Inflation

Lord Barnett Excerpts

Thursday 17th March 2011 Lords Chamber

Asked By

[Lord Barnett]

To ask Her Majesty’s Government whether they will clarify the comments made by the Chancellor of the Exchequer to the Governor of the Bank of England in his letter of 15 February on inflation targets.

[The Commercial Secretary to the Treasury (Lord Sassoon)]

My Lords, consistent with the Monetary Policy Committee remit, the governor is required to write to the Chancellor if inflation deviates from the target of 2 per cent as measured by the 12-month increase in the consumer prices index by more than one percentage point. In his response to the governor, the Chancellor noted the Monetary Policy Committee’s assessment of inflation prospects relative to the inflation target and welcomed the committee’s determination to ensure that inflation returns to target in the medium term.

--- Later in debate ---

[Lord Barnett]

My Lords, I congratulate the noble Lord on the variety of ways that he finds not to answer a question. There are only two answers to the big issue on interest rates: whether or not you agree that they should go up. The Chancellor, in reply to the Governor of the Bank of England, who had said that increasing interest rates would be a futile gesture at the moment, said that he had “complete confidence” in the governor. In those circumstances, and given that this Government are the most transparent in history, can the Minister tell us the Chancellor’s view? Is he for or against an increase in interest rates?

[Lord Sassoon]

My Lords, first, I am grateful for the congratulations, however backhanded, offered by the noble Lord, Lord Barnett, and I will bank them. We are discussing the letter from my right honourable friend the Chancellor to the governor. In that letter, as I attempted to explain in my first Answer, he does not express any view about interest rates because, as the noble Lord well knows, the setting of interest rates is an independent matter for the Monetary Policy Committee of the Bank of England. I am sorry if I have to be boring about this, but there seems to be some misunderstanding. It is absolutely not for the Chancellor to express any view on this matter. What he does, as the noble Lord recognises, is to express confidence in the governor and the MPC structure and to support their independence.