Bank of England (Appointment of Governor) Bill

Baroness Primarolo Excerpts

Friday 6th July 2012 Commons Chamber

[John McDonnell]

As extremely entertaining as the hon. Gentleman’s speech is, may I suggest that it is an example of the filibustering that, in the eyes of the general public, demeans the House? May I suggest that he addresses the Bill instead of using this mechanism in this way to embarrass himself and degrade the proceedings of the House?

[Madam Deputy Speaker (Dawn Primarolo)]

Order. That might be the hon. Gentleman’s opinion and the opinion of people outside the House, but the hon. Member for Finchley and Golders Green (Mike Freer) is in order. If he was not, I would prevent him from speaking. I appreciate that that is the view of the hon. Member for Hayes and Harlington (John McDonnell), and that he has now put it on the record, but the hon. Member for Finchley and Golders Green will be in order if he wishes to advance this argument.

[Mike Freer]

Thank you, Madam Deputy Speaker. I shall indeed turn to the substance of the debate, but I find it rather sad that an hon. Member seeking to restore the rights of Parliament should seek to deprive another hon. Member of the right to continue the long-established tradition in the House of speaking at length, if they so choose.

I was talking about the original subscribers, so I—[Interruption.] I cannot hear what the hon. Member for West Ham (Lyn Brown) is chuntering about. If she wishes to intervene, she should please do so. [Interruption.]

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[Mike Freer]

As did that intervention.

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I am sorry to interrupt the hon. Gentleman again, but let me say to the hon. Member for West Ham (Lyn Brown) that she can either sit on the Benches behind the Front Bench or sit on the Front Bench. I am afraid that she cannot go backwards and forwards as and when she wishes to intervene.

[Mike Freer]

With the forbearance of the House, I will come to the substance of the Bill, but I want to set out the historical perspective for a few more minutes, if the House will indulge me.

Looking at the original subscribers, I was surprised to see the clerk of Eton college. Nothing changes: those Eton chaps get everywhere. Sadly, however, I could find no forebears of the Eton alumni who serve in the current Executive, but I did find a Mr du Bois, a Mr Gape and a Mr Wollaston, so I wondered whether there was an historical link to my hon. Friends the Members for Enfield North (Nick de Bois) or for Totnes (Dr Wollaston) or the hon. Member for Ilford South (Mike Gapes). The index of subscribers was clearly a list of butchers, bakers, candlestick makers, tinkers, tailors and soldiers, but sadly I could see no spies—although, suspiciously, there was a rather large number of French names.

Although the Bank was not a modern-day co-op, it was owned by ordinary people until nationalisation in 1946. At the Bank’s inception, the original subscribers—the original owners—could appoint an agent to act on their behalf. That brings me to the present day—I am grateful to the House for indulging me to this point. The Bank is now technically owned by the people and, through the people, this House. Acting for the people, we have appointed the Prime Minister and his Ministers to act as our agents. The appointment of the Governor of the Bank of England by the Executive is therefore entirely in accordance with the tradition of the Bank from its original founding fathers—the original subscribers.

I have listened to the hon. Member for Hayes and Harlington and to the arguments of other Members—specifically, those on the Treasury Committee, whom I admire greatly. When considering whether to speak in this debate, I noted that my hon. Friend the Member for Chichester (Mr Tyrie) had put his name to the Bill, which gave me pause to wonder whether it had some merit. I appreciate the view that the way in which the Governor has been appointed has not changed substantially since the Bank was nationalised in 1946 and that some feel that reform is required. I also appreciate the wider point that the relationship between the Executive and the legislature in this House should be rebalanced. I welcome the current Government’s moves to do so thus far. Others have compared the appointment of the Governor of the Bank of England with appointments to the Office for Budget Responsibility, but there is a huge difference between bodies that can advise and people with the power to intervene. There is a big difference between the Bank of England and the Office for Budget Responsibility.

