Debt Management Office

Lord Bilimoria Excerpts

Tuesday 20th July 2010 Lords Chamber

[Lord Sassoon]

My noble friend Lord Higgins raises an important question. I think that it is part of a wider debate at the moment about the responsibilities and levers which central banks have, including, among others, the linkages between the conduct of monetary and financial stability policy. As noble Lords are aware, we are not shy of making structural changes where they appear to be justified, as we are doing by moving banking supervision back into the Bank of England.

That said, I believe that the arguments for minimising conflicts of interest by separating debt management and monetary policy objectives and accountabilities are persuasive. The IMF has maintained the position that countries should have such separation and it has become international best practice among our peer-group countries, including France and Germany.

[Lord Bilimoria]

My Lords, the Americans passed the Glass-Steagall Act in 1933, which was to reform their banking sector. That was repealed only in 1980 and now they have just passed the Dodd-Frank Act. Will the Minister explain the pros and cons of this Government’s proposed banking and financial sector reform compared with the American Dodd-Frank Act?

[Lord Sassoon]

My Lords, there are some big questions. I will try to bring the question asked by the noble Lord, Lord Bilimoria, back to the Debt Management Office and the Bank of England, which will make it more manageable. In the context of a fragile banking system, it is very important that the objectives on monetary policy of the Bank of England, including its ability which it exercised up to £200 billion to use quantitative easing as a way of fulfilling its monetary policy objective, are kept separated from the equally critical role of the Debt Management Office. Thanks to the deficit left to us by the previous Government, it had to issue more than £200 billion of debt last year, which compares with £8 billion in 1998-99. They both have challenging objectives and separation in that sense is very important.