Financial Services Bill

Lord Tyrie Excerpts

Monday 23rd April 2012 Commons Chamber

[Mr Hoban]

I think that there is adequate provision in the Bill on consumer credit; the FCA has the powers to tackle that issue and I am confident that it will be able to make appropriate use of the remedies available to it. A different issue about pre-payment schemes has been raised, but that does not fall within the scope of the Bill. Of course there is a mechanism in the Bill to move the regulatory perimeter if appropriate, but I think that it is the Minister with responsibility for consumer affairs who needs to respond on that point.

I know that we want to move on to deal with the next group of amendments, but before concluding I just wish to say that there is support across the House for new clause 4, which enables us to complete the transfer of regulation from the OFT to the FCA. That does yield important benefits for our constituents. We need to get that regime right if we are to ensure that there is a reasonable supply of affordable credit to our constituents and that they are well protected—that is the goal we are all aiming at. The Bill contains the powers to do that, and I commend new clause 4 to the House.

Question put and agreed to.

New clause 4 accordingly read a Second time, and added to the Bill.



New Clause 1

Retrospective reviews of Bank performance by court of directors and publication of court minutes

‘(1) Section 2 of the Bank of England Act 1998 (Functions of court of directors) is amended as follows.

(2) After subsection (5) add—

“(6) The court shall conduct retrospective reviews of the performance of the Bank with respect to its functions and objectives.

(7) The court shall determine the particular matters to be reviewed under subsection (6).

(8) The court must publish a report on each review carried out under subsections (6) and (7) unless the court decides that all or part of such a report should not be published for reasons of confidentiality or because it would endanger financial stability.

(9) When all or part of a report of a review is not published under the provisions of subsection (8), the court must—

(a) publish as much as possible of the report,

(b) send a copy of the full report to the Chairman of the Treasury Committee of the House of Commons or, in exceptional circumstances, inform the Chairman of the Treasury Committee of the reasons for not sending it, and

(c) publish the report or part of the report as soon as possible after the court decides that the considerations in subsection (8) no longer apply.

(10) After each meeting of the court, the Bank shall publish minutes of the meeting before the end of the period of two weeks beginning with the day of the meeting.

(11) Subsection (10) shall not apply to minutes of any proceedings where the court has decided that publication should be delayed for reasons of confidentiality or because publication would endanger financial stability.

(12) Where any part of the court’s minutes is not published under the provisions of subsection (11), the Chairman of the court shall inform the Chairman of the Treasury Committee of the House of Commons of the reasons.

(13) Any part of the minutes of a meeting of the court must be published as soon as the court has decided that the considerations in subsection (11) no longer apply.”.’.—(Mr Tyrie.)

Brought up, and read the First time.

[Mr Andrew Tyrie (Chichester) (Con)]

I beg to move, That the clause be read a Second time.

[Mr Deputy Speaker (Mr Nigel Evans)]

With this it will be convenient to discuss the following:

New clause 2—Reports by skilled persons—

‘The Financial Services and Markets Act 2000 is amended as follows—

“(1) In section 166, subsection (1), leave out “require him” and insert “inform that person that it has appointed a person”.

(2) In section 166, subsection (1), at end insert “The Authority may require the person to whom subsection (2) applies to pay for the costs of the report in the event that it has resulted in enforcement action being taking against that person.”.

(3) In section 228, subsection (5), at end insert “except that this is without prejudice to the right of the complainant to sue for any amounts in excess of the maximum award limit in the event that the Ombudsman has made a recommendation pursuant to section 229(5) of this Act. The Complainant’s acceptance is also not binding on the Authority which remains entitled to take such action as it would have been had the award limit not existed.”.’.

New clause 3—Enforcement of money awards—

‘Schedule 17 of the Financial Services and Markets Act 2000 is amended as follows—

“(1) In paragraph 16, leave out “which has been registered in accordance with scheme rules”.’.

New clause 13—Meaning of qualifying parent undertaking: assessment and review—

‘(1) The Treasury shall within twelve months of Royal Assent to this Act consult the FCA and the PRA on the possible need to exercise the powers provided for by section 192B(6)(a) of the Financial Services and Markets Act 2000 and shall lay before the House of Commons a report containing an assessment of the need to exercise these powers.

