Bank of England and Financial Services Bill [Lords]

Debate between Lord Tyrie and Mark Field

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 19th April 2016 Commons Chamber

[Mr Andrew Tyrie (Chichester) (Con)]

First of all, that was a very good speech. I congratulate the hon. Member for Leeds East (Richard Burgon) on covering quite a lot of ground in a good deal of detail—and with a sense of humour, which I enjoyed. I was also pleased that he got in one or two points—it saves me the trouble—about the OBR and its importance as a precedent for what we are discussing today.

I will also say—although only in a sentence, otherwise I am sure that I will get told to be quiet by you, Madam Deputy Speaker—that this is a very good Bill. In many respects, it implements a good number of the wider objectives for Bank of England scrutiny and accountability for which the Treasury Committee has for many years been pushing. I thank members of the Treasury Committee in the previous Parliament and in this one who have pressed for these measures vigorously. It shows that things can be achieved if one persists.

I am grateful to the Minister for her assistance over a number of days, and to the Chancellor of the Exchequer, who followed up a telephone conversation last night with an exchange of letters. We have now reached an agreement on how to proceed, so I will not need to press new clause 1 to a Division.

Following the exchange of letters, most of the objectives that we sought through new clause 1 are provided for, and it is worth going through the key points, which the Minister effectively clarified by reading out the Chancellor’s letter. First, appointments will be made in a way that ensures that the Treasury Committee can hold a hearing in good time. Before the appointment is formalised, the question of whether there is a pre-commencement or pre-appointment hearing is, in my view, a distinction without a difference. Secondly, if the Committee disagrees with the appointment, it will report that to the House, and if they choose, the Government must find time for a debate on the Treasury Committee’s report. That debate will be on a motion to accept the conclusion of the Committee. The Government will then have to vote it down. The Government further agree that they will respect the decision of the House once that vote has been taken.

Thirdly—this point has already been raised—at the earliest opportunity, the Government will amend legislation to ensure that future appointments of the chief executive of the FCA are made on a fixed renewable five-year term. I expect that legislative change to take place in the next parliamentary Session. I am not sure that the provision would satisfy the long title of a Finance Bill but, if it does, I would expect the Government to include it in that Bill. I also recognise that the Chancellor could not fully commit over the phone that the change would take place in the next Session, since he will have had no opportunity to secure an agreement on the legislative time from his Cabinet colleagues. I expect, however, that he will do that as soon as possible. It will be a pretty small, self-contained Bill. The fourth point, which has not been mentioned so far, is that it is the Chancellor’s clear view—I am not in any way misrepresenting him—that the arrangements that are being put in place should be the permanent method of appointment, rather than something that will just disappear with this Chancellor or, indeed, the helpful Minister at the Dispatch Box, however supportive she may be of the proposals.

Why has the Treasury Committee devoted so much time to this issue? I have a specific and a general answer to that. On the specifics, there have been widespread concerns that the independence of the FCA has been compromised by the circumstances of Martin Wheatley’s departure, and by other apparent interference in the FCA’s work by senior Treasury officials, and perhaps Ministers. We explored those circumstances through cross-examination in Committee and found no such evidence. However, my right hon. Friend the Member for Cities of London and Westminster (Mark Field) got right to the point when he said that the appearance or perception of interference none the less remains. That perception makes it harder for regulators to do their job, so it had to be addressed. Bolstering the perceived independence of this key appointment, and ensuring that the individual cannot easily be removed by the Treasury, seemed crucial to the Committee.

[Mark Field]

For the record, I do not think there was any undue interference from the Treasury, and I am happy that Andrew Bailey is taking over—he will be a good chief executive. None the less, there was that perception within the square mile and we must hold that fairly close to our hearts.

May I also say how much I approve of the Treasury accepting the guts of new clauses 1 and 9? It is greatly to its credit that we have not had to go through the House of Lords, because it does a discourtesy to this House when such changes are made through amendments in the House of Lords, rather than being part and parcel of discussions in advance of Report.

