House of Lords Economic Affairs Committee

IMMEDIATE  THURSDAY 6 MARCH 2003

DESPITE SUBSTANTIAL IMBALANCES IN THE UK ECONOMY THERE IS NO SIGN OF A FULL-SCALE RECESSION

The influential House of Lords Economic Affairs Committee today published its latest report scrutinising the role and performance of the Monetary Policy Committee (MPC).

The Chairman of the Committee, Lord Peston, said:

"While there are substantial imbalances in the economy, such as house prices and consumer debt, there appears to be little danger of inflation getting out of control.

"Although the rate of increase in GDP may slow down, there is no sign of a full-scale recession or a runaway wage explosion."

The Committee:

  • was surprised by the recent 0.25% cut in interest rates on 6 February, given the evidence it heard from the MPC.

  • was pleased with the continued transparency of the MPC's work.

  • reiterates its recommendation that members of the MPC should be recruited and appointed in a manner consistent with Nolan principles.

  • concludes that consideration should be given to both length of appointment and whether members should be employed on a full or part-time basis.

  • found that the MPC has been operating satisfactorily, especially as it has interpreted its remit in a sophisticated way; but believes that the remit itself needs careful re-examination. 

  • considers that serious research is necessary into the operation of monetary policy over the past five years, and particularly into whether the Bank of England Act 1998 has made a difference.

NOTES FOR EDITORS:

1. The members of the House of Lords  Economic Affairs Committee which conducted this inquiry were:

Lord Barnett Lord Oakeshott of Seagrove Bay

Lord Burns Baroness O'Cathain

Lord Cuckney (until 14.11.02) Lord Paul

Lord Elder Lord Peston (Chairman)

Baroness Hogg Lord Roll of Ipsden

Lord Newby Lord Sheppard of Didgemere (from 26.11.02)

Lord Vinson

2. The report is published by the Stationery Office: The MPC and Recent Developments in Monetary Policy, House of Lords Economic Affairs Committee, 2nd Report, Session 2002-03, HL Paper 66, ISBN 010 483810 8, price £13.00. The full text of the report will be available on the internet via www.parliament.uk shortly after publication.

3. The Nolan principles [on public appointment] concern the way in which appointments to senior public positions should be made. Appointment procedures should be transparent and objective, and underpinned by the principle of appointment on merit.

4. In 1998 the House of Lords established the Select Committee on the Monetary Policy Committee (MPC) of the Bank of England to provide a mechanism for parliamentary scrutiny of the work of the MPC. In early 2001 its successor, the Economic Affairs Committee, was established with a remit "to consider economic affairs". Given that broad remit, the Committee has decided to continue its scrutiny of current economic policy and the role and performance of the MPC in particular.

Further information from:

Susan Michell
Clerk of the Committee, on 020 7219 5358

Copies of the report and requests for interviews with Lord Peston from:

Jillian Bailey
Press and Publicity Officer (Committees), on 020 7219 8659

[ENDS]