Economy: Monetary and Fiscal Policy

Lord Myners Excerpts

Tuesday 8th November 2011 Lords Chamber

[Lord Sassoon]

My Lords, it is completely the case that the Chancellor of the Exchequer sets the inflation target for the MPC. I am sure my noble friend is not suggesting that we should go back on the previous Government’s decision, which I applaud, to give the Bank of England independence in this area. Monetary policy should be the first line of defence in the face of economic shocks.

[Lord Myners]

My Lords, monetary policy should be the first line of defence against the ravages of inflation. I put it to the Minister that the Government's fiscal policy, draconian as it is, is forcing the Bank of England to adopt a highly accommodative monetary policy with a disregard for the inflationary consequences, as is evidenced in the Bank's quarterly report in its failure to achieve any of its inflationary objectives over the past five years.

[Lord Sassoon]

My Lords, I am sorry that the noble Lord, Lord Barnett, is not here, because we have not had anything from his quote book for quite a time. I offer the noble Lord, Lord Myners, this from another place on 23 November 1978, when the noble Lord, Lord Barnett, was asking for cross-party support on inflation. He said:

“I had hoped to have the support of the Opposition instead of the carping criticism that we receive constantly … We intend to make our counter-inflation policy work”.—[Official Report, Commons, 23/11/78; col. 1468.]

Well, as it was in 1978, it is now. We should let the Bank of England get on with it.