I doubt that. I should be surprised if they did harm. However, in view of what he has said, and because I am fond of him I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 12 [Specification of matters relevant to objectives]:
Lord Mackay of Ardbrecknish moved Amendment No. 11:
The noble Lord said: My Lords, in moving Amendment No. 11, I speak also to Amendment No. 12. I have tabled these two amendments genuinely to be helpful to the Government. When we discussed Clause 12 previously both the noble Lord, Lord Peston, and I were puzzled about the first line of the clause, which states that,
We are puzzled about the word "may". The Minister pointed out that we had not read the entire clause properly and did not understand what it meant. However, the Minister said that he would seek the advice of draftsmen. Clause 12(1) refers to what one might call the "one-off situation"; namely, a measure that the Government may adopt if they feel that something has gone wrong. That is encapsulated in Clause 12(1) which states,
Clause 12(2) refers to what I might call the normal annual position. Clause 12(3) refers to what will be done as regards the normal annual position. On reflection, I thought that it would be far better to refer to the normal position first and then stipulate the emergency position. However, the Bill refers first to the emergency position--the "may" position--and the "shall" provision
The Bill states that the Chancellor will every year,
send a notice to the Bank to state what price stability will consist of; and what the economic policy of the Government should be; that he will publish the notice and lay a copy before Parliament. That should be first because that is what he will do every year. Then after that should be the provision that he may,
at other times--I presume in emergencies--do the other thing. I believe that that would have been neater. It would have made my reading of the clause easier. I beg to move.
Lord Peston: My Lords, before the Minister replies, as my noble friend pointed out we have discussed this matter many times in the past. After all my years in your Lordships' House I should have learned my lesson by now. However, my problem is that the word "may" logically implies "may not". It is inconceivable that the Government mean "may or may not"; therefore, the clause means "shall". So for perhaps the last time in my career in your Lordships' House, I seek a convincing explanation of why, since "may" means "shall", we do not use the word "shall". I believe that my noble friend said in Committee that "may" means "shall"; he said that it has to happen. For the moment, I pause in the hope that the Minister can explain to me the point of "may" rather than "shall", and if "may" is used, why not "may not"?
Lord Renton: My Lords, this is the first time I have intervened in debates on the Bill. I support the amendment. One of the things that worries me about the independence of the Bank of England from the Treasury is that it would be possible for the Treasury to fix a bank rate, for example, which was contrary to the economic interest of the country. If the Bank of England were to do that, there would be trouble. But if the Treasury is required to say by notice in writing to the Bank what price stability is to be taken to consist of, and what the economic policy of Her Majesty's Government is to be taken to be, it would not solve the problem I have mentioned but it might mitigate it.
Lord McIntosh of Haringey: My Lords, I hope that I did not say in Committee that "may" means "shall". It has always annoyed me when anyone has said that because it is patently not true. My noble friend is of course right to say that "may" allows the possibility of "may not". The explanation of the wording of Clause 12 is quite different. If I did not make it clear at Committee stage, I am grateful for the opportunity to try again.
Clause 12(1), which gives the Treasury the power to give notice to the Bank specifying what price stability and the Government's economic policy are, allows the
I have sought the draftsman's view on the wording of this clause in the light of our debate. He has confirmed that he is content that the clause is clear as drafted. You might say, "He would be, wouldn't he?", but, when one thinks about it, I believe that the logic is sound. Subsection (1) deals with the general; namely, the Treasury's power to give the notice. Subsection (2) deals with the specific; that is, the Treasury's duty to give notice at least once in every period of 12 months. I suggest that it is appropriate to go from the general to the specific in so far as the specific qualifies the general. I hope that the noble Lord will withdraw the amendment.
Lord Peston: My Lords, may I seek clarification from the Minister? Does he say that if "shall" replaces "may" the clause will be different? It would help me very much if my noble friend could tell me the answer to that.
Lord McIntosh of Haringey: My Lords, I am saying that we want a level of permissiveness, of allowing the Treasury to give notice when it thinks fit, but we wish to qualify that by saying that whatever the Treasury decides to do it must--that is the specific--do it at least once every 12 months.
Lord Mackay of Ardbrecknish: My Lords, I think we are in danger of coming close to splitting hairs. My suggestion is that one states as the principal clause one's normal position: that annually one will do it. Then one qualifies that by saying that if one feels obliged to do so, one can do it at other times as well. I should have thought that that was the logical way round. I appreciate that once the draftsman has made up his mind, it is often difficult to get him to change it: the very good reasons given become the position that one has to defend.
I believe that there was nothing wrong with my amendment. It is interesting to note that the Minister did not suggest it was defective. I believe that such drafting would have shown the casual reader--if there ever will be casual readers of the Bill--what the Treasury will do every year, and that if the Treasury thinks fit it could do this at other times.
