§ '—The Chancellor of the Exchequer shall not make any appointment under section 13(2)(c) until the Treasury Select Committee of the House of Commons has—
- (a) been consulted on the establishment of a procedure of open competition in relation to such appointments,
- (b) held a confirmatory hearing or hearings on the suitability of any person nominated following the procedure mentioned in sub—paragraph (a), and
- (c) reported to the House of Commons its approval of that person's appointment.'.—[Mr. Heathcoat-Amory.]
§ Brought up, and read the First time.
§ 4.3 pm
§ Madam Speaker
With this, it will be convenient to discuss the following: New clause 3—Confirmation hearings for Bank appointments—
§ '—(1) The Treasury Committee of the House of Commons may, within thirty calendar days of a nomination being made in relation to an appointment under sections 1(2) or 13 of this Act, make a report to the House of Commons—
- (a) stating its conclusion that a nominee for the post of Governor or Deputy Governor meets the criteria of competence and personal independence or that a nominee for membership of the Monetary Policy Committee meets the criteria specified in'section 13(4), or
- (b) giving its reasons for considering that a nominee for the post of Governor or Deputy Governor does not meet the criteria of competence and personal independence or that a nominee for membership of the Monetary Policy Committee does not meet the criteria specified in section 13(4), and inviting the Chancellor of the Exchequer to reconsider the nomination.
§ (2) A nomination of which the Committee signifies its approval or on which it decides not to make a report to the House of Commons shall be confirmed by the Chancellor of the Exchequer on receipt of the Committee's report or after thirty days, whichever is the sooner.
§ (3) A nomination which the Committee invites the Chancellor to reconsider shall not be confirmed until seven days after the Chancellor has written to the Treasury Committee giving his reasons for continuing with the nomination.
§ (4) The provisions of subsections (1) (2) and (3) above shall apply only when the Treasury Committee has been formally constituted.
§ (5) If at any time after the passing of this Act—
- (a) the name of the Treasury Committee is changed; or
- (b) the functions discharged by that Committee at the passing of this Act, or functions substantially corresponding thereto, are discharged by a different Committee,
§ (6) Any question arising under subsections (4) and (5) shall be determined by the Speaker of the House of Commons.'.1156
Amendment No. 34, in clause 1, page 1, line 10, at end insert—
'(2A) The directors of the Bank shall be representative of the different regions of the United Kingdom.'.
Amendment No. 29, in clause 13, page 5, line 27, at end insert—
'(2A) No person shall be appointed under subsection (2)(b) or (c) unless he is a British subject.'.
Amendment No. 31, in page 5, line 35, after `experience,', insert
',including knowledge or experience of manufacturing industry,'.
Amendment No. 28, in page 5, line 35, at end insert
'and that his views on monetary policy have been made known to Parliament.'.
Amendment No. 3, in page 5, line 35, at end insert—
(4A) No person shall be appointed under subsection 2(c) if he has within the preceding five years been an employee of the Bank.'.
§ Amendment No. 18, in schedule 3, page 21, line 31, leave out 'or (c)'.
§ Amendment No. 20, in page 21, line 32, leave out '3' and insert '4'
Amendment No. 19, in page 21, line 34, at end insert—
'1A Appointment as a member of the Committee under section 13(2)(c) shall be for a period of four years.'.
§ Mr. Heathcoat-Amory
The House will recall that at the centre of the Bill is the proposal to set up a Monetary Policy Committee to take all decisions relating to short-term interest rates. Indeed, it is already operating, and the Bill gives it statutory force. That is a major departure from previous practice, under which interest rates were set by the Chancellor of the Exchequer after consulting and receiving advice from the Bank of England.
The new clause would give the House some influence over appointments to the Bank, and specifically to the Monetary Policy Committee, through the Treasury Select Committee. As the Bill stands, the Chancellor has truly awesome powers of patronage. He will directly appoint most of the members of the Monetary Policy Committee. The Governor and the deputies will be appointed separately, but on the recommendation of the Prime Minister, so those appointments are also effectively in the hands of the Executive.
The Chancellor will be consulted on the appointment of two of the bank representatives on the Monetary Policy Committee, so he effectively has a veto on those appointments as well. The four other outside appointments to the Monetary Policy Committee are entirely in the Chancellor's gift. It is obvious that this very important new body is effectively, and in practice, a creature of the Executive, and specifically of the Chancellor.
Committee members will be appointed for only three years, so they will have little time to build up any independent authority before facing re-election and coming again under the Chancellor's discretion. That contrasts sharply with practice overseas. The Bundesbank, for instance, makes its equivalent appointments for a term of eight years, giving the members real authority and independence that stretches beyond, for instance, any one Parliament. The three-year term proposed in our case means that people will face reappointment within a single Parliament.
1157 Members of the relevant committees of the Federal Reserve bank in the United States are appointed for 14 years, so they are not only much more independent in the method by which they are appointed but have a long period of service, which gives them real authority and standing, and the ability, when necessary, to stand up to the Executive and assert their own judgment against political interference. That is not what we will have here.
That is why some of our amendments attempt to establish a longer term of office for the appointees, and I urge the House to support them; but I speak chiefly in support of the new clause, which picks up an idea first floated by the Treasury Select Committee. The Select Committee's members are drawn from all parties, it has a distinguished Labour Chairman, the hon. Member for North Durham (Mr. Radice), and its report was unanimous, so I advance these ideas in the spirit of the House of Commons trying to improve legislation and achieve some influence on the proposed procedure. Otherwise, we are faced with a quango. The Government are in danger of being seen to set up a quango, which they will appoint and on which no restraint is placed.
Hon. Members will remember that, before the election, we heard a lot of windy rhetoric from the then Opposition about how they wished to democratise quangos and make them more accountable. Of course, they have not done that. Indeed, they are creating many more quangos. We are debating just such an advance. Moreover, not only will the Monetary Policy Committee be a quango itself, but it will report to another quango, the court of directors of the Bank. Members of that court are also appointed by the Chancellor of the Exchequer, and their term of office is being reduced from four years to three. We face the rather alarming prospect of one quango reporting to another.
The reason why that is wrong, even according to the Government's own logic, is that it undermines the credibility of what the Government are trying to do: set up an anti-inflation strategy free from political interference. That is not achieved by setting up a body which is so obviously not free from political interference. For the reasons that I have described, the Monetary Policy Committee will be an offshoot of the Treasury.
The other reason why the proposal is wrong is that there are disturbing examples of how the Government respond to pressure. We all remember the episode of formula one and tobacco sponsorship. In that case, the Government changed their policy. Indeed, they broke an election promise because they came under pressure from a very rich donor to the Labour party. It is therefore not good for the Government to be trusted to make impartial appointments to the new, important body that will set interest rates, given that their record is already so unfortunate. It is vital that the appointments are made on merit in an unbiased and impartial way.
§ Ms Ruth Kelly (Bolton, West)
Does the right hon. Gentleman think that the credibility of Government policy fell on the announcement of independence for the Bank of England? From the facts, it is absolutely clear that the markets thought that the credibility of Government policy had been enhanced because long bond yields fell.
§ Mr. Heathcoat-Amory
The hon. Lady ought not to be quite so sanguine about the inflation record. She will 1158 know that her Government have missed their own inflation target in every month since the election. So the jury is out. The Government have wisely continued appointments made under the previous Government, but I am debating future appointments that the Government will make as a result of the Bill.
That is why—the hon. Lady should agree—it is very important that the Government are seen to be entirely disinterested. She will correct me if I am wrong, but I think that she was a member of the Select Committee that produced the report to which I referred. I think that I noticed her name on it. She will therefore definitely want to support the new clause.
The new clause is modest. First, it would simply ensure that the appointees are selected after a process of open competition. That is a very modest requirement. Indeed, Ministers suggested in Committee that they had no particular problems with it. Secondly, it ensures that the appointments are subject to confirmatory hearings by the Treasury Select Committee. That does not mean that the House of Commons will make the appointments or suggest candidates: it simply means that the candidates suggested by the Government should be confirmed to ensure that they measure up to the full standards of expertise and impartiality that the House expects.
I shall quote just one paragraph from the Select Committee report. I see now that the hon. Member for Bolton, West (Ms Kelly) was a member of the Committee, and therefore will fully support this sentiment. It said:We believe very strongly in the importance of ensuring that the appointment process is carried out with openness and independence from political influence. We therefore intend, even in the absence of statutory provision, to instigate hearings and make reports to Parliament.I therefore move the new clause in the knowledge that it has the support of Labour and other members of the Treasury Select Committee, including some who are in the Chamber this afternoon. It will ensure that appointments are impartial, and will give added credibility to what the Government are trying to do in setting up the committee in the first place.
§ Mr. Charles Clarke (Norwich, South)
I do not support new clause 1. It gives an inappropriate role to the Treasury Select Committee in the formation of Government legislation. I support new clause 3 which, as the right hon. Member for Wells (Mr. Heathcoat-Amory) said, was supported by the Treasury Select Committee, although not unanimously. The right hon. Member for Fareham (Sir P. Lloyd) did not agree with that proposal, so it would be wrong to give the impression that a proposal unanimously supported by the Select Committee was lying before the House.
We do not think that confirmation is a precondition for the effectiveness and independence of the Bank, but we believe that it would enhance it, and we support the way in which the Government are going about these things. The Select Committee will hold hearings in any event, as we make clear in paragraph 49 of the report, but we believe that establishment of the role of the Select Committee in statute would enhance the Bill.
There are several reasons for that. First, it would make it clear that the appointment of the key people who determined monetary policy was made not only with 1159 reference to the Government of the day, but on the basis of a broad-based discussion about the issues at stake, in which everything was brought out into the open. Secondly, it would strengthen the relationship between the Bank and Parliament. A new feature of the Bill is the establishment of precisely such a relationship. The confirmation hearings would make it clear at the time of the appointment of key people that the role of Parliament was important. Thirdly, it would enhance public confidence in the people in the Monetary Policy Committee who took key decisions.
There was a time when decisions were all taken behind closed doors in a dark and secret way, and it is to the credit of the Government that they have introduced the Bill and brought many decisions into the open. Already, not long since the new Government came to office, the publication of the minutes of the committee has enhanced public understanding of the considerations taken into account when interest rate policy is established.
