Financial Services Bill

Debate between Lord Tugendhat and Lord Northbrook

Tuesday 26th June 2012 Lords Chamber

[Lord Northbrook]

My Lords, I disagree with Amendment 5. It gives the Treasury Select Committee too much power. As I understand it, the Treasury Select Committee already holds pre-commencement hearings with those who have been selected to become governors and deputy governors. Furthermore, as I understand it, the Government have no powers to remove a Governor of the Bank of England; rather the Treasury must give its consent if the Bank decides the governor has met the criteria for removal. It is the Bank’s decision to make. The pre-commencement hearings provide the right balance between giving Parliament an opportunity to question the new appointee on their views and qualifications without bringing into question or placing doubts over the appointment itself.

[Lord Tugendhat]

My Lords, I was unable to participate in the early stages of the debate this afternoon because I was at a Select Committee, but now that I am here I should like, on the basis of experience, to support the proposition of my noble friend Lady Wheatcroft—not experience of the court of the Bank of England, I hasten to add, but of the European Commission. The President of the European Commission is appointed quite separately from the other members of the Commission and he has no particular power over who else is going to become a member. The way it is done leaves him at the mercy of Governments. My experience under a very strong and good president in the case of Roy Jenkins and under a much weaker and less effective president in Gaston Thorn is that if the chairman or president, whatever he is called, of a body has no influence over the appointment of his colleagues or over whether they stay or go, it seriously diminishes the significance of the person in charge.

As the noble Lord, Lord Burns, said earlier, we are trying to put together something that has a governance structure in keeping with the modern age and which sets an example, inasmuch as that is possible in a body such as the Bank of England which is quite separate from the corporate sector, to the rest of the country. If the chairman is to be taken seriously by the governor and, indeed, by the entire Bank of England beneath the governor, it is essential that he should be seen to be somebody who has played a significant role in the appointment. It would be quite unacceptable if a governor were appointed in whom the chairman did not have confidence. It would be quite unacceptable if the governor felt that the chairman did not have confidence in him, just as it would be unacceptable if the chairman felt that the governor did not have confidence in the chairman.

The noble Baroness, Lady Wheatcroft, has put forward a very sensible and practical proposition. As I say, I speak with experience of having served in a body where the chairman did not have the powers that the noble Baroness suggests. My experience is that that was not a very good way of doing things.