Orders of the Day — Bank of England Bill

House of Commons, 20 April 1998.

ANNUAL REPORT BY THE BANK

Helen Liddell (Labour, Airdrie and Shotts)

1 beg to move, That this House doth agree with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this, it will be convenient to discuss Lords amendments Nos. 2 and 3.

Helen Liddell (Labour, Airdrie and Shotts)

These three amendments, which have come to us from another place, will ensure that the Bank's annual report contains details of its objectives and strategy and provide for the committee of non-executives to report specifically on them. The amendments reflect and enhance existing practice, and provide useful additional clarification of the role of the court and its sub-committee. I have pleasure in commending them to the House.

Michael Fallon (Conservative, Sevenoaks)

I am grateful to the Minister for explaining the background to the amendments. She said that they came to us from another place; it may help the House if I add that they came to us from Labour Back Benchers in another place. As the hon. Lady said, they usefully clarify the position. Lords amendment No. 1 ensures that the Bank properly reviews its performance. May I ask who will lay down the objectives and strategy for the first year, which the Bank will not have been able to do before the enactment of the Bill—or do we take it that the Chancellor's correspondence setting up the new arrangements itself comprises the objectives and strategy? Lords amendment No. 2 is self-evidently an improvement—such an improvement that I wonder why it did not occur to anyone in this place. Lords amendment No. 3 is worth pausing over. It makes sense only if the Bank of England's report is published reasonably early in the financial year. Could the Minister help us by giving her interpretation of the phrase "as soon as practicable"? As I understand it, the Bank's report will include the accounts of the Bank of England. Many public bodies have to produce annual reports to the House that include their accounts and they sometimes struggle to get them in by end of July, when the House rises. I hope that the Economic Secretary accepts that that is a little late in the day for us to see the statement of objectives and strategy for the forthcoming year. It may be that they can be published in some other form. Under clause 12, the Treasury's specification for monetary policy strategy and objectives can be published at any time during the 12 months. If the hon. Lady can clarify the timetable and say when she expects the annual report to be put before Parliament, I am sure that we can wish the amendments well on their way.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

Lords amendment No. 1 seeks to ensure that the Bank of England sets out its objectives and strategies and then prepares a report on its success in meeting them. I am delighted that the Government have accepted the amendment proposed on Report in the Lords. As my hon. Friend the Member for Sevenoaks (Mr. Fallon) said, I am surprised that it was not proposed by the Conservatives in Committee or included in the Bill as originally drafted. It is difficult to see how the Bank's performance in relation to the objectives and strategy for the time being determined by the court can be kept under review under clause 3(2) if there is no requirement to publish the objectives and strategy. There is a big problem with the Bill's basis, because it takes from politicians key economic decision making in a vital area of economic policy and puts it into the hands of unelected officials. In such a case, it is the more important that every step in the decision-making process is catalogued and published so that people can see what is going on. It is more important that that happens when policy is determined by those who are unelected, because, if the policy goes wrong, there is no sanction against those officials—they cannot be turfed out of office by the electorate. As an alternative, the public must be able to see every step in the policy-making process. The setting out and publishing of strategies and objectives is a key element in achieving that. It is important to remember that the translation of an inflation target into monetary policy is not a scientific, simple, formulaic matter. The conduct of monetary policy is as much an issue of public policy debate as the setting of the inflation target itself—indeed, I would argue that it is more political. There is a consensus on a low inflation target, but there is much less of a consensus on the means of translating that target into monetary policy. The amendment should ensure that the Bank of England publishes not only its objectives and strategies for running itself on a day-to-day basis, but a statement of how it believes monetary policy should be conducted. 5 pm Clause 16 specifically states that the directors of the Bank shall keep the procedures followed by the Monetary Policy Committee under review. That is therefore specifically to be included in the functions to be carried out by the directors as set out in clauses 2 and 3, and is to be part of the annual report required under clause 4. It is logical that the amendment should also apply to the review of the Monetary Policy Committee and therefore to the conduct of monetary policy. I should be grateful if the Economic Secretary could say whether that is the purpose of the strategy and objectives that are to be required to be published. Will they contain details of the Bank's general strategy on how to conduct monetary policy—how it intends to translate an inflation target set by the Chancellor and the Treasury into day-to-day monetary policy? Samuel Brittan, in giving evidence to the Treasury Committee, said: Monetary economics is not a hard science. In his evidence, Lord Eatwell said: there is a tendency in monetary policy matters to regard certain propositions as 'obvious' and anyone who questions such propositions to be at best a nit-picking academic and at worst a crank. Yet the notion that the theory of monetary policy is 'obvious' and 'pragmatic' is belied by the fact that the theory and practice of monetary policy has undergone quite radical revisions over the past 20 years. If views held 10 years or 15 years ago were so obviously right then, why are they so obviously wrong now? The Bank of England should use the disclosures required by the amendment to spell out its latest thinking on what constitutes best science or best practice in the general conduct of monetary policy. The public, academics and general policy debate can then examine the Bank's propositions to determine how far they are proved correct with the passage of time. One of the other great paradoxes and difficulties in the Bill could be eased if we were to include in the required statement of strategy some explanation relating to the inherent conflict between the Bank's conduct of monetary policy and the Government's conduct of fiscal policy. The problem with separating those functions is that, by passing control of inflation to an outside independent body, the Government could conduct a loose fiscal regime and leave the Bank of England to deal with the inflationary consequences. Indeed, some have argued that such has been the Government's record over the past 11 months. The amendment should enable the Bank to set out how it would or did respond to the Government's fiscal policies. That would have two distinct advantages. First, it would enable the public to see the consequences of the Government's fiscal policy in terms of interest rates, mortgage rates and so on. Secondly, it would enable public policy debate to take place on the issue of whether the Bank was adopting the correct strategy in dealing with fiscal policy changes implemented by the Government. The Bank's performance will be judged at the very least principally—and probably almost entirely—by the success of its conduct of monetary policy and therefore the success or failure of the members of the Monetary Policy Committee. I hope that the amendment will enable the Bank to set out, in as much detail as possible, its strategy and objectives on the conduct of monetary policy. Important matters relating to the conduct of exchange rate policy also need to be spelled out in any statement of objectives and strategy. The key role in the conduct of an exchange rate policy rests with the Treasury and, as with fiscal policy, it is important that the Bank sets out how it has dealt with what it perceives to be the Government's exchange rate policy. In addition, the Bank itself has some role in the implementation of exchange rate policy. Such an approach is important for two reasons. First, it would enable the public to assess how the Bank has dealt with and responded to the Government's exchange rate policy and, with the passage of time, to decide whether that was the correct approach. Secondly and equally important, it would enable people to see what effect the Government's exchange rate policy had on the conduct of monetary policy by the Bank—in other words, the effect on mortgage and interest costs. The Bank should also set out what it perceives to be the consequences for the exchange rate of its own conduct of monetary policy. That would help to expose the absurd situation that might occur if the Government pursued a policy of reducing the value of sterling by selling it into the market and, simultaneously, the Bank raised interest rates to reduce the money supply artificially increased by the Government. Throughout the Committee stage, Conservative Members tried to obtain from the Government an explanation of how such conflicts would be resolved. Which policy will take priority: fiscal or monetary; exchange rate or inflation target? The Government refused—or, rather, were unable—to give an answer. The amendment might do what the Government could not, and help to make the issues transparent. A further conflict that the amendment will help to make apparent to the public relates to the Treasury's debt management policies. Whether or not the Government finance debt through a fully funded method will have an enormous impact on the money supply figures. In his evidence to the Select Committee, Professor Tim Congdon explained in great detail that debt being fully funded or not will have a specific and direct effect on the money supply. The Bank should set out in its strategy and objectives how it will respond to the method of debt funding pursued by the Government. Again, that will enable analyses to be undertaken of whether that approach is correct and, with hindsight, it will enable the public to see the effect of Government debt management policy on the level of interest rates. The amendment, accepted by the Government, should be used to create much greater transparency not only in the management of the Bank but in the far more important question of the performance by the Bank of its key function of managing monetary policy in general. The minutes of the Monetary Policy Committee go some way towards achieving that, but more general objectives and strategies set out in full, assessed in the light of experience, debated and discussed will do much to bring an element of democracy into what is, in essence, an undemocratic Bill.

