Bank of England and Financial Services Bill [ Lords ] (First sitting)

George Kerevan Excerpts

Tuesday 9th February 2016 Public Bill Committees

[Richard Burgon]

It is a pleasure to serve under your chairmanship, Mr Wilson, and to serve opposite the Minister.

On part 1 of the Bill, which is on the Bank of England, it is our intention to make the case for increased transparency and increased accountability at the Bank. At a time when the financial services sector, as the political system does, faces a lack of public support and public trust—or rather, not as much as we would like—it is in the interests of the sector as a whole and the Bank of England itself for it to present itself and its decisions in the most open way possible.

Clause 1 relates to membership of the court of directors. Amendment 9 regards representation on that court. We accept the proposals in the clause regarding membership of the court, but I note that concern was expressed in Committee in the House of Lords about a potential reduction in the number of non-executive directors in the court. Will the Minister clarify the number of non-executive directors that the Government foresee sitting in the court? In the light of amendment 9, which is in my name, and new clause 2, tabled by Scottish National party Members, the Government should make use of the option of nine non-executive directors in the legislation to ensure the widest possible representation and fullest possible input into and scrutiny of the Bank’s work through the court.

Through amendment 9, we seek to amend the Bank of England Act 1998 to insert a requirement that, of the nine non-executive directors, four be designated as representatives of specific practitioner sectors, including a consumer representative. We recognise that the court, as it stands, includes representatives of a variety of backgrounds, including, historically, the trade union movement. We welcome that and believe that that tradition and representation should continue.

To improve that representation, we propose drawing on the practice at the Financial Conduct Authority and the categorisation of its statutory panels to ensure that a practitioner representative for larger firms, a smaller business practitioner representative for smaller firms, a markets practitioner representative and a consumer representative are included. That is all I have to say directly in relation to amendment 9.

We believe that providing transcripts of the court’s proceedings, such as Hansard provides of our own discussions in Parliament, allows for rich scrutiny of lines of argument and is a clear way to increase transparency and public awareness. In the United States of America, it is the practice to broadcast meetings of the chairs of the various Federal Reserve banks. In the new clause, Members have not asked the Bank to go that far, but we believe that that is a positive example. The aim is to enable the public to understand what is going on and to allow greater scrutiny of the Bank of England’s valuable work.

[George Kerevan (East Lothian) (SNP)]

I want to speak to new clause 2, which is a probing amendment. My response will be determined by the Minister’s response. We are asking that, when making nominations to the Bank’s court of directors, the Chancellor should have due regard to the importance of ensuring balanced representation from the UK’s regions.

Overall, the Bill is useful in tightening regulation and in refocusing the organisation and direction of the Bank of England. In particular, there is much merit in tidying up the operation of the Bank’s three main committees overseeing micro and macroprudential activity and the operation of the Monetary Policy Committee and, if that is accepted, in ensuring that the Bank’s court becomes essentially the organiser of the organisation, with responsibility, as the main oversight, for how the Bank’s operation works and for ensuring that there is managerial competence and value for money and that resources are well deployed between the Bank’s various functions.

It has been generally recognised over the years that the court has sometimes had an ambiguous position halfway between being a proper corporate board and a policy-making institution. The Bill, correctly, separates the policy functions that go to the committees, leaving the board with the essential corporate governance. That is a step forward. My point is that, if we do that —if we redefine and concentrate the board’s activity—we must look at the composition of the board and ensure that it is fit for purpose—a new board for a new competence.

The composition of the current board is a little too narrow. I accept that it has moved beyond the days when the court consisted simply of City grandees. In recent years, appointment to the board has widened; the international influence has widened. It includes a South African and an American. There is some industrial representation, but by and large there is still a feeling in the wider financial community outside London and in the wider industrial and commercial communities outside London that it is too City focused. For a board that is about not simply managing the City, but managing the central bank, it would be in the interests of the central bank and of commanding the respect of the central bank if there were a wider remit in relation to appointments to the board.

In the new clause, I am trying not to be too specific. A board should not be federalised; it should not consist of delegates. A board has overall responsibility. I presume that most people around this table have been on the boards of companies, large and small. I have been on at least two dozen boards in my rather geekish lifetime. When boards have discussions about who should be on them, they say, “Well, what experience do we have? Who is not represented? What area of competence do we need that will help the board to function?” That is perfectly proper.

