Bank of England: Monetary Policy Committee

Lord Peston Excerpts

Monday 14th October 2013 Lords Chamber

[Lord Newby]

As the noble Lord says, the governor is now looking at unemployment in terms of when interest rates might change, but there is no iron rule that the moment unemployment rates hit 7%, interest rates will go up. There are three potential arguments which would mitigate against that, of which by far the most important is if the outlook for inflation was higher. As to when we might reach 7%, in August when the Bank of England published its report suggesting this, it thought it would be in the third quarter of 2016. The good news is that since then the economy has grown more quickly, and the consensus is now settling around summer 2015.

[Lord Peston (Lab)]

My Lords, will the Minister cast his mind back to when your Lordships debated what is now the Bank of England Act? My noble friend Lord Barnett and I put down an amendment precisely to achieve the flexibility which is in this command paper. We were not told that the flexibility was already there, which is what the command paper says. We were told that we were idiots, and that the remit of the Monetary Policy Committee was to hit the inflation target—only after that could it look at anything else. The Government have produced a sleight of hand here. I favour it, let me add, but it is a sleight of hand.

Will the noble Lord consider the central question which arises in this context, bearing in mind that the two greatest liberal thinkers of the 20th century, Lord Beveridge and Maynard Keynes, both placed the attainment of full employment at the centre of government macroeconomic policy? Can the noble Lord tell us whether under the new regimen that we are now offered, there is any hope within my lifetime—younger Members may have something more to look forward to—that we shall at last get back to what those two great thinkers said: full employment is a must?