Bank of England and Financial Services Bill [HL]

Debate between Lord McFall of Alcluith and Lord Eatwell

Monday 9th November 2015 Lords Chamber

[Lord Eatwell]

My Lords, the Bill reeks of the feeling that non-executive directors are a nuisance. Everywhere, we find the role of the non-executive directors in the Bank being reduced. This simple numerical reduction is something like arguing about the number of angels who can dance on a pin. None the less, let us remember why legislation was brought to this House and argued for so forcibly by the noble Lord, Lord Deighton. It was because the Bank of England was seen to have significantly failed during the financial crisis: in particular, that the Bank of England had not had sufficient alternative voices or challenge within its decision-making process. That is what underlay the Financial Services Act of, let me remind the Committee, 2012—just three years ago. From its vesting date to today, that Act has been in force for about two and a half years. How, after that period, can it be decided that the experience of the Act and the structures put in place by it were misconceived? This seems to be simply an attempt for the Bank to return to business as usual, ex ante—before the financial crisis. If the size of the court is too large then that should be the subject of a careful review and the evidence should be presented to this House. That has not been done. Where is the evidence?

The noble Baroness, Lady Noakes, said that what the court does is of course not very much. I wonder whether she was listening to the noble Lord, Lord Bridges, just now when he said that the court is responsible for deciding delegation of powers within the Bank. That seems to me to be quite a lot. With respect, perhaps in the day of the noble Baroness the court did not do very much, but the 2012 Act was specifically designed to empower the court and to produce on it a variety of views and the potential for challenge. There is not much of an issue between seven and nine. The issue is: why is this being changed now? What was wrong in 2012 that is now to be righted and what evidence is there that the decisions which this House made in 2012 were misconceived?

[Lord McFall of Alcluith (Lab)]

My Lords, I would like to make a couple of points in support of the views of the noble Lord, Lord Sharkey. The noble Baroness, Lady Noakes, made the case that the court did not do very much; that was precisely the problem. It had the job of oversight and it is a matter of record that it did not do that job well. The feeling was therefore that the Bank was engaged in groupthink. It did not allow the doors of the Bank to be opened and for the outside world to understand what the Bank was doing. That closed community failed. Evidence to the Treasury Committee acknowledged that it had failed; the current governor acknowledged that it had failed in a speech at Mansion House a number of months ago, when he made three detailed points about the areas in which it failed.

This body has failed. It therefore needs to ensure that that groupthink and closed mentality is disposed of, but that cannot be disposed of by shrinking. It has to ensure that there is a wider community looking over the Bank. After all, society depends on the decisions that the Bank makes, and it is extremely important that society has confidence in the Bank. This is not just a matter for the Bank, the directors and the governor or how he feels; this is a matter of democratic accountability to Parliament and societal involvement. As the noble Lord said, two years after a change with no examination is an unacceptable way to go about business. Let us get the doors of the Bank open and ensure that we have a wider engagement and a wider debate. That will do both the Bank and society good.