(2) In subsequent years, the FCA and the PRA shall provide an annual assessment of the possible need to exercise the powers provided for by subsection (6)(a), to be reviewed by the Treasury. Any such review must be laid before the House of Commons.’.

Amendment 46, in clause 1, page 1, line 12, at end add—

“(2A) The appointment of the Governor and Deputy Governors shall be made only after the Treasury Committee of the House of Commons has been consulted and has reported on the suitability of the candidates nominated by the Chancellor of the Exchequer for the posts.’.

Amendment 47, page 1, line 12, at end add—

“(2A) Any member appointed under subsection (2) shall be appointed with the consent of the Treasury Committee of the House of Commons.’.

Amendment 29, in clause 2, page 2, line 11, after ‘Authority)’, insert

‘and shall have regard to minimising, as far as possible, the use of public funds to support or rescue parts of the UK financial services industry.’.

Amendment 22, in clause 3, page 3, line 37, after ‘functions’, insert

‘having regard to the economic policy of Her Majesty’s Government, including its objectives for growth and employment’.

Amendment 23, page 8, line 32, at end insert—

(a) If the Treasury considers it appropriate to proceed with the making of an order under section 9K, the Treasury may lay before Parliament—

(i) a draft order, and

(ii) an explanatory document.

(b) The explanatory document must—

(i) introduce and give reasons for the order,

(ii) explain why the Treasury considers that the order serves the purpose in section 9K, and

(iii) be accompanied by a copy of any representations received from the FPC or the Governor.

(c) The Treasury may not act under paragraph (a) before the end of the period of 12 weeks beginning with the day on which the consultation began, unless the order is made in accordance with paragraph (b).

(d) Subject as follows, if after the expiry of the 40-day period the draft order laid under paragraph (a) is approved by a resolution of each House of Parliament, the Minister may make an order in the terms of the draft order.

(e) The procedure in paragraphs (f) to (i) shall apply to the draft order instead of the procedure in paragraph (d) if—

(i) either House of Parliament so resolves within the 30-day period, or

(ii) a committee of either House charged with reporting on the draft order so recommends within the 30-day period and the House to which the recommendation is made does not by resolution reject the recommendation within that period.

(f) The Minister must have regard to—

(i) any representations,

(ii) any resolution of either House of Parliament, and

(iii) any recommendations of a committee of either House of Parliament charged with reporting on the draft order, made during the 60-day period with regard to the draft order.

(g) If after the expiry of the 60-day period the draft order is approved by a resolution of each House of Parliament, the Minister may make an order in the terms of the draft order.

(h) If after the expiry of the 60-day period the Minister wishes to proceed with the draft order but with the material changes, the Minister may lay before Parliament—

(i) a revised draft order, and

(ii) a statement giving a summary of the changes proposed.

(i) If the revised draft order is approved by a resolution of each House of Parliament, the Minister may make an order in the terms of the revised draft order.

(j) For the purposes of this section an order is made in the terms of a draft order or revised draft order if it contains no material changes to its provisions.

(k) In this section, references to the “30-day”, “40-day” and “60-day” periods in relation to any draft order are to the periods of 30, 40 and 60 days beginning with the day on which the draft order was laid before Parliament.

(l) For the purposes of paragraph (k) no account is to be taken of any time during which Parliament is dissolved or prorogued or during which either House is adjourned for more than four days.’.

Amendment 24, page 12, line 2, at end insert—

‘(f) an assessment of the impact of each macro prudential measure on employment and economic growth.’.

Government amendment 12.

Amendment 39, in clause 4, page 14, line 36, at end add—

‘Within a year of commencement of this Act the Bank of England shall publish a review of the effectiveness of co-ordination by the regulators of the exercise of their functions relating to membership of, and their relations with, the European Supervisory Authorities (namely, the European Banking Authority, the European Insurance and Occupational Pensions Authority and the European Securities and Markets Authority), and their relations with other regulatory bodies outside the United Kingdom.’.

Amendment 28, page 15, line 4, leave out clause 5.