New clause 3 would therefore increase accountability and openness. The Treasury Select Committee is giving great attention to the way in which the reform would operate. It would be done extremely carefully, in the way set out in paragraph 47 of the report. We do not believe in a type of open house on the American Congress select committee model, in which people's private lives and conduct can be brought into the public arena. Discussions must be on key issues of professional competence and personal independence.
That is why we propose that the questioning of candidates should be circumscribed and limited to professional competence and personal independence, not ideologically based. It would be a speedy process of decision making; it would not be time-consuming; it would not be a veto; and it would allow the Government and the House to consider the candidates and come to a view. I submit that that is a powerful case for the reforms set out in new clause 3.
My right hon. Friend the Chief Secretary to the Treasury came to the Select Committee and, in a distinguished, open and candid performance, identified three main arguments against the proposal, although he said throughout that he had an open mind on the matter. He said, first, that their having to come before a Select Committee of the House before being appointed might deter candidates.
Secondly, there were certain political circumstances—for example, a hung Parliament—in which the process might increase instability, rather than promote stability.
Thirdly, the issue of confirmation was of such importance that it should run across a whole range of appointments in public life and would need to be considered by the House; therefore, a decision should not be taken on the Monetary Policy Committee or the Bank until that wider consideration had taken place. I shall deal with each of those points—all of them powerful—in turn.
On the question of a deterrent effect, my right hon. Friend cited the example of John Maynard Keynes and suggested that that distinguished economist might have not wished to serve in public life if he had felt that his personal life might come under scrutiny in a process of this sort. All I shall say on that point is that I believe that we live in different era in terms of the public scrutiny of those who serve the public in a variety of ways, not only Members of Parliament, but public servants more generally.
1160 Most public servants would prefer to have the chance to answer charges directly, rather than to have those charges circulated by nudge and wink or media leak. They would prefer to address the issue straight up, and I believe that, had he been alive today, John Maynard Keynes would have been of that mind. Many potential candidates for the MPC and the Bank—we have discussed this question informally with them—would prefer a state of affairs where there was an open process, open discussion and open accountability, rather than a process that took place behind closed doors. Provided—it is an important proviso—that the Select Committee dealt with the matter in a sensitive and rapid way, rather than following the example of congressional committees, potential appointees, those appointed and the body politic as a whole would all gain from the open process.
The Chief Secretary's second argument was that, in a hung Parliament, a party political ball game would be played in the Select Committee, which would make it difficult for the Government to govern and make those key appointments. I take that point, but, if we are concerned with the independence of the central bank from those party political ball games and the uncertainties surrounding a hung Parliament, it would be better and more effective to use the open hearing process; in addition, there would be no risk of the Prime Minister or Chancellor appointing cronies with no chance for public scrutiny. Therefore, the second argument does not stand up.
The third argument has more substance. It relates to the issue of the wider reform of the relationship between Parliament and the Executive in the matter of key appointments, and contends that it would be better to wait before taking the process forward.
After the Chief Secretary had given his evidence, I tabled a question to my right hon. Friend the Leader of the House to ask what assessment she was making of that issue. She replied that the Government were reviewing the situation, but that they had "no immediate plans" to propose a process of Select Committee scrutiny. If we accept the Chief Secretary's argument, there is a real danger that we will make the best the enemy of the good by saying that we cannot carry out this reform until we have achieved wholesale reform across the board.
In addition, the Bill deals with important issues relating to the Select Committee and the Governor of the Bank which differ from many of the other areas of public scrutiny, so there is a particular case to address.
§ Mr. Robert Sheldon (Ashton-under-Lyne)
My hon. Friend may be aware that the Liaison Select Committee has discussed in general terms the use of this sort of hearing, and in general—I cannot speak for every Committee—supports the view expressed by my hon. Friend the Member for North Durham (Mr. Radice). As this would be the first use made of a particular instrument, it will be important that we have in my hon. Friend a Chairman who not only is distinguished, but would be strong in ensuring that no personal references were made or personal questions asked. We would regard it as the initiation of what could be a useful procedure. I welcome what my hon. Friend has said.
§ Mr. Clarke
I am grateful to my right hon. Friend for saying that there is general support across Parliament for many of the changes about which we are talking.
1161 I should add that, this morning, the Treasury Select Committee had a discussion on the types of procedure that would be applied. The personal qualities of the Chairman of the Committee, to which my right hon. Friend has just referred, were part of our discussion, because we recognised the need to have a process according to which inappropriate questions would be ruled out, so that we kept to the twin issues of professional competence and personal independence. I agree with my right hon. Friend's expression of confidence in the Chairman of the Treasury Select Committee.
I know that there is a case for wider reform, but I hope that the consideration of such general issues will not lead to us to say that we will not introduce a reform of the type that I have described simply on the ground that those general issues should be considered more thoroughly. I genuinely believe that the reform would enhance the independence of the Bank, as well as the policies set out in the Bill—and, most important, the accountability of key institutions of state to the House.
§ Mr. Quentin Davies (Grantham and Stamford)
Before I discuss new clause 1, I should like to respond to the observations of the hon. Member for Norwich South (Mr. Clarke), with whom I have the honour to serve on the Treasury Select Committee. As he rightly said, this morning the Committee discussed the matter in considerable detail.
I listened with some surprise to the hon. Gentleman's statement that, although he supported new clause 3—we are both signatories to that second new clause in the group of amendments under consideration—he could not support new clause 1. Apart from obvious considerations of political tactics, I cannot see how anyone who supports new clause 3 could fail to support new clause 1. As far as I can see, there is only one difference of substance between the two new clauses—new clause 1 provides for an open advertisement selection procedure.
The hon. Gentleman notably failed to address that issue. He did not suggest that he disagreed with it or that there is anything wrong with it, so, logically, I cannot see why he cannot support new clause 1. I would be sorry if he decided he could not do so simply because of the dog-in-the-manger principle that it had been brought forward by the Opposition. That is contrary to the spirit in which the matter has been considered in the Treasury Select Committee. I regret that.
As for the hon. Gentleman's other remarks, I thoroughly agree with him. I would like to think that the issue of the Treasury Select Committee asking utterly irrelevant, prurient questions was a red herring. I would never have raised it, but I am a little sanguine, and there is a genuine concern that the procedures might be abused in that particular way. I have the greatest confidence that Parliament would undertake its responsibilities with great care. Certainly it would do so with as great responsibility as that shown by the Executive branch—or greater—and certainly greater responsibility than the current Executive branch has so far manifested in its conduct of the nation's affairs.
I have no doubt about that, but, since others appear to think that there might be some lingering concern on the matter, there is absolute agreement on the Treasury Select 1162 Committee that, in order to address that possible source of concern, we should, by resolution or otherwise, make it explicitly clear that the questions asked on such occasions would be pertinent ones relating to the competence and independence of candidates. There would be no question of going into people's private lives, sexual behaviour or anything of that kind.
If Maynard Keynes had come before our Committee, I can think of lot of questions that I would have wanted to ask him about his General Theory, but I should not have asked him any interesting questions about his private life.
It is a great pleasure to second the new clause tabled by my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), which makes an important contribution to the debate. The confirmatory hearings are important for two reasons.
First, such hearings would be in the interest of transparency, and in the interest of gaining public support for, understanding of and confidence in what was being done. They would help to exclude explicitly all types of theoretical dangers—which, with the present Government, might not be so theoretical—that cronies of Ministers, the Chancellor or the Prime Minister might be appointed to the Monetary Policy Committee. Such a position might be considered a nice appointment for someone to whom political favours were due.
It would be a nightmare if we had Mr. Bernie Ecclestone on the Monetary Policy Committee. It would be an even greater nightmare—if such a thing is possible—if we had someone who was simply a nominee of Mr. Rupert Murdoch, of whom the Prime Minister, in his conduct of monetary policy, has already shown that he is terrified.
Sadly, these possibilities are real, not hypothetical, and it is not a bad idea to use explicit provisions to protect the public and our institutions from them. Confirmatory hearings represent a check and a balance—an additional assurance to the country that such decisions are made objectively, as dispassionately as is possible in human affairs. That is the purpose of checks and balances, which are the basis of public confidence in a democratic constitution.
There is a second, more pragmatic and, indeed, monetary reason why it would be sensible for the Government to accept new clause 1—but the Government do not often do very sensible things, so I do not expect that they will do this now.
The new clause will make it easier for the Government to achieve what they say was their prime purpose in making the Bank of England operationally independent. The main purpose of doing so was to give the markets confidence that monetary policy is being conducted in accordance with monetary criteria, to achieve the monetary purpose of price stability—the permanent removal of inflation in our national affairs—and is not subject to political, personal or electoral pressures according to the day-to-day convenience and self-interest of Ministers.
The world is changing. As a result of one of the salient changes, almost every civilised country now has an independent central bank. It would be an enormous 1163 liability for our country if, of the major currencies of the world, only sterling was managed in such a way that it was seen to be subject to extraneous party political or electoral pressures. In those circumstances, all holders of assets in sterling would demand what would probably be a very significant premium: a risk premium for holding such assets, given the uncertainties created, the hostages to fortune represented, by the existence of those pressures on the conduct of monetary policy.
We are already paying such risk premia. The taxpayer is paying 1 per cent. more to service British Government debt, gilts, than the German taxpayer is paying to service German Government debt. That has nothing to do with the inherent creditworthiness of the British or German Governments; it results from the monetary uncertainties associated with holding sterling—the risk of devaluation, the risk of inflation, which are perceived to be greater here.
A lot of money is involved. Public debt in this country is about £350 billion. One need not be a mathematical genius to know that 1 per cent. of that is about £3.5 billion, or roughly 2p on the standard rate of income tax. I believe that that is the price of the Government having been extremely indecisive about, for example, what we are doing about monetary union.
It is very important that the independence of the Bank of England should, as far as possible, achieve some certainty that monetary policy is not subject to party political and electoral pressures. As the hon. Member for Bolton, West (Ms Kelly) said, the announcement of the operational independence of the Bank of England has had some positive effect in terms of the premia we pay in the money markets and in the Government bond markets at present. We still have a long way to go, and it is important that operational independence is regarded as credible, domestically and internationally.
