Bank of England and Financial Services Bill [Lords]

Debate between Harriett Baldwin and Kelvin Hopkins

Monday 1st February 2016 Commons Chamber

[Harriett Baldwin]

The hon. Gentleman is right to highlight the importance of auditors. Others in this place will consider the role of auditors in the crash, but I think what he will welcome in the Bill is the fact that the National Audit Office, for the first time, will have the ability to do value-for-money studies within the Bank of England.

[Kelvin Hopkins (Luton North) (Lab)]

Following on from my hon. Friend’s intervention, does the Minister not agree that one of the fundamental problems with auditors is that they are always employed, effectively, by the managers of banks or companies when they should be representing shareholders? If they want their contracts renewed, time and again private auditors provide a soft option for managers so they get the contract next time. As she says, the great thing about the National Audit Office is that it is independent and in the public sector.

[Harriett Baldwin]

The hon. Gentleman is absolutely correct that the Bill focuses specifically on the role of the National Audit Office, one independent arm of government, and the Bank of England, another independent agency. The Bill does not particularly focus on the role of auditors in private companies, but I am sure other parts of Parliament will consider that in this Session.

I turn first to the reforms that the Bill will make to the Bank of England. It introduces evolutionary changes to its governance, transparency and accountability to put it on the best possible footing to discharge its expanded responsibilities. These changes complement those taken by the Bank itself as part of its “One Mission, One Bank” strategic plan. The Prudential Regulation Authority will stop being a subsidiary of the Bank and instead be run by a committee of the Bank; another deputy governor will be able to join the court, the Bank’s governing body; and the Treasury will be able to send a remit letter to the Prudential Regulation Committee.

To strengthen the Bank’s transparency and accountability to Parliament and the public, we will give the National Audit Office the power to conduct value-for-money studies. Following debates in the other place and with the NAO and the Bank, we have made sure that that important change is implemented in a way that protects the independence of the Bank’s policy-making functions and of the NAO.

[Kelvin Hopkins]

I welcome the fact that the NAO will be looking at the Bank, but it will need extra resources to do that big job. Will the Minister guarantee that the extra people employed will represent the shareholders—us and the people we represent—and will not simply come from the banking sector and be soft on banks?

[Harriett Baldwin]

The hon. Gentleman rightly points out the importance of the NAO’s having the right resources. I have not had any representations about this particular move, but I am sure it will make its feelings known, should it require those resources.

The Bill also makes changes to the court. We will simplify and strengthen the governance of the Bank by transferring to the whole court the powers previously given to the oversight committee to oversee the Bank’s performance. Following discussions in the other place, to help guard against group-think, we have amended the Bill so that a majority of non-executive directors on the court will still be able to initiate reviews of the Bank’s performance without needing to secure the agreement of the whole court.

We will integrate prudential regulation more fully into the Bank by ending the PRA’s status as a subsidiary of the Bank. The PRA board will be replaced by a new Prudential Regulatory Committee with sole responsibility within the Bank for the PRA’s functions. That is modelled on the Monetary Policy Committee and the Financial Policy Committee. We will make these changes while still protecting the PRA’s operational independence, and we will continue to ensure transparency on the amounts raised by the levy and what the Bank spends in relation to its functions as the prudential regulator.

In order to strengthen governance and make the structures of the Bank more consistent, the Bill harmonises the legislation underpinning the Bank’s three policy committees: the MPC, the FPC and the proposed PRC. It moves the MPC to a schedule of at least eight meetings a year, from the current 12, and updates requirements for the timing of MPC publications, implementing the remaining recommendations of the Warsh review, entitled “Transparency and the Bank of England’s Monetary Policy Committee” and published in 2014.

Alongside these changes, the Bill builds on the existing arrangements and the strong working relationship between the Bank and the Treasury by updating the formal framework for how the Bank and the Treasury should engage with each other on the public funds risks and the financial stability risks of firm failure. These changes will improve co-ordination while maintaining the existing clear and separate roles of the Bank and the Treasury in the event of a crisis.

[Harriett Baldwin]

The hon. Gentleman is right to highlight the importance of the Bank’s operational independence, which Gordon Brown introduced in 1997—it was his greatest legacy to our country—but he will note that his colleagues’ motion calls for a stronger role for both the Treasury and Parliament and arguably for less independence for the Bank. It is popularly known as the people’s quantitative easing, and I hope that the hon. Gentleman will not support his Front-Bench team on the reasoned amendment.

[Kelvin Hopkins]

Following the point made by my hon. Friend the Member for Huddersfield (Mr Sheerman), it would be even more worrying if there were a cosy relationship between the NAO and the Treasury. The NAO should be responsible to this House, and the Treasury should not be able to get its tentacles on the NAO.

[Harriett Baldwin]

The hon. Gentleman is right to recognise that the NAO is completely independent of the Treasury. Although I have a nominal role on the Public Accounts Committee, the NAO is rightly accountable to Parliament.

Royal Bank of Scotland

Debate between Harriett Baldwin and Kelvin Hopkins

Thursday 11th June 2015 Commons Chamber

[Harriett Baldwin]

I welcome my hon. Friend, who has a wealth of experience in insolvency practice that he has clearly put to good use in his first question. Rothschild and the Bank of England Governor have said that one of the challenges facing this stake is the illiquidity of the float—the stock is not liquid enough to be in any of the major indices, for example—so there are liquidity benefits and potential price benefits from putting an initial float in the private sector.

[Kelvin Hopkins (Luton North) (Lab)]

May I welcome the hon. Lady to her post and say how much I agreed with the measured, sensible and absolutely correct points made by my hon. Friend the Member for Bolsover (Mr Skinner)? I can confirm to the hon. Member for North East Somerset (Mr Rees-Mogg) that the old clause IV is certainly alive in my heart. In 1983, I was pleased to stand for election on a manifesto that called for the nationalisation of the banks. Had the banks been nationalised—in public ownership and accountable to the public—all the profits would have accrued to the public purse and they might have been shielded from the world banking crisis. By giving RBS back to the private sector, are we not simply inviting more gambling, more greed, more irresponsibility and more crises in future?

[Harriett Baldwin]

May I express my thanks to the British people for ensuring that we have a Government focused on the economic future of this country, not on the failures of the past and the longest economic suicide note in history?