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House of Lords

Tuesday, 22 January 2008.

The House met at half-past two: the LORD SPEAKER on the Woolsack.

Prayers—Read by the Lord Bishop of Manchester.

Bank of England

Lord Roberts of Conwy asked Her Majesty’s Government:

Lord Davies of Oldham: My Lords, the Monetary Policy Committee of the Bank of England has had operational independence for setting interest rates to achieve the Government’s inflation target since May 1997. These arrangements have removed the risk that short-term political factors can influence monetary policy, and ensure that interest rates are set in a forward-looking manner to meet the Government’s symmetrical inflation target. There is absolutely no intention to change these arrangements, which have resulted in one of the lowest inflation rates in the G7 and interest rates of around half the average of the previous decade.

Lord Roberts of Conwy: My Lords, I am grateful to the noble Lord for that reply, but would he agree that the high reputation of the Bank of England for independence has been tarnished by its involvement in the tripartite meetings led by the Chancellor of the Exchequer in the context of the Northern Rock fiasco? Is that independence and the Bank’s high reputation in that regard not going to be further undermined in the public’s eye as that shambles continues? Furthermore, what will be the effect on the Bank and its status of the new powers anticipated for the Financial Services Authority?

Lord Davies of Oldham: My Lords, the issues regarding the Financial Services Authority will become clear in the next few weeks, as has been reported. That is when the discussions will have concluded. On the broader question, the partners in the tripartite arrangement are in close contact all the time. It will be recognised that it is necessary for them to meet fairly regularly at a certain level, and they have done so over the past decade, which has contributed to the exceptional record of the British economy over that decade. The noble Lord will appreciate that the difficulties over Northern Rock necessitated additional meetings. However, he will appreciate, too, from my Answer, that we have no intention at all of changing the role of the Monetary Policy Committee, which sets the interest rates that relate to the question of controlling inflation in this country.

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Lord Barnett: My Lords, I revert to the Question. Would my noble friend agree that not only does the Monetary Policy Committee have a remit to deal with inflation, but subject to that, in those famous three little words, the committee is supposed to be considering other matters—namely, helping the British economy? Would he ensure that the Treasury emphasises that to the Monetary Policy Committee, not that I suggest that it would panic in the same way as the Federal Reserve in America is doing—but at least to take account of the possible panic affecting us here?

Lord Davies of Oldham: My Lords, I had appreciated that my noble friend might intervene and broaden the issue with regard to the role of the Monetary Policy Committee. Of course, he will take delight in the fact that the British economy at present not only has the second lowest rate of inflation in the G7 but has a very high employment rate indeed. I know that he stresses the successes of the Monetary Policy Committee in its concern that the economy should grow and employment levels should be high.

Lord Lawson of Blaby: My Lords, will the noble Lord and the Government reflect further on the matter raised by my noble friend Lord Roberts of Conwy? It is clear, is it not, that the arrangement for removing banking supervision from the Bank of England and giving it to the FSA has not been successful, to say the least? That is not because the then Chancellor was wrong to remove it from the Bank of England; there was a case for doing so. That case was to give it to an institution which had the sole purpose and remit of banking supervision. That is what needs to be done, as I wrote in my book—

Noble Lords: Oh!

Lord Lawson of Blaby: My Lords, that was as far back as 1992, so I am not just being wise after the event. Will the noble Lord and the Government now think again and do the right thing?

Lord Davies of Oldham: My Lords, on the widespread consideration of the role of the Financial Services Authority and the need for certain changes to its operational role, I have not the slightest doubt that those concerned have read with great care the noble Lord’s book and will take on board the representation that he makes. Other voices have also commented on the developments over the past few months. All of us will appreciate that Northern Rock presented a unique and significant problem to the financial position in Britain at the time, and lessons are being learnt from that experience.

Lord Newby: My Lords, will the noble Lord accept that the main charge against the FSA is that it did not act quickly enough in pointing out that the management of Northern Rock was acting in a reckless fashion in the first half of last year? This is not the first time that the FSA has been slow. Will he reassure the House that, when a new chair of the FSA is appointed later in the year, banking experience and an ability to take tough decisions quickly are part of that person's curriculum vitae?