Helen Liddell (Labour, Airdrie and Shotts)

I am glad that the hon. Member for Sevenoaks (Mr. Fallon) sees the common sense of the approach taken, because it fits in with our debates on Second Reading and in Committee. I welcome the hon. Gentleman to today's debate, as he was not with us in Committee. I hope that he will pass on to the hon. Member for Daventry (Mr. Boswell), who was with us, our good wishes to his family, about whom the Committee heard a great deal—which may have been a sign that it took the Conservatives some time to get into their stride in relation to the Bill. I take up the specific point that the hon. Member for Sevenoaks made about who will set the Bank's strategy and objectives. As clause 2(2) says, the court as a whole will set out what that strategy is; we had a lengthy discussion in Committee on how that would be achieved. Indeed, the Chancellor mentioned the subject in his statement on 20 May 1997. The hon. Member for Sevenoaks suggested that it might be possible to hold a debate on the Bank's annual report and strategy. On 20 May last, the Chancellor of the Exchequer specifically said that it would be desirable for the Bank's annual report to be debated in the House. The Treasury Committee, in its report on accountability of the Bank of England, also recommends that there should be a debate. The hon. Member for Sevenoaks asked about this year's timetable for the annual report. The Bank's financial year ends on 28 February, and usually an annual report is available by the end of May or the start of June. We are aware of no reason to deviate from that timetable or for the Bank to deviate from it. The Government look forward to a debate in the House soon after, but I am sure that the hon. Gentleman, as an experienced parliamentarian, would not expect me to involve myself in the issue of when the House will have an opportunity to debate these matters; such issues are a matter for the usual channels. As the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) is a great fan of recycling, I am glad that he had an opportunity to recycle his speeches from Committee and from Second Reading. It is always interesting to listen to him, although one does not necessarily agree with all that he says. It will be for the court to determine the contents of the annual report. Extensive correspondence between the Chancellor and the Governor of the Bank of England has been published, as have memorandums of understanding between the Government and the Bank. There has been extensive debate in this place and elsewhere, and I am sure that the court will take into account many of the points raised. The Government welcome Lords amendments Nos. 1, 2 and 3, which provide useful clarification. They very much fit the Government's strategy, which is in favour of greater transparency, and greater clarity of operation, of the Bank. It is useful to have greater clarity of legislation as well, so I commend the amendments to the House.

SPECIFICATION OF MATTERS RELEVANT TO OBJECTIVES.

Helen Liddell (Labour, Airdrie and Shotts)

I beg to move, That this House doth agree with the Lords in the said amendment. The amendment would require any notice defining price stability or the Government's economic policies to be laid before the Lords as well as the House of Commons. It is about openness and about accountability to Parliament, so it should be welcomed. I take the opportunity to draw to the attention of the House the written answer given earlier today by my right hon. Friend the Chief Secretary, in which he announced the Government's response to the consultation on cash ratio deposits. Copies have been placed in the Libraries of both Houses. The Government have decided that the initial CRD scheme should apply a zero rate to eligible liabilities up to £400 million and 0.15 per cent. to eligible liabilities over £400 million. In relation to the amendment, there is no reason why the House of Lords should be excluded from receipt of the Government's notice—it will be publicly available anyway. The amendment clarifies that point; I commend it to the House.

Michael Fallon (Conservative, Sevenoaks)

I am grateful to the Minister for that explanation and for her welcome, although she may have forgotten that I participated on Report, when I specifically drew attention to the issue of cash ratio deposits. It might have been helpful—I know that these things are difficult—to have copies of the Chief Secretary's written answer and details of the scheme before we started to consider the amendments. However, we look forward to receiving that—at some stage later today, presumably. We welcome Lords amendment No. 4. The Minister said that the inclusion of the other place among those before whom any notice should be laid was a matter of openness and accountability; it also sounds to me like second thoughts and an improvement to the Bill. None the less, we welcome it.

MONETARY POLICY COMMITTEE.

Alistair Darling (Labour, Edinburgh Central)

I beg to move, That this House doth disagree with the Lords in the said amendment. The Bill sets up the Monetary Policy Committee, whose job it is to set interest rates in order to meet the Government's inflation target. It is worth noting that our long-term interest rates are the lowest that they have been for some 33 years. During the Bill's passage through the other place, an amendment was moved by Lord MacKay of Ardbrecknish to the effect that one of the four members of the Monetary Policy Committee appointed by the Chancellor of the Exchequer should be appointed only after receiving the advice of the First Minister of the Scottish Parliament. When the Government expressed their intention to set up the Monetary Policy Committee, we said that the members of that committee would be chosen because of their skill, because of their reputation and because of their ability to reach decisions as to the appropriate levels of interest rates for the whole of the United Kingdom. We recognised that there was anxiety—which has continuedx2014;that the Bank of England should have regard to the, sometimes varying, economic conditions in different parts of the United Kingdom. As I shall explain shortly, we have drawn the Bill in such a way as to ensure that the court of the Bank of England has a specific duty to monitor the way in which the Monetary Policy Committee discharges that duty and, in making our most recent group of appointments to the court, we have responded to many of the legitimate concerns reflected by Lord MacKay and others who spoke in support of his amendment. Indeed, those concerns were acknowledged by Lord McIntosh of Haringey in another place. I have taken the trouble of reading what Lord MacKay and others said. Some of the arguments were advanced tongue in cheek, and the Government defeat by a majority in the other place was something of a tea-time raid. Interestingly, the Conservatives in the House of Commons, and presumably the nationalists—I see one member of the Scottish National party in his place—are jumping on a bandwagon being pushed by an odd group of Conservatives and hereditary peers, who, as I understand it, oppose the Monetary Policy Committee in principle. I am bound to say, with due respect to Lord MacKay, that, excellent man though he is, I do not recall that, when he was a member of the previous Government, he ever advanced the view that conditions in Scotland were different from those anywhere else in the United Kingdom, and that any regard should be had to what Scots opinion might be on that or any other issue. However, I recognise that politics is what it is; the Conservative hereditary peers took the opportunity to put one over on the Government. I do not think that the arguments that they advanced for the amendment have any merit whatever.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

