Bank of England (Appointment of Governor) Bill
Debate between Brandon Lewis and Kwasi Kwarteng(12 years, 5 months ago)
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Brandon Lewis
The hon. Gentleman makes a very strong point. I do not entirely agree because there is a clear difference between the type of appointments we are talking about and the role that those appointees take on and the powers that they have. However, a good argument can be made for the House to consider the role of Select Committees in public appointments, the associated power and at what level it sits. Perhaps he would like to come to business questions one week and make the case to the Leader of the House for time for such a debate, or make a case for it to the Backbench Business Committee.
The hon. Member for Hayes and Harlington argued that part of the aim of a private Member’s Bill such as this is to get the Government to listen, to hear a message, to take a view. The Minister will hear the points made in the debate. He will hear various arguments from various Members about the role of a Select Committee, its power or lack of power to appoint or veto an appointment, and will take that into account as part of the Government’s plans for the future. That is quite different from whether the Bill should have a Second Reading, when it is fundamentally flawed by giving priority and special treatment to one Select Committee over and above others. As much as I respect the Treasury Committee and all its members, I, as a member of the Work and Pensions Committee, do not think it fair that the Treasury Committee should be seen in a premier league, above the other Select Committees.
The Treasury Committee has argued for a role in appointing the Governor of the Bank of England by using as a precedent, as the hon. Gentleman did, the establishment of the OBR and the Budget Responsibility and National Audit Act 2011. The provisions of that Act give a statutory role, I agree, to the Committee in the appointment of the chairman of the Office for Budget Responsibility. Additionally, they give a statutory role to the Public Accounts Committee when a new Comptroller and Auditor General is appointed. However, that argument ignores a fundamental and crucial difference between the roles undertaken by those organisations and the role of the Governor of the Bank of England.
The Bank of England sets policy. Although the Office for Budget Responsibility is important, it primarily has an analytical or forecasting role, not an Executive ability to set monetary policy. It provides independent information to Government. That information is a powerful tool for Parliament to use in its scrutiny role and it is right, therefore, for Parliament to protect that role from political interference.
The Government’s position on the issue has been sensibly pragmatic. They have encouraged the involvement of the Treasury Committee in the appointment of the Governor. It has been interesting to hear from two speakers the private views of the Chairman of the Treasury Committee, my hon. Friend the Member for Chichester (Mr Tyrie), in his comment that what he thinks the Treasury Committee is looking for is the ability to have a clear and open influence on the role, which indicates that there is not necessarily a strong view from the Chair—it is a shame that he is not in his place, but he made a comment earlier—about having the power of veto or appointment. That is an important distinction from such an eminent Member of the House, who would be the Chairman who benefited from any change.
The Government made a commitment in the coalition agreement to
“strengthen the powers of Select Committees to scrutinise major public appointments”.
The key word is “scrutinise”. That emphasises a right to examine, challenge, query or inspect closely and thoroughly appointments to major public bodies. My Select Committee has done that as well. However, it rightly makes no mention of a right to appoint or veto. As my hon. Friend the Member for Wimbledon (Stephen Hammond) said, that would be a substantial constitutional change to the way in which Select Committees work.
It is worth exploring what would happen if there were a right of veto and the Government and the Treasury Committee reached a stalemate in the appointment of a new Governor. If the Government—the Treasury—were unwilling to back down, and the Treasury Committee were determined to uphold its right to veto, given to it by this Bill, that could lead to uncertainty, creating turmoil in the markets, and at the moment we do not need any more of that. We can certainly see what such turmoil means for international relationships as much as internal markets. It could lead to a loss in international confidence in the Bank of England and the United Kingdom, which we benefit from at the moment. The result would be untold economic chaos and damage.
Kwasi Kwarteng
What does my hon. Friend think about the lengthy process for Supreme Court appointments in America, where people very often wait for months before an appointment is made? What might be the repercussions for our financial position in such an instance?
Brandon Lewis
My hon. Friend makes a good point. The way in which the American system can create turmoil is the very point I am making. As my hon. Friend the Member for Wimbledon said, we in this House know that the Treasury Committee would deal with the issue properly. The problem is the perception outside of such turmoil. We have seen in the press how such matters have been dealt with in the United States, which shows that what matters is what the public and the markets would think of such an impasse, particularly if there is a lengthy process.
Brandon Lewis
I thank the hon. Gentleman for further enhancing my point about where Executive power actually sits, in contrast to the scrutiny and forecasting role, as important as it is, which is very different from the Executive power wielded by the Government and some of the Executive bodies we are talking about.
If we are to extend the right to veto the appointment of one public official to any given Select Committee, the natural extension is to do so for other public appointments. In doing so, we would turn our Select Committee system and this House into a new form of Executive recruitment agency. Our Select Committees were established to scrutinise, investigate, consider, report and recommend. Principally, our Select Committee system is there to hold the Executive and other public officials and bodies to account. It was not created to veto the Executive, and it was not envisaged that the Committees would be used as quasi-recruitment advisers.
We should be striving to make the Bank of England more accountable to Parliament—I have no disagreement with that—but we should be looking to do so without shackling its sovereignty with more direct control over certain aspects by Parliament. Current concerns from constituents about the Bank of England do not focus on how the Governor is appointed. I certainly have not had in my postbag any letters, let alone a deluge of letters, on that.
Kwasi Kwarteng
I want to hear my hon. Friend’s view on my suspicion that constituents simply want the Bank of England to do its job and do not want the process to be politicised any more than it needs to be. A move towards a Treasury Committee veto would make it more political and less appealing to the very constituents to whom he has referred.
