Oral Answers to Questions

Mark Hoban Excerpts

Tuesday 12th October 2010 Commons Chamber

[Jacob Rees-Mogg (North East Somerset) (Con)]

5. Whether he has assessed the merits of returning responsibility for debt management to the Bank of England.

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

The current institutional framework separates operational responsibility for debt and monetary policy by the establishment of a debt management agency. This properly reflects the importance that we attach to having a clear institutional divide between responsibility for setting interest rates and for issuing Government debt. The Government have no plans to return responsibility for debt management to the Bank of England.

[Jacob Rees-Mogg]

With the return of banking supervision to the Bank of England, I wonder whether it is worth considering giving the Bank of England its debt management responsibilities back. An active participant in markets may well prove to be a better regulator than one that approaches regulation from a more intellectual sense.

[Mr Hoban]

The Bank of England engages in market activities on a day-to-day basis, but before 1997 the same institutional separation existed, with the Chancellor setting interest rates and the Bank responsible for debt management. The separation of responsibilities improves transparency and confidence in debt management and helps to keep the cost of Government debt as low as possible. My hon. Friend will appreciate how important that is, given the size of the deficit that we inherited from Labour.

[Chris Leslie (Nottingham East) (Lab/Co-op)]

But is it not clear that, as my hon. Friend the Member for Edmonton (Mr Love) was saying, the raising of the spectre of a return to quantitative easing signalled by the Chancellor last week to the Bank of England is a clear sign that the anti-growth strategy pursued by the Government risks a major slow-down in our economy? Will the Minister take responsibility and stop playing ideological games with fiscal policy in the hope that monetary policy will miraculously pick up all the pieces?

[Mr Hoban]

I welcome the hon. Gentleman to his new position. He has been out of Parliament for the past five years and he should perhaps take this opportunity to reflect on the record of his predecessors and the deficit that they racked up in Government. Is he departing from the practice that the previous Chancellor of the Exchequer followed when it came to quantitative easing?

[Sir Peter Tapsell (Louth and Horncastle) (Con)]

I am a strong supporter of quantitative easing as a form of management of the economy, but are Treasury Ministers aware that some hedge funds are making large profits by arbitraging between short and long interest rates when central banks give advance notice of their intention to intervene in foreign markets?

[Mr Hoban]

As my hon. Friend will be aware, the implementation of any policy on quantitative easing is the responsibility of the Bank of England, and it will take into account those factors.

[Rachel Reeves (Leeds West) (Lab)]

Does the Minister welcome the fact that the efforts of the Debt Management Office mean that the average duration of debt in the UK is around 13 years, several years longer than any other country in Europe? It is one of the many reasons why the UK is not in the position of Ireland or Greece.

[Mr Hoban]

The hon. Lady, who follows these matters quite carefully, will reflect that before the election long-term yields on Government debt in the UK were moved in line with those in countries such as Portugal, Greece and Spain. After the election, the margin between UK gilts and the German Bund has narrowed rather than widened, as has been the case with other European bond rates.

[Henry Smith (Crawley) (Con)]

7. What steps he is taking to ensure the independence of the Office for Budget Responsibility.

--- Later in debate ---

[Robert Halfon (Harlow) (Con)]

May I bring to the Minister’s attention the case of my constituent, Mr Peter Gorse? Mr Gorse ran a healthy small business until the Royal Bank of Scotland forced him into bankruptcy so that it could repossess his assets. Will the Minister agree to meet me and my constituent so that his case can be heard fairly by that taxpayer-owned bank and to ensure that cases such as his are fairly considered as we reform the banking system?

[The Financial Secretary to the Treasury (Mr Mark Hoban)]

The responsibility for operational matters at RBS rests with its board. The Treasury’s engagement with RBS is through United Kingdom Financial Investments Ltd, which acts as a shareholder. My hon. Friend will be aware that in July we published a Green Paper setting out some approaches to improving the access that small and other businesses have to finance, and we will make further announcements on that shortly.

[Albert Owen (Ynys Môn) (Lab)]

What representations have Treasury Ministers had from advice organisations such as citizens advice bureaux which fear that their budgets from local government will be cut at a time when they will be advising the most vulnerable people on their finances and welfare benefits? Will the Treasury team join me in paying tribute to the citizens advice bureaux for the work that they do, and commit to giving them extra funding for that purpose?