Amendment 35, in clause 5, page 16, line 15, at end insert—

‘(c) the ease with which consumers, particularly those on lower incomes, can have access to financial services and products which are affordable and appropriate to their needs.’.

Amendment 67, page 16, line 41, after ‘is’, insert

‘intelligible to them, appropriately presented’.

Amendment 41, page 17, line 1, after ‘transaction’, insert

‘, any common law fiduciary duties owed by the provider in question’.

Amendment 68, page 17, line 35, at end insert—

‘(e) the ease with which consumers throughout the UK can identify and obtain services which are appropriate to their needs and represent good value for money.’.

Amendment 69, page 27, line 19, at end insert ‘and by the Consumer Panel’.

Amendment 70, page 27, line 19, at end insert—

‘(1A) Unless the PRA has established a panel as provided for in section 2K(2) to reflect consumer interests, it must consider representations from the Consumer Panel established under section 1Q where such representations relate to the PRA’s general policies and practices, the co-ordination of the exercise of PRA and FCA functions as provided for in section 3D(1), or the exercise of the PRA power in section 3I.’.

Amendment 34, page 28, line 38, at end insert

‘to minimise unnecessary additional expenses that might be incurred by virtue of the separate administration of the FCA and the PRA, and to maximise any common administrative savings achievable through close co-ordination.’.

Amendment 36, page 29, line 15, at end insert—

‘(g) the principle that, where appropriate, authorised persons should have a fiduciary duty towards the consumers who are their clients.’.

Amendment 71, page 29, line 42, at end insert—

‘(d) that each regulator engages with the other where they identify any gaps in or between their regulatory remits, or the exercise of these, that may become apparent in relation to any product, provider, institution, market practice, responsible shareholder interest or consumer concern;

(e) that as appropriate both regulators can identify areas where they can share services and information, acting to minimise burdens on firms supervised by both regulators and/or to maximise the understanding of consumers and facilitate the exercise of their responsible interests.’.

Amendment 33, page 31, line 24, at end insert—

‘(8A) The memorandum shall contain an estimate of the additional annual costs involved in the administration of the FCA and PRA when compared with the estimated costs of the administration of the Financial Services Authority.’.

Government amendment 1.

Amendment 42, in clause 25, page 108, leave out lines 29 and 30.

Amendment 43, page 108, leave out lines 34 to 39.

Amendment 49, in schedule 3, page 174, line 1, at end insert

‘with the consent of the Treasury Committee of the House of Commons.’.

Amendment 50, page 174, line 2, at end insert

‘with the consent of the Treasury Committee of the House of Commons.’.

Amendment 27, page 176, line 9, at end insert—

‘Publication of minutes and agendas

10 The FCA shall make arrangements to publish the agendas and minutes of its meetings, unless publication would be inappropriate.’.

[Mr Tyrie]

As a number of colleagues across the House will have noticed, the Treasury Committee took the highly unusual step of tabling a new clause, which is signed by all but one member of that Committee. As hon. Members will be aware, the Committee feels strongly that this Bill is defective in a number of respects, and needs a good deal of attention and improvement. That is because the Bill will hand the Governor of the Bank of England

“unprecedented new powers to shape the British economy. While continuing to set interest rates, the Bank will take over the supervision of commercial banks and insurers, be responsible for…tackling threats to financial stability…and have the power to restrict lending on mortgages, or order banks to increase their capital…one…man or woman will wield all these powers. This individual will arguably be as powerful as the chancellor”.

As drafted, the Bill seems to fly

“in the face of all ideas of modern governance, let alone parliamentary accountability.”

Those are not just my personal views; they summarise reasonably well the views of the whole Treasury Committee. As it happens, I have not said anything off my own bat yet; everything that I have said so far is a verbatim quotation from an article by the previous Chancellor, the right hon. Member for Edinburgh South West (Mr Darling).

[Mark Field (Cities of London and Westminster) (Con)]

I entirely endorse what my hon. Friend has said. May I also say, in my role as the Member for the City of London, that although I am not suggesting for one minute that the views he has just espoused are universally held within the square mile, many practitioners have deep concerns about elements of the Bill, particularly the aspects to which he has referred?

