Financial Services Bill

Lord Turnbull Excerpts

Tuesday 26th June 2012 Lords Chamber

[Viscount Trenchard]

My Lords, I had considerable sympathy with the amendment of the right reverend Prelate, which I found rather clearer and easier to understand than I did the explanation of the noble Lord, Lord Barnett. I am not convinced that appointing an additional two deputy governors is necessary because I believe these three sub-divisions of the Bank could be rationalised. However, appointing deputy governors will tend to make the governance of the Bank of England more rather than less level in that if you have a governor and one deputy, only one person comes close to challenging the governor’s authority. As proposed in the Bill, there will be three deputy governors, which will mean that the perception of the balance of power will be more level than before.

It is completely unnecessary for the governor to chair the Financial Stability Committee, because the governor chairs the court and the Financial Stability Committee is a sub-committee of the court. It is not right that the chairman of the court—that is, the governor—should also chair one of its own committees. That is highly illogical.

[Lord Turnbull]

I do not think that the governor chairs the court any longer.

[Viscount Trenchard]

I apologise to the noble Lord and I stand corrected. Perhaps the governor should chair the court. However, where possible, the deputy governors rather than the governor should chair the sub-committees.

[Lord Turnbull]

My Lords, I am not in favour of the amendments. First, there is the post of the deputy governor for prudential regulation. This is the old head of the FSA, in so far as it deals with macroprudential regulation, who is given the status of deputy governor in order to bring him into the councils of the bank. No extra posts or salaries are being created here. One might have been created by the creation of the FSA, but that is not here.

Secondly, as to the checks and balances on the governor, I do not think that a committee as important as either the NPC or the FPC being chaired by his deputy is a good way of exerting supervision of the governor. You cannot work for someone and supervise them at the same time.

At the moment, the governor chairs these committees and brings their thinking together; and, as we discussed earlier, there are other mechanisms around the court or the oversight committee—whatever it is called—that check the over-mighty power of the governor. Using one of his deputies to do this does not make sense.

[Lord Peston]

My Lords, I shall not talk about the Treasury representatives because we have an amendment relating to them later in the list and I shall save my vitriol for then.

I did not understand Amendment 9 until the right reverend Prelate the Bishop of Durham spoke. I am grateful to him because I now understand it. In essence, he is saying that three different people ought to chair the three different committees, which makes perfectly good sense. Chairing a committee is an important task and would involve a great deal of work, and I am sympathetic to the amendment.

However, going back to my and my noble friend Lord Barnett’s amendment, these appointments are only titular. It is not for your Lordships’ House to decry those who like titles. In other words, if there are three people, men or women—although I am afraid that these days it seems to be all men in the Bank of England—who want to be called deputy governor, it is no big deal. If it turns them on, and if a wife refers to her husband as the deputy governor and that cheers her up, why not? However, I am concerned as to whether it is more than that in two ways. First, do you get paid more for being a deputy governor? The Minister keeps telling us that we have to be economical, so we have to ask whether this is the correct way to spend money.

More specifically, the amendment is also about the following. First, can we have a full job description in each case? Does a full job description for these three posts exist, and if so can we see it? Secondly, how are the three of them appointed? For example, are the three jobs advertised, and can someone from outside apply to be a deputy governor with appropriate references, experience and so on? Thirdly, who appoints to this post? Those are the questions that I wanted answering. In the transparent, modern world in which we live, the answers should be that anyone can apply for these jobs, that the jobs should be advertised, and that there should be a precise job description and a proper appointing panel. That is the world in which we live, so I hope that the answer to all my questions is yes.

--- Later in debate ---

When the Statistics Commission was established, Sir Michael Scholar was appointed as its first chief executive and came before the Select Committee to be grilled about it. The first question that I asked was about his son, Tom Scholar, who worked in No. 10, and whether he had had any contact with him before the appointment. Sir Michael, being an individual of the utmost integrity, said, “Absolutely not. He didn’t know that I was applying for the job”. Speaking to me months later, he said, “That appearance before the Select Committee, when I was asked all those different questions, gave me an authority that I didn’t previously have”. Therefore, the role of Parliament can be very positive in ensuring that individuals get that authority and have their independence preserved. This is part of the checks and balances. It is in that spirit, on a cross-party basis, that this amendment has been tabled. I beg to move.

[Lord Turnbull]

My Lords, the amendment raises a very important question, largely unresolved, about what responsibility the Executive and the legislature have for public appointments. The truth is that we have not found a definitive solution to it.