An announcement by the Labour Government that the Bank of England has been given operational independence, that monetary policy is henceforth in the hands of the Monetary Policy Committee and that that committee will be answerable for monetary policy not to the Chancellor but to Parliament through the Treasury Committee sounds wonderful. It appears that that arrangement will go quite a long way towards achieving the declared purposes of the move.
However, a slightly closer reading of what is occurring reveals that the members of the Monetary Policy Committee are appointed by the Chancellor. Furthermore, there are no checks and balances upon his decisions. No one is in a position to second-guess or query any appointment: the Chancellor's appointment decisions are entirely arbitrary.
Thirdly, as my right hon. Friend pointed out so ably, members of the Monetary Policy Committee are appointed for only three years. Therefore, members will be up for reappointment within the term of this Government and, if they want to stay on the committee, they had better be nice to the man who appoints them. It does not take a great deal of human intelligence to lead one to discount to a considerable degree the independence of a central bank whose Monetary Policy Committee is appointed on that basis.
In order to achieve independence, to reap the benefits of monetary credibility, achieve a positive impact on inflation expectations in this country—that is vital in 1164 terms of savings behaviour, wage negotiation, general price determination behaviour and so on—and to ensure that the cost of capital in this country is no higher than we need and that we do not have to pay excessive risk premia in the markets, we should welcome any measure that is designed to strengthen the credibility of that independence. The Government have been presented with a wonderful opportunity to do just that.
It will be no skin off the Government's nose if they accept the proposal. The idea was conceived and developed by a Committee of the House upon which the Labour party has a considerable majority. If the Government do not accept the proposal, we can draw only one of two conclusions—I leave it to you, Madam Speaker, to the House and to the public to decide which is more damaging to the Government.
The first is that the Government are playing this—and one assumes, by extension, other equally important affairs of state—on a purely party political basis. It is a matter of party political ego and face. The Government are not interested in acting in the interests of the country, and they are not being open-minded in their consideration of the national interest: they are concerned merely with gaining party political points. They refuse to accept any proposal that has the Leader of the Opposition's name upon it.
The second alternative—I invite the Chief Secretary to confirm whether there is a third, fourth or fifth logical possibility, but I do not think there is—would realise my worst fears: the Government intend to abuse the power of appointment. They secretly think that it represents a wonderful additional power of patronage, and might be a way of rewarding Mr. Bernie Ecclestone, of conciliating Mr. Rupert Murdoch or of allowing other squalid people to get their hands on the levers of monetary policy in this country for their own purposes.
I do not necessarily claim to be correct, but I can perceive only two logical explanations if the Government act as I hope they will not, and refuse to accept the new clause that contributes positively to the declared purpose of their legislation. If I am wrong, I challenge the Minister to explain why that is so, and to persuade the House in that regard.
§ Mr. Giles Radice (North Durham)
I apologise to the right hon. Member for Wells (Mr. Heathcoat-Amory) and to the House for not being present at the beginning of the debate. I have just returned from the funeral of a close family friend.
The Chancellor wrote to me, as Chairman of the Treasury Committee, after announcing the operational independence of the Bank of England in the area of monetary policy. In that letter, he suggested an enhanced role for the Committee in examining the performance of the Bank, and wrote:I see this as an important step in ensuring that the Bank is fully accountable.The Committee has already taken several steps to develop our role in making the Bank accountable for its decisions. We produced a report on accountability, the Government's reply to which was published today and placed in the Library. We also conducted hearings following the November inflation report and recently decided to hold another hearing after the February inflation report. We shall keep the Bank under constant vigilance.
1165 Our report concluded that it would help to strengthen accountability—it would be the final brick—if we had a part in endorsing appointments and reappointments to the Monetary Policy Committee. It is essential that the members of the committee should be seen to be competent when they are appointed; effective when they are reappointed; and independent of the Government. They must be independent people who have the necessary competence to carry credibility as members of the committee.
My hon. Friend the Member for Norwich, South (Mr. Clarke) may have covered the matter in his speech, but at the risk of repetition I shall say that our model in new clause 3, to which Opposition Members have signed up, is rather different from that in new clause 1. In essence it states that, within 30 days of a nomination, we should be able to report to the House. Either we would approve the competence and independence of the members of the Monetary Policy Committee, or we would give reasons for considering that members of the Monetary Policy Committee do not meet the criteria, and we would ask the Chancellor of the Exchequer to reconsider their nomination.
I emphasise that we are not seeking a veto. That is all very well in the United States—in a democratic system with the separation of powers—but it is not appropriate in a parliamentary system. Following a request by the Treasury Committee for reconsideration, the Chancellor would have to give reasons for continuing with the nomination of the person whom he wanted to have appointed or reappointed to the Monetary Policy Committee. That is a good model and should receive the Government's support.
My right hon. Friend the Chief Secretary to the Treasury, whose abilities I greatly admire—[Interruption.] If my right hon. Friend listened, he would hear that I was complimenting him before refuting his arguments. He has said that he has an open mind, but he has raised counter-arguments, with which my hon. Friend the Member for Norwich, South was dealing when I came into the Chamber.
My right hon. Friend claimed, first, that our proposal would put people off, but all the members of the Monetary Policy Committee to whom I have spoken believe that it would be helpful for them, for two reasons: first, it would establish their independence; and, secondly, it would establish their profile as members, so that they could explain why they thought they were the right people and what kind of job they expected to do. That would be good for the Monetary Policy Committee and would strengthen it.
My right hon. Friend's second argument is more substantial—that we should take a broader look at the issue because if the Treasury Committee is given a special place in legislation, every other Select Committee will want to have a place in legislation for appointments to the Department that it oversees. I understand that, but I would argue that the Bank of England is an exceptionally powerful body with an exceptional position, and for that reason, exception should be made.
I hope that the Government will accept our new clause tonight, but, whatever happens, I want to make it clear that the Select Committee has decided to go ahead with 1166 the confirmation procedure. We shall present a report to the House on the procedure that we shall follow. If the procedure is to be effective, it must be consistent. The procedure must be laid down, and we must always go through it. We must be fair to the candidates who come before us, and we must stick to the issues of competence and independence.
It is no secret that we were discussing this morning the possibility of allowing the Chairman to rule out any extraneous issues—for example, the sex life of John Maynard Keynes would not be relevant in deciding whether Maynard Keynes was competent or independent. We must satisfy the House of Commons and the general public that we can do the job properly, as I believe we can. We shall report to Parliament on the procedure that we shall adopt, and we shall go ahead with confirmation hearings throughout this year.
Whatever happens tonight, the confirmation process will go ahead and will become the norm, at least for Bank of England appointments. That will be good for the Government, because we will see that they are not trying to appoint people to the Monetary Policy Committee of the Bank who are not competent or who are creatures of the Government. It will be good for the Bank, as it will underline its independence, credibility and competence. It will be extremely good for Parliament, as it will bring Parliament into the equation, and it will therefore be good for our democracy.
§ Mr. Nick Gibb (Bognor Regis and Littlehampton)
The new clauses go to the root of the reason for my opposition to the Bill. They go to the root of the accountability of the new Bank of England.
Monetary policy is not an exact science. The Chancellor of the Exchequer, who is accountable to the House, will determine the inflation target, but the translation of the inflation target into monetary policy is incumbent on the Monetary Policy Committee. The Government seem to believe that they simply need to set an inflation target and throw a bunch of experts into a committee, and that, as if by magic, those experts will come up with the correct interest rate policy to translate that inflation target into reality.
The report of the Treasury Committee, a learned tome, provides ample evidence to support the view that that is not the case. Sir Samuel Brittan stated:Both the Chancellor and the Governor greatly overestimate the role of technical expertise.He continued:
Monetary economics is not a hard science. An attempt to confine the Monetary Policy Committee mainly to so-called experts will simply enthrone the conventional wisdom of the moment.In his evidence to the Select Committee, Tim Congdon wrote:Two main schools of thought on the monetary situation can be identified,—economists (the National Institute, narrow-money monetarists such as Sir Alan Walters and Professor Patrick Minford) who believe that the rapid growth of the money supply since early 1995 is of no relevance to the economic situation, and that the over-valued pound and the recent rise in interest rates…may cause a recession in late 1998 and 1999".1167 That school of thought must be contrasted with the views of another group:—economists who believe that the rapid growth of the money supply, on the broad definitions"—rather than the narrow definitions—
since early 1995 is not only the main reason for the current buoyancy of demand, but will cause continued above-trend growth in late 1997 and early 1998, with inflation rising thereafter.Lord Eatwell told the Treasury Committee:Moreover, there is a tendency in monetary policy matters to regard certain propositions as 'obvious' and anyone who questions such propositions to be at best a nit-picking academic and at worst a crank. Yet the notion that the theory of monetary policy is 'obvious' and 'pragmatic' is belied by the fact that the theory and practice of monetary policy has undergone quite radical revisions over the past 20 years.He went on to ask:If views held 10 years or 15 years ago were so obviously right then, why are they so obviously wrong now?That is the very essence of why we need to consider further and crucially the appointments to the Monetary Policy Committee.
There are all kinds of views. There are broad and narrow monetary policy views, Keynesian economics and the economics of those who wish to stick to the gold standard. The views of the members of the Monetary Policy Committee are pivotal in determining Britain's monetary policy. I was surprised by the remarks of the hon. Members for Norwich, South (Mr. Clarke) and for North Durham (Mr. Radice) that, when the Treasury Committee comes to question members of the Monetary Policy Committee in its confirmatory hearings, they will not want to discuss their ideological or economic views, but will solely consider competence and independence. Unless the Government set down beforehand a set of criteria for determining the economic views that are to be represented on the Monetary Policy Committee, it is important to know the views of its members.
If the Treasury Committee considers merely economic competence and independence, the monetary views of the members of that committee will be determined by lottery. If one happens to pick four economists with narrow monetary views, that will be the committee's make-up.
I put that point to the Paymaster General in Committee and he said:The hon. Gentleman asked me to list a set of criteria for prospective members of the Monetary Policy Committee. We cannot do better than the qualities for which current members have been chosen. However, the two most important qualifications are outstanding intelligence, for which there is no substitute, and a demonstrable economic knowledge. Those are the essential criteria, but all sorts of other matters must be considered. However, it would be inappropriate to delay our proceedings with them.I think that it is important to delay our proceedings with them, which is why I intend to do so today.
