Bank of England and Financial Services Bill [HL] — House of Lords, 2015-11-09
Topic: Domestic Commerce
James Bridges (Conservative, Centre-right): My Lords, the noble Lord does himself a great injustice by saying that these amendments are not epoch-making. I see this process as a form of legislative acupuncture—not that I have ever gone through acupuncture, but I am reliably informed that every needle makes a difference. I am delighted to answer these points Clause 1 makes the deputy governor for markets and banking a member of the Court of Directors. Following the expansion of the Bank’s responsibilities through the Financial Services Act 2012, a deputy governor for markets and banking was appointed, as noble Lords will know, with responsibility for reshaping the Bank’s balance sheet, including ensuring robust risk-management practices. This important position, currently filled by Dame Minouche Shafik, is not a statutory member of court. This clause amends the Bank of England Act 1998 to make this position statutory, ensuring equal status for all the Bank’s deputy governors and simplifying the Bank’s governance structure In addition, Clause 1 provides enhanced flexibility to add or remove a deputy governor or to alter the title of a deputy governor. Correspondingly, it provides the ability to make changes to the composition of the court, the FPC, the MPC or the new PRC where a deputy governor is added or removed. It should be noted that this power will not permit the Treasury to remove a deputy governor or change his or her title while that deputy governor is in office. This is a measure to ensure flexibility for future need. The Government will be able, by order—a point I will return to—to adapt the size and shape of the court to bring in new expertise when necessary. Thus the Bank’s senior management team can be easily adjusted to meet future requirements The Bill also provides for the continued balance of internal and external members on the FPC, the MPC and the PRC. When a deputy governor is added or removed from a policy committee, the Bill enables a comparable change in the number of appointed members to that committee. In a little more detail, if one or more deputy governors is added to the FPC or the PRC, there may be an equal increase in the number of members appointed by the Chancellor. Similarly, if one or more deputy governors is removed from the FPC or the PRC, an equal number of members appointed by the Chancellor may be removed. The situation is comparable for the MPC. If one or more deputy governors is added to or removed from the MPC, then there may be an equal increase or decrease in the number of members appointed by the governor of the Bank. External expertise on these committees is important to ensure a range of views are considered. This provision is necessary to facilitate a diversity of opinion and counter the risk of groupthink The noble Lord raises a number of issues in the amendments and I will try to address them. The first issue is where the responsibility for adding, removing or altering the title of a deputy governor lies. In the Bill, this power is conferred on the Treasury rather than specifying, as the noble Lord’s amendment wishes, the Chancellor of the Exchequer. This does not mean that the Chancellor is not consulted. Obviously the Chancellor would be kept fully informed of anything as important as adding or removing a deputy governor, but where a more minor administrative change is made, such as the title of a deputy governor, it may be more appropriate for a junior Treasury Minister to take the lead. Retaining the existing drafting provides this element of flexibility but—I think this is the key point—the Chancellor remains accountable, whatever the phrasing of the Bill, to the public and to Parliament for the decisions and actions in his department Secondly, the noble Lord proposes that the Treasury should publish the reasons for making changes to the composition of the FPC, the MPC or the PRC. This gives me the opportunity to clarify the process of making changes to the membership of these bodies following a change to the deputy governors. If the need to alter, add or remove the position of a deputy governor is identified, the Treasury will discuss this with the governor of the Bank. The need for the change could initially be identified by either the Treasury or the Bank. If, following these discussions, the Treasury believes that the change is required, along with any associated changes to the membership of the MPC, the FPC and the PRC, the Treasury will present secondary legislation to Parliament. It will then be for Parliament, as the noble Lord said, to determine whether the change goes ahead. I therefore hope it is clear that Parliament plays a key role in this process. It is the ultimate decision-maker and, in passing an order on the membership of these committees, the Government will need to outline their reasoning to this House and the other place in order to pass our and their acute scrutiny and debate. It is in this context that the reasoning will inevitably be published In short, it seems that the noble Lord’s amendments, while worthy of debate, are unnecessary, and I hope that he will feel able to withdraw them.