Bank of England (Appointment of Governor) Bill

Debate between Brandon Lewis and Stephen Hammond

Friday 6th July 2012 Commons Chamber

[Stephen Hammond]

In this case, it would be for the judgment of the Treasury Committee or the Government. Someone with some financial experience might well be helpful in the current world.

This is not a filibuster, because this is exactly the point at which I am going to leave the history of the Governors of the Bank of England, merely making the point that the Treasury Committee might have rejected some of the candidates who have been appointed, even though they have been among the most excellent Governors of the Bank of England.

[Brandon Lewis (Great Yarmouth) (Con)]

Under the current system, with a Select Committee able to provide a view, if not exercise a veto, is it not the case that any concerns could be made very public and very clear to the Government? That can already happen in the present system.

[Stephen Hammond]

I can only concur.

The Financial Services Bill, now in the other place, is designed to redress the inadequacies of the current regulatory regime. As the hon. Member for Hayes and Harlington noted, the new proposals view the Bank of England as absolutely at the heart of the regulatory system. It will now be charged, which it was not previously, with the protection and enhancement of the UK’s financial system. I do not need to rehearse in detail the fact that the Bank of England is therefore charged with looking at the working of the Financial Policy Committee and, underneath it, the Prudential Regulatory Authority and the Financial Conduct Authority.

--- Later in debate ---

[Stephen Hammond]

My contention was not that he would not have been appointed, but that he might not have been, simply because he had been a Bank of England insider all his life and had no experience of other parts of the financial system, or indeed of the economy. I am merely suggesting that if we empower the Committee to appoint the Governor, it may not take account of a number of the salient factors that the Chancellor can consider. It may take a narrower view.

The hon. Member for North Ayrshire and Arran (Katy Clark), who has now left the Chamber, made an interesting point about a split along political lines. In the case of Lord George, Committee members on both sides of the political divide might have taken the view, as a caucus, that a Bank of England insider would be entirely inappropriate as a Governor. I am not saying that he would not have been appointed; and my earlier remarks were not a filibuster, but a deliberate attempt to show that the appointments of some of the greatest Governors might have been called into question.

The Financial Services Bill rightly confers increased powers of scrutiny, but I do not understand how this Bill would safeguard independence, and I did not hear the hon. Member for Hayes and Harlington explain that this morning. When he kindly allowed me to intervene earlier, I suggested that it would safeguard the independence of the Governor from the Government, but did not necessarily take account of his independence from Parliament. I think he should bear in mind the possibility that the independence of both the appointee and the institution itself would be undermined if the Treasury Committee were given the power of veto.

[Brandon Lewis]

Could it not be argued that if the Committee had such a direct power of appointment and veto, that in itself could bring into question its ability properly to scrutinise an independent Governor for whose appointment it was responsible in the first place?

[Stephen Hammond]

That is an interesting and valid point, and one that I had not intended to make myself. I look forward to hearing my hon. Friend’s views in more detail.