The right hon. Gentleman has said that the Government defeat was the result of Conservative hereditary peers voting against them, but the actual results—93 contents against 90 not contents—show that the Government lost by only 3 votes. As The Times said today, the laziness of the working peers appointed by the Labour party was responsible for the Government's defeat.

Alistair Darling (Labour, Edinburgh Central)

I dare say that in we shall soon have plenty of time to debate the workings of the other place. The fact remains that more than half of those who voted against the Government were hereditary peers. On practically every occasion when the Government have been defeated in the other place, it has happened only because of the voting strength of the hereditary peers—who tend to support the Conservative party. The scheme of devolution that we have proposed and that will result in a Scottish Parliament proceeds on the principle that power will be devolved unless it can be more effectively discharged by the United Kingdom Parliament. Economic matters, particularly monetary policy, are not devolved, for the simple reason that there is only one currency in the United Kingdom, and it is difficult to see how monetary policy could be conducted on anything other than a UK-wide basis. Although there are undoubted regional variations in economic performance, the fact is that it would be very difficult to operate monetary policy in any other way. That is why economic matters and monetary policy have not been devolved. Scotland will remain part of the UK. We do not propose a separatist solution, or a federalist solution of the type that the Liberal Democrats would like at some stage. We believe that the monetary policy committee must reach its policy decisions having regard to what is good for the whole of the UK economy. Indeed, it would be very difficult to do otherwise. Economic conditions in different parts of Scotland differ greatly. There is evidence of significant overheating in the Edinburgh housing market, but the same cannot be said of Wick. Economic conditions are also quite different in Edinburgh and Glasgow, only 40 miles apart.

John Swinney (Scottish National Party, North Tayside)

rose—

Alistair Darling (Labour, Edinburgh Central)

Clearly the hon. Gentleman anticipates that my arguments will not agree with his view—which is that Scotland is completely different from England, and that economic conditions everywhere in Scotland are exactly the same. That view of the modern economy is economically illiterate.

John Swinney (Scottish National Party, North Tayside)

The Chief Secretary is entitled to his definition of economic illiteracy. Does he accept that interest rate policy in the United Kingdom should be influenced by the fact that house prices in the south of England have in the past 12 months increased by more than 12 per cent., while in Scotland they have fallen by 1 per cent? Should that not have some bearing on any decisions taken by the Monetary Policy Committee?

Alistair Darling (Labour, Edinburgh Central)

I can speak with some feeling when I tell the hon. Gentleman that that is certainly not true of Edinburgh, where house prices are rising dramatically. I recognise that the hon. Gentleman's constituency is not the same as Edinburgh; nor is the constituency of his hon. Friend the Member for Angus (Mr. Welsh), who has just joined us. While there is undoubtedly pressure on house prices in the south-east of England, the same cannot be said of parts of the north-east of England. The point is that inflationary pressures are, and will be, different in different parts of the UK, but it is necessary to take an overall view. Not even the nationalists would argue for a different monetary policy for each county or district. Interest rates need to be set to achieve inflation targets for the whole of the United Kingdom. I remind the hon. Member for North Tayside (Mr. Swinney) that his party is in favour of Scotland, or the United Kingdom, joining the European single currency. Interest rates will then have to be set for the whole of Europe, never mind the United Kingdom. It is therefore somewhat inconsistent to maintain that Scotland should opt out. In any case, that is not what the amendment would do. It acknowledges that there is concern, and that the Monetary Policy Committee should have regard to the differing economic conditions in different parts of the country, but we had anticipated that. Under the old system, the criticism was that the Bank of England sometimes gave the impression that it did not acknowledge the problems experienced by different parts of the UK. That is why the Bill makes it clear that one of the duties of the reformed court of the Bank of England will be to keep under review the way in which the Monetary Policy Committee reaches its decisions and collects the regional, sectoral and other information on which it is necessary to base them. Clause 16 lays that down; I am sure that if hon. Members have not read it, they will do so now. The Lords amendment is not necessary, because of the safeguard that we have inserted in the Bill. We said before the election that we thought that the court ought to be more reflective of the differing interests of the whole of the UK. We made the latest group of appointments in February; hon. Members will be aware that, for the first time ever, there are now individuals on the court representing interests in Scotland, Wales and Northern Ireland. Jim Stretton, chief executive of the Standard Life assurance company and well respected in Scotland, has been put on the board. In anticipation of his appointment, he has already taken steps to ensure that conditions in Scotland are made known to the Monetary Policy Committee and to other members of the court. Graham Hawker, chief executive of Hyder, has also been put on the court. He has been a director of Welsh Water for more than a year, and is well known in Wales. We have also appointed Roy Bailie from Northern Ireland, who is not only a former chairman of the Northern Ireland tourist board but was chairman of the CBI in Northern Ireland between 1992 and 1994. Another appointment is Bill Morris of the Transport and General Workers Union—unlike the former Government, we have no aversion to including people from the trade union movement on the court of the Bank of England. He will lend his experience, and that of people involved in manufacturing industry, to the process. There is also Sheila McKechnie from the Consumers Association. All those people are examples of the Government's willingness to broaden the base of the court of the Bank of England. As we make further appointments over the next few years, we shall ensure that the court has a wide base throughout the whole country. Under the terms of clause 16, the Monetary Policy Committee will thus be enabled to reach decisions that will be good for the whole UK. The Lords amendment was an attempt to make mischief. Their Lordships are of course entitled to take advantage of their opportunities. The matter was never raised in Committee or on Report, which suggests that Opposition Members did not feel strongly about it at the time. Above all, the amendment is not necessary. The Chancellor of the Exchequer appoints members of the Monetary Policy Committee on the basis of what he believes best for the whole of the country, not just one part of it. The reforms that we have made to the court, and the people whom we have put on it, will ensure that the interests of Scotland and other parts of the UK are taken into account. The amendment should be rejected. It was an unnecessary bit of mischief making, which adds nothing to the Bill.

