The first and third of the Government review objectives are also mutually supportive: breadth of investment is essential to the business model of a large part of the UK industry, so by removing unnecessary barriers to investment we further both objectives. So why focus on competitiveness and productive investment today? Apart from being front of mind in most of my discussions with the insurance sector, they feature amongst the principles the PRA ‘has regard to’ when making rules or designing policy. Matters that PRA ‘has regard to’ serve to focus the decision-makers’ minds in weighing up how best to advance the PRA’s objectives given to us in law[4]. To put this more colloquially, the PRA does not make rules or design policy solely in pursuit of a secondary objective or the goals underlying a ‘have regard’. Rather, the existing secondary competition objective, and also the principles underlying our ‘have regards’ shape how we go about advancing our primary objectives. We have thought carefully about the impact of our potential reforms in these areas. So, I want to explain how we’re having regard to competitiveness and productive investment as we develop reform proposals. Investment flexibility and productive investment Looking first at investment flexibility. UK insurers manage almost £ of investment assets, and it is an objective of regulatory reform to support the productive investment of those funds.
But just as the Scottish Enlightenment still influences our thinking today, so the twin features of that framework – namely inflation targeting and independence of the Bank of England – will be crucial to successful monetary policy in the future. Just as the Monetary Policy Committee meets monthly to decide on interest rates, so David Hume and Adam Smith met regularly in the Poker Club to debate the policy issues of the day. Hume was an officer of the Club with the unusual title of the Assassin’s Assessor, “without whose assent nothing could be done”, and whose role was to ensure that in meetings “there was likely to be no bloodshed”. So I take it that Hume at least would have been content with last week’s decision to leave interest rates unchanged. There is no Assassin’s Assessor on the Monetary Policy Committee, nor – you will be relieved to hear – any bloodshed. But, month by month, we shall be debating the prospects for the economy in order to decide in which direction, if any, interest rates need to move. 4  BIS Review 52/2006