HL Deb 14 June 1989 vol 508 cc1422-4

2.52 p.m.

Lord Ezra asked Her Majesty's Government:

Whether, and if so when, they propose to privatise the Bank of England.

Lord Strathclyde

My Lords, the Government have no plans to privatise the Bank of England.

Lord Ezra

My Lords, I am obliged to the noble Lord for making it clear that the Government do not at present propose to privatise the Bank of England and that there are limits to their privatisation programme. Does he, however, agree that the time is now ripe to re-examine the Bank of England's role, particularly with regard to its relative independence, especially in the light of the new conditions which will arise in Europe with the creation of the single market? While I accept that the Bank must inevitably act as the Government's agent in many respects, is it not desirable that it should have greater independence in other respects along the lines of the Federal Reserve Board and the Bundesbank?

Lord Strathclyde

My Lords, that is an interesting proposal which I shall put to my right honourable friend the Chancellor of the Exchequer. The differences between the Bundesbank and the Bank of England are perhaps not as great as they appear. I wonder whether the noble Lord would welcome the removal of ministerial accountability for the Bank of England were his proposals to be put into effect.

Lord Bruce of Donington

My Lords, I welcome the Government's acquiescence in the validity of the Bank of England Act 1946, which gives them powers of general direction over its activities. Will the noble Lord clarify the position, particularly in view of the fact that the governor has the right of private audience with the Prime Minister? Will he tell the House what would happen if the Prime Minister were to give one set of directions to the governor and the Chancellor of the Exchequer were to give a different set?

Lord Strathclyde

My Lords, that is, as the noble Lord suspects, a completely hypothetical situation and one that is unlikely to arise in the near future.

Lord Barnett

My Lords, could we take it that the reason why the Government do not propose to privatise the Bank of England is that they see no good reason to do so? If that is the case, does it represent a major change in government policy, given that they have never before needed good reason for privatising anything?

Lord Strathclyde

My Lords, I disagree with the noble Lord. The Bank of England works well with its existing system. We believe that the Government have a clear resoponsibility to maintain the currency and avoid inflation through their monetary policies.

Lord Jenkins of Hillhead

My Lords, is it, however, on the whole the Government's view that the Bank of England should belong to the more independent group of central banks, including the two mentioned by my noble friend Lord Ezra and the Swiss Federal Bank, or that it should incline to the group of more supine central banks of which the Bank of France is the outstanding example?

Lord Strathclyde

My Lords, as I said in reply to an earlier question, we have no plans to change the existing situation; but, as before, I shall put those suggestions to my right honourable friend the Chancellor of the Exchequer.

Lord Morris

My Lords, is my noble friend aware that his original Answer will be welcomed by many people, not least when one considers the important role that the Bank of England plays as the nation's banker?

Lord Strathclyde

My Lords, I am glad that my noble friend welcomes my reply.

Lord Hatch of Lusby

My Lords, in answer to my noble friend Lord Barnett the Minister said that the Government believe that the Bank of England's present situation is necessary to counter inflation. When will it do so? Is it helped or hindered by government policy? As the inflation rate is now rising, does that mean that the Government will again use the Bank of England to raise the prime interest rate?

Lord Strathclyde

My Lords, the noble Lord is going far off the Question. I said that the existing situation of control of the Bank of England works well and that the Government have a clear responsibility to maintain the currency and to avoid inflation.

Lord Cledwyn of Penrhos

My Lords, is the Minister aware that we on this side of the House welcome the Government's acceptance that in matters of the first importance public ownership is best.