David Heathcoat-Amory (Conservative, Wells)

Although the amendment comes from another place, it fits well with the concerns expressed about the Bill in the House and in Standing Committee, and particularly with worries expressed on both sides of the House on occasion about the powers and composition of the Monetary Policy Committee. The Chief Secretary has just reminded us that the court of directors of the Bank of England is drawn from a wide spectrum of experience and backgrounds, but that is not the point. We are discussing the Monetary Policy Committee, which is the decision-making committee that determines interest rates, and therefore affects mortgage holders, businesses and anyone who borrows or lends money. It affects people and businesses not just directly, but through its effect on the exchange rate and its influence on economic policy generally. The importance of the amendment reflects the central importance of the Monetary Policy Committee. Anyone who doubts that has only to look at what has been happening in the past few months, when the committee has been setting interest rates. There is an almost even split on the committee between those who want to leave interest rates where they are and those who want to put them up. It has been the job of the Governor of the bank to cast his vote, in those cases against a rise. 5.30 pm That is not an altogether happy situation. It has not brought certainty and stability, because of the widespread view that another rise in interest rates is inevitable at some point. That is what the markets anticipate, and it has contributed to the strength of sterling and the consequential damage to industry and exporters. The Chancellor of the Exchequer says that the matter is nothing to do with him. He has washed his hands of the whole affair and says that it is now the job of the Monetary Policy Committee. It is beyond dispute that the committee is extremely important. The issue of who is appointed and how members are appointed is equally important. In Standing Committee and on Report, we examined the case for confirmatory hearings, which would be one way of giving the House and hon. Members an input into appointments to the committee. The idea of confirmatory hearings came from the Treasury Select Committee, which of course has a Labour majority and a Labour Chairman. The House divided on Report on the Committee's suggestion to implement confirmatory hearings, although, mysteriously and regrettably, the Labour members of the Committee, having proposed the amendment, all disappeared when the House divided. We lost the vote, but we won the argument. Confirmatory hearings would have been a good idea. The powers of patronage enjoyed by the Chancellor of the Exchequer are very great—possibly too great. He directly or indirectly appoints all the members of the Monetary Policy Committee. Not only do the appointments give him that power, but the term of appointment is short. Members are appointed for only three years. In comparison with other central banks, that is a very short term. Members of the Bundesbank are appointed for eight years, and those serving on the Federal Reserve bank of the United States serve for 14 years. That is done deliberately to give them a degree of independence from the Executive, which gives members and their committees credibility in the markets. The three-year term for which the Chancellor has opted means that committee members can be sacked or reappointed within the term of one Parliament. If they are politically inconvenient or defy the Government's monetary policy, it is possible to get rid of them in short order. That concerned hon. Members on both sides in Committee and on Report. We tackled the issue in various ways. Amendments were moved not just to institute confirmatory hearings in line with the Treasury Select Committee's proposal, but to give members of the committee longer terms of appointment, and to require fuller minutes, which would give the views of the members of the committee to the public and to the markets. We also thought that the pay of at least some committee members should be related to performance, and we proposed an amendment to require the Monetary Policy Committee to report on any developing split between monetary and fiscal policy, which was rather a perceptive amendment in view of what has happened since then, as there is now a clear divergence between monetary and fiscal policy, which is one reason why interest rates have had to go up five times since the election, with consequential damage—

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. The right hon. Gentleman is straying outside the precise terms of the Lords amendment before us, which is about Scotland.

David Heathcoat-Amory (Conservative, Wells)

I never wish to defy you, Mr. Deputy Speaker, so I shall return briskly to the amendment. I wanted to remind the House of the importance of the Monetary Policy Committee, the way in which it is appointed and who serves on it, and the measures whereby we tried to improve that. It took the other place successfully to pass an amendment, which was moved by my noble Friend Lord MacKay. The amendment would give the First Minister of the Scottish Executive, when he is in place, the right to advise on one of the external appointments. It arose from what was by any standard a good debate in another place. I was disappointed by the way in which the Chief Secretary dismissed the amendment on the ground that it was simply voted through by hereditary peers. If he studied the debate, as he said he had, he would agree that it was the quality of debate that was important. The amendment tackles many of the points on which I have been digressing. First, it widens the appointment procedure. By making one of the appointments dependent on the advice of the First Minister, it takes at least some of the monopoly of patronage away from the Chancellor of the Exchequer, although it still gives him considerable latitude. The First Minister might suggest a number of candidates, from whom the Chancellor could choose. In any case, the person appointed in this way to the Monetary Policy Committee is not required to be resident in Scotland or even to be a Scot. It could be someone temporarily working in Scotland with experience elsewhere, or a Scot who might have an appointment or be working in a business south of the border. The amendment allows complete discretion, but gives another input into the selection procedure. It therefore introduces—this is the second point—an element of devolution. The present appointees on the Monetary Policy Committee come exclusively from the south-east of England, or at least the southern part of the country. They are all splendid people with a great deal of experience. There is no criticism of them but, as has been noted, they all come from a triangle that links Oxford, Cambridge and London. It would strengthen the Monetary Policy Committee and its credibility in the markets if one of its members came from another part of the country or was appointed by someone from another part of the United Kingdom, and had a different perspective on the decisions to be taken. In resisting the amendment, the Chief Secretary suggested that Scotland would be treated differently from England. That is not the case: it is not the decision that would be devolved to Scotland, but the appointment of one of the people on the committee that takes the decisions. I can think of no better place to devolve that appointment. Scotland is the birthplace of perhaps the greatest ever economist, Adam Smith, and I am sure that there are other people in the present day of similar calibre. Edinburgh has a very large financial sector and its banking system is distinct from that of England. For those reasons, I believe that the amendment deserves support. Anticipating the Liberal Democrats' contribution, let me say that I cannot support their idea of widening the measure to allow for an appointment from each constituent country of the United Kingdom. I think that the Liberal Democrats wish to see one appointment from Wales, one from Northern Ireland and one from Scotland, which would leave only one appointment from England. That would introduce a wholly unnecessary degree of federalism and is perhaps another example of the Liberal Democrats' adopting someone else's idea and making it unworkable. I note in passing that the idea of a Scottish appointment is supported by the Scottish Trades Union Congress—

Ross Cranston (Labour, Dudley North)

If this is such a great idea, why did the right hon. Gentleman not mention it before in the House or in Committee when we discussed the matter at great length?