I am just saying that, given the key role that the Bank of England plays in the UK, there should be more representation of the regions and nations of the UK. That is particularly the case because the banking community is no longer concentrated simply in the City of London. There are operations in Manchester, Bristol, Glasgow, Edinburgh, Cardiff and beyond, and the industries and sectors there want to feel some confidence that the Bank of England listens to them.

I know of course that the Bank of England has long had a system of agents. I suppose that many of us around the table will have met the agents in our region over the years. However, the agents have a different function. We are talking about a new board for a single bank.

Let me say—I hope that the Government will respect this—that the principle has already been conceded in one respect, which has been referred to. It has been traditional since the post-war period for the Bank to have a representative of the labour movement, the trade union movement, on the grounds that labour and capital were the two great elements of the economy. Given that that principle has already been conceded, all we are talking about is extending it.

My final point is that the distinguished Governor of the Bank of England, Mr Carney, of course comes from Canada, where the principle is already accepted. There is a rule that, in composing the board of the Bank of Canada, due consideration should be given to the provinces being represented. There is not a rule that every province has to be represented on the board of the Bank of Canada; it is not as specific as that and nor should it be. However, if we look at the board of the Bank of Canada, we see that, strangely enough, all the provinces are represented. Mr Carney is perfectly comfortable with that, so we are not trying to impose a burden that he has not had to face in the past.

[Richard Burgon]

I will comment on new clause 2, in the name of the hon. Member for East Lothian. As I said, we see merit in the proposal for wider geographical representation on the board and we believe that it complements our proposals to ensure that different stakeholders are represented. We would be interested to hear a little more detail if possible. He spoke about different centres of employment—Birmingham is one example—but I would be interested to hear specific comments on whether this proposal relates to personal residency or employment and, crucially, does the SNP believe that devolved bodies should make recommendations to the Chancellor?

To clarify, our new clause 5, on the publication of transcripts of meetings of the court, is a small tidying amendment, but we hope that it would have a significant impact by opening up the discussions of the court to wider scrutiny and that it would ensure increased transparency and accountability. That is why I will seek a Division on new clause 5 and why I invite all hon. Members to consider voting for it.

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[Harriett Baldwin]

With great respect to the hon. Gentleman, I do understand that. Perhaps he would like some further examples. The court plays an important role in relation to emergency liquidity assistance at the time of a financial crisis. We have to agree as a Committee that there will be times when the court is discussing something that we do not want to have transcribed and put into the public domain. Personally, I thought that Governor Warsh was very convincing in comparing what happens on day one of the Monetary Policy Committee and what can happen at other times—not necessarily all the time—and how a record will be published. The hon. Gentleman will vote one way and I will vote another. I do not agree with the amendment.

Amendment 9 would require representation on the court of particular sectors, and require the Chancellor to have regard for balanced regional and national representation on the court. Obviously, the Bank of England plays a central role in the UK economy, and its policy decisions are vital to everyone in the United Kingdom. I therefore entirely agree with hon. Members about the importance of the Bank of England giving careful consideration to how its policy decisions affect people throughout the country. This is at the heart of the Bank’s mission of promoting the good of the people of the United Kingdom by maintaining monetary and financial stability—indeed, that is precisely what the Bank does.

I will give a few examples. The Bank has representatives around the country; those agents work from 12 agencies, in Scotland, Wales, Northern Ireland and the regions of England, to gather information from businesses operating across many different sectors, including financial and non-financial firms. The regional agents, often joined by the Bank’s governors and members of the policy committees, regularly meet and hold panel discussions with companies of a range of sizes across the UK to gauge economic conditions and inform the Bank’s monetary policy and financial stability work. I trust that all members of the Committee have had an opportunity to observe that activity in their constituencies. If they have not, I strongly recommend that they do so, because those Bank activities are extensive. To give hon. Members an idea of how extensive they are: in 2014-15 the agents visited some 5,200 companies drawn from firms in all sectors and in all corners of the country; also, panel discussions were held with 3,700 businesses. Undoubtedly, the Bank goes to great lengths to ensure that it develops a detailed understanding of the conditions for businesses in all sectors across the whole United Kingdom.

In addition, the Prudential Regulation Authority’s practitioner panel ensures that the interests of those who must put the PRA’s rules into practice are communicated to the regulator. The panel includes representatives of banks, insurers, building societies and credit unions. The Financial Conduct Authority’s consumer panel has a statutory right to make representations to the PRA, and the FCA chief executive sits on the Financial Policy Committee and the PRA board, and will sit on the new Prudential Regulation Committee.