Clearly I shall not succeed in having the clause changed. My career as a draftsman has been short but sweet. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 13 [Monetary Policy Committee]:
Lord Mackay of Ardbrecknish moved Amendment No. 13:
The noble Lord said: My Lords, in moving the amendment, I speak also to Amendment No. 14.
The amendments are related only in so far as they deal with the method of appointment of the four members of the Monetary Policy Committee. They are not related in any other way. Amendment No. 13 is merely an additional probe to an amendment I put forward at Committee stage. But Amendment No. 14 is a serious amendment arising from the debates at Committee stage.
The four appointments we are discussing are what I might describe as the away team of the Monetary Policy Committee. The home team will be the Governor, the two deputy governors and two of the employees, as outlined in Clause 13(2). Currently there are only four of them, but once the Bill is enacted there will be five members of the home team, and four members of the away team.
Those people will decide monthly on the interest rates to be pursued in this country. From the last debate we had, it was perfectly clear, however one reads Clause 11, that the Monetary Policy Committee will be an extremely important body. It will be a body constructed by the Chancellor appointing people to it. We are looking now at the four members of the away team, the outsiders so to speak, who will be appointed to play a major part in making that decision. Arguably, this will be the most important public body in the land--far more important than many others.
At Committee stage, I posed the question of the method of appointment. The Minister gave me some reassurance. Perhaps he can do so again, although I would prefer him to put the reassurance on the face of the Bill. The Minister pointed out that appointments to nationalised industries and public corporations are under the remit of the Commissioner for Public Appointments. He told me that a review was going on; a consultation document was out; and the Government expected to respond in the course of the next few months. He also told me that any extension of the remit of the commissioners, for example, to include the Monetary Policy Committee, would not need primary legislation. It would be dealt with by an Order in Council.
Having reread what the Minister said, I was unsure whether the Government believed that these four appointments should be made in the same way as other appointments, through the Commissioner for Public Appointments: being advertised, applied for, and so on. I shall be grateful if the Minister can clarify that. If the Government believe that they should be appointed in the same way as members of nationalised industries and other public corporations, is it not time that these matters were on the face of important Bills such as this one, so that no one is in any doubt?
Amendment No. 14 refers back to Amendment No. 10, proposed by the noble Lord, Lord Barnett, and to one or two other points made earlier. Those four members will be extremely important. They must therefore understand the needs of the economy of the whole of the United Kingdom. In Committee, we had an interesting debate on the need for manufacturing industry to feel that it had someone on the monetary policy committee who understood it and its problems. We also discussed whether we needed to be sure that
The amendment I have tabled homes in on Scotland. For reasons I mentioned earlier, the Government have deliberately decided, as a matter of policy, to change the whole way in which the United Kingdom is governed. We are no longer to have one central government for all policy issues in the United Kingdom. We are to have three governments--and possibly four, if the talks in Northern Ireland reach a conclusion in reasonably short order.
The economies of the nations that make up the United Kingdom can be very different. I started out being mildly worried about this matter; however, I became more concerned when I read the CVs of the four excellent people who have been appointed to the monetary policy committee. It seemed to me that, apart from experience beyond this country, their working lives have been very much in a triangle consisting of Oxford, Cambridge and London. Indeed, the furthest north any of them seemed to think they should go in their professional careers--I hope I am not to be told that they spend a fortnight on holiday in Scotland once a year--is Oxford or Cambridge. I have still not worked out which of the two is further north--I keep hoping that somebody will tell me--but neither is terribly far north, considering the Midlands, the north of England, Scotland, Wales and Northern Ireland.
I shall not read the details at great length. Professor Goodhart is a professor of banking and finance at the London School of Economics. I shall turn to his past in relation to other matters. I do not think that he has ever in his career been north of Cambridge and the LSE--he taught in both. DeAnne Julius is the odd person out. Not only is she a woman; she is also not an academic economist. She works as the chief economist of British Airways. Nothing in her CV, unless Washington is north of Oxford and Cambridge, which it probably is--I am told it is not--suggests that she has worked outside that interesting triangle. Sir Alan Budd is the third. His appointments have all been very much within the triangle I mentioned. Professor Buiter is the last; he is professor of international macro-economics at Cambridge University. Prior to that, he was at the London School of Economics and Yale. To my knowledge, Yale is not in Scotland. Nor indeed is Bristol, where I note that he also worked, as he did at Princeton. He is obviously much travelled in his career; however, his travel does not include Scotland or any other part of the United Kingdom beyond Oxford, Cambridge and London.