A consensus appears to be developing that Select Committees are an under-utilised parliamentary tool. However, we have recently seen a national focus—indeed, an international focus—on the Select Committee on Culture, Media and Sport and, this week, on the Treasury Committee, which is so ably chaired by my hon. Friend. Although new to these Benches, I have sensed a shift, both inside and outside the House, in the role of Select Committees. They no longer simply scrutinise expenditure or the performance of Departments; they now have an investigatory role. That is valued, but there is a huge difference between scrutinising and investigating, and getting involved in appointments. I am particularly worried by the parallels with congressional committees in the United States, because of the precedent set by the vitriolic stand-offs and deadlocks between the Executive and Congress over appointments. I vividly remember the appointment—or the non-appointment—of Clarence Thomas. Whatever the merits of that particular case, the whole drawn-out saga and the blood on the political floor were deeply damaging to the institutions involved. I fear that if this Bill passes, we will go down the same path.

I welcome reform, but I have a number of concerns about the Bill. The Treasury has already agreed new powers for the Governor, and I remind the House that the Governor is one of the most important financial figures not just in this country but in global finance. He or she—as it might well be in the future—is of vital importance not just to the UK economy, but to the world economy. Tinkering with our constitution has ramifications not just for us, but across the world.

My concern about constitutional tinkering is that it is like a thread. If we pull that thread, we will not know where it leads. As my hon. Friend the Member for Wimbledon (Stephen Hammond) said, why stop at appointing the Governor of the Bank of England; what about other public bodies? The thin end of the wedge argument carries a lot of weight, as does the argument that we are tinkering with the constitution.

I refer hon. Members to what will happen next Tuesday. If it comes to pass, the House of Lords will be abolished or “reformed”, as it is euphemistically called. We will have a new elected body at the other end of the building. How long will it be before that body starts to—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. I have to tell the hon. Gentleman that what he is saying now is not in order. He is speculating about something that has not yet happened. I suggest that he concentrate on this Bill, either on a historical or contemporary basis, and not refer to Bills that we have not yet debated.

[Mike Freer]

I am grateful for your advice, Madam Deputy Speaker.

My worry is that the other place, in whatever form, will seek to flex its muscles and say, “If the Commons has a role in appointment and dismissal, why not us?” There could be a deadlock not only between the Executive and the House of Commons but between the House of Commons and the other place.

The Treasury Committee’s role is vital. I have no doubt that its role in expressing a voice in the appointment of a Governor of the Bank of England is crucial. Let me deal, however, with the issue of deadlock. In reality, if there were a deadlock, we are told that it could come down to an opinion being expressed on the Floor of the House. Given the potential for such an impasse to create instability in the markets, I remain unconvinced that this Bill provides proper safeguards to prevent this from occurring. In reality, a vote on the Floor of the House is likely to be whipped, and the Chancellor of the day would get his candidate. The Chancellor would have his way, but only after a delay and a bruising stand-off between the Committee and the Chancellor. How would the markets react if there were such a delay?

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[Joseph Johnson]

I thank my hon. Friend for that point. I remind the House of what I was permitted to relay about the private views of the Chairman of the Treasury Committee. His private view—he was not speaking in his capacity as Chairman of the Committee—

[Madam Deputy Speaker (Dawn Primarolo)]

Order. With respect, shall we leave the Chair of the Treasury Committee to express his own views and stop talking about his private views?

[Joseph Johnson]

Thank you, Madam Deputy Speaker. I will follow that guidance.

I am equally concerned that giving the Treasury Committee a veto over the dismissal of a Governor could, in certain circumstances, create an unacceptable situation in which the Governor has lost the confidence of the Government but hangs on as a lame duck. That would clearly be unacceptable given the Executive powers he would be discharging on behalf of the state. That is exactly why the Government have historically attempted to address those issues by limiting the Treasury Committee’s role to non-statutory pre-commencement hearings with members of the Bank’s policy committees, which of course already include the Governor and deputy governors.

Let us not forget that the Treasury Committee already has a huge impact through its oversight, as Lord Burns noted in another place,

“simply by the way it brings people in, talks to them, summarises its opinions and then leaves it in the hands of Ministers to decide how far they wish to take account of those views”.—[Official Report, House of Lords, 26 June 2012; Vol. 738, c. 163.]