Through this Bill we are going further in ensuring that the regulators take into account the diversity of business models operating in the financial sector. Specifically, we are making it clear that both the PRA and the FCA must take account of the differences between different types of firm, including mutuals, whenever they are discharging their general objectives. We argue that these amendments are unnecessary and, indeed, unhelpful. They would cloud the appointments process.

[George Kerevan]

Does the Minister not accept that there is a difference between being consulted and having a right to be consulted and having a right to feel that one is represented on a deliberative body?

[Harriett Baldwin]

There is, but the purpose of the deliberative body, as we have heard, is effectively to act as the board of the Bank of England, supervising the different committees. Prior to the financial crisis, members of the court were often selected specifically to represent a range of sectoral interests, including many of those proposed in the amendments. The first problem with the amendments is that requiring representatives of different sectors and regard to regional representation will entail a much larger and therefore oversized and dysfunctional court. Before the financial crisis, when the court had non-executives specifically to represent different interests—why stop at the four listed in the amendment?—the court had an incredible 16 non-executives, rendering it far too large to operate effectively and unable to hold the executive properly to account.

[Harriett Baldwin]

The hon. Gentleman is right to highlight that difference. Of course, what the Chancellor of the Exchequer would have regard to is the quality and ability of those individuals to perform the function they are asked to perform. The Banking Act 2009 sensibly limited the court to nine non-executives, and in practice we have now reduced the number of non-executives to seven while keeping that non-executive majority, which means that the court is now sufficiently small to form an effective body that can challenge the executive. The amendments before the Committee would inevitably mean a return to a large, inefficient and ineffective court.

A second problem with amendment 9, which would require sectoral representation on the court, is that it would give rise to conflicts of interest. The amendment calls for several practitioner representatives on the court. We have tried that in the past, too. During the crisis, the conflicts of interest meant that some of those on the court who could have been of most assistance to the Bank had to leave the room for the most important decisions, such as on liquidity provision to the markets and on individual firms. That hampered the court’s ability to respond effectively.

[George Kerevan]

Does the Minister agree that her statement about the ineffectiveness of the board, because of its narrow composition during the crisis, makes our point that we need wider representation across the country, across areas and across industrial sectors?

[Harriett Baldwin]

I do not think anyone disagrees with the idea that we would want to have a range of different abilities and skills on the court of directors. What we are fighting against in opposing the amendments is the propensity of such amendments to lead to a larger and larger group of individuals on the court. Importantly, in relation to highlighting the potential for conflicts of interest, the conflicts policy now makes it clear that, among other restrictions, members of the court should not accept or retain any interest that is in conflict with membership and should not normally be associated with a PRA or Bank-regulated firm, whether as a director, employee or adviser. That ensures that the wide-ranging expertise—we all agree that that is necessary—appointed to the court can be deployed without obstacles, and leaves the court better equipped to respond to a crisis. The amendment would unravel those arrangements, and I argue that we should oppose it; we should not allow it to take us backwards.

The third and most important concern about the amendments is that they would impose unnecessary and undesirable constraints on appointments to the court. In the past three years, the court has been transformed. The Chancellor has appointed the highest-quality team, with significant experience of running large organisations and deep expertise in matters relevant to the Bank. The Government look far and wide for the best candidates, with roles advertised in the international press. Let me be clear: obviously, there are highly competent and highly qualified individuals who work in the sectors proposed and from all the regions across the UK. The amendments would constrain the appointments process utterly unnecessarily, potentially preventing us from forming the highest-quality, most experienced board for one of the most important institutions in the country.

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[George Kerevan]

The Minister is being very sporting in giving way this morning. Can I take it from the tenor of everything she has said that the place for the trade union representative on the court, which we have had since world war two, is now in jeopardy?

[Harriett Baldwin]

I do not know where the hon. Gentleman would get that impression from. It is important that we have a chief executive of a major telecoms provider, a chief executive of a major power utility, a private equity specialist, a leader of a global information services group and a leader of a major public sector trade union. The chair, Mr Anthony Habgood, is one of the most experienced and respected company chairmen in the country.

[George Kerevan]

There has always been, since world war two, a place reserved on the court for a leading trade union figure. That is not written down anywhere, but it has always been accepted. Will it continue?

[Harriett Baldwin]

Nothing in my remarks this morning has suggested any change whatsoever in that policy, but it is important that the best people are selected for the roles and we do not accept the Opposition amendments, which would further constrain the selection process. I hope we can all agree that every member of the court, wherever they are from, should consider in their decision making the Bank’s impact on everyone in the UK, across the UK, not just in one region or one individual sector.

