Bank of England (Economic Affairs Committee Report)
Debate between Baroness Vere of Norbiton and Lord Bridges of Headley(6 months, 3 weeks ago)
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The Parliamentary Secretary, HM Treasury (Baroness Vere of Norbiton) (Con)
My Lords, what an outstanding debate. I particularly thank my noble friend Lord Bridges for so skilfully opening it, and the Economic Affairs Committee. So many of its members have spoken today, and I thank them for their contributions, for the thoughtful and detailed way in which they carried out the inquiry and the report on the Bank of England, and for the breadth of witnesses they chose to interview. I am delighted that my noble friend Lord Moynihan of Chelsea chose a Treasury debate in which to make his maiden speech—of course, I am not surprised. He will make a great contribution to your Lordships’ House for many years to come, and we look forward to it.
Price stability is essential for a strong economy and, consequently, strong public finances. It is widely recognised that an operationally independent central bank is the best way to achieve price stability. That is why the UK enshrines the Bank of England’s operational independence in law, with price stability as the primary objective of the Bank’s Monetary Policy Committee. The Treasury and the Government remain committed to not only independence but the objective of price stability, and I am delighted that I therefore agree wholeheartedly with the noble Baroness, Lady Kramer, and the noble Lord, Lord Livermore—not a frequent occurrence in my life—with both Front Benches also wishing to retain the independence of the Bank of England.
My right honourable friend the Chancellor wrote to the chair of the EAC in January this year. It is worth briefly summarising some of the commitments that he made in his letter. At the outset he noted the operationally independent monetary policy, which is so important within the broader macroeconomic framework, and indeed the importance of the separation of fiscal and monetary policy in the effective delivery of monetary policy. The Chancellor noted the negative impacts of inflation on so many elements of society and our economy when it is greater or lower than 2%, and he again resolved not to change the definition of price stability. This aligns with the view of the EAC, but it should also be noted that the Federal Reserve and the European Central Bank have the same inflation targets. The Chancellor also noted the Government’s previous review of the monetary policy framework in 2013, which drew the same conclusions.
The Chancellor went on to note the Government’s commitment to ensuring that fiscal and monetary policy remain aligned to support the Bank’s efforts to return inflation sustainably to 2%. This is in agreement with the conclusions of the committee. This has meant reducing the level of government borrowing in a way that gradually withdraws support from the economy, as demonstrated by the declining path for the cyclically adjusted primary deficit.
On the relationship between the Bank and the Debt Management Office—the DMO, which many noble Lords have mentioned today—the Chancellor noted that monetary policy and debt management are distinct areas with separate mandates and decision-making processes. Given the institutional separation of monetary and debt management policy, in addition to existing public documents clarifying the relevant governance structure, the Government do not consider that an additional memorandum of understanding between the two organisations is necessary to clarify their relationship further.
On the committee’s call—and indeed that of many noble Lords, including the noble Baroness, Lady Liddell, and the noble Viscount, Lord Chandos—for the Government to publish the deed of indemnity, the Chancellor reiterated in his response that the Government would not. The deed contains operationally sensitive information relating to government cash management practices. It is not government practice to release information of this kind, and nor is it in the public interest. However, crucially, the Government are confident that this does not undermine the transparency of these arrangements, given the publication of other relevant reports and accounts, in addition to public comment and costings from the Office for Budget Responsibility, or OBR, on this topic.
Lord Bridges of Headley (Con)
Can my noble friend explain why, then, the Governor of the Bank of England told our committee that the publication of the deed of indemnity would not excite people?
Brexit: No-deal Ferry Contracts
Debate between Baroness Vere of Norbiton and Lord Bridges of Headley(5 years, 6 months ago)
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Baroness Vere of Norbiton
I really wish I had not paused for breath at that particular moment. Discussions will happen with the Department of Health and Social Care, Defra and BEIS, and we will all look at the amount of class 1 goods that need to come into the country. DfT will then be tasked to ensure that that can go ahead.
Lord Bridges of Headley (Con)
Following on from that answer, will my noble friend commit to publishing a comprehensive update on the Government’s preparedness for no deal?
Baroness Vere of Norbiton
It would be inappropriate for me to commit to that at this time, but I am sure that the Government are listening.
Honda in Swindon
Debate between Baroness Vere of Norbiton and Lord Bridges of Headley
Baroness Vere of Norbiton
My noble friend is right to say that the electric car tax increases from 13% to 16% but it will then drop from 2020, so the effect will be short-term. However, if I get any more information on that, I will certainly share it with her.
Lord Bridges of Headley (Con)
My Lords, will my noble friend please clarify when Parliament will be told what tariffs will apply to Japanese imports in the event of no deal?
Baroness Vere of Norbiton
I thank my noble friend for that question. Unfortunately, I cannot tell Parliament what tariffs will apply or when they will be published. Noble Lords will be aware that a number of things will have to be put in place if no deal becomes imminent. Obviously, most of us hope that that will not be the case but certainly the level of any tariffs, if any, will be one of the important components.