David Heathcoat-Amory (Conservative, Wells)

The hon. Gentleman has attended the debate for only the past few minutes, but he will have heard me list the alternative amendments that we pressed upon the House. I regret that the hon. Gentleman apparently took no interest in them at the time, because they would have had an effect similar to that of this amendment. For instance, they would have given the hon. Gentleman an input—if he desired it—into the decision making through the Treasury Select Committee and confirmatory hearings. One of our regrets in Committee was that Labour Members were carefully chosen to serve on the Standing Committee in such a way as to filter out anyone with independent views or powers of scrutiny. No Labour Member who spoke critically or showed that he had something to contribute in the Second Reading debate was included in the Standing Committee membership. For instance, the hon. Member for Great Grimsby (Mr. Mitchell) made an extremely penetrating speech on Second Reading, and we regretted that he was not a member of the Committee and we could not discuss his views at greater length. Perhaps he does not regret that fact, but we did occasionally. A range of Labour Members who did not have a great deal to contribute served on the Committee. Therefore, although we persistently won the argument, we always lost the vote, and it was left to the other place to devise the amendment that we are now discussing. It sweeps up many of our ideas and amendments. It may not be perfect—in fact, I prefer some of our amendments—but it is a valid and constructive contribution to the question of how members of the Monetary Policy Committee should be appointed, how that committee should operate and how it might gain enhanced credibility from that method of appointment. In summary, the Lords amendment places a modest constraint on the untrammelled powers of patronage enjoyed by the Chancellor of the Exchequer. It is a modest element of devolution, and it could improve the decision making and standing of the Monetary Policy Committee. For those reasons, I urge the House to accept the Lords amendment.

Austin Mitchell (Labour, Great Grimsby)

I rise to speak in favour of this intriguing little amendment which has been proposed by that well-known defender of Scottish interests, the House of Lords. I moved a similar amendment before the Bill left this place which sought to ensure a wider geographical representation on both the court of directors and the Monetary Policy Committee. I would like to see representatives from Scotland appointed by the First Minister for Scotland as well as a representative from the north of England. It is vital that the committee reflects a wide spread of interests. The Minister said, quite rightly, that the committee is the custodian of the national interest. However, the national interest comprises regional interests and the interests of different sections of our society. That includes manufacturing interests in the north and in Scotland, as well as the interests of finance and financial services in London. Therefore, I would like to see specific geographically based representatives serving on the committee. That is the only way in which we shall reach some consensus about the national interest. Committee members are not Olympians who give a detached opinion about what is in the national interest: they are all pushing a particular barrow. If their interest is not geographical, the committee will reflect the interests of finance. I do not wish to see finance dominate the interests of manufacturing in this country. 5.45 pm This is an interesting and important little amendment. I understand why the Government intend to oppose it, but it is a little sad to see a Scottish party rejecting this Lords amendment. It is not a happy spectacle. The amendment also allows us to mention some concerns that a Scottish representative on the Monetary Policy Committee might have raised during that committee's deliberations. There is no doubt that the experience of that committee—lwhich is at work even before the legislation is passed—has not been happy, to say the least. Its operations have been very messy indeed. It is not as though the committee comprises a body of independent monetary experts who, in light of their academic knowledge about the workings of inflation, can read the dials and pull the appropriate levers, which results in the inevitable inflationary effect in 18 months. The economy does not work like that, and the myths of monetarism have been exploded. The monetary target towards which the committee has worked is undoubtedly far too tight. That has led to deflation, and consequently to high interest rates in this country. It has pushed up the value of the pound, making it attractive to the money pouring out of Europe as a result of instability caused by pursuit of the monetary union farce. That money goes into sterling, which pushes up the value of the pound. At the same time, the deutschmark has been deliberately and steadily depreciated, and far eastern currencies have also been devalued substantially. As a result, the Monetary Policy Committee—which does not include a Scottish representative—is not able to do its job properly. It is becoming the instrument of over-valuation, which will lead to a major recession this time next year. I am afraid that we have appointed the wrong people to the Monetary Policy Committee. They are eminent academics: almighty, invisible academics only wise, like light inaccessible hid from our eyes—at least for six weeks until they have taken their decisions. That brings me to another point: the decisions should be known immediately. Why are the committee's minutes not published immediately, so that they may be subject to lobbying?

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. I think that the hon. Gentleman has enough parliamentary experience to know that he is moving into a general debate about the role of the committee. That is not the intention of the amendment under discussion.

Austin Mitchell (Labour, Great Grimsby)

A Scottish representative would introduce a note of canny common sense which does not seem to have operated in the committee thus far. I think that it is important to strengthen the representation of the interests of manufacturing in the way that this Lords amendment would do. When the Monetary Policy Committee was first constituted, I thought that Bank of England officials, because of their long desire for high interest rates—the first reflex of the Bank of England is: when in doubt, put up interest rates—would act as agents for deflation. I thought that the Government's appointees would work in a different way and serve the people's interests, which lie in growth, expansion, jobs and full employment. However, the exact opposite has occurred. Of the appointments made by my right hon. Friend the Chancellor of the Exchequer, only Dee Ann Julius has been voting for sense. That is incredible. We have appointed experts to advance the interests of the people and the Government's views, yet they are voting consistently and persistently for higher interest rates. 1 hoped that Scottish representation would be a weight against such an automatic bias in favour of deflation, which my right hon. Friend the Chancellor has imposed on us. When the Organisation for Economic Co-operation and Development, the World bank and the International Monetary Fund are saying that there is no need further to increase British interest rates—there is a case for them being reduced—it is incredible that our appointees are still urging a further increase in interest rates. Let the members of the committee be accessible, and let them be Scottish. Let them speak for the interests of the people. The members of the committee are subject to lobbying, and lobbying should take place. We need to know what they have said immediately they have said it. The experiment has begun badly, with a messy procedure that is creating not stability but endless speculation, argument and pleas that the committee should make a final statement to the effect, "That is the end of increases in interest rates and we shall now start on the way to reducing them." There are constant calls for that action to be taken, but that cannot be, because the committee is divided. As I have said, it is not giving us stability or sense. Instead, it is creating a scenario of deflation. If outside interests were appointed, the committee might be led to sense. My right hon. Friend the Chancellor of the Exchequer must do something to stop the remorseless rise of the pound, which is so damaging to our manufacturing base. I have sent him various solutions, and I hope that he accepts them. I hope also that he will consider the arguments that I have advanced this evening. Certainly something must be done.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I oppose the Government's motion to disagree with the amendment. I support the amendment for some, if not all, of the reasons advanced by the hon. Member for Great Grimsby (Mr. Mitchell). Although the amendment is far from perfect, it would give Scotland at least some say on appointments to the powerful Monetary Policy Committee. Liberal Democrats believe that such a small but significant element of guaranteed representation, or a voice in appointments to the MPC, would give Scotland an extra dimension, and would be useful in ensuring more effective policy making within the Bank. My party's position needs a little explanation because my colleagues in the other place voted with the Government on the amendment. They did so for reasons that we understand and share. Indeed, my hon. Friends and I tabled amendments whose thrust met the criticisms of our colleagues in the other place. Criticisms of the original amendment were limited to scope. Unfortunately, despite our best endeavours, we failed to produce an amendment that you and your colleagues, Mr. Deputy Speaker, could deem to be in order. I wish to place on record again our view, as advanced by me and my hon. Friend the Member for Twickenham (Dr. Cable) in Committee and on Report, which is contrary to what the Chief Secretary alleged. We believe that the newly independent Bank of England should represent fully all the nations and regions of the United Kingdom. In the spirit of our amendments, we shall support the Lords amendment, which provides the only element of additional representation on offer. Speaking in the other place, Lord Newby explained why Liberal Democrats felt that the interests of Wales, Northern Ireland and the regions of Britain should all be captured in the deliberations of the MPC. Such representation is not uncommon on the management and decision-making boards—