The amendments call for a different kind of court, made up of representatives from UK regions and representatives of narrow interests, and that would result in a court riven by conflicts of interest. We have tried that kind of court before and we know how the story ends. I hope that members of the Committee agree that we should not allow the amendment to take us back there.

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[Richard Burgon]

The abolition in clause 3 of the oversight committee was clearly a very controversial part of the original Bill, as evidenced at each stage of the debate in the House of Lords. My colleague in the other place, Lord Tunnicliffe, supported Lord Sharkey in seeking to challenge it. Labour Members believe that the abolition of the oversight committee is an attack on accountability within the Bank, and yet another example of the Government rolling back recent legislation. I am sure that we will come to that topic on another day.

Not only is the reverse burden of proof or the presumption of responsibility being removed before it is even implemented, but the oversight committee was established only in the Financial Services Act 2012, as hon. Members will remember. The Government clearly felt unable to sustain their line of argument, and in amending the clause to allow a majority of non-executive directors the power to initiate reviews, they have made a welcome concession. It remains our view that the abolition of the committee is a retrograde step. We are yet to be convinced that affording the non-executive directors this power without the existence of the previous forum for discussion will mean that power can be exercised effectively. Perhaps the Government can say how they believe the non-executive members will discuss their concerns outside of the meetings of the court. Will they have to organise something akin to a stand-alone non-executive directors meeting? Perhaps such a forum exists, and the Minister can inform and enlighten me about it.

Following the negotiations in the other place, we have decided to allow this change in the Bill to be made. We will keep a watching brief on how it works over the coming months and we will seek to take advice from the non-executive directors on how they feel it has affected their ability to carry out their oversight functions.

We have proposed a number of amendments to improve the clause, particularly amendment 12, which seeks to increase the authority of the non-executive directors. On Report in the Lords, the Government stated that the initiators of a review among the non-executive directors would determine that they have the power to decide who should carry it out. It could be someone external or someone internal, from the independent evaluation office.

During a Treasury Committee hearing, the Governor was questioned at length, and told the Chair of the Committee that the IEO’s work is set by the court. Therefore, our amendment seeks to give the non-executive directors a duty to bring in external expertise and analysis to conduct such a review into the work of the Bank. Amendments 10 and 11 would further clarify and strengthen the Bill in that regard.

[George Kerevan]

I, too, had reservations about the abolition of the oversight committee. I warm to it to the extent that we have clarified, or are in the process of clarifying, the role of the court in a narrower sense as a proper functioning board of a wider organisation, although the Minister’s responses in the previous debate have given me some cause for concern.

It is important to grasp that the existing oversight committee is nothing more than the non-executive directors meeting as a body, so the existing oversight body gives some official grounds for the non-executives to meet. I have been on many boards where it was quite the norm for non-executives to meet informally, and one trusts that the non-executives on the court are of sufficient experience to be able to do that. Nevertheless, there must be a worry if the current ability to meet separately and to be resourced as the oversight committee is taken away. Therefore, the amendments being proposed to the clause are a useful way of just stressing on the part of Parliament that what I have described is what we expect the non-executives to do.

It might be important to consider circumstances where the non-executives might want to discuss the overall direction of the Bank. We have had one such experience in the last couple of years. The major activity of the Prudential Regulation Authority, which is soon to be the Prudential Regulation Committee, has been to conduct the stress tests on the banks. It does so under separate legal obligations from Europe. The stress testing is a highly extensive and highly resource-driven activity, and there were issues in the first round of stress testing because resources were clearly being directed from other parts of the Bank to help the PRA to do its job. There were issues about who was making decisions, and about whether enough resources and staff time were being made available from the other parts of the Bank to the PRA. A number of the non-executive directors became slightly alarmed about how the stress tests would be conducted and about the availability of the necessary resources.

There can be quite significant points when the non-executive directors would have to say, “We are worried about the deployment of resources by the executive directors. We want to stand back and look at how this is being done.” The non-execs must have the power as a body to lean against the significant influence of the executive. The Bank of England is one of the major institutions of the UK and of global banking, and the Governor of the Bank, Mr Carney, for whom I have a great deal of respect, is one of the most senior central bankers in the entire world. Leaning against him when he says, “Do this or do that,” is difficult. The amendments would give the non-executives some backbone, so when they are worried about the direction of resources they can say, “Whoa.”

