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House of Lords

Wednesday, 22 April 2009.

3 pm

Prayers—read by the Lord Bishop of Ely.

Economy: Quantitative Easing


3.07 pm

Asked By Lord Barnett

The Financial Services Secretary to the Treasury (Lord Myners): My Lords, the Chancellor of the Exchequer and the Governor of the Bank of England discussed the use of the asset purchase facility for monetary policy purposes at a meeting on 5 February. The Chancellor stated this fact in his open letter to the governor on 3 March. Since then, the Chancellor has continued to have regular meetings with the governor to discuss a wide range of issues.

Lord Barnett: My Lords, I thank my noble friend, but does he accept that in current economic circumstances quantitative easing is likely to have an even greater impact on the economy than some of the helpful measures in the Budget? Does he agree that something like one-third of the amount initially said to be going out in quantitative easing—namely, £75 billion—has been spent so far? Is there a danger that the Governor of the Bank of England is being rather slow in handling this matter, or is it simply that the methods that he has chosen are not suitable? In the circumstances, it is urgent for industry and the banks that this is done well and properly in terms of amounts and the method of doing it. I hope that the Minister can assure us that it is not the governor who decides this but the Government.

Lord Myners: My Lords, I welcome my noble friend’s support for the Budget measures announced earlier today in the other place. Those measures complement the monetary policy that is being pursued, of which quantitative easing is now an important part in the context of low interest rates where the price of money can no longer be as effective in determining money nominal demand as was the case when interest rates were higher—hence the Bank of England, through the Monetary Policy Committee, is now also targeting the quantity of available money through the creation of central bank reserves in a non-sterilised fashion. It will take time to determine whether this works, as the governor has always said that it would, which is why he is phasing this in over time, with a target of £75 billion over a three-month period. We are seeing some very positive benefits. We have seen long gilt yields fall to low levels. We have seen a tightening of credit spreads. We have seen a reduction of LIBOR and an increased

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appetite on the part of banks to extend credit. The early signs of quantitative easing are encouraging but, by its very nature, it is a strategy that it is hard to measure over a very short period.

Lord Higgins: My Lords, does the Minister agree that it is crucial to distinguish between interest rate policy concerned with the price of money and monetary policy concerned with the supply of money? For the past 10 years, we have had only the policy from the Bank of England that is concerned with very short-term interest rates. The change to concern with the supply of money is welcome, but is it not the case—the noble Lord will correct me if I am wrong—that in the whole of this massive document there is no attempt to forecast what is going to happen to the supply of money? This is crucial if we are to understand what is happening in the economy.

Lord Myners: My Lords, what is crucial is that the conduct of monetary policy continues to be focused on managing inflation to a 2 per cent target, which was restated by my right honourable friend in the other place in the Budget speech earlier today, and that the control of monetary policy and the achievement of that inflation goal lies in the hands of the MPC. It was the MPC that advised the Government that the limitations of interest rate movements in affecting money aggregate demand were severely diminished by the fact that interest rates are now at a level that we have not seen for 350 years, as a result of which the MPC had to reach out for what the governor described as unconventional methods—that is to say, quantitative easing. I should add that we are not alone in this; the Swiss are engaging in quantitative easing and the Americans are engaged in both quantitative and qualitative easing.

Lord Newby: My Lords, the Minister said that there are positive benefits to this policy and that the Government envisage that £75 billion will be created over three months. Now that we are some way into the three months, have the Government yet formed a view about what might happen at the end of the period? Will the £75 billion be it, or might we see another £75 billion or £50 billion in the succeeding three months?

Lord Myners: My Lords, this is a matter on which we will take advice from the Monetary Policy Committee and the governor.

Lord Lamont of Lerwick: My Lords, while I support the principle, in theory at least, of quantitative easing, I agree with what my noble friend Lord Higgins said. Is not an inflation target the end, while money is the means by which the inflation target is achieved? Is it not therefore regrettable that, when the Government restated the inflation target when it gave the Bank of England independence, they abolished all monitoring ranges for money, because money is actually how you determine inflation?

Lord Myners: My Lords, the belief that money measurement is the key to economic management was much more strongly held in the 1970s and 1980s than it is now. Let us remember that since the Government gave the Monetary Policy Committee responsibility for targeting inflation and setting interest rates, we

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have had a truly extraordinary period of continuing low inflation. It is to the credit of the mechanism and the Bank of England that that has been achieved without a lot of gobbledegook about different forms of monetary measurement.

Lord Butler of Brockwell: My Lords, the Minister told the House that it is the Government’s policy fully to fund their borrowing requirement and for the monetary authorities, if they think fit, to inject liquidity into the economy by buying back gilts. Would it be practicable in the converse situation for the monetary authorities to overfund the Government’s borrowing requirement, as may be necessary before too long?

