Bank of England (Appointment of Governor) Bill

Chris Leslie Excerpts

Friday 6th July 2012 Commons Chamber

[Chris Leslie (Nottingham East) (Lab/Co-op)]

The hon. Member for Wimbledon (Stephen Hammond) is clearly keeping a fine Wimbledonian tradition going: when it rains, a great national treasure stands up to opine or sing for a very long time. I have always thought of him as the Cliff Richard of the House of Commons.

[Stephen Hammond]

Will the hon. Gentleman give way?

[Chris Leslie]

On the Cliff Richard point, yes I will.

[Stephen Hammond]

Only last year I was a backing singer for Cliff Richard at the opening of the Wimbledon fair.

[Chris Leslie]

I am glad I was not there.

The Bank of England was established in about 1694, and we obviously must not rush these reforms. I commend my hon. Friend the Member for Hayes and Harlington (John McDonnell) for introducing this sensible proposition. If, as I hope, the Bill moves into Committee, we can refine some of the details of the accountability mechanisms. The Opposition are of the opinion that there is a need for stronger parliamentary accountability in respect of the appointment of the Governor. That ought to be done by the House of Commons as a whole, on the recommendation and advice of the Treasury Committee, rather than simply be delegated to the Treasury Committee to decide.

The arguments have already been enunciated. It is important that pre-confirmation hearings take place, that recommendations can be made by the Treasury Committee, and that then Parliament as a whole can decide. That would be the best way to proceed.

I do not want to speak for long because I want my hon. Friend to have the chance to secure his Bill’s Second Reading and to pass it on to Committee, where we can talk about these details. The Government’s proposals will vest the Bank of England with significant and radical new powers, particularly over what is known as macro-prudential policy making, through the new Financial Policy Committee and the Prudential Regulatory Authority. The Minister rather coyly suggests that the Financial Conduct Authority does not have a dotted line to the accountability process within the Bank. We all know that this is not just about a powerful bank, but about the immensely powerful Governor of the Bank of England. Some have described that person as a superhuman individual and the appointment will clearly be of major national significance to our economy and to the finances of our constituents and businesses up and down the country.

We debated the question of improving internal checks and balances for the Governor of the Bank of England when we considered the Financial Services Bill. The Opposition said at the time that the court of the Bank of England needed radical improvement and that its role should be more supervisory. That recommendation came from the Treasury Committee, yet there was resistance from the Government. It is now not unreasonable to want to improve and enhance the external checks and balances on the Bank of England and I do not think that would in any way compromise the independence of the operational monetary policy decisions over interest rates. I do not think that those things are at all incompatible.

It would have been nice if the Financial Services Bill could have been amended in the Lords in such a way, but the Government resisted that. We need to ask why they are so frightened of giving Parliament—in which, by the way, they have a majority—the opportunity to have that debate on pre-confirmation hearings and given to give the Treasury Committee the power to make a recommendation that the House of Commons could make on its own.

It is important to note that other central banks in other jurisdictions have similar arrangements. In the United States, for example, Congress has oversight over the appointments.

[Kwasi Kwarteng]

The contrast with the United States of America is very interesting, but surely the point is that Congress in America has jurisdictional right of veto over a whole range of appointments. That does not apply to this House, so to focus simply on the appointment of the Governor of the Bank of England without considering other appointments seems to be slightly bizarre, if that is the development the Opposition want to see.

[Chris Leslie]

It is strange to hear ambitious and thrusting Government Back-Benchers seeking to continue to be neutered, saying, “No, please don’t give us any more of a say or any more powers. We don’t need any and it would be wrong for us to have any involvement whatsoever, even if that simply meant rubber-stamping the recommendations made by the Treasury Committee.” I am baffled that hon. Members should want to continue to hobble their role in such a way.

[Mr Gyimah]

rose—

[Chris Leslie]

I will give way to the former employee of Goldman Sachs.

[Mr Gyimah]

I thank the hon. Gentleman for being so well versed in my career history. I want to ask him about the substance of the issue that he is supposed to be discussing. Let me go back to his point about the United States: the big difference is that in the United States the Executive is not part of the legislature. Here, the Executive are part of the legislature, so when the Chancellor and the Treasury Committee appoint the Governor of the Bank of England, we still have a route of accountability via the Executive and the Select Committee. We do not need the same veto as Congress given how our constitution works.

[Chris Leslie]

We could have a long constitutional discussion, but essentially I do not think that anything is lost by airing more openly and transparently the background and the thinking of candidates for appointment as the Governor of the Bank of England in the Treasury Committee and then giving Parliament a say.

[Mike Freer]

The hon. Gentleman referred to openness and transparency and to my hon. Friend the Member for Spelthorne (Kwasi Kwarteng) as neutered—although I am sure he is not. As a former Minister in the previous Government, the hon. Gentleman will have been privy to discussions on openness and transparency. Can he share with us the views of the previous Government on openness and transparency in the appointment of previous Governors?

--- Later in debate ---

[Chris Leslie]

Of course, the previous Government did not vest in the Bank of England such significant macro-prudential powers and we had a different regulatory approach, although that is a debate for another day. The fact that the Bank of England is so supremely powerful under this Government’s proposals makes the case better than I could for giving Parliament this say and this oversight. That is why it is eminently sensible to give the Bill a Second Reading. We can talk about detailed improvements to it in Committee. I personally do not believe that we should leave the responsibility entirely with the Treasury Committee, with only 12 members, and think that all Members should have a final say guided by the Committee’s view. That would be the best thing to do. I commend my hon. Friend the Member for Hayes and Harlington for making this proposal.