Financial Services Bill

Debate between Baroness Drake and Lord Burns

Tuesday 26th June 2012 Lords Chamber

[Baroness Drake]

My Lords, perhaps I might ask the Minister a very brief question. Proposed new Section 3E(2) says:

“The Oversight Committee must … if or to the extent that the Bank accepts the recommendations, monitor the implementation of the recommendations”.

My question is very simple. If the Bank does not accept the recommendations, what then happens?

[Lord Burns]

My Lords, I, too, support the burden of this amendment. It is a subject that a lot of us spoke about during Second Reading, and this is an important part of strengthening the governance of the Bank of England, which we have been speaking about for much of the afternoon. The things set out here have the ability, over time, to change quite substantially the relationship between the non-executives and the executives at the Bank. I think we all agree that that will provide a better balance, given the wide-ranging powers that the Bank of England will have. The proposed new section sets out some of the important issues about making reviews of policy performance, which lie at the heart of this, and the engagement of the non-executive directors in what has been happening from a policy perspective within the Bank. The suggestions about publication and handling recommendations would also be extremely helpful.

The very same question raised by the noble Lords, Lord Flight and Lord Hodgson, also came to my mind. Why does one need a separate oversight committee for this, rather than handling it within the board itself? I have sat on a lot of boards by now and I have never found a problem with engaging with this kind of activity. Within a unitary board, people know the occasions when they must remain silent or absent themselves and who is in a position to do that. It is very much about commissioning reviews, as set out here. It is not as if one is suggesting that the directors themselves would be conducting the reviews, but they are going to be commissioning them, either from inside or outside the Bank.

It seems to me that the only argument arises from the scepticism that we have heard from many noble Lords about the entrenched position of the executives relative to the non-executives of today. Therefore I understand why the Government might think that this is a way of bringing confidence to this process. However, over the long term, I hope that it could be done within the remit of the board as a whole, because that gives confidence within a unitary board; confidence between the executives and non-executives that, together, they can review what has happened in the past and can learn the lessons of the past so that an attitude of confrontation does not develop between one set of people reviewing the performance of another set. However, I understand why it might be right at this point.