Lamont to spell out new openness

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The Independent Online
NORMAN LAMONT will today spell out his plans for more open economic policy-making, including a greater consultative role for the Bank of England and the Commons Treasury committee.

The Chancellor, who delivers his annual speech on monetary policy to the City tonight, is understood to be planning a further cut in interest rates to coincide with his Autumn Statement on public spending on 12 November.

Robin Leigh-Pemberton, Governor of the Bank of England, left the door open for a further cut in rates when giving evidence to the Treasury Select Committee yesterday. He said the recession had made it more acceptable to ease policy and the Bank found it difficult to detect 'any inflationary pressure in the economy'.

Mr Leigh-Pemberton denied that the Government had altered its policy of pursuing non-inflationary growth, but said circumstances had changed. But he did warn against stoking up inflation again. He said the Bank was 'cautiously realistic about the speed at which interest rates can fall'.

In the City, speculation over interest rate cuts persisted and the markets now think base rates will be chopped by almost 2 points to stand just above 6 per cent by Christmas.

Mr Lamont has opted for more open policy-making because neither MPs nor the markets believe any longer that the traditional Treasury secrecy produces good decisions.

An apparently greater say for the Bank of England in the Treasury's plans for regularly published economic assessments and its current stand on economic policy seems to be the first step in granting the Bank more independence from the Treasury. However, the Bank's forecasts of the economy, which, unlike the Treasury's predictions, are not subject to political pressures, will remain unpublished.

Ultimately the Treasury also has plans to allow public debate on Budget planning, with the publication of a green Budget.

The Chancellor is nevertheless aiming to bolster economic confidence by chopping rates on 12 November, in the hope that financial markets will react positively to the Autumn Statement.

Despite the pressures on spending, Mr Lamont has so far succeeded in holding the planning total for 1993-94 to pounds 244.5bn. Plans for increased help for capital projects, such as the Channel Tunnel rail link and the Jubilee Tube Line, are unlikely to count against the budget deficit.

In its economic predictions to be published with the Autumn Statement, the Treasury is also understood to be forecasting that a very modest recovery - growth of less than 1 per cent - will begin next year. That is despite recent survey evidence pointing to deepening recession and even the threat of economic slump.