[Mr Tyrie]

I have heard a good number of those concerns from the practitioners to whom my hon. Friend refers. What they say, what he has just said and the fact that I was quoting a former Chancellor all illustrate an important point: new clause 1 is not just supported by the Treasury Committee and by many independent experts who have taken a look at it. My impression, which has been gained from talking to fellow MPs and many others, is that the purpose behind the new clause is supported right across the House of Commons.

New clause 1 would bolster parliamentary accountability in two ways. First, it would place a duty on the court of directors to conduct retrospective reviews of the Bank’s performance and publish the results for Parliament to examine. Secondly, it would require the court to publish its full minutes. Those two suggestions sound, to me at least, pretty reasonable, but they encountered a wave of objections from the Bank. The Bank’s frequent refrain to us has been that the current accountability arrangements are pretty much okay just as they are. We need to be clear that the current arrangements for the court simply will not do. The board of the Bank—the court—is currently prohibited from examining the Bank’s performance and it cannot make recommendations about what it may discover if it does ask any questions. The court’s role is strictly confined to process—mainly to auditing the budget. Any well-governed institution must have a board capable of examining its performance and permitted to comment on how to learn lessons from mistakes or from successes. That is why we propose that the court be required to conduct and publish reviews of the Bank’s policy. Of course that would also give Parliament an opportunity to make recommendations on what it should look at.

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[Mark Field]

Given that, as my hon. Friend puts it, we are dealing with an unprecedentedly powerful institution, would he care to speculate as to why there has been this reluctance, in the face of repeated requests from the Treasury Committee, on the part of the Bank of England to do as he has asked?

[Mr Tyrie]

My hon. Friend tempts me towards a place I would very much enjoy going, but—in the interests of I cannot think what; let me suggest brevity, or something like that—I will not go there.

There has also been a concession on the minutes, but it goes somewhat short of what is appropriate. The concession is that a record of court meetings will be published—I am citing the phraseology used—but it seems to me that that will not do either. The court should publish full minutes, not doctored minutes. I do not want to sound too pejorative, but the minutes should not be written especially for the purposes of a certain type of scrutiny by Parliament. The full minutes should be published, as is the case with the Monetary Policy Committee, subject to the confidentiality provisions to which I alluded earlier.

New clause 1 addresses only a small part of what is needed to knock this Bill into shape. Much more time should have been devoted to it. The need for all this to be on the statute book by the end of this year is yet to be explained to us. It would be far better to let the timetable slip for a few months and to get the Bill right. The crisis has afforded us a once-in-a-generation opportunity to overhaul the legislation and the Bank and it seems to me that we are not fully taking it up.

It is also regrettable that all this work is being done in the form of amendments to the Financial Services and Markets Act 2000, which is itself an immensely complex piece of legislation. As the Governor of the Bank argued before the Committee and elsewhere, we would have done better to write a new Bill from scratch, but we were told that that would take too long. Again, there is a rather curious interaction between trying to get something right and the arbitrary timetable that is imposed.

I very much hope that the other place will get to grips with some of the other shortcomings of the legislation, many of which are relevant to amendments in this group. Let me list a few. The first is the effect on the accountability and governance of the complex web of interacting committees that are in place or being created—the FPC, the MPC, the Prudential Regulation Authority, and the sub-committee, NedCo, in particular. The second is the need for stronger accountability to Parliament as regards macro-prudential tools, and I note that amendment 23, tabled by the hon. Member for Nottingham East (Chris Leslie), addresses that issue—intelligently, if I may say so. The third is the heavy circumscription of the powers of the Chancellor to intervene in a crisis, which will, I understand, be addressed on day two on Report. More work is certainly needed to get this legislation right. The fourth is the need for Parliament and the Treasury Committee to engage in the process of the appointment of a new Governor, which has been in the papers over the past few days and is dealt with by amendments 46 and 47, tabled by the hon. Member for Hayes and Harlington (John McDonnell). The fifth concerns the FCA, which seems to be the poor relation in all this legislation, and a similar duty to publish minutes and conduct reviews of its work. That is touched on in amendment 27, tabled again by the hon. Member for Nottingham East.

[Andrea Leadsom (South Northamptonshire) (Con)]

Does my hon. Friend agree that it is also regrettable that the FCA, despite another request from the Treasury Committee, does not have a statutory primary objective to promote competition in the banking sector? The Committee has been calling for that ever since this inquiry started.