Brandon Lewis
I agree wholeheartedly with my hon. Friend. I attended a business forum meeting only 10 days ago and talked with businesses about the financial situation in our country. They were very optimistic and upbeat, but they were talking about what more we can do to make it easier for them to grow their businesses and create more jobs. Residents want to know what the Government are doing to allow more jobs to be created and to match the skills with the jobs that are available. They are not talking to me about how we choose the Governor of the Bank of England. They see a very clear difference—this relates to the interventions I have been enjoying from the hon. Member for Edmonton—between the Executive powers and the scrutiny powers and see that it is the Government’s job to set policy that will allow our economy to grow and, therefore, do not necessarily see, understand or have an interest in how the Governor of the Bank of England is appointed. They want to see that job being done properly and the Government setting out the economic policy correctly.
Kwasi Kwarteng (Spelthorne) (Con)
I was particularly interested to hear the contribution of my hon. Friend the Member for West Suffolk (Matthew Hancock), who added an international and historical dimension to the debate, which I think should be broadly appreciated. I congratulate the hon. Member for Hayes and Harlington (John McDonnell), my near neighbour, on bringing the debate to the House. I think that his measure would contribute in some way to scrutiny, but I am afraid that the Bill raises important constitutional considerations and, on those grounds, I am reluctant to support its Second Reading.
Another feature of the debate has been the frequent comments, often from a sedentary position, about the length of the speeches. I have been a Member for two years and know that the constant refrain is that proceedings are guillotined, debates are not fully developed, ideas are not fully expressed and that there is far too little consideration or earnest debate on important matters on the Floor of the House. Today, by contrast, we have had a very full debate, yet some Members are complaining about that. They cannot have it both ways. They cannot complain about the truncated nature of many of our debates and then complain about the full and thoughtful speeches that have been made today. Those are inconsistent principles.
Brandon Lewis
Does my hon. Friend agree that it seems particularly odd to hear those comments from some Members, as we have had to sit in the Chamber at 1 o’clock, 2 o’clock and even 3 o’clock in the morning listening to long speeches from Opposition Members?
Brandon Lewis
The points that Opposition Members have made go to the heart of the problem with this Bill, because it would be stage one of—to quote what an hon. Member said earlier—a drip-feed effect that changed the very way in which Select Committees worked by changing their power from one of scrutiny to one that is linked to the Executive.
Kwasi Kwarteng
Absolutely. If the hon. Member for Islington North (Jeremy Corbyn) wants to debate that point, he should include it in his own private Member’s Bill, if he is fortunate enough to introduce one. He should introduce a Bill, and then we might have a lengthy debate.
The specific proposal before us is not appropriate, however, and I shall say why. The historical examples, which have been too little regarded, are very important. We have to look at the development of Parliament, to understand its powers and to understand the evolution of the Bank of England and its unique role in the historical and current governance of political economy. We have to understand a range of things.
As my hon. Friend the Member for West Suffolk said, we have to look also at international examples from recent history and throughout the world, and it is quite wrong for Opposition Members to try to curtail or to truncate debate. As I said at the beginning of my speech, I do not think it wrong for the House of Commons to debate things fully, and, on that basis, I turn to what Parliament does and what we are trying to do.
We scrutinise the Executive. Our job is not to make Executive appointments, to opine upon or to veto people appointed by the Crown; it is simply to scrutinise the Executive. The appointment of a Bank of England Governor is a matter for the Executive, and has been ever since the Bank’s nationalisation in 1946. One of the more interesting speeches today related to the origins of the Bank, because we have to understand where it has come from, and I repudiate any attempt to curtail Members’ right of speech when they are describing the history of the Bank. Everything is contingent: one has to understand the history of institutions to understand better how we can develop them.
The Bank of England was for almost 270 years an independent institution. It was a private bank, and its governor would spend two years in the role on a rotating basis. That broke down after the first world war, in 1920, when Montagu Norman was appointed Governor of the Bank of England. The hon. Member for Hayes and Harlington suggested that the new Governor—this superman or superwoman—would have such enormous powers and influence that no Governor has ever equalled them. That is completely unhistorical and false. Montagu Norman was Governor of the Bank from 1920 to 1944. He was Governor in 1925 when we went back on the gold standard and in 1931 when we came off the gold standard. He was Governor in 1939, just before the second world war, when exchange controls were imposed. He only left, dragged kicking and screaming from his post, after 24 years. He was a man of enormous power and influence, and it is very unlikely that any subsequent Governor will exercise the same kind of power. The simple reason is that under the current proposals we suggest that a Governor should have a single term of eight years, so there is no question of a man or woman being Governor for the same length of time as Montagu Norman or, similarly, Kim Cobbold, who was Governor for 12 years.
Members who are trying to make the case for supervision are utterly exaggerating the nature of this man or woman’s power once he or she is appointed to this important role. That is obviously due to their desire to exaggerate the power of the Governor to try to justify the appropriation of power on the part of the Treasury Committee. Under the Bill, that Committee, which is made up of 13 Members of this House, would have inordinate powers unequalled by that of any other Select Committee. That would distort the relationship of the Treasury Committee to this House and give it a preponderant influence in relation not only to scrutiny but to the Executive branch through its power of veto.
The proposal imports an alien structure from the United States, and that frustrates and disappoints me. The American constitution is a very different beast with a very different history from ours. As my hon. Friend the Member for East Surrey (Mr Gyimah), who is no longer in his place, pointed out, it has a strict division of powers. In America, no members of the Executive sit in the legislature. It is therefore right and proper that the legislature, as embodied in Congress, should have the power of scrutiny over an Executive who have no role in the legislature.
Finance (No. 4) Bill
Debate between Brandon Lewis and Kwasi Kwarteng(12 years, 8 months ago)
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