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[John Mann]

The debate on the clause is very important, because the little-discussed danger is that we are creating an all-powerful Governor who determines, in his or her ultimate wisdom, a financial stability strategy for the country—as if everything will then be fine.

The current Governor obviously has a bit more time on his hands because interest rates have not risen since 2009. The MPC, with its monthly meetings having gone down to eight a year, has not had a great deal to do other than maintain the status quo. In some ways, that is precisely the problem that was there previously. Before the 2008 crisis the Governor was responsive—looking at things, making speeches about what had happened in the past month or two and trying to tweak the system—and examination of the underlying problems in the system, in the sector and on occasion in the economy as well simply did not happen. The danger is that we again become complacent about such things. That is precisely why the Treasury Committee was keen to see an enhanced and powerful court of directors taking responsibility. It would be useful to have a clear statement from the Minister, endorsed by Parliament, that the model being created is not that of the all-powerful Governor, and nor is it one that we expect to see in future.

The Treasury Committee is a wonderful body, with great membership over the years and reasonable membership even to this day, but a clear message about what is expected of it by Parliament would be valuable: the Committee, on behalf of Parliament, is expected to hold the court to account properly and effectively. That has not been the case over the past decade. The chair of court has appeared, but the non-execs have been invisible. With the court having a more important role, it is critical that the Treasury Committee be given a clear indication by Parliament that it is expected to give a reasonable amount of its time to holding the court to account publicly for the new powers, whether the Committee likes it or not, or does it joyously or reluctantly.

It will be useful to hear from the Minister about those two points, so that we get her views on the record.

[George Kerevan]

In itself, the clause is innocuous. It is a tidying-up operation, but lurking beneath it is a danger. Standing back from the restructuring of the policy committees of the Bank, we appear to be ending up with an exercise in bureaucratic symmetry—a committee to do this and a committee to do that, micro, macro, prudential or supervision, and the Monetary Policy Committee. The different committees are not supposed to talk to each other, doing discrete policy. That looks all right—someone is doing it—but what we are in fact ending up with is what I want to underline to the Minister and, through her, to the Treasury team.

The danger is that in creating bureaucratic symmetry, we have not got very far in creating a workable regulatory regime that is robust enough to meet the next crisis. One of the problems is that we are creating a silo for fiscal stability—basically, checking when a bubble arises and stopping it—and a silo for monetary policy, but the two are not talking to each other, so we are in danger of creating conflicts between the two main policy committees.

It is perfectly possible for the Monetary Policy Committee to go in a separate direction. At the moment it is refusing to raise interest rates, but that is leading to the committee in charge of fiscal policy and financial stability starting to discuss whether it should use its financial buffers to slow down a bubble in the housing market. It is possible, but a bit crazy, for the two different committees to take two different stances when the whole point of putting financial stability and monetary policy under the same roof—the Bank—was meant to be a co-ordinated policy.

Assigning responsibility for financial stability to the Financial Policy Committee does not get us off the hook of someone somewhere laying down broad policy objectives. The MPC has broad monetary policy objectives—I think that in the present climate of deflation, they are probably the wrong ones—but the FPC has very vague guidelines as to what it should be doing, and so suddenly we discover, in default, that the only person in the land who is actually overseeing all the different policy options is the Governor himself, and he is not even getting clear enough direction from the Treasury. By all means support clause 5 as a tidying-up operation, but it still leaves big holes in terms of who is actually laying down the major policy directions for the committee.

[Harriett Baldwin]

Opposition Members have suggested that the Bill, in and of itself, makes a change to the power and importance of the role of the Governor of the Bank of England. I would submit that the Governor of the Bank of England is an incredibly powerful and important appointment, but I would not say that the statutory powers of the Governor are increased from their already elevated level by the Bill. Obviously, he is the one who has a role across all the different committees, but he has always had a very important role.

The hon. Member for Leeds East is absolutely right to highlight the fact that in the other place there was extensive debate on the precise wording of the clause. Convincing arguments were made to change it and the Government tabled amendments to provide the court with an express power to delegate determination of the strategy. That is a change from the original intention after the consultation undertaken in the summer. To be clear, it will be for the court, as the governing body of the Bank, to decide who is best placed to set and review the strategy.

The hon. Member for Bassetlaw asked specifically about the role of the Treasury Committee in continuing to scrutinise the role played by the Bank of England, the Governor and the court. I see nothing before us today that would change the current arrangements whereby the Committee has an important role in taking evidence.