If the criteria are not provided, how will the Monetary Policy Committee be made up? What criteria will determine its prevailing point of view? In Committee, the Paymaster General, speaking of me, said:He wants to ensure that the good balance that currently exists in the Monetary Policy Committee is maintained. He is anxious to exclude serendipity and random choice from our selection process. I assure him that such elements will play no part in it."—[Official Report, Standing Committee D, 27 November 1997; c. 166.]1168 But the Government have given us no idea of how serendipity and lottery will be prevented from determining the prevailing point of view of the Monetary Policy Committee.
The Treasury Committee is determined that the committee's membership will be scrutinised. The Government, in their vast exchanges of correspondence with the Governor and the Chairman of the Select Committee, which seems at the moment to be determining Government policy, said that accountability is of the essence. The Chancellor of the Exchequer, in his letter of 6 May, says:The Bank of England will make reports to and give evidence to the House of Commons, through the Treasury Select Committee on an enhanced basis, and I will write to the Chairman of the Committee.When that letter to the Chairman came, it said:
Given its responsibilities, I believe that it is important that the Bank should be subject to enhanced Parliamentary scrutiny, in particular through your Committee. I am writing to suggest … an enhanced role for that Committee.The Government see a role for the Treasury Committee. The Treasury Committee has an enormously important role in determining the ideological make-up of Britain's future monetary policy. Given that the Government see the Treasury Committee as paramount in ensuring accountability of the Bank of England—the Government accept that the Treasury Committee will be the only method of parliamentary accountability for the Bank of England—and given that the Treasury Committee wants to undertake confirmatory hearings, is it not beholden on the Government, under their own criteria, to give the Treasury Committee statutory responsibility to conduct confirmatory hearings?
§ Mrs. Fiona Jones (Newark)
I am grateful for the opportunity to make my maiden speech today in a debate on the Bank of England Bill. The Bill paves the way for a framework of stability, vital to economic growth, which we need to provide opportunity. I shall comment on the new clause in due course.
I take some pleasure—I am sure that hon. Members will sympathise with my desire—in relinquishing the somewhat unlikely title of virgin. As someone who has reached the age when life apparently begins and has accumulated two children along the way, it seems remarkably ill-suited. I had expected during the course of a career in politics to be called many things and have experienced more than the odd colourful insult. However, taking into account the over-zealousness of some journalists, and the occasional lapse in attention to fact on the part of most newspapers, I still had not expected the accusation in question.
Having endured through gritted teeth being dubbed a "Blair's babe", I am grateful at least to have the opportunity to relinquish for ever the title of being the last virgin in the House. However, a right hon. or hon. Member who has hitherto remained secretive may now wish to claim the title. No doubt confessions to the press will be eagerly awaited.
I am proud to make this contribution today at the beginning of the first full year of a Labour Government for almost two decades. We have the important task of laying solid foundations both economically and in terms of the way in which we shape society. What we do in this 1169 year and in the coming years will shape our future in the new millennium. The Government are setting policy to ensure long-term prosperity. We must ensure stability in monetary and fiscal policy as a precondition of high and stable levels of employment and growth.
My constituency has suffered many economic blows in recent years. It is vital for the people of Newark that we achieve the conditions necessary for industrial expansion. The constituency of Newark is in Nottinghamshire. As well as the town of Newark, which was besieged by parliamentary forces several times during the civil war, the constituency includes the smaller but equally pleasant market town of Retford. At the constituency's western extremity is the historic Southwell dominated by its imposing minster. In addition, there are a number of hamlets and villages between the main centres, stretching from the Lincolnshire border to Robin Hood country to the west.
My constituency has suffered for many reasons in recent years. The rundown of the mining industry was a great blow to many local families who had, for generations, made their living in the pits. The area has also lost many jobs in engineering over the years and sadly now the agriculture industry is not without its problems and many farmers, particularly on family-sized farms, are in a desperate position.
However, the area has good road and rail communications and, thanks to the enthusiasm and skills of local people, new businesses are growing up in the constituency, particularly in food processing and in the pine industry. That growth now requires a platform of long-term economic stability on which to build.
It is customary at times such as this to thank one's predecessor, and I do so with genuine sincerity. Richard Alexander represented Newark for 18 years. He was well respected by his constituents, and by his local party, which in itself is quite an achievement. I well remember Richard Alexander's determination and courage when he took a stance against pit closures because he felt that they would do so much damage to the economies of constituencies such as Newark. Richard Alexander was committed to public service and I sincerely hope he finds some way of continuing that service in the future.
Today, Newark boasts a hostelry called the Lord Ted. It was given its name in recognition of another of my predecessors, Ted Bishop, later Lord Bishopston. Sadly, Ted is no longer with us, but his family took great delight in my being returned as the Member for Newark, because he was a great campaigner for women's rights and equality, long before it became fashionable to be so. I understand from his family that he would have been greatly pleased to see a woman representing Newark, and to see so many women Members in the House—although whether he would have been inclined to call them "babes" is a different matter.
Continuing on the theme of my predecessors, undoubtedly the most famous was William Gladstone, whose first seat was Newark. Hon. Members will be pleased to hear that I do not intend to speak for five hours, as Gladstone did during his Budget speech in 1853.
1170 5 pm
In addition to sharing the privilege of representing such a fine constituency, Gladstone and I share a common birthplace, for we were both born in Liverpool. I grew up in comfortable but humble surroundings on a typical Liverpool housing estate. My family were committed to the Labour movement. That was in many ways fortunate because it meant the poverty that I witnessed did not make me despondent but inspired me instead to contribute to finding a political solution, to put hope and opportunity in place of deprivation and misery.
In poor families everyone suffers, but women—especially mothers, who face the day-to-day challenge of putting food on the table for a family—are particularly ground down by the pressures of life. They become old before their time and experience little pleasure in a stressful existence. Everyone has a right to more than that.
As a youngster I learnt my politics from two people: my father, who, like many others, joined the movement in 1945 believing that we could indeed change everything, and his friend, our then local Member of Parliament, Eric Heffer. They were bound in friendship by their strong belief in compassion for others, Christianity and socialism. I am for ever grateful for their influence.
The Labour Government elected in 1945 achieved much but left much unfinished business. Together with the job of modernising their accomplishments, that leaves the current Government with a formidable task. We need to achieve an environment that makes everyone—no matter how poor, disabled or down-trodden by their circumstances, by their life—feel that when they open their front door somewhere outside is an opportunity for them. We must reform and modernise the welfare state, but those reforms must empower those who are able to do so to attain the goals of which they are capable, while allowing those who are less able to live in comfort with respect. Socialists expect nothing less from a Labour Government.
When asked about political issues, the President of a country some distance from here, anxious to exhibit the depth of his political knowledge, remarked, "It's the economy, stupid." Indeed, the economy is the cornerstone on which every nation must base its future aspirations. Without a successful and vibrant economy, we cannot provide hope, opportunity or, indeed, welfare. The Government have made it clear that we want a stable and competitive pound over the medium term. Economic stability is critical for business, and that encompasses low inflation, which has to be delivered. By charging the Bank of England with operational responsibility for setting interest rates to meet the Government's objective, a more credible framework for monetary union has been established.
I now come to the clause that we are considering. I have a reservation about the relationship between Select Committees and the Government. Although I accept entirely that there is a consensus in the House that there must be accountability at all levels, I am very concerned that we should allow a Select Committee to take on this responsibility in isolation. If Select Committees are to go in that direction, it cannot be done in isolation.
It is interesting that hon. Members mentioned John Maynard Keynes. Over the past decade we have heard much about why so-called fat cats should be paid so much money and have so many advantages in terms of cars and 1171 houses. It makes me wonder whether we will be able to attract anybody to come before the Select Committee and be interrogated.
It may be appropriate for me to thank hon. Members for their patience. It is certainly appropriate for me, on behalf of all the new Members who have made their maiden speeches in the past months, to thank the experienced Members of the House, who have sat through many speeches with much patience and good humour.
§ Sir Peter Lloyd (Fareham)
I am delighted to follow the hon. Member for Newark (Mrs. Jones), and congratulate her on her maiden speech. I greatly enjoyed listening to her and, judging by the cheer that she has just had from the whole House, everybody in the Chamber did too. I agreed with much of what she said about new clause 1, but I particularly enjoyed listening to her obvious positive concern about her constituency.
Newark is my wife's home town. She retains an enormous affection for it and, over the years, through many visits, I have come to share her affection, so the hon. Lady is extremely lucky—[Laughter.] Well, that is true as well, but the former came first. The hon. Lady is very fortunate in her constituency, and from the way in which she spoke, her constituency is lucky in her.
I thank the hon. Lady for her kind and generous remarks about her predecessor, Richard Alexander. He was, indeed, an excellent constituency Member and he was a great friend of many of us on both sides of the House—a friendship that he built up in his quiet and effective way during his 18 years in the House. We miss him very much. Although it is nice to welcome the hon. Lady, we regret that he is not here, and we are glad that she has put those remarks on record so that we can all share them. We wish the hon. Lady a very successful and happy career in the House, and we certainly look forward to hearing her speak again.
I shall make a few discordant remarks about new clauses 1 and 3. As a member of the Treasury Committee, I voted against the recommendation that is now encapsulated in the comparatively pussycattish new clause 3. For the same reasons, I do not support the rather more tigerish version that is new clause 1. I shall say briefly why. I fear that any vetting for professional competence will be superficial and will inevitably sound rather pompous. What will the Select Committee do to test competence? Will it count the number of degrees that the candidate has, assess his or her performance in previous jobs or evaluate the learned papers that he has published? The Select Committee is not well placed to do any of that and it should not try.
How will the Select Committee vet independence? Will it look to see whether the candidate is an old friend of the Chancellor or shadow Chancellor? What is the difference between—to use words that were used earlier—an old friend and an old crony? I do not know. Will the Committee check for whom the candidate has worked? Will there be a character assessment? Would holding strong views pro or against economic and monetary union, or firm monetarist convictions, be seen as limiting the candidate's independence? Some might think so. I do not, but it is arguable, and from some of the things that have been said this afternoon, others think so, too. If the vetting procedure is to be just a formality, those questions do not matter, but then why bother with the process at all and take up everybody's time?