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[Mr Tyrie]

I am grateful for that support from my Committee colleague. Competition is now one of the operational objectives, but the punch of the FCA’s three operational objectives has been diluted by the fact that an overarching strategic objective has been placed above them, and it could be used to trump the operational objectives and enable the FCA to avoid a primary duty to take account of competition. I completely agree with my hon. Friend.

The PRA veto on the FCA’s work as a whole is another issue that the Committee has raised from time to time, but I must admit that it is not covered by this group of amendments. I shall therefore move on swiftly before I am ruled out of order.

It is now common ground that the proposed governance and accountability of the Bank and the FCA are defective and need to be strengthened. The Committee is determined that they should be strengthened. We regret that they are not already in much better shape, and there is a great deal of work for the other place to do to the legislation. As a Committee, however, we showed by our decision on the need to obtain a full explanation for RBS’s failure that we would not hesitate to take new steps in order to get information that we think should be in the public domain. We took the unprecedented step in that case of sending specialist advisers into the FSA to conduct a full investigation. It should be made clear now that we will not hesitate to do the same with respect to the Bank of England if this legislation remains defective. Sending in specialist advisers was a somewhat cumbersome route to getting to the facts of the RBS issue, and it would be far preferable to improve the Bill so that such action by the Committee would no longer be necessary.

The bottom line for improving Bank accountability, to its own board and to Parliament, should be judged by two criteria. First, does the proposal hold out the prospect of improving the performance of the institution—that is, the quality of public policy? Secondly, does it help secure public consent for the decisions that that body takes? The latter is particularly important for an institution as powerful and as remote, in many respects, as the Bank of England. The Committee believes that new clause 1 would meet both those criteria and I commend it to the House.

[Chris Leslie]

I thank the hon. Member for Chichester (Mr Tyrie)—or is he right honourable? If he is not, he should be. I thank him for his eloquent and powerful advocacy of new clause 1. The Treasury Committee has done sterling work in trying to cajole and persuade the very reluctant Bank of England to move from the 18th century to the 19th century. If we could speed things up a little through his new clause, that would certainly be welcome. The hon. Gentleman is not exactly asking for the moon on a stick; he is simply asking for the publication to a reasonable degree of the minutes of the court of the Bank of England—shock, horror—and for proper internal scrutiny in the Bank and a review of how it has performed. The hon. Gentleman is entirely correct that it is appalling that the Bank of England has never conducted a review of its role in the 2008-09 crisis. Every other branch of government, including the FSA, has done similarly and I would have thought that such a review would be a pretty basic prerequisite for moving on, especially if we are moving to a new era when the Bank of England will be incredibly powerful thanks to the great news powers that the Government wish to bestow on it.

The Bank of England is an old institution. It started life in 1694 with just 17 clerks and a couple of gatekeepers, and it has subsequently been modernised by a number of Acts of Parliament. It is time, however, for it to become less of an honorific institution. The court should be made up of individuals who really take seriously the responsibility to scrutinise the performance of the executive of the bank, and the hon. Member for Chichester made his points perfectly well. As he says, it is like getting blood out of a stone. Some sort of oversight committee might, as the Minister said in Committee, be able to conduct retrospective reviews. The hon. Member for Chichester is entirely correct that it is ridiculous for only a record of the minutes to be published.

I will support the hon. Gentleman’s new clause, if it comes to it, but I suppose we should wait to hear what the Minister has to say. I shall not dwell on the new clause, though, as the group includes many other amendments which address a range of issues on the governance of the Bank of England and the new regulatory structures, and we have a very short space of time in which to debate it. I have, I think, 11 amendments in the group. I will not dwell on them all; I will focus on the key ones.

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[Chris Leslie]

I did indeed consider the downside of having parliamentary scrutiny that might in some way impact adversely in an emergency scenario. We have not sought to amend the provision that would allow the Treasury to bring forward those orders in an emergency situation. It could do that. We could have retrospective scrutiny of that order once it had come into place. These are for ordinary, normal times scenarios. The amendment may be imperfect. I would have liked a proper way to deal with the issues, but there has been significant resistance along the way for such measures.