There is a case for the status quo, which involves the candidate being interviewed by the Treasury Select Committee and, if the Minister ultimately decides that he wishes to go ahead with an appointment, the Minister being free to make the appointment. However, the bar has been raised and it has been made more difficult to bring forward a candidate of poor merit. There are also advantages to the candidate of the kind that the noble Lord, Lord McFall, has just mentioned.

The second option is for the candidate to be interviewed but for the committee to have a veto. At the moment we are still talking about appointments, and that is what we have with the OBR.

The third option is the scheme that was the subject of a report by the Institute for Government, under the chairmanship of a much beloved Member of this House, the noble Lord, Lord Adonis. It suggests dividing candidates into two tiers. These are unambiguously tier-1 appointments. The Chancellor of the Exchequer or the Government propose someone and the candidate is then interviewed. If the committee is dissatisfied, it then summons the Minister to defend their case. If there is still no resolution, the matter goes to the whole House; it does not simply go back to the Select Committee. The OBR case, which I may have voted for at the time, is a bit of an anomaly. You either stay where you are or go for the wider power. If there is a serious disagreement, the whole House should be involved.

As for dismissal, this is in some ways even more important. If the Government are to remove the Governor of the Bank of England, the issue is so big that it should go beyond the Treasury Select Committee and be a matter for the whole House. However, there is one caveat. Did he jump or was he pushed? I can think of many instances, including that of the Commissioner of the Metropolitan Police, where someone might resign because their position has been made untenable. The Minister may say, “I did not sack him. It had nothing to do with me. He decided to go”, yet all the time he has been pushing away, undermining his position. We do not really have very much control over that as that has to be a question of conduct. I have some sympathy with the principle that this post, particularly if it comes to a dismissal, needs some very powerful protection. However, if it is that important it should be referred to the whole House and not simply to the committee.

--- Later in debate ---

[Lord Phillips of Sudbury]

My Lords, I am afraid to say that I agree with the final remarks of the noble Baroness—it is a no-brainer.

I speak as a weary lawyer who is tired unto death of our legislation getting more and more prescriptive and complex as well as longer. If we cannot trust the Chancellor of the Exchequer to exercise sensible judgment in a matter of this kind then, frankly, he or she should not be Chancellor of the Exchequer. If, as it says in the amendment, the member has to add to diversity, what about integrity and independence? You could go on and on adding to and subtracting from the characteristics. I know that that is reflected in other parts of the 1998 Act but the amendment, for all its good intentions, is unnecessary and potentially disruptive.

If you want to play legalistics with this, you might ask what will happen if you have a full diversity of opinion on your board or court. Do you still have to add further diversity when you have got a full hand of diversity? As the provision is drafted here, you would. It is unpoliceable. For all those reasons, and despite its excellent intentions, I am against the amendment.

[Lord Turnbull]

My Lords, I direct this question to the noble Lord, Lord Eatwell. Does he regard Amendments 122 and 123—which were tabled by the noble Lord, Lord McFall, and refer to persons representing the constituent parts of the United Kingdom —as helpful or unhelpful to his cause? Are they helpful because they may add to diversity, or unhelpful because you would be choosing people on the basis of their geographical representation rather than their professional expertise?

[Lord Sassoon]

I hesitate in replying because the noble Lord, Lord Eatwell, might want to answer that excellent question. However, it is up to the noble Lord.

--- Later in debate ---

The Government are being very specific indeed here—very belt and braces. Of course, on a reasonably conducted board, one would expect that the chief executive—in this case, the governor—would be consulted. It would be strange if somebody was appointed against the will of the chief executive or the governor. However, it seems very strange that where the governor’s position is in question, the Government go for absolute explicitness and give the governor a complete blocking position, whereas in the other amendments we have been discussing, the Minister says that we should trust people to behave in a proper and sensible fashion. There is a certain element of one sauce for the goose and another for the gander here.

[Lord Turnbull]

My Lords, we have a great deal of common interest here that would advance the position of the court. We have two rival schemes, one in Amendment 11 in this group, the other tabled by the Government. We can mix and match here. The sense is that we prefer the Amendment 11 reference to the court, but we prefer the amendments in the government group, particularly about whether these amendments are made using internal or external resources, or whatever. If we put these two things together, we have a rather good scheme.

[Lord Phillips of Sudbury]

My Lords, I want to enlarge on the question I asked my noble friend just before he sat down. The point has been made from different quarters of the House about the desirability or otherwise of having yet another committee. However, whichever way that argument goes—and I note the rather odd situation that this oversight committee is to be a sub-committee of the court, and the composition of the court and the composition of the oversight committee are precisely the same—