Bank of England (Appointment of Governor) Bill

Debate between Lord Johnson of Marylebone and Mark Hoban

Friday 6th July 2012 Commons Chamber

[Joseph Johnson]

My hon. Friend is right. It is important to focus on the substance of what needs to change at the court, rather than on the men in pink coats and the silver platters. That means ensuring that members of the court, or the supervisory board, as the Treasury Committee would prefer it to be called, have the ability and willingness to take a tough and challenging line, with a chairman who is prepared to take on a rather more effective and higher profile role than has, perhaps, been the case in the past.

Logically, if anyone should be given a right to consent to the appointment or removal of the Governor of the Bank of England, it should be the chairman of the court of the Bank of England, rather than the Treasury Committee as a whole. That avoids many of the constitutional difficulties to which many of my hon. Friends have referred.

[Mr Hoban]

To help my hon. Friend, the Governor can be removed only at the request of the court of the Bank of England.

[Joseph Johnson]

I thank the Minister for that intervention. The Governor can be removed only with the assent of the court of the Bank of England, but the chairman of the court is not at present a statutory consultee in the appointment of the Governor. One of the means of strengthening the court as an oversight mechanism might be to consider whether the court, through the chairman of the court, could be made a statutory consultee in any appointment process. If the chairman and the court are to be taken seriously by the Governor, and given that it would be unacceptable if a Governor were appointed in whom the chairman of the court did not have confidence, it is essential that he should be seen to be somebody who has played a significant role in the appointment of the Governor. I am therefore sympathetic to the idea—originally floated, I acknowledge, by Baroness Wheatcroft in the other place—that the chairman of the court of the Bank of England should be consulted by the Chancellor, and I hope that the Government might consider tweaking the Financial Services Bill to that effect on Report in the other House.

The legislation as it stands does not prohibit the Chancellor from consulting widely before recommending that a candidate be appointed as Governor, and in practice the Bank of England and the Treasury work closely together to recruit key Bank of England posts. The Financial Services Bill would strengthen the governance of the Bank of England if it specifically mentioned the chairman of the court as a statutory consultee, and thereby indirectly achieved the principal objective of the Bill before us without introducing all of the constitutional risks that come with giving the Treasury Committee a veto.

As I said earlier, there is an important distinction between binding pre-appointment hearings and advisory confirmation or pre-commencement hearings. We more or less have the balance right today between those two forms of parliamentary scrutiny, and I strongly urge the House not to veer wildly to an extreme that it may later come to regret.

I have made clear my concern that the Treasury Committee’s ability to scrutinise the Bank of England effectively would be impaired if we were to make it complicit in the appointment of the Governor. I have also argued that the supposed precedents set by the role of Parliament in the appointment of the head of the OBR and the Comptroller and Auditor General are misleading. With an enhanced role for the chairman of the court of the Bank of England, potentially with a consultee role for the Treasury Committee; with an enhanced and streamlined court of the Bank of England, whose members are empowered to create a real atmosphere of challenge; with the introduction of a single eight-year term for the Governor rather than renewable five-year terms; and with regular scrutiny of the Governor, his deputies and policy committee members by an impartial Treasury Committee, we are putting in place a stable and strong governance structure for the 21st-century Bank of England that will equip it to play a central role in this country’s economic and financial system.

Eurozone Crisis

Debate between Lord Johnson of Marylebone and Mark Hoban

Thursday 3rd November 2011 Commons Chamber

[Mr Hoban]

I thought that the outcomes of that G20 summit were very impressive. I particularly welcomed the achievement of the previous Prime Minister in agreeing a commitment to treble the resources available to the IMF, but the right hon. Gentleman, along with his colleagues, voted against that commitment.

[Joseph Johnson (Orpington) (Con)]

According to the BBC’s economics editor, Stephanie Flanders, the European Commission said this morning that any country that left the euro would also have to leave the European Union. Is that the Government’s understanding of the EU treaties?

[Mr Hoban]

I am not a constitutional lawyer, for my blessings, but it is plainly necessary to establish the legal basis for any such action. I am not aware of what the Commission has said, and I think it very dangerous for us to engage in speculation on the subject.

Eurozone (Contingency Plans)

Debate between Lord Johnson of Marylebone and Mark Hoban

Monday 20th June 2011 Commons Chamber

[Mr Hoban]

I do not think the hon. Gentleman is suggesting that we should withdraw our membership of the IMF—[Interruption.] It is not clear from the question he is asking. Part of the condition of any bail-out of an economy by the IMF—whether it is a eurozone economy or another economy—is a debt sustainability plan, which is a rigorous part of the assessment process. As was clear in the Eurogroup statement last night, the IMF and the Eurogroup have signed off on Greece’s debt sustainability plan, so they expect that money to be paid back.

[Joseph Johnson (Orpington) (Con)]

The hon. Member for Birmingham, Edgbaston (Ms Stuart) questions the UK’s resilience in the event of a wave of eurozone defaults. Does the Minister agree that in the eyes of the markets, the UK has already become something of a safe haven, with UK 10-year borrowing rates and credit default swap rates falling last week while the comparable rates in other countries soared, precisely because the UK Government have a good deficit reduction plan, and a good plan for settling our banks and making them stronger—and they are sticking to it?

[Mr Hoban]

My hon. Friend is absolutely spot on in his analysis. I believe that the 10-year gilt rates fell to 3.2% at the end of last week, which reflects the markets’ vote of confidence in the UK economy and particularly the fact that we took the difficult decisions that the Labour party shied away from when they were in government. We took those decisions, which is why the market rates are similar to those in Germany, yet our deficit is more in line with that of Portugal.

Regulatory and Banking Reform

Debate between Lord Johnson of Marylebone and Mark Hoban

Thursday 16th June 2011 Commons Chamber

[Mr Hoban]

The hon. Lady will have an opportunity later this afternoon to quiz me on this in more detail as we are meeting to discuss it. She will recognise that credit, particular the high-cost credit to which she refers, is currently regulated by the OFT, not the FSA. We will announce shortly our response to the consultation on who should regulate consumer credit in future.

[Joseph Johnson (Orpington) (Con)]

Many of my constituents depend on the existence of a thriving financial services industry in London. They are hard-working, responsible and diligent employees and not at all deserving of the opprobrium that is often heaped on people who work in the sector. Like Professor Willem Buiter of the London School of Economics, they are very much of the view that the financial crisis damaged London’s prestige and international standing much more than it did other leading financial centres around the world. Does the Minister share that view?

[Mr Hoban]

The financial crisis clearly had an impact on London’s standing as a global financial centre, but my hon. Friend will be pleased to note than in the most recent survey of global financial centres London still came top. That is a recognition of London’s continued strength. It is important to ensure that we have a well-regulated and well-functioning financial services sector that can not only meet domestic demand, but serve the interests of an array of international companies. I believe that the package we have announced today, coupled with further regulatory changes being made in the European Union and internationally, will help to ensure London’s continued pre-eminence as a centre for financial services.