My Lords, I thank my noble friend for his Question, with which I know for a fact that my noble friend Lord Barnett was in total agreement. I also thank the Minister for his kind remarks, because he might be forgiven for thinking that one of Lord Barnett’s missions in life was to make his life a total misery. Lord Barnett will be remembered for his formula, but those of us in this House will surely remember that he contributed to a vast number of other topics and therefore deserves to be remembered for all that as well. I think we all agree that he will be missed much more than, perhaps, some of us when our time comes.

My Lords, I thank my noble friend for his Question, with which I know for a fact that my noble friend Lord Barnett was in total agreement. I also thank the Minister for his kind remarks, because he might be forgiven for thinking that one of Lord Barnett’s missions in life was to make his life a total misery. Lord Barnett will be remembered for his formula, but those of us in this House will surely remember that he contributed to a vast number of other topics and therefore deserves to be remembered for all that as well. I think we all agree that he will be missed much more than, perhaps, some of us when our time comes.

I congratulate my noble friend for raising this Question, but I am sorry to say that I disagree with him. Changing the name of the Bank of England would be economically very damaging to our country. Is the Minister aware that there is a lesson to be drawn from this? It is mainly that making constitutional changes on the hoof is not the right way to do this sort of thing. The next time he sees his right honourable

friend the Prime Minister, will he tell him that the way to go on in this area is to think before you speak and not the other way round?

I congratulate my noble friend for raising this Question, but I am sorry to say that I disagree with him. Changing the name of the Bank of England would be economically very damaging to our country. Is the Minister aware that there is a lesson to be drawn from this? It is mainly that making constitutional changes on the hoof is not the right way to do this sort of thing. The next time he sees his right honourable

friend the Prime Minister, will he tell him that the way to go on in this area is to think before you speak and not the other way round?

In particular so that he can occupy his usual place and ask some really difficult questions.

In so far as I understand this subject at all, is it not the case that aggressive tax avoidance leaves companies making enormous sums of money and millionaires paying lower rates of tax than those with average or around average incomes? Does this not bring the whole tax system in our country into disrepute? How urgently are the Government trying to deal with aggressive tax avoidance, with a view to punishing those who do it?

In particular so that he can occupy his usual place and ask some really difficult questions.

In so far as I understand this subject at all, is it not the case that aggressive tax avoidance leaves companies making enormous sums of money and millionaires paying lower rates of tax than those with average or around average incomes? Does this not bring the whole tax system in our country into disrepute? How urgently are the Government trying to deal with aggressive tax avoidance, with a view to punishing those who do it?

My Lords, to place this important Question in context, is it the Government’s view that there are two possible aims of economic policy: the first is that we should maintain as high a rate of real, sustainable growth as is feasible, and the second is that we should maintain a stable, low inflation rate? Bearing in mind that those two objectives are not always compatible, what is the Government’s view of what the policymakers ought to be doing at the moment?

My Lords, to place this important Question in context, is it the Government’s view that there are two possible aims of economic policy: the first is that we should maintain as high a rate of real, sustainable growth as is feasible, and the second is that we should maintain a stable, low inflation rate? Bearing in mind that those two objectives are not always compatible, what is the Government’s view of what the policymakers ought to be doing at the moment?

My Lords, as background to this Question, we should remember that when we were debating the 1998 Act the Minister went to great lengths to emphasise that the activities of the Monetary Policy Committee would be scrutinised not only by other place but also by this House. Certainly, when I was chairman of the Economic Affairs Committee—a committee I invented, as the Minister is well aware—we used to see the Governor of the Bank of England regularly. All that is background to a very simple question: when was the last time that the Governor of the Bank of England went to the Economic Affairs Committee and was scrutinised by it?

My Lords, as background to this Question, we should remember that when we were debating the 1998 Act the Minister went to great lengths to emphasise that the activities of the Monetary Policy Committee would be scrutinised not only by other place but also by this House. Certainly, when I was chairman of the Economic Affairs Committee—a committee I invented, as the Minister is well aware—we used to see the Governor of the Bank of England regularly. All that is background to a very simple question: when was the last time that the Governor of the Bank of England went to the Economic Affairs Committee and was scrutinised by it?

My Lords, I must apologise to your Lordships for being an economist and for allowing some economics to get into an economics question. Is the Minister aware of the research evidence on these matters, which is that we need some inequality in our society in order to provide a proper incentive system? However, it is possible—and it is almost certainly the case in our country—that we have far too much inequality, which is a disincentive to economic growth. The Government do not seem to understand that, but when the Labour Government take over next year they will understand it and will deal with the matter.

