Bank of England (Appointment of Governor) Bill

Debate between John McDonnell and Sam Gyimah

Friday 6th July 2012 Commons Chamber

[John McDonnell]

The decision in the case that my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) raised was not accepted. The Select Committee system has worked remarkably well, and when people have served on them, they have done so on a cross-party basis. However, the point the Minister makes still does not undermine the argument that it is better to have a group examining, interviewing and then coming to a decision about an appointment on a cross-party basis than to leave it in the hands of a single, party politician.

[Mr Sam Gyimah (East Surrey) (Con)]

rose—

[Mr Graham Brady (Altrincham and Sale West) (Con)]

rose—

[John McDonnell]

I have allowed large numbers of interventions. If I can press on, I will see whether I can allow further interventions later.

Let me go through the other arguments that the Chancellor has made. He also argued that involving the Treasury Committee in determining the appointment of the Governor would blur the lines of accountability, saying that

“it is proper that the Government of the day chooses the Bank Governor,”

and

“is held accountable for that choice”.

However, the reality is that the Governor’s term of office rarely coincides with a Government’s term of office. Many Governments inherit the Governor appointed by the previous Government and can therefore barely be held accountable for that appointment. The involvement of Parliament in the appointment would simply mean that both the Executive and Parliament would be held accountable for it. That is perfectly proper and appropriate.

Let me turn to Executive functions. When challenged over his decision to allow the Treasury Committee a veto over an appointment to the OBR, but to refuse it one over the appointment of the Governor, the Chancellor argued that

“the Governor…is carrying out executive functions on behalf of the State,”

such as setting monetary policy and monitoring financial stability. In the evidence session on 5 July 2011, the Chair of the Treasury Committee pointed out to him the contradiction between that argument and the argument that the Committee should have a veto over the OBR appointment precisely because it would be carrying out Executive functions. The Chancellor then made a rather bizarre distinction between different Executive functions, which was beyond the Committee’s comprehension.

The other argument, which was raised in the other place, concerned market sensitivity. The argument was that the appointment of the Governor was market sensitive and that involving the Committee in the process could have a detrimental impact on the markets by creating uncertainty over the appointment. It could just as easily be argued that OBR appointments are extremely market sensitive. However, whether the appointment of the new Governor is undertaken behind the closed doors of the Treasury or openly and transparently in the Committee, there will still be speculation in the markets about which candidate will be appointed and what the impact will be. If the post is so market sensitive, it is even more important that the appointee is seen to have the approval and confidence of both the Executive and Parliament.

[Mr Gyimah]

Let me take the hon. Gentleman back to his point about the Governor’s term of office, which would be a single, eight-year term. In other words, once appointed, the Governor does not have to seek reappointment and so can act independently. Therefore, we do not really need the Treasury Committee to be involved to ensure that independence.

[John McDonnell]

The key aspect is independence at the point at which that person is appointed, so it is critical that the new Governor, when they are appointed, is seen to be completely independent, and also carries the House as well as the Executive. That is the point I am making.

I have spoken long enough and many other Members wish to speak, so let me conclude. Over the coming period a new Governor of the Bank of England will be appointed. The new Governor will not only have more powers and responsibilities than any Governor before him or her, but will face the immense challenges of reforming and restoring confidence in our banking system and financial services. My view—and, I think, the view of others—is that it is therefore critical that the person appointed to this vital post has the credibility, independence and authority to meet those challenges. Engaging Parliament in determining the appointment, along with the Executive, will ensure that the new Governor has that credibility, independence and authority.

Those are the arguments, but let me say this to the House. I hear that there has been organising among Back Benchers to filibuster today and talk this Bill out. We have been here before, so let me say this to hon. Members. That is an extremely short-sighted approach, and it is not in the interests of the Government or good governance. If we get into the puerile antics that we have seen before, it just brings Parliament into disrepute and increasingly encourages people to judge this House to be degenerating into an irrelevant farce, especially on today of all days, when, outside this House, there are flood warnings across the country. Many hon. Members will want to return to their homes and their constituencies to be with their constituents. I therefore urge Members to take this matter seriously and ensure that their speeches are as brief as possible—I apologise for speaking too long myself—to enable the House to come to a decision that the Government can then consider. If the Bill gets talked out today, I will deeply regret that, but let me say this to the Government and to the House. This issue will not go away; it will return at a later date. I ask the Government and the House to seize this opportunity to make this reform. I hope that wiser counsels will prevail. I therefore commend this Bill to the House.