Interest Rates

HC Deb 18 June 1997 vol 296 cc227-9W

Mr. Jack

To ask the Chancellor of the Exchequer, pursuant to his answer of 3 June,Official Report, column 147, if he will state numerically what constitutes high and stable levels of growth and employment for the British economy for the financial years (a) 1997–98, (b) 1998–99 and (c) 1999–2000. [3333]

Mrs. Liddell

I refer to the answer I gave to the right hon. Member on June 2,Official Report, column 147.

Mr. Denzil Davies

To ask the Chancellor of the Exchequer under what authority operational responsibility for setting official interest rates has been transferred to the Bank of England. [3602]

Mrs. Liddell

[holding answer 16 June 1997]: The Chancellor of the Exchequer announced on 6 May that operational responsibility for setting interest rates would be transferred to the Bank of England; that legislation placing this responsibility on a statutory footing would be introduced as soon as possible; and that, during the intervening period until the legislation came into force, all aspects of the new arrangements for making and announcing decisions on monetary policy would operate on a de facto basis.

Mr. Mitchell

To ask the Chancellor of the Exchequer what consideration he expects the Bank of England monetary policy committee to give to(a) existing and (b) announced fiscal policy measures in setting interest rates. [4274]

Mrs. Liddell

It is the job of the Bank's Monetary Policy Committee to set interest rates to achieve the Government's inflation target. In doing that the Committee will take into account a wide range of information, including fiscal policy measures.

Mr. Mitchell

To ask the Chancellor of the Exchequer what assessment he has made of the impact of the increase in interest rates since 1 May on(a) inflation, (b) growth, (c) employment and (d) the exchange rate. [3233]

Mrs. Liddell

The Government have put in place a monetary framework designed to achieve economic stability. Economic stability is a precondition for high and stable levels of growth and employment. The Chancellor's assessment of the impact of the interest rate increase of 6 May was set out in a Treasury press release (40/97) of 6 May. The Bank has been given operational responsibility to set interest rates at a level to achieve the Government's inflation target.

Mr. Mitchell

To ask the Chancellor of the Exchequer (1) by what means the interests of(a) manufacturing industry and (b) British regions are taken into account by the Bank of England in determining interest rates; [3263]

(2) how the views and needs of manufacturing industry in (a) Scotland and (b) the English regions in respect of interest and exchange rates are to be assessed by the Bank's Monetary Policy Committee; and if he proposes to incorporate representatives of Scotland and the English regions in the process of considering interest rate changes. [4036]

Mrs. Liddell

In determining interest rates, the Monetary Policy Committee of the Bank of England will be able to draw on the information gained from business surveys, and the Bank's network of regional agents which cover the whole of the United Kingdom. The bank's agents have widespread contacts with companies, both large and small, and other organisations covering all sectors of the economy.

Mr. Mitchell

To ask the Chancellor of the Exchequer if he will list those OECD countries where central banks determine interest rates(a) without regional representation to the Bank and (b) without a contract between bank and Government setting out the bank's targets. [3264]

Mrs. Liddell

All central banks tend to take regional developments into account when setting interest rates. The form of regional representation, however, varies across countries with independent central banks. For example, in Germany and the US regional central bank presidents sit on the Committee determining interest rates. In contrast, there is no such regional representation in other countries, such as New Zealand. With regard to contracts, in some countries, for example Germany, central banks determine interest rates without formal agreement with the respective government. In other countries, more less formal agreements exist, as in the case of Canada.

Mr. Mitchell

To ask the Chancellor of the Exchequer how he proposes to co-ordinate demand management and fiscal and monetary policy following the transfer of decision-making on interest rates to the Bank of England. [3196]

Mrs. Liddell

The Government aim to achieve lasting economic stability through prudent economic management and sound finance. Co-ordination of fiscal and monetary policy will be assisted by having the Treasury representative on the Bank's Monetary Policy Committee in a non-voting capacity.

Mr. Mitchell

To ask the Chancellor of the Exchequer (1) what instructions and targets he has given to the Bank of England in respect of levels of(a) growth, (b) unemployment and (c) inflation in its determination of interest rates; [3231]

(2) if he makes representations to the Bank of England's Monetary Policy Committee about his intentions and aims in respect of (a) growth, (b) unemployment, (c) growth in demand and (d) fiscal policy before its meetings. [3213]

Mrs. Liddell

The Government's central economic objectives are high and stable levels of growth and employment. The Bank of England is responsible for taking the operational decisions necessary to meet the Government's inflation target of 2½ per cent. A copy of the remit for the Bank's Monetary Policy Committee and background notes can be obtained from the House of Commons Library.