My Lords, I must apologise to your Lordships for being an economist and for allowing some economics to get into an economics question. Is the Minister aware of the research evidence on these matters, which is that we need some inequality in our society in order to provide a proper incentive system? However, it is possible—and it is almost certainly the case in our country—that we have far too much inequality, which is a disincentive to economic growth. The Government do not seem to understand that, but when the Labour Government take over next year they will understand it and will deal with the matter.

My Lords, is the Minister aware that quite a few people in full-time employment are in jobs below their qualifications and abilities, so the figures need to be looked at more carefully? Much more to the point, is he aware that if we look at the present state of the British economy, to cite that great liberal economist John Maynard Keynes, it is nowhere near full employment and the Government’s policies will never get us there?

My Lords, is the Minister aware that quite a few people in full-time employment are in jobs below their qualifications and abilities, so the figures need to be looked at more carefully? Much more to the point, is he aware that if we look at the present state of the British economy, to cite that great liberal economist John Maynard Keynes, it is nowhere near full employment and the Government’s policies will never get us there?

My Lords, the noble Lord, Lord Forsyth, referred to raising standards for all children. If the schools that the Minister is talking about are so good, why do not any noble Lords opposite send their own children—or more likely, their grandchildren—to those schools, as many of us did, because we felt it was our responsibility to be supportive of local schools?

My Lords, the noble Lord, Lord Forsyth, referred to raising standards for all children. If the schools that the Minister is talking about are so good, why do not any noble Lords opposite send their own children—or more likely, their grandchildren—to those schools, as many of us did, because we felt it was our responsibility to be supportive of local schools?

My Lords, first, I congratulate my noble friend on asking this important Question, although I hope he would agree that it is not only small firms that suffer from the late payment problem. All firms tend to find that the problem arises. Does the Minister agree that there are two aspects to this Question? One is an ethical aspect: namely, businesses simply should not, as a matter of course, use late payment as their method of financing themselves temporarily. Do the Government agree that this is a serious ethical problem and that businesses ought to start to behave better? The second aspect is an economic one. Does the Minister agree that, rather like the parable of the fleas, if a big firm does not pay the next firm down, it in turn will not pay the next firm down and it will go on ad infinitum until eventually someone will go broke? When they go broke, lots of firms will go broke and the system will become destabilised. Does the Minister agree that the last thing this country needs is any new form of destabilisation?

My Lords, first, I congratulate my noble friend on asking this important Question, although I hope he would agree that it is not only small firms that suffer from the late payment problem. All firms tend to find that the problem arises. Does the Minister agree that there are two aspects to this Question? One is an ethical aspect: namely, businesses simply should not, as a matter of course, use late payment as their method of financing themselves temporarily. Do the Government agree that this is a serious ethical problem and that businesses ought to start to behave better? The second aspect is an economic one. Does the Minister agree that, rather like the parable of the fleas, if a big firm does not pay the next firm down, it in turn will not pay the next firm down and it will go on ad infinitum until eventually someone will go broke? When they go broke, lots of firms will go broke and the system will become destabilised. Does the Minister agree that the last thing this country needs is any new form of destabilisation?

My Lords, will the Minister cast his mind back to when your Lordships debated what is now the Bank of England Act? My noble friend Lord Barnett and I put down an amendment precisely to achieve the flexibility which is in this command paper. We were not told that the flexibility was already there, which is what the command paper says. We were told that we were idiots, and that the remit of the Monetary Policy Committee was to hit the inflation target—only after that could it look at anything else. The Government have produced a sleight of hand here. I favour it, let me add, but it is a sleight of hand.

Will the noble Lord consider the central question which arises in this context, bearing in mind that the two greatest liberal thinkers of the 20th century, Lord Beveridge and Maynard Keynes, both placed the attainment of full employment at the centre of government macroeconomic policy? Can the noble Lord tell us whether under the new regimen that we are now offered, there is any hope within my lifetime—younger Members may have something more to look forward to—that we shall at last get back to what those two great thinkers said: full employment is a must?

My Lords, will the Minister cast his mind back to when your Lordships debated what is now the Bank of England Act? My noble friend Lord Barnett and I put down an amendment precisely to achieve the flexibility which is in this command paper. We were not told that the flexibility was already there, which is what the command paper says. We were told that we were idiots, and that the remit of the Monetary Policy Committee was to hit the inflation target—only after that could it look at anything else. The Government have produced a sleight of hand here. I favour it, let me add, but it is a sleight of hand.