My concern is this. Over my political lifetime there have been situations--not prevalent at present, but which did exist for many years--where the economies of Scotland and perhaps the north of England were quite different from the economy of the south-east of England. The economy of the south-east of England was often over-heating, and therefore in need of higher interest rates, when the economies further north were
My argument is even stronger given the changes that are being made in the government of the United Kingdom by the Government this Session. While I fully accept that Treasury matters are reserved--indeed, the Minister gave that assurance in Committee--I must say to him that debate in the Scottish parliament will not be reserved. Its members will be allowed to debate anything they wish to debate. If they feel that the interest rates being pursued by the monetary policy committee are not in the best interests of Scotland, they will start debating the matter loud and long. They will be forced to do so, since they will have as their responsibility economic development, financial assistance to industry, inward investment and the promotion of trade and exports from Scotland.
That brings me directly to the question of the value of the pound, which is a matter that must concern members of that parliament. Tourism is also a factor, and the value of the pound plays an important part. Just as noble Lords are probably finding that the Easter Recess can be spent quite cheaply abroad, I suspect that people from abroad are finding this country, including Scotland, slightly more expensive than it once was because of the value of the pound. So although the Treasury's responsibilities are not devolved, there are many aspects which are devolved and which will be very much influenced by the decisions of the monetary policy committee.
My amendment is couched in the most sensible terms. Indeed, I even accept that the Chancellor of the Exchequer will continue to make the appointment, which I hope shows that I have listened to the Minister. What I am saying is that one of those members should be appointed on the advice of the First Minister of the Scottish Executive. I keep being told that the First Minister is to be Mr. Donald Dewar. Donald Dewar and I are friends; we go back a long time. I should be perfectly confident in the good advice that he would give the Chancellor. Indeed, I suspect that I should be perfectly confident in the good advice that any First Minister would give the Chancellor. So I do not think that I am being unreasonable in the way I have phrased this matter. I have changed the amendment quite markedly since Committee stage. I have thought about it, and I have tried to be practical. I have tried to give the Minister an amendment which he can accept, but which, if your Lordships decide to insist, would actually work, because the First Minister would exist and would be able to give advice. That would be very important.
I am not alone in believing this. The Law Society of Scotland thinks that there is merit in this case. Indeed, from my point of view support came from a very unlikely quarter--but support is coming from the most unlikely quarters these days. I now find that the National Union of Students considers that I am quite one of its heroes, having voted down one of the Government's proposals on fees. I suppose that the change of position in the Chamber brings new supporters. The supporter that I now pray in aid is the Scottish Trades Union Congress, which is very dominant in the Labour movement in Scotland. The Scottish Trades Union Congress made a submission to the Chancellor of the Exchequer ahead of the Budget in which it asked for Scotland to have a seat on the influential Bank of England committee which sets interest rates. It goes on to say, as I have, that there have been times over the past 50 years when interest rates did not seem quite right for Scotland. It also accuses the Bank of being "particularly insensitive" to the impact of interest rates on regional economies. It states:
that is, an appreciation, an awareness, of the economic priorities of the different parts of the UK--
The Minister will tell us that, indeed, seats on the court are being given to people from a wide range of interests and places in the United Kingdom. I paid tribute to that in Committee and do not wish to take away from that. It is a plus, and is good for the Government on that basis. However, we also know that the court has no influence over the important issues the monetary policy committee will decide: namely, interest rates. So the Government cannot pray in aid that they have good regional or cross-sectional industry representation on the court and that that will do. The Government also say that the court and the monetary policy committee are quite separate when it comes to deciding interest rates. The STUC obviously understands it as well, as it goes on to say:
It may think that I am an unlikely ally in this regard, but the STUC is correct. If the Government will not listen to the Opposition I hope they will listen to their friends in the Scottish Trades Union Congress. It is an important amendment. I believe that I have couched it reasonably. The Chancellor will still make the appointment and it will be on the advice of the First Minister. I cannot believe that a good professor of economics cannot be found in any of the Scottish universities. It would be a real insult if that is the Government's answer. There will be a number of people in Scotland, in the universities, business and commerce, who would make excellent members of the monetary policy committee. One of them ought to be on it. I therefore commend my amendment to the Minister and to the House. I beg to move.
Page 5, line 17, leave out ("may") and insert ("shall").
"The Treasury may by notice in writing".
"The Treasury may by notice in writing to the Bank".
"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",
"by notice in writing to the Bank",
5.30 p.m.
Page 5, line 39, at end insert ("in accordance with the procedures of the Commissioner for Public Appointments").
"The STUC believes that the latter"--
"will only happen when seats on the monetary policy committee, and on the Bank's court, are allocated by region".
"We therefore call on the Chancellor to review representation on the monetary policy committee to ensure that Scotland's circumstances are properly taken into account".
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