[Mr Tyrie]

Does the Opposition spokesman agree that what we really need is a commitment in principle to a super-affirmative procedure in normal circumstances for the majority of these macro-pru tools?

[Chris Leslie]

I totally agree with the hon. Gentleman. That is the very least that we should have. I simply counsel the House that many hon. Members are already under significant pressure because of the European rules and regulations that seem to come from an unaccountable place. It is not entirely unaccountable, but it can sometimes feel that way to our constituents. If we end up with a situation where we do not put in place at this stage the right parliamentary scrutiny arrangements, we are potentially opening up another front where a powerful institution, unelected and seemingly very distant from our constituents concerns, could have a major impact on their day to day lives, and we would be sitting here twiddling our thumbs unable to do anything about it, never mind even to debate it. We have had debates in the past on the retail distribution review and other examples where there has been massive frustration in the House about the lack of an accountability thread between parliamentarians and regulators. That would be magnified many times over if we did not put in place the right arrangements.

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[John McDonnell]

I am not part of the charmed circle of the Treasury Committee, but I wish to add my congratulations to the hon. Member for Chichester (Mr Tyrie) and the members of the Committee on the work they have undertaken in examining the Bill as it has gone through the House.

I have tabled amendments 46, 47, 49 and 50, which seek to enhance the Treasury Committee’s role in the appointments of the Governor and deputy Governors of the Bank of England, and the chair and chief executive of the Financial Conduct Authority. I have done so because the background to this legislation is perhaps the most catastrophic failure of the Bank of England and the financial regulatory authorities that we have seen in 70 years. Their failure to predict or intervene effectively to ensure that the financial crisis was averted or dealt with adequately, speedily and effectively is there for all to behold. It has brought this country to its financial knees and into a recession that is turning into a depression, which is something we have not seen since the 1930s. The reasons for that have been evidenced today. New clause 1 would address part of the issue—namely, the lack of transparency of the old regime—but another element was the lack of accountability.

This legislation will create, in the Governor of the Bank of England, one of the most important roles in the country. The Financial Times editorial of Thursday 19 April stated:

“The central bank governor is not just some technocrat, but the most powerful unelected official in the country. His role has become more political since the crisis, not less, and will be even more sensitive when the BoE acquires new powers to avert financial crises. The next governor must win public acceptance and possess sharply honed political antennas. This might be harder for a foreigner.”

That last comment refers to the speculation about some of the candidates that the Government are considering.

In today’s Financial Times, the shadow Chancellor sets out his concerns about the range of powers and responsibilities that the new Governor will have, stating that only a superman or superwoman need apply, because the job will be so influential and will have such a wide range of roles and responsibilities. The Treasury Committee appreciated that fact very early on in the game, in its consideration of the new legislation. That is why, way back in November, it recommended that it should have a role in the appointment of this significant post. The Chancellor of the Exchequer argued against that proposition. I find it extraordinary that the Treasury Committee won the right to have a veto over the appointment of the chair of the Office for Budget Responsibility, yet failed to win a role in the appointment of the much more significant post of the Governor of the Bank of England. Indeed, it has no role in the appointment of the deputy governors, and no effective role in the appointment of the Financial Conduct Authority proposed in the Bill.

I genuinely thought that the Government were about to shift their stance on this matter, because, back in November 2011, the Treasury Committee stated strongly that it was not persuaded by the Chancellor’s refusal to grant it a role in the appointment. It went on:

“The power of veto with respect to the OBR was given to ensure the independence and accountability of that body. The Governor of the Bank’s independence from Government is crucial for his or her credibility. Given the vast responsibilities of the Governor, the case for this Committee to have a power of veto over the appointment or dismissal of the Governor is even stronger than it is with respect to the OBR. We therefore recommend that, in order to safeguard his or her independence, the Treasury Committee is given a statutory power of veto over the appointment and dismissal of the Governor of the Bank of England.”

I wholeheartedly supported that view. The Chancellor’s argument was that the Treasury Committee could not have such a role because the Governor was exercising an Executive function and should therefore be a Government appointee. That is an absolutely specious argument.