Will the noble Lord consider the central question which arises in this context, bearing in mind that the two greatest liberal thinkers of the 20th century, Lord Beveridge and Maynard Keynes, both placed the attainment of full employment at the centre of government macroeconomic policy? Can the noble Lord tell us whether under the new regimen that we are now offered, there is any hope within my lifetime—younger Members may have something more to look forward to—that we shall at last get back to what those two great thinkers said: full employment is a must?

My Lords, is the noble Lord aware that research evidence shows categorically that if you want to get the debt to GDP ratio down, the vital ingredient is to increase the rate of growth of GDP? That is the way to do it. Measures such as raising taxes or cutting the deficit by cutting large chunks of public expenditure simply do not work. Overall, the lesson

we have to learn is that an austerity package is not required; a package concentrating on raising GDP is the correct policy.

My Lords, is the noble Lord aware that research evidence shows categorically that if you want to get the debt to GDP ratio down, the vital ingredient is to increase the rate of growth of GDP? That is the way to do it. Measures such as raising taxes or cutting the deficit by cutting large chunks of public expenditure simply do not work. Overall, the lesson

we have to learn is that an austerity package is not required; a package concentrating on raising GDP is the correct policy.

I know I do not have to tell the noble Lord not to count chickens, and I know I do not have to remind him that good news may be good news but let us wait for things actually to happen. However, to be serious about this subject, surely what is needed is for Britain to get back on to its long-term sustainable rate of growth and, better still, to raise that long-term sustainable rate of growth. Neither of those things can possibly happen for the next three years, despite what the noble Lord opposite said about supporting current policies. Would it not be a good thing if, instead of the individual countries of Europe all going their own separate ways, we at long last had, as was intended when we set up the Common Market, a joint European economic policy? I think that that would lead to major growth throughout this continent.

I know I do not have to tell the noble Lord not to count chickens, and I know I do not have to remind him that good news may be good news but let us wait for things actually to happen. However, to be serious about this subject, surely what is needed is for Britain to get back on to its long-term sustainable rate of growth and, better still, to raise that long-term sustainable rate of growth. Neither of those things can possibly happen for the next three years, despite what the noble Lord opposite said about supporting current policies. Would it not be a good thing if, instead of the individual countries of Europe all going their own separate ways, we at long last had, as was intended when we set up the Common Market, a joint European economic policy? I think that that would lead to major growth throughout this continent.

I congratulate the noble Lord on his answer, which seems to me for once to be entirely right. The exchange rate did collapse but it had no noticeable effect on improving the balance of payments, as he said, because the supply side of our economy has not been able to respond. Apart from that—theoretically—we do not know whether it is the balance of payments that affects the exchange rate, the exchange rate that affects the balance of payments, or whether it is the two interacting. In other words, we do not know very much about this at all. A sensible Government will therefore concentrate on trying to improve the supply side of the economy and leave the exchange rate to go where it will.

I congratulate the noble Lord on his answer, which seems to me for once to be entirely right. The exchange rate did collapse but it had no noticeable effect on improving the balance of payments, as he said, because the supply side of our economy has not been able to respond. Apart from that—theoretically—we do not know whether it is the balance of payments that affects the exchange rate, the exchange rate that affects the balance of payments, or whether it is the two interacting. In other words, we do not know very much about this at all. A sensible Government will therefore concentrate on trying to improve the supply side of the economy and leave the exchange rate to go where it will.

My Lords, according to this bit of paper the original Question asked “what assessment” the Government have made. As far as I can see, they have made no assessment. Does the noble Lord remember, from whenever he learnt some economics, that economic theory does not tell us anything at all about the optimum rate of tax? This is because people with a greater preference for leisure will work less and pay less tax, if you cut the tax. That is why economics and economists are such a pain in the neck.

My Lords, according to this bit of paper the original Question asked “what assessment” the Government have made. As far as I can see, they have made no assessment. Does the noble Lord remember, from whenever he learnt some economics, that economic theory does not tell us anything at all about the optimum rate of tax? This is because people with a greater preference for leisure will work less and pay less tax, if you cut the tax. That is why economics and economists are such a pain in the neck.