1172 If the procedure is to be genuine and serious, the Select Committee will have bitten off a harder task than it suspects. I fear that candidates with good, conventional academic records, who do not know anyone and who have no strong opinions on the economy, will be better placed than others who do. Moreover, I suspect that some good candidates who value their privacy may not want to put themselves in the way of public procedure that can delve into their career and character.
Candidates certainly should not be asked, as the hon. Member for North Durham (Mr. Radice), the distinguished Chairman of our Select Committee, suggested, to explain why they should be appointed to the Monetary Policy Committee. That is a matter for the person who appoints them—the Chancellor of the Exchequer.
§ Mr. Radice
My colleague on the Treasury Committee must have misheard me. I said that there were two issues: competence and independence. I said that those were paramount and that any other issues were extraneous.
§ Sir Peter Lloyd
I am sorry. I thought that the hon. Gentleman welcomed the chance for candidates to explain why they should be appointed. I accept his explanation and I am sorry that I did not follow his remarks accurately.
Hon. Members and candidates may have nothing to worry about on that score, given the sensible and sensitive members of the Select Committee, particularly under its current chairmanship. What benefit is there, however, in opening the way for future Committees—and other Select Committees, if some hon. Members have their way and the provision is extended throughout the Select Committee system—to behave as some congressional committees are said to behave in the United States? The right way in which to proceed is to extend the public appointment rules drawn up for quangos to all public bodies. If an appointee is unsuitable for any reason, including lack of independence or competence, or is manifestly not up to the job, the Committee and the House have it in their power to call the Government to account and they should certainly do so. Vetting would not make the Monetary Policy Committee any more accountable; if anything, it would make the Chancellor more accountable.
Even if, however, we could devise a system of vetting that avoided all the pitfalls, we should not institute the vetting system called for in the new clause. It is the job of Select Committees to get answers to their questions from the Government, and to throw light on Government policy so that Parliament and the public are better informed. Their job is to probe what has happened, to reveal shortcomings and to make recommendations for improvement. They will do that more single-mindedly if they eschew all direct involvement with Executive decisions, and appointments are one such.
It may not be a very significant point, but why should the Select Committee approve appointments? It would then have an interest, however slight, in seeing its competence justified. It should hold its fire until the appointments—which are better made by the Executive with more information to go on—show cause for criticism or praise because of what the appointees do or fail to do.
§ Mr. Austin Mitchell (Great Grimsby)
I, too, congratulate my hon. Friend the Member for Newark 1173 (Mrs. Jones). I do so for two reasons. First, after the 1983 election, I was the only Labour Member in a long line right down to London, so it is good to have socialist neighbours all around. Secondly, I congratulate my hon. Friend on her interesting and entertaining speech. She has no need to worry about her future in this House, given her ability to speak like that. Nor should she worry about being the last virgin. I remember Doris Day before she was a virgin. The endless reconstitution of virginity is part of the processes of this place.
I shall speak briefly on this issue because I want to speak at greater length on the official old Labour amendments later. New clause 3 is very much a new Labour issue; indeed, it is so new Labour that it has support from the Opposition, including from the Liberal Democrats, which makes me think that it must have something to do with Europe. I support it because we should have the kind of hearings mentioned in it. I am surprised that the Government have not conceded that, and that a new clause was necessary.
Such hearings, however, are not enough. As my hon. Friend the Member for North Durham (Mr. Radice) said, the Select Committee will be concerned with competence and independence, but it should also be concerned with a third factor—the appointees' views. I have taken that into account in amendment No. 28. We must accept the fact that appointees to the Monetary Policy Committee are appointed by the person who also appoints members of the Treasury Committee; Labour members of that Committee are, in effect, appointed by the Chancellor of the Exchequer. No man or woman cometh to the Committee except through him, and nobody that he does not want goes on the Committee; we need only witness the fate of my hon. Friend the Member for Hackney, North and Stoke Newington (Ms Abbott).
One set of Chancellor's appointees will look at another set of Chancellor's appointees. The information that comes out of that process needs to be known more widely because monetary policy is not an exact science. It is no use pretending that there is a judicial body that can approach the issue with independence of mind and say, "Ah yes, we can agree on these matters." Monetary policy is not a science at all; it is a collection of prejudices dressed up in Savile row suits, and the prejudices are different for each member.
I was surprised to read in The Observer that two members of the Monetary Policy Committee do not appear to be British. What central bank of any other European country would appoint foreigners to such a crucial committee? We need to know those appointees' views on monetary policy. I know the views of one of them, who is a Dutch professor, because he gave evidence to, and advised, the Treasury Committee, but I do not know the views of the other appointees. The House needs to know so that we can make our own judgment about them. That should be public information. There needs to be open government so that we know what is going on.
I tabled amendment No. 34 because I want directors appointed on a regional basis. That does not mean that we should follow the example of health authorities, which can appoint people of a certain party political persuasion, 1174 as the previous Government did on a considerable scale. We want people who come from the regions rather than from the central nexus of finance that dominates the City of London and the directors of the Bank of England.
This country's wealth was first generated in the regions. The north and the midlands are the home of manufacturing industry, which has been badly dealt with by the financial world. In seeking to develop a raunchy economy, it placed a higher premium on investing overseas than on investing in this country; it placed a higher premium on investing in trade and commercial wealth than on manufacturing and industrial wealth. Even now, manufacturing industry is being badly dealt with as a result of the dominance of London. For instance, when measures are taken to increase interest rates, it is usually because of pressures in London.
Inflation pressures are always higher in London because of the number of people and the cost of property there. Pressure on inflation is generated by finance—the high salaries paid in the City of London by financial bodies—and by the loose credit created by finance. That leads to asset and house price inflation, which is always higher in London than in the rest of the country. When that is damped down, it is for London reasons—because the pressures have become too strong in London. The north has not felt the same benefits from expansion, and has not had the same economic stimulus. It has been hit harder than London and the south-east, where the problem has been caused.
Manufacturing is on the international front line and must compete with overseas companies. The rise in interest rates that has inevitably resulted from the London pressures has hit manufacturing harder than any other sector of the economy. It has been clobbered because of inflationary pressures generated by finance in London.
Decisions on interest rates are taken or influenced by the directors of the Bank of England. That is why I want a regional representative who can speak for the regions. We now have a Government who can speak for the north—perhaps too far north for my liking—more effectively than the previous Government. We need a Bank of England that can speak for the regions on jobs, industry, manufacturing, competitiveness, growth and expansion. The problems in the north are more severe, and the Bank should provide the voice of the regions.
§ Dr. Vincent Cable (Twickenham)
The Liberal Democrats support new clause 3 and new clause 1 which, despite its authorship, is a constructive amendment designed to achieve the same thing as new clause 3, but in a slightly different way. We also support amendment No. 34, tabled by the hon. Member for Great Grimsby (Mr. Mitchell), which introduces a regional dimension; that has been overlooked in the debate, but it is important. I add my congratulations to the hon. Member for Newark (Mrs. Jones) on her excellent maiden speech. Our party requires us to study Mr. Gladstone's speeches as part of our political education. The five-hour speech to which she referred was probably one of his shorter ones. He was the gentleman who, more than a century ago, introduced income tax as a temporary measure. This measure is historically as important.
1175 We support the legislation in principle. It was introduced as a result of a rush of blood to the Chancellor's head, but there is nothing wrong with that.
§ Mr. Quentin Davies
The hon. Gentleman said that he and his colleagues were brought up to study Mr. Gladstone's speeches. Has he learnt anything from that study? Have the Liberal Democrats relearnt in the 1990s the virtue of financial responsibility, good housekeeping, balanced budgets and lowering taxes?
§ Dr. Cable
If the hon. Gentleman had read our manifestos, he would realise that we have thoroughly imbibed the thoughts of Mr. Gladstone. Indeed, we hope that the Bill will be followed by a fiscal responsibility Act, of which Mr. Gladstone would have approved.
The legislation was introduced after the Chancellor's sudden rush of blood to the head. The Government have now had eight months to think about it and to listen. We hope that they will now reflect on the detail. It is crucial that the legislation works. The independence of the Bank of England is a good concept, and we agree with it in principle. However, this measure is not guaranteed to work, and whether it does will depend on its design; its design depends critically on credibility. The two key elements of the legislation are designed with credibility in mind. Making the operational management of money supply independent of politics is one element of credibility, and the other is the separating of the regulatory functions from the control of money supply to prevent cross-contamination. Problems that arise from regulation, such as BCCI-type problems, affect the credibility of monetary authorities. It is difficult to legislate to provide credibility, but that is at the heart of the Bill.
The new clauses are designed to address the problem of credibility through the system of appointment. It is fair to say that the Government have been highly responsible and balanced in their appointments; they were not political, and competent people have been chosen. This legislation must survive the test not of years, but of decades. We have no guarantee that future Governments will be as responsible in their selection, and will not choose cronies or incompetents.
It is worth reflecting on the language of the clause that establishes the appointment process. It is couched in broad terms, and states:The Chancellor of the Exchequer shall only appoint a person under subsection (2)(c) if he is satisfied that the person has knowledge or experience which is likely to be relevant to the Committee's functions.There must be several hundreds of thousands of people who could satisfy that clause. It is crucial to build in some control over how that process operates.
The Select Committee process was ably debated by the hon. Member for Norwich, South (Mr. Clarke), and it is worth reflecting on some of the points he made. He dealt with the Chief Secretary's first objection, which was that competent people would be put off if they had to go through a scrutiny process and be exposed to the light of day. In the past few weeks, we have had a good example of that. One of the members of the monetary committee has been subject to an extremely scurrilous campaign in a national newspaper. It would have been much better for her and for the whole process if the issues had been discussed properly through an open, transparent process. 1176 There is no reason why members of the monetary committee should be protected from public scrutiny; like us, they are well-paid, public figures. Nor should such a process be conducted secretly and covertly. The right hon. Member for Ashton-under-Lyne (Mr. Sheldon) has already dealt with the constitutional aspects. Many of the objections raised to new clause 3 and, by implication, to new clause 1, have already been dealt with effectively.