The legislation to give independence to the Bank of England went through the House, although I never supported it. That means that the Governor has more than an Executive function. The Bank is not an Executive arm of the Government. The Chancellor of the Exchequer and the Government cannot have it both ways. If they support the independence of the Bank of England from the Government, they must establish some other form of accountability to Parliament. If they do not believe that it is independent, and that it is simply an Executive arm of the Government, the Governor will be appointed directly by the Chancellor of the Exchequer. Even if that is the Government’s argument, the Chancellor of the Exchequer is still accountable to the House, so there must be some role that the House can play in advising him on the appointment of this important post.

My amendments would simply reassert the role of the Treasury Committee and thus Parliament itself in this vital range of decisions about appointments to key elements of the new structure proposed by the Government. Let me be frank. I agree with everything said about the role of the Treasury Committee Chairman and I agree that he needs to be called “right honourable” and the all the rest of it, but sometimes people are born great and sometimes people avoid greatness being thrust upon them. I do not know what negotiations went on, and it might well be that the negotiations were along the lines of, “We will not push for a veto on appointment as long as we can get some transparency and thus at least some element of accountability for that post to the Committee itself.” If that was the tenor of the negotiations with the Government—I happily allow the Treasury Committee Chairman to intervene to clarify it—I am afraid that the deal is not good enough.

What needs to be said very clearly by this House is that these are such significant appointments—particularly the Governor of the Bank of England but also the head of the Financial Services Authority in view of its key role in seeking to avoid further crises and in regulating this country’s financial services—that this House must have at least some say over the calibre of these persons.

[Mr Tyrie]

I can reassure the hon. Gentleman that the report does not reflect any back-room deals, but I would like to ask him a question. I am strongly sympathetic to the approach set out in his amendments. He needs to know that the Treasury Committee intends to hold pre-appointment hearings for these jobs in any case, including for the very senior jobs like that of the Governor, when he is identified. In the unlikely event that a nomination were challenged by the Committee, many would argue that the position of the person, even at nomination stage before he or she took up the appointment, would be untenable. In that case, does the hon. Gentleman not agree that the sensible thing for the Government to do is to engage with Parliament and with the Treasury Committee a little earlier in the appointments process?

[John McDonnell]

I wholeheartedly agree, but sometimes in relationships with the Government a line is drawn in the sand, which makes the right of veto sometimes crucial, particularly if there is a bloody-mindedness in the direction of policy making by the Chancellor when it comes to appointments to key posts. Although I take the gist of the hon. Gentleman’s argument and can see how the Treasury Committee could create a climate of opinion or produce a report that influences the appointment in a way that makes it impossible for a person to take it up because of the lack of credibility, I think there needs to be an even stronger role for the Treasury Committee and therefore Parliament in all these matters.

This is a crucial opportunity missed in respect of the Treasury Committee’s ability to influence the Government; in respect of the Government’s ability to demonstrate to this House a greater openness when it comes to the transparency of the operation of the Bank of England and of the new regulatory authorities; and in respect of the Government themselves in how they make appointments to these crucial positions.

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Amendment 23 relates to the super-affirmative procedure for statutory instruments on macro-prudential tools. The Government agree that public and parliamentary scrutiny of macro-prudential tools is important. The Bank has already consulted on tools and made public recommendations to the Treasury. The interim FPC has recommended to the Treasury that the statutory FPC be given the following three tools: the counter-cyclical capital buffer, sectoral capital requirements and a leverage ratio. That was in a document that it published in March. The Government are considering those recommendations and will consult publicly on their proposals for the FPC’s initial toolkit during the passage of the Financial Services Bill. The Government will aim to maximise the amount of scrutiny available to Parliament. The secondary legislation itself will, as recommended by the Treasury Committee, be subject to approval by both Houses of Parliament, as will any changes to it to reflect changes to the FPC’s toolkit. Therefore, strong arrangements are in place to ensure that there is public and parliamentary engagement in determining the macro-prudential tools that should be available to the FPC.

[Mr Tyrie]

I realise that the Minister will not want to commit himself to change anything now, but would he be prepared to say now that he would consider looking at the possibility of going a little step further than the affirmative procedure in some measure towards something that we would recognise as a super-affirmative procedure for these measures?

