Bank of England (Appointment of Governor) Bill

Debate between Brandon Lewis and Sam Gyimah

Friday 6th July 2012 Commons Chamber

[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.

[Mr Gyimah]

On that point, is there therefore a risk that if the Treasury Committee were included in this process, to the extent of having a veto, ministerial responsibility could be blurred in relation to the appointment of the Governor of the Bank of England?

[Brandon Lewis]

My hon. Friend makes an interesting point, and not one that I had planned to make, so I hope that he will expand on it later.

In addition to the risk of having a Governor who is perceived to be a second choice or a lowest acceptable common denominator, which I hope I have outlined graphically, there is also the risk that that politicisation itself is part of the problem. In recent weeks many Members have made the point that we should focus our time and effort less on the process, which our constituents are not interested in, and more on the result and how we deliver for them and for our country. Suddenly giving a Select Committee the power to veto an appointment would detract from its ability, power and credibility to scrutinise what the Executive are doing to improve our country, because it would actually be focusing on being part of the Executive.

As I have said, the concern that our constituents might have about the Bank of England’s role in the banking and financial sectors, which is particularly prominent at the moment, is that its decisions are transparent. Any concerns they have about the Bank’s enhanced role under the Financial Services Bill focus on whether those functions are open to proper public scrutiny through Parliament. The inalienable political independence of the Bank of England is something that we, as Member of the House of Commons, should cherish, defend and uphold, which I think we do. When the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), published his insider’s account of the financial crisis that beset this country in 2008, I was alarmed at his suggestion that he considered overruling decisions made by the Governor of the Bank of England. He so seriously considered that course of action that he sought advice from Treasury officials to ascertain whether it was within his competences to do so as Chancellor of the Exchequer. If he had done so, the political uproar would have been enormous. The media and other commentators would and, no doubt rightly, could have criticised it as a blatant attempt at political interference, and, as Members will know, we had a debate along those lines just yesterday.

I urge Members to create no similar furore through this Bill, which blatantly attempts to assert direct parliamentary control over the appointment of the politically independent Governor of the Bank of England. Such unnecessary interference risks turning the appointment into a political football between the Executive and the legislature, which our financial markets would not tolerate or consider a sensible way forward. Indeed, they would, I believe, go into complete turmoil again, and our constituents would not thank us for being the ones who put them in that potential position.

The hon. Member for Hayes and Harlington said earlier—I made a note—that the Select Committee would seek consensus on the appointment, but our current system allows for that. The threat of a veto or the power to appoint moves things in a different direction, to an Executive role, and the appointment would therefore become an Executive one. It would be a mistake for the House to go down that route. Select Committees rightly have the power to scrutinise, but we must be clear about where the line is between the ability to scrutinise and comment as a critical friend and, from time to time, a non-friend, and the ability to adopt a decision-making power in an Executive role. That is something which rightly lies with the Executive—the Government—themselves, and I therefore oppose the Bill.