Bank of England and Financial Services Bill [HL] — House of Lords, 2015-11-09
Topic: Domestic Commerce
John Eatwell (Non-Affiliated, Unknown): My Lords, as was evident in the speeches around the House at Second Reading, there is a feeling in this House that the Bill is a serious retrograde step from the measures taken in 2012 and 2013 following the financial crisis to strengthen the accountability and oversight of the Bank of England. The purpose of my Amendment 1 is to exemplify the argument that I made at Second Reading that the Bill renders the governance structure of the Bank of England opaque and not fit for purpose. Many measures in the Bill that we will come to discuss later on this afternoon serve the cause of making the governance structure opaque. One device for achieving this obscurantist outcome is to use the term "the Bank" in an active sense; that is, where an entity labelled "the Bank" is to act, notably to make policy or policy decisions, without ever defining who might be responsible for those actions since, as my amendment seeks to make clear, "the Bank" could refer to anyone involved in the institution: the governor, deputy governors, various committees, or even the doorkeepers in their pink coats I read carefully through the Bank of England Act 1998—the version as amended by subsequent legislation, which the Bill seeks to amend further. In all clauses within that Act that provide the power to make policy, the active entity is clearly identified. So in Section 9A the financial stability strategy must be determined by the court. In Section 9C, the Financial Policy Committee has clearly defined functions and powers. In Section 13 the formulation of monetary policy is clearly defined as the role of the Monetary Policy Committee There are a few instances in the existing Act where the vague term "the Bank" is used in an active sense. However, as far as I can tell, in all such instances it is clear from the context which entity within the organisation might perform the relevant function. For example, Section 9Y of the Bank of England Act provides "the Bank" with powers to enable the pursuit of the financial policy objective. These powers are to seek information to enable the Financial Policy Committee to do its job. Clearly, the active entity would be the Financial Policy Committee asking for information. Section 18 of the Bank of England Act requires "the Bank" to produce reports on the activities and objectives of the Monetary Policy Committee. The active entity would presumably be the MPC, although I admit that in this case it is not entirely clear Generally, up until now the vague term "the Bank" is used within the Bank of England Act, where the context is such that the active entity can be identified and consequently, and crucially, can be held to account. If this Bill were to be enacted as currently drafted, that would no longer be the case. In new paragraph 13B(2) introduced under Clause 8(6) of the Bill, the Bank is given the power to revise and replace the code of practice to which members of the Monetary Policy Committee must comply. Can the Minister tell us exactly who "the Bank" is in this context? Who can revise and replace the code of practice with which members of the Monetary Policy Committee must comply The most extraordinary example of deliberate obfuscation is to be found in Clause 5, where we find amendments to the Bank of England Act that would make "the Bank" responsible for the determination of strategy with respect to the financial policy objective. Indeed, Clause 5(2) amends Section 9A of the Act with the extraordinary statement that "the Bank" must consult the Financial Policy Committee about that strategy. Will the Minister tell us precisely who is doing that consulting I remind the Minister that the financial policy objective and the role of the FPC arose out of the experience of the financial crisis, when it was evident that the Bank of England’s attention to questions of financial stability was woefully inadequate, yet now this vital piece of policy-making is to be handed over to—we know not whom. The Treasury has connived in this obscurantism. In its impact assessment of the Bill, it states with respect to Clause 5: "Making the Bank responsible for setting the strategy", within the Bank, "will ensure that Court is responsible for the running of the Bank and that the Bank’s policy committees are responsible for making policy" Really? How does it know? It is not in the Bill. Nothing in the Bill identifies the division of responsibilities with respect to the financial stability objective in the terms set out in the impact assessment. I remind the Minister of the words of the Treasury Select Committee in another place: "The Bank is a democratically accountable institution and it is inevitable that Parliament will wish to express views and, on occasion, concerns about its decisions" Does the Minister agree with that view? If he does, will he tell us how it will be possible for Parliament to hold the Bank to account when the Bill sets out to obscure where within the institution responsibility for the exercise of vital powers may actually lie My amendment—which is, if you like, a probing amendment—is intended to expose what is being done in the Bill. The amendment makes it clear that the term "the Bank", when used in the active sense, is an empty, amorphous expression and hence is designed to obscure. If the Minister disagrees with my definition of "the Bank", perhaps he would be good enough to provide his own definition. I beg to move.