Financial Services Bill

Debate between Lord Burns and Lord Hodgson of Astley Abbotts

Tuesday 26th June 2012 Lords Chamber

[Lord Hodgson of Astley Abbotts]

My Lords, I do not wish to upset the noble Lord, Lord McFall, or my noble friend Lord Flight, but I urge my noble friend to resist these amendments. If we look at the objectives of the Financial Policy Committee, it needs to be a pretty focused, pretty small body. Having 14 people, or 12 people, depending on which of those amendments one is addressing, seems not to lead to the operational focus and directness that this particular policy committee will need. Having four external members will give a perfectly adequate external perspective; more would be more likely to confuse than to illuminate.

[Lord Burns]

I argued at Second Reading that it would be very useful if we were able to get some balance between the way the MPC is formed and behaves and the way that this new FPC works. The MPC has existed on the basis of four internal members, four external members and the governor, which is a total of nine. The other important principle that has always been emphasised is that each member of the committee had to act as an individual. They were not there to behave as a collective body; indeed, we have often seen, in the case of the internal members of the Bank of England, that they have voted in different ways. I would see great merit in carrying over the principles of the MPC into the FPC, which is that there should be a governor plus equal members, excluding the governor, from inside the Bank and outside the Bank.

I have two questions to add. The first is, does the Minister understand that the arrangement will be the same as for the MPC, which is that the members of this committee are being asked to behave as individuals, and to have individual, rather than collective, responsibility? That is important. The second question is that, as I read this, there is scope for all three deputy governors to be on this committee. Will all three deputy governors be on the MPC? I cannot remember what happens. If that were the case, it would change the balance of the Monetary Policy Committee. The membership includes the chief executive of the FCA. I can quite see that he would wish to be present at the meeting, but it does not seem to me that he needs to be a voting member of the FPC, given that his responsibilities are somewhat distant from the FPC’s main tasks.

My main point is about individual accountability as far as the people are concerned, not an expectation that the internal members would be acting as a group. As far as possible, we should hold some kind of symmetry between how the MPC and the FPC are set up, otherwise I can see that, over time, there would be constant pressure, with one saying, “Well, the other one is set up in a different way—shouldn’t we move to that?”.