Bank of England Meetings: Minutes (Hansard, 13 March 1996)

§ The Minister of State, Department of Social Security (Lord Mackay of Ardbrecknish)
My Lords, earlier publication of the minutes of the monthly meetings could have an unsettling effect on financial markets. Publication of press notices, the Bank's quarterly inflation Report and the minutes of the monthly meetings makes the UK's monetary framework one of the most open in the world. Indeed no other major country publishes monetary minutes earlier than we do.

Lord Bruce of Donington
My Lords, I am grateful to the Minister for that reply. He will recall that my original Question referred to a delay of six weeks between the holding of the meeting between the Governor and the Chancellor of the Exchequer. That means that in the case of the meeting held on 13th December last, the minutes were not published until 31st January. However, in the meantime a further meeting between the Governor and the Chancellor had taken place, notably on 17th January. That meant that when the Governor met the Chancellor on 17th January they did not have in front of them the minutes of the previous meeting. I do not want to seem to be unreasonable on this, but, if the minutes in fact represent an accurate account of what happened, there is no reason why they should not be published within, say, a fortnight of the meeting itself rather than be held over for six weeks until someone, somewhere has made some unspecified corrections which result in the minutes not being minutes at all but doctored minutes.

§ Lord Mackay of Ardbrecknish
My Lords, I believe that the noble Lord's last remark was uncalled for and I do not believe that he has evidence to sustain it. The position that my right honourable friend the Chancellor took in 1994 was that in the interests of transparency and better economic management the minutes of the meeting between himself and the Governor should be published after the subsequent meeting.
I commend to the noble Lord the minutes of the meeting held on 17th January. The conclusion was: Summing up, the Chancellor said that the main issue was whether to move this month or wait until February". Without boring your Lordships, perhaps I may say that the minutes contain a lot of discussion about what to do. As it turned out, they decided to move in January but if they had decided to move in February they would have been unable to do so if the minutes of the meeting had been published before the February meeting. We are carrying out a sensible economic policy and we shall continue with it.

§ Lord Renton
My Lords, although the Government are to be congratulated on extending open government in many ways, does my noble friend agree that there are various occasions, in particular with regard to matters of finance when confidentiality is essential?

§ Lord Mackay of Ardbrecknish
My Lords, of course I agree with my noble friend that one must be careful in making discussions public in case the very basis on which they are held will influence the markets. It is exactly because of that that we publish the minutes 847 after the succeeding meeting with a delay of six weeks, as the noble Lord, Lord Bruce of Donington, said. As anyone who reads the minutes will see, the Governor and the Chancellor have a full and frank discussion about all aspects of economic policy.

§ Lord Barnett
My Lords, is the Minister aware that I agree with the first half of his Written Answer of 22nd February? I should be obliged if he would pass to the Chancellor my congratulations on his willingness to override the Governor of the Bank of England when appropriate as regards interest rates. I hope that he can be persuaded to override other decisions in government, in Cabinet in particular.
As regards the second part of the Answer, I agree with my noble friend that the explanation is strange. Is the Answer his or the Chancellor's? If it is his, will he reconsider it? If it is the Chancellor's, will he ask him to reconsider it?

§ Lord Mackay of Ardbrecknish
My Lords, I shall pass on the noble Lord's first comment to my right honourable friend the Chancellor. I am sure that coming from that quarter he will be suitably pleased to receive such a plaudit. As regards the more general part of the noble Lord's question, the point about the minutes of 17th January, to which reference has been made, and the discussions about lowering the interest rates by 0.25 per cent. then or in a month's time illustrates that, if they had decided that a month's time was better, and if the minutes had been published, say, a fortnight after the meeting on 17th January, the world would have known then that the Governor and the Chancellor intended to lower interest rates in the middle of February.

§ Viscount Chandos
My Lords, does the Minister agree that confidentiality may be one thing but confidence, both domestically and internationally, is a vital ingredient in successful monetary policy? Does he further agree that rumours and speculation about disunity between the Chancellor and the Governor are a patent way of reducing confidence?

§ Lord Mackay of Ardbrecknish
My Lords, I am not entirely sure where that question gets us. I am not sure whether it suggests that no minutes should he published of discussions between the Governor and the Chancellor or that they should have discussions only when they are firmly agreed about what they are to discuss and about the outcome.
I would have thought that the suggestion that the Governor and the Chancellor meet and discuss openly the problems that they have with economic policy and how they believe economic and monetary policy should be managed and publish the minutes of their meeting six weeks later would enhance confidence both at home and around the world.

§ Lord Cockfield
My Lords, can my noble friend the Minister cast some light on an interesting paradox arising out of these monthly meetings? Why is it that every time they agree to reduce the rate of interest, the rate of interest on the Government's own borrowings 848 goes up? Why was it when on the last occasion the rate of interest was reduced to 6 per cent. the yield on the Government's last issue of gilts promptly went up to about 8.3 per cent.?

§ Lord Mackay of Ardbrecknish
My Lords, as I am not present at the meetings between the Governor and the Chancellor, unfortunately, I cannot give my noble friend an insight as to other matters that are discussed and not recorded in the minutes. If my noble friend tables that question I shall be happy to answer him.

§ Lord Peston
My Lords, may I help the Minister by telling him the answer? I assume that the noble Lord, Lord Cockfield, knows it too. It is that the yield on long-term gilts reflects the expected short rate of interest, and essentially what the market is saying, as was apparent yesterday, is that it expects the Chancellor as soon as possible to reverse those cuts. Is that not what the evidence shows?

§ Lord Mackay of Ardbrecknish
My Lords, I am always slightly suspicious when a professor of economics comes to my aid. Perhaps I should say that of course the noble Lord is right. However, as professors of economics seldom agree with each other I cannot concur with him. All I know is that at present we are seeing our economy in a most encouraging position. Inflation is low and all the predictions are that it will remain low. Growth is good and the general position for the economy is markedly better than that of many of our friends in the European Union, for example.

Lord Bruce of Donington
My Lords, is the Minister aware that I went carefully through all the minutes and discovered that there is nothing remotely confidential about them? All the data that they contain are readily available in the Government's press handouts in relation to inflation, unemployment and prices. They are only assembled in the minutes and there is nothing remotely confidential about them. The Government want to make sure that what was heard of the conversation between the Governor and the Chancellor reflects as nearly as possible their views on the subject.

§ Lord Mackay of Ardbrecknish
My Lords, there is a great deal more in the minutes than merely factual information. One can read of the Governor's views about the interpretation that should be put on the factual information and, equally, the views of the Chancellor and the way in which they see the economy moving in the future. However, if the noble Lord is saying that the minutes should not be published, he has every right to that opinion. I believe that my right honourable friend the Chancellor has taken a positive step and that most people interested in these aspects of policy welcomed the decision that he took in 1994.