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. The hon. Gentleman is seeking to speak to amendments that were not selected. He must not do that.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

I am sorry, Mr. Deputy Speaker. I am trying to make a connection that is relevant to the position of Liberal Democrats in tonight's vote.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. I allowed the hon. Gentleman to make that connection. He must not now develop an argument.

Edward Davey (Liberal Democrat, Kingston and Surbiton)

My argument, Mr. Deputy Speaker, is that representation such as the amendment would grant is not uncommon in other independent banks. The comments that I shall proceed to make are directly relevant and I hope that you will find them in order. The Federal Reserve Bank of the United States and the Bundesbank in Germany have representation that goes beyond the central area. Against that background, the amendment does not represent a madcap invention. Instead, it focuses on a tried-and-tested way in which to operate decision making on monetary policy. It would ensure that a region's voice could be heard and that differing economic conditions could be taken account of in setting interest rates. The Chief Secretary has argued that clause 16(2) meets the regional representation issue. The clause requires the court to ensure that the MPC has collected the necessary regional and sectoral data and examined them. The right hon. Gentleman said that, by appointing people to the court of the Bank who are clearly identified with Scotland, Wales and Northern Ireland, the Government have demonstrated that they believe that the regions will be fully represented. Such measures are superficial; the data requirement would have been met in any event. Before the Bill was introduced, the monetary-policy-making authorities examined similar data to that which will come before the MPC. The problem with the Government's approach, as the right hon. Member for Wells (Mr. Heathcoat-Amory) said, is that no one who takes decisions on interest rates will represent the nations and regions of our country. As the Bill stands, no one on the MPC need be from Scotland, Wales or Northern Ireland. Although the members of the committee are all eminent people, no one would suggest that they spent, or have spent, the bulk of their working lives outside what the right hon. Member for Wells described as the triangle of Oxford, Cambridge and London. The Government's approach to recognising nationhood and regionalism in the Bill is insufficient. The amendment is intended to put that right, albeit only partially. It has been argued that such representation is not necessary because Britain is not a federal state, yet, as we are passing the Bill, the United Kingdom is fast down the track of becoming such a state. Perhaps it is not yet in name a federal state, but it is very much so in practice, with a Scottish Parliament and a Welsh assembly, and now an assembly in Northern Ireland. There is to be a council of the British Isles. The institutions of UK federalism are being formed. These institutions need to be nourished and further developed. Options such as government in the English regions or national government for England alone are now being actively discussed in all parties. Recognising the regions and nations more explicitly in the Bank's new decision-making body would help to nourish federalism in the UK. The Chief Secretary argued that the MPC should be made up solely of the best available people and should not be restricted to representatives from Scotland or elsewhere. Indeed, it should have the best people. However, the suggestion that Scotland could not supply such people shows an amazing lack of confidence in the right hon. Gentleman's countrymen. Given the number of successful Scottish business men and economists, going back to Adam Smith, as the right hon. Member for Wells said, I am surprised that the Chief Secretary does not have more confidence in his countrymen. As he sits on the Treasury Bench, which is stuffed full of Scots, I am surprised that he takes a rather weak and indecisive approach. At this late stage, I urge the Government to think again and to give Scotland a voice in appointments to the MPC, as a first step to allowing wider national and regional involvement.

Lewis Moonie (Labour/Co-operative, Kirkcaldy)

I was delighted to hear a Liberal Democrat Member, the hon. Member for Kingston and Surbiton (Mr. Davey), advancing the opposite case to that which his party supported in the other place. I have often heard that Liberal Democrats have a habit of doing that. However, this evening is the first time that I have heard a Liberal Democrat Member indulge in the practice. It was impressive. It is with some trepidation that I support my right hon. Friend the Chief Secretary. That is not because of lack of conviction about the arguments which he advanced, but because of my friendship with Lord MacKay, who argued the opposite case in another place. As I am likely to sit in a small boat fishing with him at some time over the next few weeks, I shall tread carefully. If one thing is sure, the Tay is running deep at this time of year. I suspect that I would sink like a stone. There is only one key argument, but it has two parts. First, should there be regional representation in the Bank of England? I think that it is agreed that there should be. Secondly, should that representation be on the Monetary Policy Committee? That is a different kettle of fish. I am absolutely convinced that there is—as there should be—adequate representation of regional interests on the court of the Bank of England through our policy, and that will be more so in future. It is highly illogical to say that the membership of a small, tight committee such as the Monetary Policy Committee should be gradually expanded to encompass whatever form of federal or regional government we decide on over the next few years: we are talking about a Scot today, but it may be an Irishman tomorrow, then a Welshman, then a Yorkshireman and then someone from the north of England. We would have the sort of committee that used to be set up in certain parts of the Labour party not long ago: the way in which to make absolutely certain that a decision was not reached was to put everyone with a point of view on the committee. The amendment is nonsense. The MPC should be small, tightly focused and appointed in the way it is at the moment, so that there is no dubiety about who is on it and why. There is adequate provision for regional points of view to be considered by the court, and that is where they should stay.