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Lord Davies of Oldham: My Lords, the House will appreciate that the role of chairman of the FSA is a significant one and an appointment will be made in due course. On the idea that the FSA should have acted earlier, these arrangements have been in place for more than a decade. Northern Rock produced a more significant shock to the system than anything that has been experienced over the past decade and lessons need to be learnt from that experience. The Government have given an undertaking that the FSA is looking closely at its operational requirements and we will come forward with proposals in the very near future.

Baroness Noakes: My Lords, the world is waiting for the Government to announce whether they will reappoint the Governor of the Bank of England for a further term. The delay is bad for the Bank of England and bad for the perception of its independence. Is the road block in the Treasury or in No. 10?

Lord Davies of Oldham: My Lords, the road block is common sense. The appointment of the Governor of the Bank of England is not due until the middle of this year. To accelerate the process at this time would do nothing for the stability of the economy or confidence in the Bank of England. We should follow a normal course for that appointment. It is such a crucial appointment. The timetable is well established. Everyone knows what that timetable is. The Government are not producing a road block: they are just following common sense.

House of Lords: Appointments Commission

2.44 pm

Lord Steel of Aikwood asked Her Majesty’s Government:

The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Hunt of Kings Heath): My Lords, the Government will address this issue in their response to the recent report from the Public Administration Select Committee in another place.

Lord Steel of Aikwood: My Lords, I welcome that Answer as far as it goes. My Question was, of course, prompted by the fact that the Select Committee had asked in the wake of the cash for peerages question not only that this be done, but that it be done with a proper sense of urgency. In view of that, will the response indicate whether the Government will introduce legislation themselves or give support to my Bill, which is wending its weary way through Committee in this House?

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Lord Hunt of Kings Heath: My Lords, as the noble Lord knows—we had an interesting initial canter in Committee on Thursday—the Government in the House of Lords take a neutral position towards his Bill. We owe it to the Select Committee to give due consideration to our response to it. I ought also to say that we are engaged in a process that has led on from the votes of both Houses last year and the work of the cross-party working group. The Government’s aim is to produce a White Paper in due course.

Lord Lea of Crondall: My Lords, is my noble friend aware that most Members of this House have rumbled the objection that setting up the statutory Appointments Commission puts off the day of the revolution? We all know that that red letter day has already been postponed not by the noble Lord, Lord Steel, but by the Prime Minister.

Lord Hunt of Kings Heath: My Lords, there is certainly a lot of rumbling on this matter. All I would say to my noble friend, whose interest in this whole area is extremely helpful—

Noble Lords: Oh!

Lord Hunt of Kings Heath: My Lords, this is your Lordships’ House, you know. We have free votes in both Houses. We see the work of the cross-party working group as a very important way of allowing the political parties to discuss these very important matters. Although the vote of the other place was not greeted with acclamation in this House, it has none the less set the circumstances in which one could look to cross-party consensus, which is surely the way forward for major reform of your Lordships' House.

Lord Tyler: My Lords, does the Minister accept that the report of the Select Committee in the other place is of considerable interest to Members of this House? Can he give us an undertaking that there will be an opportunity to discuss the report and can he specifically comment on paragraph 181, which makes it clear that in the committee’s view much might be achieved without legislation?

Lord Hunt of Kings Heath: My Lords, the allocation of time is not a matter for me but I have no doubt that if noble Lords wish to debate the matter, the business managers will be their usual accommodating selves and allow that to happen. As regards the Select Committee’s recommendations, it is absolutely right that it said that action could be taken in advance of legislation. But rather than responding to that I should say that we are considering it very carefully. We will respond to the Select Committee in due course and we will deal with that matter then.

Baroness Boothroyd: My Lords, the Minister mentioned the publication of a White Paper “in due course”. What does “in due course” mean in governmental terms—March of this year or December of this year?