The amendment to provide regional balance tabled by the hon. Member for Great Grimsby is important and has received very little attention. Most of the successful independent banks have relied heavily on regional independence. The directors of the Federal Reserve bank, as opposed to its members, are drawn from the states of the United States and, as a result, have independent constituencies. The Bundesbank council has greater strength owing to the fact that it is drawn from the Lander. There is an argument for a regional dimension in this country. I am surprised that the Government, whose Treasury Front-Bench team is 60 per cent. Scottish, have not spotted the fact that macro-economic policy has a distinct Scottish dimension. The Chief Secretary will know very well that the mechanisms in Scotland, which is an oil economy, are different from those in the rest of the United Kingdom. Interest rates affect Scotland differently from England because the balance of house tenure is different. That aspect should be built into the Bank's considerations, and the hon. Gentleman's proposal is one way in which to do that.
The Liberal Democrats strongly support the basic principle of independence of the Bank of England. We support the concept that the Government have introduced, although we regret that they have not been more flexible over some of the amendments designed to improve the Bill. We shall support the new clause when it is put to a vote.
§ Mr. Jim Cousins (Newcastle upon Tyne, Central)
I congratulate my hon. Friend the Member for Newark (Mrs. Jones) on her maiden speech. As a frequent user of the east coast main line, my knowledge of Newark and Retford is regular, frequent but rather fleeting. She filled in many of the gaps that I missed as I shot past. She emphasised the importance of roots and convictions, and we should all take that greatly to heart. She mentioned that Newark had had a bad time in the civil war. Newcastle had a worse time, because in 1644 it was besieged for several weeks, and was finally captured by the Scots. I mention that episode because it has a certain relevance to the debate. Any discourtesy to the Chief Secretary will be balanced by the fact that my hon. Friend the Member for Great Grimsby (Mr. Mitchell) can rest assured that some of us hold out against the Scots on occasions that are not always lost in history.
We are discussing serious and important issues. The Bank of England Bill is as much a constitutional as an economic Bill. It exchanges secrecy for openness, and it exchanges the illusion of a control that was never really exercised for the reality of an important debate about how the economic management of the country is to be carried out. In a sense, that is the test of the new clauses and amendments.
1177 5.30 pm
I welcome the amendments tabled by my hon. Friend the Member for Great Grimsby. We should try to ensure fair representation of regional and industrial interests on the Monetary Policy Committee through proper scrutiny of its members. Although I doubt that a quota could be provided for sensibly in statute, the exercise of accountability among members will make it possible to keep such matters in mind.
I am afraid that I disagreed with my colleagues on the Treasury Select Committee. I did not take their view that periods of service on the Monetary Policy Committee should be longer than those proposed by the Government. Any danger of cronyism will soon be exposed: it will not survive scrutiny. That is not the danger. In financial affairs, a much greater danger is that a club of good old boys—and, for that matter, girls—will be established, that those people will be able to hold office for far too long and that their habits will become altogether too cosy. I am therefore glad that the Government have decided on short terms of service.
New clause 1 is at the centre of the debate, and I have listened carefully to what has been said about it. As a member of the Treasury Select Committee, I wanted the House to have an opportunity to discuss it: that is why I supported the proposal in that Committee. It is important for us to wrestle with constitutional innovations, and to consider ideas such as that of confirmatory hearings. I have also listened to what the Government have said, however, and they have by no means closed their mind to the possibility of statutory confirmatory hearings at a later date.
I understand—this is expressed clearly in the Government's response to the Treasury Select Committee report—that the Government are looking to the Select Committee. I understand that they are encouraging the Committee, albeit cautiously, to experiment with confirmatory hearings with regard to members of the Monetary Policy Committee. Certain issues cannot be overlooked. The hon. Member for Grantham and Stamford (Mr. Davies) speculated that a member of that committee might have had connections with Rupert Murdoch. Rupert Murdoch is a business man with a substantial empire; it is entirely possible that a member of the MPC appointed in the future may, at some point in his or her career, have had a business connection with him. Would it be appropriate for a confirmatory hearing to explore that and make something of it? Not necessarily, surely. Good judgment is involved here.
§ Mr. Quentin Davies
I am sure that the hon. Gentleman listened carefully to what I said, but what worries me is not that an individual might have worked for Mr. Murdoch at some time. As the hon. Gentleman pointed out, Mr. Murdoch's empire is so extensive that it might be difficult to complete a career in certain spheres—especially journalism—without working for part of that empire at some point.
My fear is that a person of that kind might be able to influence a Government to appoint a certain person. A deal might be made, for instance, whereby a Murdoch nominee would be appointed and the Government would be given a better run in The Sun. That is the sort of 1178 legitimate concern that Parliament should bear in mind if there is any suggestion of extraneous influence on the Government in the appointment of members of the MPC.
§ Mr. Cousins
1 might have known that that would be a long intervention.
The rather po-faced way in which the hon. Gentleman made his intervention is entirely contradicted by the lip-smacking glee with which he introduced the subject of Rupert Murdoch in the first place. The Government are properly concerned about the issue. For a brief period in her career, a member of the MPC served with the American Central Intelligence Agency. We can all imagine what irresponsible people could make of that at a public hearing.
The Chairman of the Treasury Select Committee, my hon. Friend the Member for North Durham (Mr. Radice), has made it clear that the Select Committee wants to experiment, and to demonstrate to both the House and the public that we, as a group of parliamentarians, are capable of engaging in these tasks properly and responsibly. I think that the Government are entirely right to leave it to us to demonstrate the worth of their proposal, and to enshrine it in statute only after we have done so.
§ Mr. David Ruffley (Bury St. Edmunds)
I support new clause 1. It is important, because it introduces a check on over-mighty Executives who could—as Opposition Members have pointed out—use their power to appoint members of the MPC to install cronies, and to use that body as a political instrument, or a political wing, of the Treasury. In other words, it would not in any sense be independent.
In Committee, that argument was said to be wrong for two reasons. Labour Members said, "We are not going to appoint political cronies; we have not done so thus far." They pointed out that the MPC currently included individuals who were not in any way political, and that the City considered that its current composition was fine and above board. That, however, implies nothing about what the Chancellor of the Exchequer, or other Treasury Ministers, may wish to do in the future. Opposition Members think it perfectly possible that the wily and cunning Chancellor may indeed use all his skills of spin and underhandedness to manipulate all sorts of activities in the new MPC and the new Bank of England. We are worried about what may happen in the future without a measure such as new clause 1.
The second reason for suggesting that there would be no political cronyism was given by the Chief Secretary, who said that the City would not put up with any political appointments. The City would make its displeasure known, and the Chancellor would not dare to install political allies or stooges. That argument was deconstructed convincingly and elegantly by my hon. Friend the Member for Grantham and Stamford (Mr. Davies), who made the entirely valid point that a premium would attach. Investors and traders outside this country, and even in the City, would say, "This is a dodgy committee. We are worried about what the macro-economic management of this currency and this country is all about." There would be a premium when it came to buying and selling. The Chief Secretary did not address that point in Committee, and I think that he should do so. It is not enough to say that the committee will be self-regulating.
1179 A huge power is being transferred to an unelected quango that is like no other quango. In Standing Committee, Labour Members wanted to know the difference between the new statutory body created by the Bill and the Prison Service agency or the Passport Agency. Labour Members must be living on a different planet if they do not understand the difference, which is clear, between those bodies and the one created by the Bill. The difference is that interest rate policy touches the lives and interests of so many people. It affects mortgage holders; it affects the levels at which exporters trade their products; and—because monetary policy affects inflation—it affects everyone's cost of living. Those are huge political issues that concern people's daily lives.
It is nothing short of disgraceful for Ministers, with virtually no consultation, to introduce this Bill and to propose a statutory body comprising unelected placemen and appointees. We should carefully examine new clause 1, and assert the fact that Parliament must be able to hold the Executive to account on big political decisions, such as setting interest rate policy. That must be right.
Opposition Members want to halt the dangerous trend of downgrading the importance of the House that the Government have set in train—by leaking stories to newspapers, by the manner in which they set policy on economic and monetary union, by their errant disregard for the House's practices and by not consulting the House, as they should, in determining their conduct as a responsible Executive. In that spirit, I support new clause 1.
§ Mr. Michael Fallon (Sevenoaks)
I should like to speak briefly to the final four amendments in the group. Before I do so, however, it is my very pleasant duty to congratulate the hon. Member for Newark (Mrs. Jones) on her maiden speech. As the successor to both Richard Alexander and William Gladstone, she has her work cut out. If she emulates the popularity of the former and longevity of the latter, she will be doing very well indeed. It was an extremely fluent speech. I have no idea why she chose to wait before delivering it, but we shall certainly be disappointed if it is as long again before we hear her next speech. The Opposition congratulate her on it.
§ Mr. Ruffley
In my speech, I was negligent in not congratulating the hon. Member for Newark (Mrs. Jones) on her speech; I wish to do so fulsomely. It was an elegant, beautifully crafted and wonderfully delivered speech, and I should like to congratulate her. I apologise for not doing so earlier.
§ Mr. Fallon
Before advising the Opposition on the course of action that we should take on new clauses 1 and 3, I should like to speak briefly to the final four amendments in the group: amendment Nos. 3, 18, 20 and 19.
The object of amendment No. 3 is to ensure that the outside appointments to the Monetary Policy Committee really are outside appointments. Currently, five members of the Monetary Policy Committee are Bank of England employees. It should therefore be self-evident that the other four—the so-called external appointees—should not be Bank of England employees. That is certainly the understanding that the Select Committee expresses in its report, which—at paragraph 46, and again at paragraph 50—refers to those members being external.
1180 The Chancellor of the Exchequer, in his statement in May—which is helpfully included as appendix 1 in the Select Committee's report—makes it clear, at paragraph 20, thatthe Government will also appoint four members of the Monetary Policy Committee from outside the Bank of England.However, it is not clear in the Bill whether that will happen.
The purpose of amendment No. 3 is to make it very clear that those four external appointments must be external, and that they cannot have been employed recently by the Bank. The amendment seems to be so self-evidently useful that I look forward to the Chief Secretary accepting it.