Lord Myners: My Lords, that is a possibility, but it is not under contemplation at all in economic management at the moment. It will clearly be necessary at some point in the future to reverse the impact of quantitative easing, which we will do through increases in interest rates, allowing existing bonds to mature and selling stock from the APF back into the marketplace.



3.14 pm

Asked By Lord Roberts of Conwy

The Parliamentary Under-Secretary of State, Department for Work and Pensions (Lord McKenzie of Luton): My Lords, in the quarter to February 2009, 2,100,000 people were ILO unemployed. In March 2009, 1,464,100 people were claiming jobseeker’s allowance.

Lord Roberts of Conwy: My Lords, those figures in fact conceal considerable increases of 177,000 in the quarterly figure from the previous quarter and 73,700 in claimant numbers at the end of March as opposed to February. Does the Minister believe that we can expect similar increases over the months to come—say, the next 18 months—as many people expect in spite of whatever the Government may do, or does he believe that the recession will be short-lived and that the green shoots are already sprouting or are about to sprout?

Lord McKenzie of Luton: My Lords, I say at the start that I do not think that the Answer was meant to conceal any figures. It was meant to be a direct response to the Question. The data are in the public domain and are published by the Office for National Statistics. We know that these are tough times and that these figures are challenging. We are very clear about that. I think that today my right honourable friend the Chancellor of the Exchequer said that, although his projection is that the economy will begin to turn up at the end of the year, unemployment is unlikely to come down within that timeframe but will increase for some while. We cannot stop people falling out of work; what we can do and are doing as a Government is to support

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people back into work as quickly as possible to ensure that we do not replicate the mistakes of the past where we had cycles of worklessness and the deprivation that that entailed.

Lord Davies of Coity: My Lords, of course unemployment is very bad for the people who are experiencing it and we want to eradicate it, but can the Minister tell the House how many people are in the employment market today compared with 1997?

Lord McKenzie of Luton: My Lords, indeed I can, as it happens. My noble friend makes a very important point about what has happened in the labour market. At the beginning of 2008, the claimant count was at its lowest level for 30 years and employment was at an historic high. Currently, 29.267 million people are in employment. In 1997, the figure was some 3 million lower and, going back to the recessions of the early 1990s, it was 4 million lower.

Lord Oakeshott of Seagrove Bay: My Lords, we may not be able to see green shoots but we can certainly see a green plant on the Labour Back Benches. Did the Minister notice in the figures today the very chilling increase in the redundancies total? The number has more than doubled over the past year, with an increase of 40 per cent in the past quarter alone. In construction, there has been a fourfold rise in the figures. They are a very chilling forward indicator of unemployment. Can he draw these figures to the attention of any of his ministerial colleagues who might be in danger of suffering another embarrassing attack of green shoot-itis?

Lord McKenzie of Luton: My Lords, the noble Lord is right to say that in the figures that were recently announced there was an increase in the number of redundancies. Again, I am sure that he heard the Budget speech earlier. With the extra support announced in the Budget today, the Chancellor is building on the support given to business in the Pre-Budget Report and what has flowed from that, and there are also the issues that my noble friend Lord Myners has just talked about. However, I remind the noble Lord that, despite the challenges of redundancy levels and the total claimant count, something like 10,000 jobs are still coming into Jobcentre Plus offices each working day and many more are arising. Although there were around 363,000 new claims for JSA, in the past month 275,000 people flowed off JSA, so it is a dynamic situation.

Lord Soley: My Lords, does my noble friend agree that at a time of increasing and perhaps inevitably rising unemployment the key is to ensure that the right training schemes are available, particularly for the emerging new economy, and that the statements made today and at other times are very important in that respect? Perhaps we should also remind ourselves that one of the successes which is not referred to very often is that, both now and over the past few years, the unemployment rate in this country has been significantly lower than the rates for all our major European competitors? That shows the success of the economy as well. But training is the key.

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Lord McKenzie of Luton: My Lords, my noble friend is right about the data on our comparative position. I think that we have the second highest employment rate in the G7 and the second lowest unemployment rate. He is also absolutely right about the importance of training and support. It is why today’s Budget allocated an additional £1.7 billion to Jobcentre Plus, so that it can continue its strong programmes of support, plus a £1.2 billion package of support for young people between the ages of 18 and 24 who have been claiming jobseeker’s allowance for 12 months or more.

Lord Ryder of Wensum: My Lords, in view of the fact that this morning the Chancellor forecast that the economy would, incredibly, grow by 3.5 per cent in 2011—in other words, at a faster rate of growth than at any time during the Brown boom years, before the Brown bust—when does the Minister expect unemployment to fall?

Lord McKenzie of Luton: My Lords, the Government are not in the business of offering projections on—

Noble Lords: Oh!

Lord McKenzie of Luton: We do not, my Lords, and neither have previous Governments. However, we are in the business of ensuring that there is the infrastructure and capacity in the system to support people as they fall out of work, to prevent them falling out of work where we can by supporting the business community, and to help them get back into work as quickly as possible when they do fall out.

