Bank of England and Financial Services Bill [HL] — House of Lords, 2015-11-09
Topic: Domestic Commerce
Bryan Davies (Labour, Centre-left): My Lords, I am grateful to the noble Lord, Lord Sharkey, not just for his amendment but for the arguments that he put forward, with which we have a great deal of sympathy. I still find it difficult to understand the Government’s case for reducing the number of the non-executive directors in the Bill from nine to seven. I am sure that this issue will run like a—I almost said a golden thread, but certainly a constant thread throughout our discussions because we are concerned about the issues of accountability and openness, as well as the effectiveness of the Bank. I know that the Government want to achieve all those objectives. At the moment, I am afraid we have not, despite the assiduous work of the Minister. I pay due regard to that and to the meetings we have had identifying aspects of the Government’s case. However, we are still not persuaded of the merits of this argument, although the Minister obviously thought that we would be, and we probably anticipated that we would be I am unclear as to why the Government want to reduce the number to seven; they must recognise that that will change the balance of the court. What is the argument for reducing this crucial number of non-executive directors? I hear what the noble Lord, Lord Flight, said about a certain qualification for non-executive directors, but he would be the first to recognise that we need on this body people with a breadth of experience and understanding, not just of banking issues but of the most fundamental aspects of the operation of the economy What seems to underpin the Government’s position is the view that plenty of academic evidence exists which indicates that smaller boards are preferable to the more extensive boards that obtained in a great deal of City institutions in the past. I am not against that consideration as I hold academics in some regard. I probably ought to, given the well-informed contribution of the noble Lord, Lord Eatwell, who discussed the preceding Bill to which this one obviously relates, so of course I respect academic opinion on size. However, unless the Government make their case with greater clarity than they have done so far, I am not prepared to accept that the Bank of England is exactly like any other City institution. It is not. It has responsibilities and duties that go beyond those of any other institution and because of that we have to look carefully at the balance of forces on the Bank’s board. I almost use the word "cavalier" with regard to what the Government are doing, although I am not sure that they are being cavalier. However, they are seeking to reduce the size of the court and are claiming that this is good practice on the basis of some fairly thin arguments. We want to see good practice on the part of the Bank. We are well aware that the present position is the product of the legislation that was taken through after the crisis. We are all well aware of the criticisms and failures that occurred during the 2007-08 financial and economic crisis. However, we do not believe that the Government’s proposition for the Bank is based on secure arguments or that it will result in improvements We would like to know how the Government reached their decision to reduce the number of executives while increasing the official side of the Bank. We are not sure what consultation was undertaken on these matters, what advice was taken or who the prime mover behind such a striking and significant change was. The Minister is working hard on the Bill. We value that and the expertise he brings to it. This is only a limited aspect of the whole issue of the accountability and effectiveness of the Bank. However, on this point, the Government have thus far not established their case. Therefore, Her Majesty’s Opposition broadly support the amendment in the name of the noble Lord, Lord Sharkey.