Skip to main content


Volume 301: debated on Thursday 27 November 1997

The text on this page has been created from Hansard archive content, it may contain typographical errors.


What assessment he has made of the measures that will be required to control domestic inflation, with particular reference to house prices, in the event of United Kingdom interest rates converging with those prevailing in the other major economies of the EU. [16588]

Will the hon. Gentleman give an assurance that, in pursuing convergence of interest rates so as to achieve his objective of joining a single currency, he will not find that he has to increase the tax burden on the British people in order to achieve his inflation targets?

The question was muddled—I now understand what the hon. Gentleman wanted to say. The position is simple: the Governor sets the monetary policy to achieve the inflation target set by the Chancellor.

Does my hon. Friend agree that the tough measures that he has had to take stand in marked contrast to the policies of the previous Government; and that the failure of the previous Government's policies led directly to nearly 1 million people losing their homes?

My hon. Friend is absolutely correct. It is precisely because the Conservative party did not have the political courage to give operational independence to the Bank of England that economic policy was too often dictated by political expediency. That is why we experienced the two biggest recessions and the two biggest periods of inflation during 10 years of hopelessly incompetent macro-economic policy under the Conservative party.

The Minister had a little difficulty with the question asked by my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond)—I hope that he can do better this time. Can he give the House an assurance that, if this country joins a European single currency and if the interest rate across Europe is inappropriate for the control of domestic inflation, he and his Government will be willing and able to make representations against the interest rate policy of the European central bank?

The hon. Gentleman is as muddled as his hon. Friend. My right hon. Friend the Chancellor made it absolutely clear that five tests would have to be met, the central one of which was convergence. Central to convergence is convergence of interest rates and the question of entry does not arise until that is sustained and a sustainable period of convergence has been achieved.