Financial Services Bill

Debate between Lord O'Donnell and Lord Barnett

Tuesday 26th June 2012 Lords Chamber

[Lord Barnett]

My Lords, if anyone troubles to read the amendment, which stands in my name and that of my noble friend Lord Peston, they will see that I am asking why we need two more deputy governors. I do not know whether that means that they get higher salaries. Perhaps the noble Lord can tell us the salaries of the members of the Court of Directors. It is not clear to me just who is responsible for financial strategy. The Bill proposes the introduction of one deputy governor for financial stability and one for monetary policy. I do not know how many people are responsible for this. As has been said, there are supervisory committees, boards, a Court of Directors, the Financial Policy Committee, the Monetary Policy Committee and the Treasury, and I assume that ultimately the Chancellor might take a slight interest in financial stability and so on.

Why do we need two new deputy directors? They could be called deputy chairmen, or anything you like, but the point is that we should just let them chair the committees. I assume that the work they will do will be repeated elsewhere many times. I do not even know whether the Court of Directors will have the final word. To my knowledge, the Court of Directors has never made the final decisions in the past. The noble Lord, Lord Sassoon, once told me that when he was a senior official at the Treasury he attended the Monetary Policy Committee as the Treasury spokesman. I have never been able to find out, either from him or from anyone else, just what the Treasury spokesman spoke about at the Monetary Policy Committee. Clearly, he had some important things to tell that committee before it came to its conclusions.

I suppose that the question underlying our two amendments in this group is: who is ultimately responsible for these major issues? Is it the Court of Directors of the Bank of England, the Financial Policy Committee or the Treasury, and why do we need two new “deputy governors” rather than just “members of the court”? I beg to move.

[Lord O'Donnell]

Perhaps I may respond to the noble Lord’s comments about the Monetary Policy Committee and the Treasury person on it, having been that Treasury person at a very large number of MPC meetings. That person is referred to as the Treasury representative. In the early stages of the meetings, they would explain what was going on in fiscal policy to allow fiscal monetary co-ordination to take place. However, the convention was that the Treasury representative did not get involved in the committee’s discussion about a decision on interest rates.

--- Later in debate ---

[Lord O'Donnell]

Having sat through large numbers of meetings of the Monetary Policy Committee chaired by Eddie George and Mervyn King, I know that the reality is that the chairman has one vote, although they have a casting vote. That dominates the style of the meetings; they are not so much dominated by the style of the individual who is chairing them. Having sat through all those, I do not think that the contrast is as great as the noble Lord, Lord Peston, makes out. It is certainly true that I remember one occasion when the vote was coming round to Eddie George and he was 4-3 down, and he chose to use his vote to make it 4-4 and then used his casting vote to make it 5-4. That was an interesting use of the chair’s power. It is important, though, that the chair has only one vote and that therefore, of the nine, they can be outvoted; indeed, that is a good thing.

As laid down in the previous Act, the governor has always had responsibility for financial stability, so it is a question of how they choose to use it. Like the noble Lord, Lord Peston, I worry about the sheer weight of meetings because it is not just these meetings but the international ones as well. That is an issue, and it may be that one of the things that we got wrong with the Bank of England Act was specifying precisely how many meetings there should be. On occasion, it would be nice if you could go through a period of longed-for financial and economic stability when you might be able to pass on one or two of these meetings and not be forced to have them quite so often when actually there was not that much to do. However, that is a nirvana that we are not that close to at the moment.

[Lord Barnett]

My noble friend and I put down the amendment not because we care too much about whether someone is called a deputy governor but to discuss the underlying problem here. The Minister might be saved a lot of work in future; as we have heard, we are very fortunate in this House as it is, without reform, in having three noble Lords who can answer our debates, and the Minister need not bother. I am grateful to them, and we are fortunate to have them here. I know that one of them is even worrying about the job of the governor and whether he can cope with it—I see the noble Lord nodding—and he may find at the end of our debates on this Bill that he would rather not bother.

The Minister has not replied to my questions, but of course I did not expect him to. He did not tell us what the salaries were or whether someone gets more of a salary as a deputy than as an ordinary member. He told us that the job was advertised and anyone could apply. I wish I had known that years ago; I might have thought of applying. I do not know who was on the committee then; it may have been those three noble Lords on the Cross Benches who decided on the candidates. Whoever it was, we have had an interesting debate. However, what we have not yet discussed, although no doubt we will have other opportunities to do so, is the job of,

“a Deputy Governor for financial stability”,

and “for monetary policy”.

After all this, I am still not clear what the Monetary Policy Committee does, what the Financial Policy Committee does, what these deputy governors and their committee do, what the governor is going to do, what the Chancellor is going to do and who the hell is doing what. I am sure that in our later debates the noble Lord, Lord O’Donnell, will be interested to know. As I have no intention of applying for any of these jobs, I would like to know how they are decided and who applies. Incidentally, as my noble friend Lord Peston said, it is interesting that there is never a woman anywhere in the Bank. There may be some lower down in some menial jobs.