§ 15. Mr. Nick St. Aubyn (Guildford)What plans his Department has to extend the use of Bank of England reserve requirements as an instrument of monetary policy. [41688]
§ Mr. St. AubynThe rate of inflation last May was 2.5 per cent., which was exactly in line with the previous Government's target; the rate of inflation today is 4 per cent., which is 1.5 percentage points above this Government's target. Do Treasury Ministers accept that it is their failure of fiscal policy, in particular increasing taxes twice in one year, which has caused the increase in inflation? Will they, instead of asking the Bank of England to write to them explaining the failure of monetary policy, write a letter to the Bank to explain their deeply flawed judgment on fiscal policy?
§ Mr. RobinsonNone of that arises from the question, but I am quite happy to reply to the hon. Gentleman. We need no lectures from the Conservative party, whose Government saw inflation rise to 21 per cent. in 1980. Inflation will come down as our long-term policies for stability and growth prove to be correct, and we avoid the boom-and-bust economic policies that the previous Government went in for. We go for long-term policies because there is no quick fix. For the hon. Gentleman's information, the Bank of England has expressly ruled out using the reserve ratios as an instrument of monetary policy; it did so last August, as recorded in the report of that date at paragraph 63.