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Lord Hunt of Kings Heath: My Lords, I do not want to be pushed on that question, even by the noble Baroness. We want to get a move on. The discussions have gone well and are constructive. I very much hope that we can see the White Paper published in a few months, but it is surely better that we get it right and that we get as much agreement as possible rather than rushing into publication.

Lord Richard: My Lords, is my noble friend aware that he is absolutely right to resist the blandishments of the noble Lord, Lord Steel? Does he agree that the Question asks that a statutory Appointments Commission should take decisions,

of this House? Those are precisely the matters that this House and the other place have to decide themselves.

Lord Hunt of Kings Heath: My Lords, I have a great deal of sympathy with the point that the balance and size of a reformed House must command the confidence of Parliament. Obviously, these matters will need to be embraced in the forthcoming White Paper.

Lord Howarth of Newport: My Lords, have not the Government repeatedly said since 1999 that they think that the Appointments Commission should be put on a statutory basis? Given that it is obvious, not least from the proceedings in this Chamber last Thursday, that it is going to take a very long time indeed before consensus is reached on comprehensive reform of the second Chamber and, given that legislating without consensus would be a prolonged nightmare—worse even than legislating on the European Union treaty—why do the Government not grasp the opportunity presented in the Bill tabled by the noble Lord, Lord Steel of Aikwood, adopt it as their own and legislate for a solid and useful set of reforms for which there is widespread consensus?

Lord Hunt of Kings Heath: But, my Lords, I would have thought that our pleasant experience last Thursday show that nothing is easy when it comes to Lords reform. What set out, as the noble Lord, Lord Steel, suggested, as a pretty straightforward and simple Bill, frankly, found many of your Lordships not in support. That is why it is much better, in view of the votes that have taken place, to attempt comprehensive reform based on a White Paper, which I hope will appear in the manifestos of the political parties at the next election, and quick legislation would follow soon after. That is the way forward.

Baroness Symons of Vernham Dean: My Lords, does my noble friend agree that we are dealing with two different issues? It is one thing to talk about establishing the committee on a statutory basis and to have scrutiny of appointments to this House; it is quite another thing to allow that committee to take decisions on the size, balance and composition of this House. Enabling an unelected committee to do that would be undemocratic.

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Lord Hunt of Kings Heath: My Lords, that is certainly an important point. The Appointments Commission has come in for a mite of criticism in the years that it has been established but, if one looks at the names of the Peers who have been appointed to your Lordships’ House—more than 40 have been—one sees that the commission has come up with some outstanding people.

Duty-free Allowances

2.52 pm

Lord Marlesford asked Her Majesty’s Government:

Lord Davies of Oldham: My Lords, on 28 November 2006 European Union Finance Ministers agreed to raise the tax-free allowance for travellers entering the EU by air and sea to €430. This equates to about £290, which doubles the current allowance. However, the implementing EU directive was adopted only on 20 December 2007 and the earliest date that the increased allowance may be introduced is 1 December this year. The increase in the allowance will come into effect from that date.

Lord Marlesford: My Lords, does the Minister recollect what the Chancellor of the Exchequer said in his 2005 Budget speech? He said:

He repeated the proposal in his 2006 Budget, but did not mention it in his 2007 Budget. Will the Government at least undertake that a traveller from outside the EU who enters the UK through the green customs channel with up to £1,000 worth of goods, but who genuinely, if mistakenly, took Mr Gordon Brown’s Budget speech at face value, will not be prosecuted?

Lord Davies of Oldham: My Lords, that is an interesting proposal; but the noble Lord will recognise that we are governed not by ministerial Statements but by the law of the land. The Chancellor—now the Prime Minister—was putting forward a proposal for discussion in the European Community at the figure that the noble Lord identified, which was well suited to the United Kingdom. A number of other countries in the European Union took different views and it has taken this long to reach agreement.

Lord Pearson of Rannoch: My Lords, does not the Minister really mean that we are no longer governed by the law of this land, we are governed by Brussels? Does the Minister seriously think that the British people would have voted in 1975 to stay in what they were assured was a Common Market if they were going to have to put up with this sort of thing from Brussels a few years later?

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