John Swinney (Scottish National Party, North Tayside)

For a moment, Mr. Deputy Speaker, you may have thought that Lord MacKay of Ardbrecknish was still a Member of this House because of the way in which he is haunting the debate like a spectre. I appreciate the concern of the hon. Member for Kirkcaldy (Dr. Moonie) about his future in a boat on the deep River Tay; I shall alert the bailiffs in my constituency to his imminent presence with Lord MacKay to ensure his protection. The remarks of the right hon. Member for Wells (Mr. Heathcoat-Amory) bore a startling resemblance to the Hansard report of Lord MacKay's contribution to the debate in the other place. Notwithstanding that, I welcome the debate. The heart of the argument is the question of how representative the MPC is of the component economies of the United Kingdom and of different economic conditions. I want to comment on the component economy of Scotland in relation to the United Kingdom. I intervened on the Chief Secretary to point out that the latest Halifax survey shows that house prices in the south-east have increased by 12.4 per cent. in the past 12 months, but in Scotland, have fallen by just under 1 per cent. I accept that patterns of overheating and house price increases are not uniform, but there are substantial differences in the nature and pattern of economic activity between those two important parts of the United Kingdom. According to the Scottish Council (Development and Industry), Scotland's manufacturing exports last year were valued at more than £20 billion and were higher per head than those of other parts of the United Kingdom. Today, there has been a further and welcome initiative from Scottish Trade International to boost the export performance of Scotland, but it is difficult to promote such an initiative when the value of sterling is so high and the relationship between interest rates and the value of sterling is creating difficulties for our exporters. Unemployment in Scotland is now consistently higher than in the rest of the United Kingdom, which is a disturbing change to the trend. In response to my intervention, the Chief Secretary said that there was overheating in the economy in different parts of the country; he is obviously familiar with overheating in the Edinburgh house market. On how many occasions would he expect the Bank of England Monetary Policy Committee to turn a blind eye to overheating in the economy of the south-east of England? I suspect that it would never do so, because it observes such conditions primarily to guarantee that the economic policy of the United Kingdom is sustained. Under Labour and Conservative Governments, it has persistently been directed by the prevailing economic conditions in the south of England. The Chief Secretary made a series of points about the way in which the composition of the court of the Bank of England had ensured that the different component factors of the economy of the United Kingdom could be borne in mind in its discussions and decisions. Everything that he said about the Bank of England court would be justifiable and valid about the MPC, which takes decisions that are of much greater significance to the economy of Scotland. I welcome Jim Stretton's appointment to the court of the Bank of England. Having worked in the life insurance sector before being elected to the House, I am aware of his formidable reputation in the industry, but he is not on the MPC, which is where big decisions about interest rates, which affect the livelihoods of manufacturers and exporters within the Scottish economy and in the rest of the United Kingdom, are taken. Will the Chief Secretary say what input is given to the MPC in relation to the divergent patterns of economic activity within the United Kingdom? There is scant reference to the economic conditions of Scotland in the minutes of the MPC, and I should welcome his guidance on whether there is a need to improve the amount and type of information that goes to the MPC to ensure that it hears a more representative account of the position of the United Kingdom economy. The MPC is where the action is; it has increased interest rates five times since the general election, and there should be a voice for Scotland. For that reason, we shall support the Lords amendment.

Alistair Darling (Labour, Edinburgh Central)

I cannot agree with the last argument.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. The hon. Member for North Tayside (Mr. Swinney) has finished his remarks, so the Chief Secretary should seek the leave of the House to speak.

Alistair Darling (Labour, Edinburgh Central)

With the leave of the House, Mr. Deputy Speaker, may I say that I do not agree with the Scottish National party's argument? It tends to view everything in terms of the difference between Scotland and England and, somehow, everything is the fault of the English. I represent a Scottish constituency, and I think that I represent the majority view of Scotland, which does not take that simplistic and sometimes nasty view of the way of things. We live in the United Kingdom and remain part of it. We have heard two arguments. The first came from Conservative Members and my hon. Friend the Member for Great Grimsby (Mr. Mitchell). They were against the concept of independence for the Bank of England in the first place, and always have been against it. It is curious that the shadow Chief Secretary has embraced a Lords amendment that would give a voice to the First Minister of the Scottish Parliament on something in which the right hon. Gentleman does not believe. Interest rates have had to go up; it would have been much better if the previous Government in their last months in office had taken the necessary steps to ensure that we achieved the long-term stability that this country needs rather than ducking decisions purely because the Conservative party might have been damaged even more in the run-up to the general election. The second irony is that the shadow Chief Secretary and, for the first time in a generation, the Conservative party, seem to care what Scotland thinks. Conservatives say that they want to save us from the works of the Monetary Policy Committee by having a voice for Scotland on it. It is nice that the Conservative party has such confidence in Scotland. The amendment has no merit whatever. It is unnecessary, and the court of the Bank of England is far more widely representative than ever—the previous Government did nothing about that in 18 years in power. Our reforms of the MPC are in the long-term interests of the United Kingdom, which is evidenced by the fact that long-term interest rates are the lowest for 33 years. On that basis, I urge the House to reject the amendment.

Michael Fallon (Conservative, Sevenoaks)

The Government cannot have it both ways. On the one hand, the Economic Secretary commends previous Lords amendments as sensible revisions from the revising Chamber; on the other, the Chief Secretary whinges that this amendment is the result of a teatime ambush. If it is, whose fault is that? Perhaps it is that of the Government Whips in the other place, or of new Labour peers, who have been nominated to the other place but are too busy to attend. Perhaps they are spending more time with their money—who knows? The Chief Secretary has wholly misunderstood the amendment. Appointments to the Monetary Policy Committee would still be made by the Chancellor if it were accepted. He would simply be required to make one appointment on the advice of the First Minister. What is the Chief Secretary frightened of? He does not appear to have much confidence in the first First Minister, whoever he might be. I thought that it was supposed to be the current Secretary of State for Scotland. Under this amendment, why would he want to nominate someone of whom the Chancellor would not approve? That argument simply will not wash. The Chief Secretary's argument that, because we opposed the Bill in the first place, we should not now support the amendment, will not wash either. We did not want an independent Bank of England of the nature that is set up by the Bill but, as we are getting one, we do not see why the Monetary Policy Committee should not better reflect all parts of the UK. This is an amendment for openness. It widens the membership of the Monetary Policy Committee and helps to break up the Oxbridge-London mafia—[Interruption.] I certainly support its break-up. Above all, it is an amendment for Scotland, which all true Scots should be proud to support. I invite my right hon. and hon. Friends to oppose the Government's motion.

BOARD OF BANKING SUPERVISION

Helen Liddell (Labour, Airdrie and Shotts)

I beg to move, That this House doth agree with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this, it will be convenient to discuss also Lords amendment No. 7.

Helen Liddell (Labour, Airdrie and Shotts)

The amendments further reinforce the independence of the Board of Banking Supervision by giving the chair to one of the non-executive members. We have consulted the Financial Services Authority chairman, Howard Davies, and, through him, the non-executive members of the board. Having done so, and having confirmed that they are content with this change to their rules, I commend the amendments to the House.

Michael Fallon (Conservative, Sevenoaks)

We, too, welcome the change made to the Bill on Third Reading in another place. Those who believe in transparency clearly consider it a good idea that the chairman of the authority should not also be the chairman of the Board of Banking Supervision, especially when that board may be investigating the performance of the authority, deciding not to investigate the performance of that authority or, as in the Barings case, dealing with the conclusions of that investigation. That brings us to the bigger question of exactly what the Board of Banking Supervision's new role is going to be. Perhaps the Economic Secretary can tell us briefly whether it is to be advisory or supervisory. The independence that the Economic Secretary is now accepting for the chairmanship, which we welcome, brings out the issue of practitioner involvement. I must say at once that we are not happy with what the FSA is proposing in its consultative documents, and we expect a considerable improvement when the draft clauses are published later this year.