Lord Tomlinson: My Lords, in concluding this short exchange of views, perhaps my noble friend will bring some noble Lords opposite back to reality by reminding them where the unemployment crisis began. It began with the irresponsibility of the banks, the financial sector and the big six audit companies which took £600 million in fees for auditing the banks but between them could find nothing out of order to report. That is the cause of the current unemployment.

Lord McKenzie of Luton: My Lords, my noble friend makes some interesting observations, particularly on auditing firms. He is quite right that the UK economy is suffering from what economies across the globe are suffering from. We know that that was generated in particular by a banking crisis and irresponsible actions. That is why my noble friend Lord Myners has said today and previously that it was very important for the banking system to be stabilised at a macro level so that the economy could expand as a result.



3.23 pm

Asked By The Lord Bishop of Southwell and Nottingham

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The Parliamentary Under-Secretary of State, Ministry of Justice (Lord Bach): My Lords, the Government announced in June 2007 that the case for re-using old graves had been accepted in principle. The matter is being kept under review.

The Lord Bishop of Southwell and Nottingham: My Lords, I thank the Minister for his reply, but this is a country where there are widespread conurbations and a shortage of green space. On 2 April the Parliamentary Under-Secretary of State wrote to the chairman of the Churches Funeral Group explaining that,

Why, after eight years of discussion, is there a shortage of parliamentary time for legislation, or is there a more fundamental reason?

Lord Bach: My Lords, this remains a sensitive issue; that should not be a surprise to the House. Research indicates that a good proportion of individuals when asked are concerned and doubtful about the issue. I hope that the right reverend Prelate and others in the House agree that on issues such as this, it is important to take people with you to try to achieve consensus—

Noble Lords: Oh!

Lord Lloyd of Berwick: My Lords, the noble Lord has said that the Government are keeping the position under review. What is there to review? What is likely to change? Does he not accept that people are likely to go on dying in London at roughly the same rate and that some of them will want to be buried in London? Why cannot the Government make the only sensible decision now?

Lord Bach: My Lords, I need to tell the noble and learned Lord that in London they can. London local authorities, after the passing of the London Local Authorities Act 2007, can disturb existing remains in the grave to create space for new interments, provided that various qualifications are met: that they have complied with earlier Acts; that they have given notice of their intentions to the family—if the family says no, that is the end of the matter for a generation—where the remains are in consecrated ground, that they have obtained a faculty from the Consistory Court; and that the family does not object to the proposed disturbance of the remains. In London, that can happen now.

Lord Henley: My Lords, if the Government can, after eight years, find a way to resolve that in London, why cannot they resolve it in the rest of the country, especially in the other big conurbations where there are similar problems?

Lord Bach: My Lords, it was resolved in London by way of a Private Act. Other local authorities are absolutely entitled to bring Private Bills to Parliament and carry them through, so it is not a matter for the Government in that regard.

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Lord Thomas of Gresford: My Lords, from what he has said, I think that the Minister would agree that graves are not just a piece of ground but a place of pilgrimage for many people. I would be grateful if he could assure us that when this matter is reviewed, a mechanism will be in place to consult families for any such re-use of graves.

Lord Bach: My Lords, I agree absolutely with the noble Lord. This is a sensitive issue that needs to be handled delicately. A possible scheme would require prior local consultation for a reasonable period. It would also have to give direct descendants and religious organisations the power to prevent the re-use of individual graves for at least a generation. What families feel is vital.

Lord Pilkington of Oxenford: My Lords, forgive me for saying this, but has the Minister considered the medieval practice of burying people in shrouds? Medieval graveyards were used for 1,000 years and re-used without a problem. I will pay money to anyone who can produce a tombstone previous to about 1670 in a graveyard. Surely the public can be persuaded to follow the wisdom of their predecessors.

Lord Bach: My Lords, I am sure that we can learn a lot from the Middle Ages, but I am not sure that we can in this regard.

Lord Mawhinney: My Lords, do the Government have a policy to support or even promote environmentally compatible burials outside traditional burial grounds or crematoria? If so, what form does that policy take?

Lord Bach: My Lords, that is obviously a consideration. As the noble Lord knows, a case has been recently before the court that touches on the question that he raises. As I understand it, there is a reserved judgment from the Divisional Court. We would like to see the results of that case before commenting.

Lord Trefgarne: My Lords, could not one part of the solution to this problem be to persuade more people to be cremated? What is the Government’s policy in that regard?

Lord Bach: My Lords, I do not agree with the noble Lord. How people deal with relations of theirs who have died should be their choice, frankly. If the Government were to interfere, they really would be a bullying Government. As the House knows, we are not that. I should tell the noble Lord that 70 per cent of people choose to have their relatives cremated at the moment, and about 30 per cent are buried.

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