My Lords, given the economic mess that the Government’s policies have got the whole country into…

My Lords, given the economic mess that the Government’s policies have got the whole country into…

My Lords, does the Minister agree— I am sure he will agree as his background is similar to my own on this matter—that there is no such thing as a perfect price index—far from it? Those of us who taught the subject spent all the time explaining why there is no such thing. Is it not for the Government to explain what they want to use this particular index for? Is it to measure the inflation rate, in which case

the RPI is not, in my view, the right index and the GDP deflator is, or is it to measure the cost of living? Even then, they have to answer the question: whose cost of living? Does the Minister agree with that?

My Lords, does the Minister agree— I am sure he will agree as his background is similar to my own on this matter—that there is no such thing as a perfect price index—far from it? Those of us who taught the subject spent all the time explaining why there is no such thing. Is it not for the Government to explain what they want to use this particular index for? Is it to measure the inflation rate, in which case

the RPI is not, in my view, the right index and the GDP deflator is, or is it to measure the cost of living? Even then, they have to answer the question: whose cost of living? Does the Minister agree with that?

My Lords, given the massive size of the current account deficit—almost unprecedented—would it not be to the advantage of our country to improve the competitiveness of UK industry if the external value of sterling fell drastically?

My Lords, given the massive size of the current account deficit—almost unprecedented—would it not be to the advantage of our country to improve the competitiveness of UK industry if the external value of sterling fell drastically?

May I break the habit of a lifetime by saying how much I agree with the opening remarks of the noble Lord, Lord Lawson? In all the years we have known each other, I think that is a one-off. As far as I recall, the Minister did not take part in the deliberations on the 1998 Act. He is indicating that he did. Then he must remember that the noble Lord, Lord Barnett, and I spent a large part of our time trying to move the Monetary Policy Committee’s remit in exactly the direction in which the Government are moving it; and claim to be moving it, let me add—the relevant words are there in the speech of the Chancellor and that of the noble Lord, Lord Deighton. They have updated it. My knowledge of the English language is not that large, but I think that “update” means change. How have they produced this most remarkable sleight of hand? The noble Lord, Lord Barnett, and I were told regularly that we could not change the remit because amendments were not acceptable to the Government. How has the Chancellor produced an extraordinary sleight of hand and changed the remit without bringing it before Parliament?

May I break the habit of a lifetime by saying how much I agree with the opening remarks of the noble Lord, Lord Lawson? In all the years we have known each other, I think that is a one-off. As far as I recall, the Minister did not take part in the deliberations on the 1998 Act. He is indicating that he did. Then he must remember that the noble Lord, Lord Barnett, and I spent a large part of our time trying to move the Monetary Policy Committee’s remit in exactly the direction in which the Government are moving it; and claim to be moving it, let me add—the relevant words are there in the speech of the Chancellor and that of the noble Lord, Lord Deighton. They have updated it. My knowledge of the English language is not that large, but I think that “update” means change. How have they produced this most remarkable sleight of hand? The noble Lord, Lord Barnett, and I were told regularly that we could not change the remit because amendments were not acceptable to the Government. How has the Chancellor produced an extraordinary sleight of hand and changed the remit without bringing it before Parliament?

My Lords, I apologise to noble Lords for intervening twice in the same Question Time, which is not my wont, but I am very intrigued by the Question. Will the Minister say whether her department actually collects data on the nationality of rough sleepers? Secondly, are Poles disproportionately represented in that database? Thirdly, is she aware that if she were looking for a good Keynesian expansionary policy to get the economy going, collecting useless data is one of the best things I can think of?

My Lords, I apologise to noble Lords for intervening twice in the same Question Time, which is not my wont, but I am very intrigued by the Question. Will the Minister say whether her department actually collects data on the nationality of rough sleepers? Secondly, are Poles disproportionately represented in that database? Thirdly, is she aware that if she were looking for a good Keynesian expansionary policy to get the economy going, collecting useless data is one of the best things I can think of?

My Lords, bearing in mind that Section 19 of the Bank of England Act 1998 gives reserve powers to the Treasury to give directions to the Bank of

England, am I right that those powers have never been used? I am pretty sure that I am right. Does it not follow that the failure—despite the fact that the Act says that this is the MPC’s objective—to hit the inflation target for three years without the slightest sign that it will be hit for the next two years, coupled with monetary easing, is down to the MPC?

My Lords, bearing in mind that Section 19 of the Bank of England Act 1998 gives reserve powers to the Treasury to give directions to the Bank of

England, am I right that those powers have never been used? I am pretty sure that I am right. Does it not follow that the failure—despite the fact that the Act says that this is the MPC’s objective—to hit the inflation target for three years without the slightest sign that it will be hit for the next two years, coupled with monetary easing, is down to the MPC?