Amendment Nos. 18, 19 and 20 deal with the length of appointment of Monetary Policy Committee members. Some hon. Members who have spoken in this debate discussed the nature and length of the appointments, and the House should be a little clearer about them. In Standing Committee, it was fairly obvious that the Government have themselves not decided on them.
I am sorry not to see the Paymaster General—who dealt with the Bill in Standing Committee—in the Chamber for this debate. Perhaps he has been—I must not say detained—occupied elsewhere. In Standing Committee, he said:This is not an exact science".He even invited the Standing Committee members
to wait for us to introduce proposals."—[Official Report, Standing Committee D, 27 November 1997; c. 175.]The Bill is now in the later stages of its passage through the House, and I should have hoped that by now we had had more proposals from the Government on how the appointments will be made, how they will be phased and staggered, and whether Ministers really do think that three years is the right length for membership of the Monetary Policy Committee.
It is precisely because the Government have not yet proposed firm ideas that the Opposition have. Amendment Nos. 18 and 19 distinguish between Monetary Policy Committee internal and external members. In the same sitting of the Standing Committee, the Paymaster General drew that distinction—which I think is important—between internal and external members. We would therefore allow the three-year period to apply to internal members, but suggest the longer period of four years for external members.
I must confess that amendment No. 20 is very much a fall-back amendment. If the Chief Secretary is not prepared to accept our suggestion of differing lengths of appointment for different Monetary Policy Committee members, we still think that there is a case for a term longer than three years—which has been accepted by hon. Members on both sides of the House. The advantage of four years over three years is that such a length is more likely to allow some membership crossover between general elections—which is an important point to which I look forward to hearing the Chief Secretary's reply.
1181 I return to new clauses 1 and 3. This has been a very good debate, and a very House of Commons debate—because, ultimately, we are dealing with a House of Commons matter. In Committee, the Chief Secretary himself said:the House should consider the merits of such hearings and decide".—[Official Report, Standing Committee D, 18 November 1997; c. 28.]That is exactly what has happened. The Treasury Select Committee has gone off and considered the merits of the hearings, and, in a very persuasive and well-argued report, it has produced its conclusions. Today, the House has debated those conclusions.
Strong support has been shown on both sides of the House, and certainly among Conservative Members, for the principle that lies behind both the new clauses. The principle may be simply stated: to make the Bank—that quango bank—more accountable. If it is right for the Chancellor to delegate his responsibility for monetary policy to the Bank of England, it must be equally right for the House to ensure that its accountability is similarly transferred, and that the House continues to play a role by confirming some or all of the appointments to the Monetary Policy Committee.
I do not think—I sense that it is also the House's view—that there is any reason to delay further a decision on the matter. Nor is there any case for simply relying on further warm words from the Chief Secretary. As its Chairman has told us, the Treasury Select Committee is now likely to proceed on that basis even informally, and that reinforces the case for putting those arrangements into statute.
The only remaining question is which new clause we should put into the Bill, our new clause 1 or the Committee's new clause 3. They are slightly different. The Committee's new clause does not allow for open competition for the appointments, but it is a fuller new clause, and perhaps even better drafted than ours on the key principle.
Most important of all is the principle that as this is a matter for the House, we should perhaps be guided as a House by the advice of our principal Committee in making our decision. Depending on what the Chief Secretary says in his reply, I shall therefore probably suggest to my right hon. and hon. Friends that we withdraw new clause 1, and invite them to support new clause 3.
We have listened to what the House has said. Now we hope that Ministers will have listened, too.
§ The Chief Secretary to the Treasury (Mr. Alistair Darling)
I begin by welcoming my hon. Friend the Member for Newark (Mrs. Jones) and congratulating her on her maiden speech. I understand that she was a journalist before entering the House. She is now a journalist turned politician, so she will know what it is like to be a shark that discovers it has cut itself, and finds itself at the centre of a feeding frenzy, the victim of its former friends.
My hon. Friend made a thoughtful speech and paid a handsome tribute to Richard Alexander who, as many of us remember, took an independent line when he felt that 1182 his constituents' interests were at risk. She also spoke in support of the Government's economic policy and of many of the measures in the Bill, which are central to achieving the objective to which she referred, economic stability.
My hon. Friend need have no fear; I am sure that she will have many useful contributions to make in debates both on the Floor of the House and in Committee, and she deserves to be congratulated.
Before I deal with the main debate, which is essentially about confirmation hearings, I shall speak briefly about what was said by the junior shadow Treasury spokesman, the hon. Member for Sevenoaks (Mr. Fallon). I suppose that I must congratulate him on his transfer from the shadow Department of Trade and Industry team, although perhaps the circumstances were not as he might have wished.
The term of office of members of the Monetary Policy Committee was debated at some length in the Standing Committee. We believe that three years is the appropriate time, and it is entirely in line with the interim report of the Hempel committee, which says that three years is a reasonable time. There is an expectation that members will be reappointed from time to time, and we believe that three years is the right period.
§ Mr. Andrew Tyrie (Chichester)
If the Chief Secretary is so sure that three years is the right time, will he explain why he feels that the United Kingdom should be out of step with the Bank of France, which has terms of six and nine years, with the Federal Reserve, which has terms of up to 14 years, and with the Bundesbank, which has terms of eight years?
§ Mr. Darling
Simply because we are dealing with the Bank of England, not the Bank of France or of anywhere else.
§ Mr. Darling
I happen to think that a term of office of 13 or 14 years is too long. It is for the United States to decide what is appropriate for its country, but I think that that is too long. There is an expectation that the Government will reappoint members from time to time, so three years can become six years or even nine years. Three years is therefore an appropriate period, and I am not inclined to accept the Opposition's advice on that point.
Equally, although I understand what the Opposition say about former employees of the Bank, I am not sure that I would want to take such a hard and fast line and say that somebody could not be appointed, just because he or she had worked for the Bank in the past five years. That may be something which the Chancellor the Exchequer would want to consider in deciding whether an individual was an appropriate person, but there still may be circumstances in which a former Governor or Deputy Governor would be an appropriate person. I do not know; we shall have to see, but I am not inclined to accept the Opposition's suggestion.
I shall now talk about new clauses 1 and 3, although new clause 1 is no longer with us because the Opposition, who presumably did not think that it would command a majority in the House, have withdrawn it. That new clause 1183 raised two matters that the Treasury Select Committee new clause—if I may refer to new clause 3 in that way—does not raise. It required the Chancellor to consult the Treasury Select Committee on a procedure for a competition in relation to appointments to the Monetary Policy Committee—
§ Mr. Deputy Speaker (Sir Alan Haselhurst)
Order. I must tell the Chief Secretary that no new clause has yet been withdrawn, because the House has not been asked to approve a withdrawal.
§ Mr. Darling
I apologise, Mr. Deputy Speaker. I was anticipating what would happen if the shadow Treasury spokesman stuck to what he said and withdrew new clause 1. In case he does not, I shall continue to deal with what he said about it.
§ Mr. Barry Sheerman (Huddersfield)
Can we get the record straight? I understand that the reason why the new clause may be withdrawn is that the Opposition cannot guarantee that even their own Members will support it.
§ Mr. Darling
My hon. Friend may be right, but, in the spirit of what has been quite a useful debate, and one remarkably, although not entirely, unpartisan, I shall address the merits of the points raised. Many hon. Members have thought a great deal about the procedures, and I should like to give the Government's response.
None the less, I shall start by making a slightly partisan point, in the light of what the shadow Chief Secretary said. I welcome the Opposition's conversion to open government. However, I am bound to say that in the 10 years that I spent on the Opposition Benches, I do not remember even one occasion when the Conservative Government ever offered to consult anyone about open procedures for appointing any person to any quango or body for which they had responsibility.
I know that the Tories are changing, and that last September at their conference they said they were terribly sorry and wanted to be a softer and caring party—and now they even want open government. Clearly they are touching and feeling their way to a new Conservatism, and it is all most welcome.
§ Mr. Darling
No, not at the moment, although I shall certainly give way later to the hon. Gentleman, who may not be fully at ease with that change of mood in the Conservative party. First, I should like to make some progress.
My hon. Friend the Member for Great Grimsby (Mr. Mitchell) raised several points about the new clauses, one of which was about the balance of the court. I do not want to accept his amendment, because appointments to the court are Crown appointments, but I agree with everything that he said about the need to have a balance on the court, from the regions, from finance and from business, so that there is a broad representation.
My hon. Friend will understand that I cannot say anything further tonight, other than that I hope that when he sees the appointments that will shortly be made to the court, he will not be disappointed. The Chancellor has 1184 made it abundantly clear that he intends to ensure that the restructured court has a far broader base than it has ever had in the past, and, as my hon. Friend will see, we shall make the first moves in that direction in the not too distant future.
Let me set out the Government's approach in general, and then turn to the proposals by the Select Committee in particular. But first I shall make one important preliminary point that should not be overlooked. Tonight's debate has essentially been not about the principle or the constitution of the Monetary Policy Committee, but about whether there should be confirmatory hearings, which are ancillary to those—designed, as my hon. Friend the Member for Norwich, South (Mr. Clarke) said, to enhance the procedures.
We should not lose sight of the fact that the test of the Monetary Policy Committee will be whether it achieves the Government's inflation target of 2½ per cent. That will be the test in which most people will be interested.
I set out the Government's view when I appeared before the Treasury Select Committee last November. I repeat that the Government continue to have an open mind on whether the House should move towards instituting confirmatory hearings, but that we see some practical difficulties that need to be given much thought.
Of course, it is necessary to approach the proposition from the point of view not only of making appointments to the Monetary Policy Committee but of making a whole range of important public appointments.
I accept that the Monetary Policy Committee is clearly of great importance. Its job is to deliver the inflation target, so the calibre and quality of its members clearly matter. Indeed, clause 13(4) acknowledges that, because it provides that the Chancellor is bound to appoint only those people who have sufficient expertise and knowledge to discharge that duty.
I must start with an important matter of principle, a House of Commons matter about which each and every one of us ought to be concerned. At the moment, the constitutional position is that Ministers are responsible to the House for what they do. The Chancellor is accountable for his conduct of the economy and for appointing members to the MPC. If Select Committees are to be given the power of confirmatory hearings and, almost by definition, to choose who might be on the MPC—a number of hon. Members have made it abundantly clear that they would want to exercise some degree of choice, depending on their views on Europe, monetarism or whatever—the MPC appointed might be the appointee not of the Chancellor but of the Select Committee or, perhaps, the House. That is not merely a nice debating point, as an issue of principle is involved.