Helen Liddell (Labour, Airdrie and Shotts)

I reiterate the point made in Committee, which is that we do not propose to retain the Board of Banking Supervision in its current form when we introduce new legislation. That would not be in keeping with the wider regulatory responsibilities of the FSA. The FSA has been consulting on the issue of practitioner input for the longer term. It is not a subject that we would want to discuss at this stage, but there will be plenty of opportunity to do so at the end of the consultation period, when the legislation comes before the House.

ORDERS

Helen Liddell (Labour, Airdrie and Shotts)

I beg to move, That this House doth agree with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this, it will be convenient to discuss also Lords amendment No. 9.

Helen Liddell (Labour, Airdrie and Shotts)

The House will be aware that the House of Lords Select Committee on Delegated Powers and Deregulation considered the order-making powers contained in the Bill. Its report of 4 February recommended that the parliamentary procedure to implement the power under paragraph 3(2) of schedule 7 should be the affirmative rather than the negative. The Government accepted the Committee's recommendation, and I accordingly commend the amendments to the House.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

I am a relatively new Member of the House, and I wish to raise a concern that I and other new Members have—one that is shared increasingly by people outside, especially those who need access to legislation. It relates to the growing amount of delegated legislation. It has been a feature of all Governments in recent years, but it appears to be a particular penchant of the new Labour Government. For example, it now appears that major tax changes, such as reforms to the capital gains legislation, are to be introduced by statutory instrument rather than through the Finance Bill. The 11th report of the House of Lords Select Committee on Delegated Powers and Deregulation says of paragraph 3(2) of schedule 7: The power to amend the Table is potentially wide, and the appropriate degree of parliamentary control depends on the uses to which it will be put. The House may wish to consider whether it is not of such significance as to justify amending the Bill to provide for the affirmative resolution procedure, rather than the negative procedure currently proposed in the Bill. Indeed, the memorandum to the Select Committee prepared by the Treasury lists in an annex all the new delegated powers created by the Bill—there are some 15 new delegated powers from one single Bill. I raise this matter now as a concerned Back Bencher, but it was already of general concern when I was in practice before entering the House. Will the Minister confirm that she is aware of this widespread concern, and give an assurance that the Government will seek to redress the huge increase in secondary legislation which has been their hallmark since it came to power a year ago?

Helen Liddell (Labour, Airdrie and Shotts)

The Government believe—

Alan Haselhurst (Deputy Speaker, Saffron Walden)

Order. The hon. Lady must ask the leave of the House.

Helen Liddell (Labour, Airdrie and Shotts)

With the leave of the House. As a relatively new Member, I also make mistakes. The Government have made it clear that we believe in consultation, and in listening to people's views. Although I am a comparatively new Member, I was in the House during the last Parliament when the previous Government used the deregulation orders many times and in relation to secondary legislation. Therefore, I believe that this amendment is a useful addition to the Bill, and I reiterate my commendation of it to the House.

CONSEQUENTIAL AMENDMENTS

Helen Liddell (Labour, Airdrie and Shotts)

I beg to move, That this House doth agree with the Lords in the said amendment. This is a technical amendment that would ensure that the transfer of the gilts registration function of the National Savings stock register to the Bank of England register also has legal effect in the Channel Islands and in the Isle of Man. I commend it to the House.

Nick Gibb (Conservative, Bognor Regis and Littlehampton)

Does this amendment have anything at all to do with the review into those territories being conducted by the Home Secretary?

Helen Liddell (Labour, Airdrie and Shotts)

With the leave of the House, Mr. Deputy Speaker—no.

TRANSFER OF FUNCTIONS: CONSEQUENTIAL AMENDMENTS

Helen Liddell (Labour, Airdrie and Shotts)

I beg to move, That this House doth agree with the Lords in the said amendment.

Alan Haselhurst (Deputy Speaker, Saffron Walden)

With this it will be convenient to discuss Lords amendments Nos. 12 to 16.

Helen Liddell (Labour, Airdrie and Shotts)

This is a group of six technical amendments. Amendment No. 11 tidies up the consequential amendment contained in schedule 5. Amendments Nos. 12, 13 and 16 would ensure that consequential changes to the Courts and Legal Services Act 1990 are accurate. Amendment No. 14 is required to make a consequential amendment to the Building Societies Act 1997. It arises because of the transfer of banking supervision to the Financial Services Authority. Amendment No. 15 would remove some redundant definitions from the Bill. I commend the amendments to the House.

Michael Fallon (Conservative, Sevenoaks)

I want briefly to raise two issues. The Economic Secretary described the amendments as technical. Amendment No. 14 is not that technical. As I understand it, it replaces the Bank of England with the Financial Services Authority as the consultative body if any amalgamation is proposed to the Building Societies Investor Protection Board and the Deposit Protection Board. It might assist the House if the hon. Lady said whether that is the Government's immediate intention—is an amalgamation proposed? I put the hon. Lady on notice that we will need to go into greater detail on the role of the Financial Services Authority as it relates to building societies more generally. While we were all on holiday, the Treasury slipped out an announcement about a voluntary code, which ensures that generally building societies will not be brought under the arrangements for the new authority. Perhaps the hon. Lady could help the House on amendment No. 15, which would delete the words "overseas institution" and "representative office". The other place was told that the words were no longer needed in the Bill, because they had no operative effect, yet they are still in paragraph 1 of schedule 8. Perhaps the Economic Secretary could explain why, if they have no operative effect, they are still in the Bill.

Helen Liddell (Labour, Airdrie and Shotts)

The Building Societies Act 1997, which went through with the co-operation of both sides of the House, makes provision for a future amalgamation of the Building Societies Investor Protection Board with the Deposit Protection Board. Provision is made for consultation with the Building Societies Commission and the Bank before making any order effective. It will be for the Governor of the Bank to appoint ordinary members of the new board. Therefore, it is sensible to make consequential amendments that draw together the reality of the Financial Services Authority in relation to building societies. There was no question of the Government sneaking out a voluntary code on building societies—it was introduced by the Council of Mortgage Lenders last July. We merely made an announcement that we would see how it operated before deciding whether the future financial services legislation would contain such a provision. I hope that it is clear that in no sense did the Government try to sneak through a critical measure while the House was in recess. Indeed, the announcement was made before the House rose—although some people may have risen slightly earlier than others. On amendment No. 15, as the hon. Gentleman said, the words "overseas institution" and "representative office" have no operative effect, so there is no need to define them. The amendment would remove their definitions from the Bill.