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Banking Bill

One of the first things I learnt about being active in politics was always to stay to the end of the meeting. The noble Lord, Lord Saatchi, has followed that injunction, sitting quietly listening to our deliberations for eight hours. I am pleased to welcome him back to our debates on economic policy and to those heady days when we were discussing the then Bank of England Bill. I am afraid I never altogether agreed with him then and I do not now on this subject. The problem of the Bank of England or the Monetary Policy Committee is when you give it one shot but two targets. The great advantage of the remit at the moment is that it has one shot in its locker, which is the interest rate, and one target, which is the inflation rate. That makes it much easier for it to do the job. As it happens, most of the criticism of the MPC for most of its period is that it kept interest rates too high, that it could have reduced interest rates further to promote growth and employment, and that, far from it being a profligate institution about interest and inflation rates, it erred on the side of caution. Also, from the beginning of last year David Blanchflower, a member of the MPC, argued that, given what was coming down the track in inflation as much as anything else, the Bank should have been cutting interest rates. Even within the existing remit of the MPC it would have been completely possible for it to cut interest rates quicker than it did. We objected that it seemed to be slow in reducing rates dramatically in the autumn, but at that point our solution was for the Treasury to invoke the provision in the Bank of England Act that would allow it in exceptional circumstances, which these undoubtedly were, to override the basic interest rate target and to set different objectives for the MPC. We thought that the Government could and should have acted in that regard. As it happened, it would have made very little difference because the Bank acted of its own volition probably within about a fortnight of our feeling that it should have moved more quickly. I am sorry not to be able to support the amendment. I do not know whether the noble Lord intends to speak separately and in detail to Amendment 198B. If he does, I shall respond to it then.