Bank of England (Appointment of Governor) Bill

Debate between Jeremy Corbyn and Mike Freer

Friday 6th July 2012 Commons Chamber

[Mike Freer]

I am grateful for your advice, Madam Deputy Speaker.

My worry is that the other place, in whatever form, will seek to flex its muscles and say, “If the Commons has a role in appointment and dismissal, why not us?” There could be a deadlock not only between the Executive and the House of Commons but between the House of Commons and the other place.

The Treasury Committee’s role is vital. I have no doubt that its role in expressing a voice in the appointment of a Governor of the Bank of England is crucial. Let me deal, however, with the issue of deadlock. In reality, if there were a deadlock, we are told that it could come down to an opinion being expressed on the Floor of the House. Given the potential for such an impasse to create instability in the markets, I remain unconvinced that this Bill provides proper safeguards to prevent this from occurring. In reality, a vote on the Floor of the House is likely to be whipped, and the Chancellor of the day would get his candidate. The Chancellor would have his way, but only after a delay and a bruising stand-off between the Committee and the Chancellor. How would the markets react if there were such a delay?

[Jeremy Corbyn]

Does the hon. Gentleman not accept that whoever was appointed would have greater legitimacy because they would have the authority of having been appointed by Members of Parliament and there would be a route of accountability to the appointment?

[Mike Freer]

That is one argument, but the contrary argument is that if the chosen candidate fails to carry the support of a substantial number of Members—there could be a majority of just one—there would be a credibility gap and the candidate would be damaged. What if the Chancellor were forced to withdraw a candidate or if the candidate chose to withdraw and we ended up with a second candidate or a third, eventually getting to the least worst candidate? That is not good governance; it is certainly not good for the credibility of the institution and cannot be good for the policy of the Bank of England.

People say, “Well, if there is a delay, it does not matter too much; it is more important to get the right person for the job.” Members will recall that when the former chairman—if that is the correct term—of the International Monetary Fund, Mr Strauss-Kahn, was forced to resign, the gap between his departure and the appointment of Mrs Lagarde caused a huge sense of drift in the international markets. That should cause the House to think twice about creating a scenario that could cause the same sense of drift here.

I have another objection to the Bill. We have already agreed to a fixed eight-year term for the Governor’s appointment. That is a difficulty in itself, because the eight-year period will not be coterminous with the fixed parliamentary terms, but if we continue to delay an appointment, a huge problem may be caused. Governors could be appointed mid-Parliament, which could lead to a politicisation of the appointment.