--- Later in debate ---

[Mr Hoban]

We are clear that we want to see the court’s minutes published, which I think is absolutely vital, and that we want to see those retrospective reviews in place. The questions my hon. Friend the Member for Chichester has asked are whether we have gone far enough, whether the proposals should be in the Bill or whether we should just accept the proposal put forward by the court. Tonight I have committed to listening to those arguments—he made a powerful speech—and returning to the issue when the Bill goes to the other place.

[Mr Tyrie]

Will the Minister clarify a couple more points? First, when he says that he is committed to the publication of the court’s minutes, does he mean the publication of the full minutes or only a summary record of them, which it appears is what was proposed before. Secondly, he thoughtfully suggested that the non-executives of the Bank should commission internal reviews. Will they also be permitted to look at, assess and comment on the merits of the material they receive?

[Mr Hoban]

I think that it is important that the court’s non-executives perform a full role in scrutinising the Bank’s activities. They need to be able to look at the output of those reviews, consider them and express their views on them. On the issue of minutes, I will not say that we are getting into a semantic debate, because that would be unfair. What we want to do is ensure that a proper record of the court’s meetings is published.

I am not sure that the minutes should necessarily be verbatim, reporting every word that everyone has said, but they should certainly be a very good summary, catching the thought processes that took place in the court and the issues that were debated and discussed, so that Parliament and stakeholders can hold the Bank to account for the way in which it has used its powers not just when it comes to the Financial Policy Committee, but in other areas. I hope that that gives my hon. Friend the reassurance he looks for on our commitment to transparency and on ensuring that we do all we can to strengthen the transparency arrangements of the Bank of England.

I am very conscious that a number of other points were made, and I want to discuss them. The hon. Member for Hayes and Harlington (John McDonnell) tabled two amendments on the appointment of the Governor of the Bank of England and Parliament’s role in it. We do not have time tonight to go into the detail of that procedure, but the Chancellor has said that there will be an open process, and having heard the debate in the House he will reflect on it when thinking about how the process should develop.

I turn to Government amendment 1. In Committee, the hon. Member for Nottingham East argued for a check on the PRA’s ability to decide not to disclose the use of its veto over the FCA. The Government accept that the PRA will always be the best placed organisation to determine whether or when to disclose the use of its veto, but there is room for an element of independent consideration when it decides against such disclosure. The Government have therefore decided to place a duty on the PRA, through amendment 1, to consult the Treasury on a decision not to disclose, and this will ensure that proper disclosures do take place.

I will respond in writing to the remarks that my hon. Friend the Member for Cities of London and Westminster (Mark Field) made on the use of skilled persons. He raised some important issues.

[Mr Hoban]

What is important is that the PRA establishes its process for consultation with regulated firms. It is required to set out in its annual report its process of consultation.

In conclusion, this is an important part of the legislation, and I am very disappointed that the hon. Member for Nottingham East has tabled a wrecking amendment that would take the guts out of the Bill. I thought that the Opposition supported the reform of financial regulation, but they clearly do not, so I hope that if the hon. Gentleman puts his wrecking amendment to the vote the House will oppose it.

[Mr Tyrie]

I am grateful to the Minister for what I have heard this evening. He has shown enough flexibility for me to feel able to withdraw new clause 1, but before I do so it is just worth my spelling out what I think I have heard.

I think I have heard that we are going to have the publication of the full minutes of the court of directors, and that we are going to permit and, indeed, encourage the court—the non-executives of the Bank of England—to commission internal reviews, to assess them and to give us their assessments, made available to Parliament.

I heard also about some flexibility on whether we will go beyond the affirmative procedure when looking at macro-prudential tools. Their proper scrutiny is extremely important for millions of people in this country. Whether we will go as far as a super-affirmative procedure I do not know, but an element of flexibility has also been provided for there.

With that in mind, my intention is not to push new clause 1 to a vote. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 10

Mortgage rate forewarning

‘The Treasury shall bring forward recommendations within six months of Royal Assent of this Act requiring mortgage lenders to forewarn existing customers about potential interest rate changes and their impact on the affordability of mortgage repayments.’.—(Chris Leslie.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.