Hon. Members asked about the co-ordination between the Monetary Policy Committee and the Financial Policy Committee. They are independent committees with separate objectives. It is important that the Governor sits on both committees and is able to see what is going on in both committees, but we think it right to strike a balance to ensure that each of the committees remains focused on its individual remit while fostering interaction between monetary and macroprudential policy.

There has been a good debate in both Houses, illustrating the value of line-by-line scrutiny. I think that we have landed in the right place and I commend clause 5 to the Committee.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

Monetary Policy Committee: membership

Question proposed, That the clause stand part of the Bill.

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[Harriett Baldwin]

I would certainly be very concerned if the hon. Member for Leeds East were developing a reputation as a moderate, not least because that might cause him not to be put forward as a Labour candidate at any future election. That would be a very worrying development. My analysis of his political point of view is that no one in this country could describe him as a moderate. This may be the first occasion on which he has been described as such. “Trot” might have been a more appropriate description of some of his political views, but I digress in an entirely inappropriate way.

I want to respond to some of the points raised and indeed to the important speech made by the hon. Member for Bassetlaw about the fact that the UK is an open economy. Therefore, by its very nature, it is open to economic developments in the rest of the world. He highlighted three topics with which the Financial Policy Committee should rightly be concerned. The first was the importance to financial stability in this country of the UK Government being able to receive tax revenues in order to pay for public services. He will know that it is incredibly important in this regard that we work with other countries and, notably, the OECD on the base erosion and profit shifting work, which is an important matter, perhaps not so much for this Committee but for other Committees in this House. That is an incredibly important issue on which we work internationally.

I reassure the Committee that, in terms of the overall resilience of the UK banking sector today, compared with the resilience at the time of the last shock, it does appear to be increasingly resilient. We would like to put that on record. The aggregate capital ratio, the common equity tier 1 ratio, is currently 12% for the banking system as a whole, which is a full 3.7% higher just since the end of 2013. The major UK banks all came through their stress test with the FPC at the end of last year without being asked to raise more capital. The FPC concluded that the UK banking system would have the capacity to support lending to the real economy even in the context of a severe global economic slowdown triggered by a downturn in the emerging economies.

The hon. Member for Bassetlaw also mentioned the housing market. Again, I think that it would be really valuable for the Committee to put on the record that the Government have granted the FPC powers of direction regarding residential mortgages and are also consulting—I hope that Opposition Members will support this—on extending its remit to cover powers regarding buy-to-let mortgages as well. Those are important points.

The hon. Gentleman also mentioned the rise of private sector borrowing. On that point, we argue that progress has been made to improve the personal financial position of households in the UK. Household debt relative to income has fallen from 168% in 2008 to 142% at the last reading. That includes both mortgage and unsecured debt. The FPC does study these numbers very closely. It stated, the last time that it looked through them, that given the actions that it has taken household indebtedness currently does not pose an imminent threat to financial stability, not least because underwriting standards are currently more prudent than in the past. Of course, however, the FPC must and will continue to monitor the household sector and will take further action if necessary.

[George Kerevan]

I appreciate the Minister’s overview of the financial markets and how stable they are. Obviously, she has not read the financial press this morning. The whole basis of the international bank resolution regime that we have brought in since 2008 is based on convertible bonds. The convertible bond market has gone berserk in the past two days. Constant default rates on commercial paper covering bonds have spiked by a whole number of points. Let me assure the Minister that the markets are not anywhere near as quiescent as she tells us.

[Harriett Baldwin]

Again, the hon. Gentleman puts words into my mouth that I did not utter. However, I did want to point out that the FPC looks at the financial sector’s resilience. No one would deny that the markets are going through rough and troubled times, but the FPC’s role is important and I hope he will agree that its powers to look at different aspects of the economy have improved the architecture of financial regulation since the last crisis. I highlight the way in which the Bank of England, as part of its monetary policy remit, has kept inflation as low as it has.

The hon. Member for Leeds East pointed to the “spaghetti” of the Bank’s organisation. I agree that we need clarity to be able to tell our constituents about how the architecture works. I share that objective. The Bill improves the pasta-related shapes of financial architecture. I would argue that the current situation, with a subsidiary and so on, is more like spaghetti. When I was trying to think of an appropriate pasta-related analogy for what the Bill does in establishing new architecture that we can explain to our constituents in simple terms, I came up with the idea of three ravioli—independent, but, importantly, in the same bowl.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clause 7

Monetary Policy Committee: membership

Question proposed, That the clause stand part of the Bill.