Bank of England (Hansard, 27 June 1996)

§ 1. Mr. Michael Brown
To ask the Chancellor of the Exchequer what recent representations he has received urging him to make the Bank of England fully independent of Her Majesty's Government. [33405]

§ The Chief Secretary to the Treasury (Mr. William Waldegrave)
The Chancellor has received no such representations recently.

§ Mr. Brown
In view of that reply, and as the Government have been so successful in reducing interest rates and inflation over the past few years, does my right hon. Friend agree that there is absolutely no need whatsoever for an independent central bank in this country? Further, will he confirm that we are not legally obliged—under our opt-out—to become part of the central banking system of the treaty on European Union under stage 2 of economic and monetary union?

§ Mr. Waldegrave
On the latter part of my hon. Friend's question, I confirm that he is right.
However, on the former part of my hon. Friend's question, I agree with the Governor of the Bank of England, who said that the present framework gives us a better chance of price stability than at any other time in his professional lifetime. Under the joint leadership of my right hon. and learned Friend the Chancellor and the Governor, to whom I pay tribute, that has been delivered.

§ Mr. Betts
The Chancellor has previously said to the House that he does not believe that there will be any constitutional implications as a result of the creation of a single currency. Will the Chief Secretary tell the House whether the transfer of powers from the Government and from the House to an independent European central bank is not a significant constitutional change?

§ Mr. Waldegrave
It is odd for the Labour party to lead on this particular matter. The right hon. Member for Dunfermline, East (Mr. Brown)—who, I take it, has gone to Scotland to try to find out what his party's policy is on devolution—recently said: The Treasury rather than the Bank of England must continue to set the targets for monetary policy as well as fiscal policy. 450 However, at the same time, the right hon. Member for Sedgefield (Mr. Blair) went to Germany. I presume that he was correctly reported by one of the German newspapers under the headline The pound can go, says Blair, as he cuddles up to Kohl. The question is really for Labour Front Benchers.

§ Sir Terence Higgins
Will the Government resist arty claims that are made for an independent central bank? I congratulate my right hon. and learned Friend the Chancellor on his recent decision to reduce interest rates, which has been completely vindicated by events. Will he consider a further reduction, combined with explanations to the public—particularly to pensioners and to those on fixed incomes—that, although nominal rates have been cut, real rates and returns on savings are far higher than they ever were, when under a Labour Government they were negative?

§ Mr. Waldegrave
My right hon. Friend is absolutely right—he remembers that clearly and accurately. What is more, the 20 per cent. rate of tax for savings has, in particular, helped pensioners with savings. My right hon. Friend is right: the Chancellor judged the situation correctly, to the great benefit of the country.

§ Mr. Malcolm Bruce
Is there not an inconsistency in the Government's position of denying the right of a group of central bankers in London to set interest rates but, as the Chancellor acknowledged in Florence, maintaining that Britain could be a founder member of the monetary union? If that were the case, interest rates would be set by a group of central bankers in Frankfurt. Where is the logic in those two positions?

§ Mr. Waldegrave
My right hon. and learned Friend the Chancellor said, quite correctly, that, because of his management of the economy, Britain could be in a position to take that decision, if it chose to do so. Thanks to my right hon. Friend the Prime Minister, we can make that decision freely at the appropriate time. The real confusion lies not among the Liberal Democrats—who have always been consistent—but in the Labour party.
I do not know whether the hon. Gentleman knows that one of the real bosses of the Labour party, Mr. John Monks, said recently that it will be the Leader of the Opposition's "destiny" to sign up for the single currency. That is the signal that the Labour party is giving to Europe, but it is not the signal that it is giving to the hon. Member for Bolsover (Mr. Skinner). If, by any mischance, the Labour party gets into power, the hon. Member for Bolsover will be in Opposition then, as he is in Opposition now.