Bank of England and Financial Services Bill [HL]

Debate between Lord Davies of Oldham and Lord Myners

Tuesday 15th December 2015 Lords Chamber

[Lord Myners (CB)]

My Lords, I declare an interest as a former member of the Court of the Bank of England. I support the amendment proposed by the Minister and I do not support the amendment to it proposed by the noble Lord, Lord Eatwell, largely for the reasons identified by my noble friend Lord Turnbull.

The functionality of the court has improved markedly since I was a member—no doubt the two are directly related. There was a dominance of the court by the executive, and the non-executives were, quite frankly, confused about their role. They did not manage to organise themselves in a manner that effectively challenged the Chancellor. I and one or two members of the court became so concerned that we felt the need to report that the court was not working effectively—but we then struggled to find out to whom we should report it. I remember going to see the Permanent Secretary to the Treasury and then the Chancellor of the Exchequer and saying, “The Bank of England is not working well because it is too detached from the real world of what is happening in banking, and it acts as the sole voice of one person—namely, the governor”. I believe that it is now a far more democratic institution.

However, I struggle to understand why this power requires to be reflected in law. I would have thought that the effective functioning of a board of directors, on which we have based the court, would allow the court to establish a sub-committee to do anything that it chose to do and that it did not need specific authorisation in law to do so. If the Government’s view is that that power does not exist for the court, we need to be very clear that the Government are telling us that the court should in no circumstances be considered to be on a par with the board of directors of a company in terms of holding the executives to account.

[Lord Davies of Oldham (Lab)]

My Lords, I am grateful to the Minister for his introduction to this debate. He will not have been at all surprised that one or two penetrating questions have been put forward. I put on the record the assiduous way in which he set out to make changes to the Bill in response to our debates at Second Reading and in Committee. In doing so, he greatly assisted those of us who were able to negotiate with him to see the advantages that could be obtained by moving some way back to the future, as it were, and re-establishing the Bank as it was.

I think that lessons have been learned over recent years. My noble friend will appreciate that the original Bill that came before this House effectively ended the oversight committee and reduced the power of the non-executive directors. The Minister has taken steps to respond to the great concern expressed on all sides of the House on these issues and has brought the non-executives into a position of considerable significance, not least in determining the remuneration of executives’ pay, in which it is important that the non-executives should be in a substantial majority. Also, they have the right to carry out the oversight functions on which we pin such a great deal of emphasis. Therefore, we are grateful to the Minister for the extent to which he has moved.

I am grateful to my noble friend Lord Eatwell for his insightful contribution. He will know that this is only the first shot at this Bill as far as Parliament is concerned in this noble House. But it will certainly be taken on board in the other place, and it may be thought that it is the other place that ought to deliberate quite significantly on the role and position of the Treasury Select Committee in relationship to the Bank of England. I do not think any of us have thought that either the chairman of the Treasury Select Committee or the committee itself have been backward in coming forward when issues have presented themselves that needed inquiry. Therefore, I think that my noble friend Lord Eatwell can derive from this debate some satisfaction from the fact that there will be an opportunity for that to be debated further.

The House has concentrated on the question of the role of the non-executives. I am grateful to the Minister for having responded to those anxieties and presented amendments that have, to a very large extent, brought the situation back to a position of some significance. However, it was the case that, at Second Reading in particular, there were very great anxieties about the extent to which the government proposals significantly reduced the power of the non-executives, and that we were faced with a Bank in which their role was nothing like the role that they had played in the more recent past. I think that we have, through these amendments, met the wishes of the House. I am grateful to the Minister for having listened to the House and to several representations that we have been able to make. I am also grateful that he has been able to meet significant figures from the Bank—the chairman of the court and the chief executive—to understand the nature of the issues before us. So these amendments are to be commended and we support them.