Bank of England (Appointment of Governor) Bill

Debate between Brandon Lewis and Mark Hoban

Friday 6th July 2012 Commons Chamber

[Brandon Lewis (Great Yarmouth) (Con)]

I oppose the Bill. Based on the principles and the ethos expressed by the hon. Member for Hayes and Harlington (John McDonnell), I share one or two common interests with him. I understand that he attended the local grammar school in my constituency of Great Yarmouth in his formative years, and I am sure that he still holds our town in great affection, as do I as its Member of Parliament. His reason for introducing the Bill is to ensure that there is full and proper scrutiny and an open and transparent approach to the appointment of such an important position, but I fear that that is the only principle on which, for this morning at least, the hon. Gentleman and I are likely to agree.

The Bill threatens us with direct parliamentary interference in the appointment of the Governor of the Bank of England and, through that, unnecessarily jeopardises the wider political independence of the Bank. I want to address two particular elements of how the Bill approaches the problem, on which some comment has already been made. First, does it provide the right mechanism in how it goes about considering an appointment? I will come to that point in a few moments. Secondly, what effect would such a change have on how the Select Committee works and on the role of a Select Committee? As a member of the Select Committee on Work and Pensions, I fully appreciate its scrutiny role, and we have also considered appointments and commented on them. To my knowledge, there has not yet been a cry from our Committee to have the direct power of veto or appointment. It is simply important that the Committee has the chance to interview, take a view and make clear our opinion on a particular appointment.

I understand that the Bill was drafted in response to the comments made in wider circles, including by the Treasury Committee, about the need to have a greater say in the appointment of the Governor of the Bank of England. That has arisen partly through the extension of powers provided by the Financial Services Bill. That Bill, as we know, is being examined in Committee in another place at this very moment and I am sure that that scrutiny will involve comment on whether there is any need for direct parliamentary involvement in the appointment of the Governor of the Bank of England.

[Mr Hoban]

I want to offer some assistance to my hon. Friend and to the House. The subject was debated in the other place recently and the noble Lord McFall withdrew his amendment suggesting that the Treasury Committee should have such a role, in recognition of the fact that many in the other place felt that that was going far too far.

[Brandon Lewis]

I thank my hon. Friend for that intervention, which highlights the fact that when this subject was considered in depth in the other place the view was taken that the Bill might not be the right way forward. When their lordships considered whether the non-statutory arrangements for scrutinising the appointment of the Governor and the deputy governors were adequate, they will have done so in the light of the extensive new powers in the Bill and will have considered whether the Treasury Committee might or might not require a more formal role in the process. They have clearly commented on that. That process and involvement would require legislation to enshrine it in law and the Bill endeavours to formalise that process within the law. I am sure the hon. Member for Hayes and Harlington will have read carefully the Lords deliberations in Committee to see whether there are any pronouncements in favour of the course of action that he prefers. So far, as we heard from the Minister, the Lords seems to have taken the view that that is not necessarily appropriate.

I shall listen carefully to the views expressed today and those expressed in another place. At present my view is that the Bill would interfere with, rather than strengthen, the Select Committee’s scrutiny. The current system used for the non-statutory hearings that precede the appointment of members of the Monetary Policy Committee is working and should continue to be used for the appointment of the Governor of the Bank of England. The Treasury Committee has held those hearings since 1997 and has carefully scrutinised, reviewed and commented on appointees.

Members of the Select Committee have disagreed with the Government’s nominee. They urged the then Chancellor of the Exchequer to think again about appointing the economist Christopher Allsopp to the MPC. Well known in some circles for his flexibility on policy, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) promptly took no notice of the Committee’s recommendation and went ahead with that appointment. That was his ministerial prerogative, as he was exercising the powers that he was given as a member of the Executive. A Treasury Committee report after that incident was still able to observe that the hearings played an important role nonetheless.

In a parliamentary democracy it is right for Ministers to make Executive decisions and it is also right for Parliament to scrutinise those decisions. I stress the word “scrutinise”. There is a clear line of differentiation in the current structure between the Executive and Parliament’s ability and role in scrutiny, and it is one that we should protect. It would be wrong for Select Committees to have Executive power, in effect, and such a change would create an Executive power for a Select Committee in an appointment.