Oil Prices

Lord Barnett Excerpts

Wednesday 8th June 2011 Lords Chamber

Asked By

[Lord Barnett]

To ask Her Majesty’s Government what plans HM Treasury has to ensure that inflation is reduced and consumers derive benefit when there is a reduction in oil prices.

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

My Lords, the independent Monetary Policy Committee of the Bank of England, the MPC, is responsible for maintaining price stability. It sets policy to meet the inflation target in the medium term. The MPC continues to judge that inflation is likely to fall back through 2012 and 2013. Petrol retailing is a competitive market. It is that competition which should see reductions in oil prices passed on to consumers.

--- Later in debate ---

[Lord Barnett]

I thank the noble Lord for his Answer. I am conscious of the fact that he has a propensity to quote what I said some 40 years ago. I thought of checking this time, but on reflection I realised that the Government have inherited a different policy from that of my time. In 1997, the then Chancellor Gordon Brown, as the noble Lord has pointed out, introduced a new policy involving the transfer of power from the Chancellor to the Governor of the Bank of England and the Monetary Policy Committee. The Government do not particularly like the then Chancellor but I assume that they are happy with the inheritance. Perhaps the noble Lord will confirm that. I know that he does not like talking about interest rates but will he also confirm the extreme national and international importance of interest rates and that the Chancellor still has absolute confidence in the governor and his policy for dealing with inflation?

[Lord Sassoon]

My Lords, I am very happy to confirm that this Government are entirely comfortable with the structure around the MPC and have complete confidence in the governor. I could go on. I have quotes from 40 years ago. I was going to use quotes from 30 years ago but if the noble Lord would prefer me not to use them on this occasion I will not do so. However, his words of wisdom are always my guide.