Financial Services Bill

Baroness Wheatcroft Excerpts

Tuesday 6th November 2012 Lords Chamber

[Baroness Wheatcroft]

My Lords, I share the qualms that have been voiced about this group of amendments. I believe that the court needs to exercise far more power than it has appeared to in the past, although I am intrigued to hear the noble Lord, Lord Myners, say that when three members of the court tried to make their views and their concerns known, they had no impact at all. That would seem to be a failing of the Government rather than the governance of the court.

The amendment that causes me particular concern is Amendment 3B, which proposes that the Bank’s strategy should for the time being be “prepared” by the Court of Directors. It does not seem to me that “preparing” a strategy should be for the non-executives. It may well be, and should be, their right to determine whether that strategy is the right strategy. However, we want them to “determine” rather than “prepare”.

[Lord Flight]

My Lords, it seems to me that none of these things makes any difference. The real issue is that if a board of directors cannot sack the chief executive if it thinks that he is not doing his job properly, then it is an enfeebled board. That is the fundamental issue. As long as we have the chief executive appointed for a term period and not able to be removed by the board, then there will be an issue about the effectiveness of that board.

--- Later in debate ---

[Lord Myners]

My Lords, I support the amendment in the name of the noble Baronesses, Lady Noakes, Lady Wheatcroft and Lady Kramer. I, too, have been struck by the potency of the Walker report appendix on group effectiveness, drafted by the Tavistock Institute. My experience leads me to conclude that the larger the group, the less effective it becomes. The R-squared is actually extraordinarily high and making the FPC any larger would not be the right solution, although it would be better than doing nothing.

Amendment 4 is, in my judgment, significantly superior to Amendment 5 and I think the noble Baroness, Lady Noakes, has, as she so often does, put her finger on the issue. It is almost certainly the governor who is insisting on having this right to appoint additional people to the committee. The past culture of the Bank is that it speaks with a single voice and that voice expresses the opinion of the governor. The more people around the committee table who therefore speak with that single voice, the better it is from the perspective of the executive. From the perspective of a functioning committee, that is almost certainly not an optimal outcome. In fact, if the Tavistock Institute had been invited to comment on the existence of a cabal or blocking group within a committee, I am sure it would have been even more powerful in its views about its appropriate constitution.

The central thrust of everything we are doing in helping the Government get this legislation through Parliament is to try to ensure that we have as many checks and balances in place as is appropriate. One of them must be a check on the strength of the voice of the executive of the Bank on these committees and, while both of the amendments put forward by the noble Baroness, Lady Noakes, will achieve that, Amendment 4 is preferable to Amendment 5.

[Baroness Wheatcroft]

My Lords, Amendment 4 will achieve an improvement in the balance of the FPC and I support the other amendments in this group, tidying-up amendments which would bring the number of extra appointees from the Bank down to one instead of two. It is obviously better to have a balance, if we can, between the Bank team and the outsiders—as they will undoubtedly feel that they are to start with.

We have heard about groupthink. There obviously has been a fair amount of groupthink at the Bank in the past, although it is worth remembering that on the Monetary Policy Committee the Governor of the Bank of England has been outvoted on several occasions, so it is possible for people to disagree with the governor and for the committee to go against him. However, on the basis that a balance would be better, bringing down the level of Bank people represented on the FPC would be an improvement.

[Lord Deben]

I merely suggest that in these detailed discussions, when we hear mainly from those who are very expert, it is as well to consider views from outside, from business as a whole. A trick which all businessmen know is that there are two ways in which you can control a committee. One is to have a very small committee mainly related to you, and the other is to have a very large committee in which you know very well that you can organise the dynamics. I am much impressed with the arguments of the noble Baroness, Lady Noakes, who has put her finger on a very important issue. I hope that the Government would accept that nowadays there is a good deal of expertise looking at these matters and the Tavistock Institute has much of it. I would be unhappy if we suggested that we knew better than its experience, over a very long time, of how best to do these things. I hope the Government will see this as a perfectly reasonable thing, a balanced situation. The noble Baroness, Lady Noakes, and I do not always agree on matters—indeed, there are lots we disagree on—but on this occasion, coming from my understanding of trying to run boards and companies, this would be a good thing to do and not to do it would seem a little perverse.