[Mr Tyrie]

One other issue is the apparent statutory protection against dismissal, which came into question as a result of Martin Wheatley’s departure. Whatever the reality, the current statutory protection appeared inadequate, which was perhaps because he was appointed only for a three-year term. Five years—a goodly and longer term—will provide more protection. To put it even more simply, the changes rectify in another way the risk of arbitrary dismissal. For example, if the Treasury Committee strongly supports keeping the incumbent after four and a half years, it can make that abundantly clear in a report and recommend to the House of Commons that any other candidate is voted down. So in practice, with the letter, we already have the protection that we wanted.

The FCA needs a strong and demonstrably independent chief executive, accountable to Parliament. It endured a difficult birth and struggled to emerge from the rubble of the failed FSA. Some of its best staff have been poached by the Prudential Regulation Authority, the Bank and the private sector, and it has been hitting the headlines for all the wrong reasons, not least with the breach of its own listing rules, which wiped 20% off the share value of the life assurance sector. With what will amount to a requirement for parliamentary approval of future appointments or dismissals of the FCA chief executive, the incumbent will now be in a strong position to resist pressure from Ministers and officials, and their authority will be bolstered.

The fact that this is a non-statutory change—unlike new clause 1, which would have been in the Bill—does not perturb me a great deal. Any attempt by the current or future Chancellor to circumvent these arrangements is likely to lead to a complete collapse of trust between the Treasury Committee and the Government, and I do not foresee that happening.

[Mark Field]

Does my right hon. Friend have some small concern that if a measure is not included in the Bill, no precedent will be set? To return to an earlier exchange that I tried to have with the Minister, that might give the Treasury licence to take this as a sui generis case, rather than recognising that the Treasury Committee should perhaps have a more important role in approving the appointments of a number of senior figures in the financial services firmament.

[Mr Tyrie]

That argument can be turned on its head. One can argue that this sets a precedent that is more easily rolled out, without the need for statutory change, to other bodies. In the Treasury field, we now have a statutory double lock for the appointment and dismissal of the head of the Office for Budget Responsibility, which was recently found to be of some use following controversy about alleged interference in the production of the forecast—again, we did not find any evidence of that, but the perception of it might have weakened the OBR. We have a requirement for a resolution of the House prior to the appointment of the chairman of the Office for National Statistics, and now we also have these arrangements. So we have a battery of different arrangements on which to draw.

Financial Services (Banking Reform) Bill

Debate between Lord Tyrie and Mark Field

Monday 8th July 2013 Commons Chamber

[Mark Field]

My hon. Friend talks about the idea of incentives to find holes in the ring fence. Surely it is in the nature of the way in which one looks at regulation to try to find holes in the ring fence. There is nothing untoward about the idea of looking at a regulation or law and trying to find a way around it. Obviously, one should try to do so without breaking the spirit of the rule or regulation, but if we live in a highly regulated society it is surely inevitable that those who are regulated will look to try to find ways of avoiding them. Surely that is a fault of having over-regulated societies, whether in banking or in other fields of commerce.

[Mr Tyrie]

I am not going to delay the House by disagreeing for too long. It is rare that I disagree with my hon. Friend, but I wonder whether we would like surgeons to test all the time the regulations that encourage them to do a good job as they pull out their scalpels and wonder if they can get away with just one incision here or there.

[Mark Field]

I think my hon. Friend makes my point for me. The medical profession is a profession and relies on such things as the Hippocratic oath, and it has a centuries-old approach to how they go about their day-to-day business. An over-regulated industry is one that encourages the avoidance of regulation. Genuine professionals look on their professional responsibilities in a very different light.

[Mr Tyrie]

There is a heap of regulation surrounding the wielding of those scalpels. The common feature of the two industries is not the professionalisation or non-professionalisation of the industry; it is that both owe a duty beyond bettering themselves. In the case of the banks, they owe a duty because of the implicit guarantee; in the surgeons’ case, they owe a duty to the patient. I will not prolong this discussion any further, but I think most people accept that we do not want banks constantly trying to find a way around or through the ring fence.

Financial Services Bill

Debate between Lord Tyrie and Mark Field

Monday 23rd April 2012 Commons Chamber

[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.

--- Later in debate ---

[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.