§ 6 pm
§ Mr. Charles Clarke
Does my right hon. Friend accept that some members of the Select Committee did not want to influence the appointment or the ideological position—pro or anti-European, anti-monetarist or whatever—but were concerned purely about professional competence and personal independence? Although there may be hon. Members, as he says, who think that the Treasury Select Committee should directly influence the appointments, that is not the view that informed new clause 3.
§ Mr. Darling
I entirely accept what my hon. Friend says—that those members of the Select Committee who 1185 support the proposition want to confine their attentions to a very narrow range. However, it has been made abundantly clear in the debate and, bearing in mind the differing views and nature of the 650 Members of the House it is entirely possible—we have heard it tonight—that many hon. Members might want to go well beyond those two narrow steps and to look further.
§ Mr. Darling
I should like to make some progress; then I will give way.
I was pointing out that we might have a situation in which an appointee to the MPC or, for example, the Director General of the Prison Service, was not the appointment of the Minister, who might say, "That's not my appointment. I'm not willing to take responsibility for what the appointee or the body does."
§ Mr. Fallon
We cannot let the Chief Secretary get away with that. No one is suggesting that the Select Committee would choose who was to be appointed under the statute. Indeed, no one is proposing an amendment to that effect. Both new clauses simply deal with confirmation of appointments made by the Chancellor.
§ Mr. Darling
The hon. Gentleman is right as far as new clause 3 is concerned. It makes it clear that, at the end of the day, the Chancellor can have his way.
§ Mr. Darling
The appointments would be subject to confirmatory hearing and, were the Select Committee to say that the person was not suitable, the new clause is phrased to allow the Chancellor to write explaining his reasons and go ahead with the appointment. The new clause would avoid the precise problems to which I referred, although it would still be the case that the individual might have been so crippled in the process of confirmation that he or she would be put in a difficult position. Were the House to decide to have confirmatory hearings in total—that is to decide that the relevant Select Committee could decide whether someone was to be confirmed—the appointee could become that of the House and not of the Minister.
I raise that matter because we must consider the issues of principle raised by the new clause. That is why the Government's position is that it is a matter that the House as a whole must consider across the board, not simply as an amendment to the Bill.
§ Sir Michael Spicer
The right hon. Gentleman bases his case, as I understand it, on the fact that the House is making excessive demands of the Government in this matter. The whole issue must be seen, must it not, in the context of the fact that the Government have stripped away the House's ability to render the Government accountable on the Floor of the House on monetary policy as a whole.
§ Mr. Darling
As I said, the Chancellor of the Exchequer can be held to account by the House at any 1186 time for the conduct of the Government's economic policy. The Government have given the Monetary Policy Committee operational responsibility for fixing interest rates in such a way as to achieve the Government's inflation target.
§ Mr. Quentin Davies
It is fatuous to raise as an objection to a new clause a danger that is explicitly excluded by the wording of that new clause. That is the position here, as the right hon. Gentleman has just acknowledged. Does he not realise that if he pursues an argument on that basis, he is sending the House a clear message that he does not have a case against the new clause at all?
§ Mr. Darling
I shall develop that argument further. I repeat that there is an issue of principle as regards ministerial accountability—an issue about which hon. Members need to think long and hard.
§ Mr. Gibb
Given that the Treasury Select Committee stated that it will go ahead with the confirmatory hearings regardless of whether the amendment is passed and given the Chief Secretary's firm opposition to those hearings, how will the Government cope if the Select Committee refuses to confirm one of the appointments?
§ Mr. Darling
We are debating whether we should incorporate the new clause into the Bank of England Bill. That is an entirely different proposition from that advanced by the Treasury Select Committee, to which I shall return shortly.
To conclude my initial point, ministerial accountability and who is responsible for what are matters about which the House needs to think. The whole question of ministerial accountability has fallen into disrepute in the past few years. If we are to reconsider that area, we must consider the implications long and hard. Neither that argument nor the other arguments that I will advance are fatal to the proposition of confirmatory hearings, but we do not believe that such a measure should simply be bolted on to the Bill; it is something that the House should consider.
I shall deal with the other arguments. My hon. Friend the Member for Norwich, South helpfully set out some of the arguments that I put before the Treasury Select Committee, which I shall deal with briefly. First, I observed that there was a risk that the appointments process would be not about the merits of a particular candidate, but a way of getting at the Government of the day. I accept that no member of the present Treasury Select Committee would dream of doing such a thing, but it must be within our contemplation that a future Select Committee or other Select Committees might decide, depending on the composition of the House—within recent memory a Government did not have a majority—the Opposition, dissident members of the governing party or cross-party, to have a go at the Government by trying to get at an individual. It is not fatal, but it is something which we must consider. If that happened, it would bring the whole system into disrepute.
I also said that I thought that confirmatory hearings of that type might discourage candidates from coming forward. I mentioned John Maynard Keynes, who has been referred to on many occasions. I have been in the 1187 House for only 10 years and my hon. Friend the Member for Norwich, South has been here for only nine months, but I am sure that he will have observed from time to time a tendency for hon. Members to use their privilege as Members to say things that they would never get away with outside the House. For whatever reason, they might decide to have a go at someone appearing before them.
I mentioned Keynes because his economic credentials would have been without doubt. However, were he to appear before the Treasury Select Committee today, although the Gallery would be packed, while many of the journalists and others would be there to hear his General Theory, a number would be there in the hope that he would be asked about his private life, which, even by today's standards, might be thought by some to be rather unorthodox.
Again, I am confident that in the majority of cases that sort of thing would not happen, but it must be within the contemplation of the House that, on occasion, the Opposition or others might have a go at the Government by trying to find out something about an individual appointee that would make it difficult for the Government.
§ Mr. Radice
The fact is that we have had formal soundings with the members of the Monetary Policy Committee, and all of them have approved of the idea. I accept the dangers to which my right hon. Friend refers, and we must guard against them, but the members of the MPC believe that confirmatory hearings would enhance their position rather than weaken it.
§ Mr. Darling
I agree. I have spoken to members of the Monetary Policy Committee in anticipation of a visit to the MPC, to which I certainly look forward. As part of the open process that the Government have instituted, the chance for members to advance their theories and approach on inflation would add to transparency. I have not the slightest doubt that my hon. Friend will ensure, when the Select Committee sets up the procedures, that they are fair and that the individuals have a chance to state their case and will be questioned only on matters that are germane to their appointment.
We are discussing specific new clauses, but we are dealing with a general principle. I undertook to set out the Government's position, which is that the idea is worthy of consideration, but that we have a duty to consider not only the advantages but the downside. None of the matters that I have mentioned is fatal to the proposal, but it would be wrong to apply confirmatory hearings to these appointments and not to others that are equally important. Examples could include the utility regulators, the Governor of the Bank of England and his deputies—those are fairly important appointments, after all—and members of the Financial Services Authority. That is why we are not inclined to accept either of the new clauses.
One important point concerning new clause 1 that has not been discussed to any great extent today is the need to ensure that the individuals maintain the high standards of public life that we would all expect.
I remind the House that the Government made proposals last November that would mean adopting a code of practice involving various procedures designed to make the appointments process more open and auditable, because the job and the desired qualifications of the appointee would have to be publicly specified: candidates 1188 would have to be identified through advertising or appropriate consultation, and the sifting or selection of candidates would have to be undertaken and overseen by a panel with at least one independent member. If the proposals are acceptable, we will act right across the board to implement them.
We must consider what the Treasury Select Committee would decide on. We have already had some discussion about that. Would the Select Committee discuss candidates' views or the number of papers that they had presented to the academic community, for example? We all know that economists cannot agree, and I doubt whether the Select Committee would always agree about who is best. The choice is bound to be subjective. We should not lose sight of the fact that the key test is whether the Monetary Policy Committee delivers the Government's objective of low inflation.
The Treasury Select Committee has said that it wants to call members of the MPC before it, and I welcome that. The whole House has an opportunity to watch how the procedures develop and work in practice. It could be that many of my fears come to nothing, but they should not be ignored, because we must always guard against dangers. I hope that the Select Committee will bear it in mind that the whole House will be watching to see whether the confirmatory hearings are successful and whether, indeed, they add to the general openness and transparency that the Government want.
The matters dealt with in the new clauses deserve further consideration. We are keeping the proposal under review, but we do not believe that it would be right to institute confirmatory hearings for one set of appointments in this Bill alone. It is the Monetary Policy Committee's job to achieve the Government's inflation target. That is where the main interest lies. The Chancellor remains accountable to the House for the conduct of economic policy.
For those reasons, I urge the House to reject the new clauses. We will keep the matter under review, and perhaps at some stage the House can have a substantive debate on the merits of having confirmatory hearings right across the board.
§ Mr. Heathcoat-Amory
We listened carefully to the Chief Secretary. He was highly sympathetic to the concept of confirmatory hearings—but not now, and not for this Bill. His reasons disintegrated before the House. He was afraid that the candidates would be questioned about their private life, and that people could be deterred from standing by the thought that they would be cross-examined by the nasty Treasury Select Committee.
As the Chairman of the Select Committee, the hon. Member for North Durham (Mr. Radice), said in his excellent contribution, the questioning would centre only on the competence and independence of the candidates; that is written into new clause 3, so there is no danger, either in intention or in law, that the questioning could go as wide as the Chief Secretary fears. He gave no reasons why we should not accept the excellent all-party report. We will urge the House to vote for new clause 3.
The Chief Secretary said that the proposal would open up a Pandora's box, and that not only Monetary Policy Committee members but even the Governor of the Bank of England might be subjected to such hearings. That is 1189 indeed the case. A glance at new clause 3 shows that it applies to the Governor himself. The right hon. Gentleman did not even read it before inviting the House to reject it.
New clause 3, tabled by the hon. Member for North Durham and others, is well drafted, and we intend to support that, rather than new clause 1. I therefore beg to ask leave to withdraw the motion.
§ Motion and clause, by leave, withdrawn.