Select Committee on Treasury Ninth Report


The Treasury Committee has agreed to the following Report:





1. In October 1997, in their Report Accountability of the Bank of England,[1] our predecessors announced their intention to hold confirmation hearings to establish whether those nominated to the Monetary Policy Committee (MPC) of the Bank of England[2] fulfilled the criteria which they specified, namely demonstrable professional competence and personal independence of the Government. They believed that such hearings would not only encourage the Government to appoint people with the qualities required, but would also underline the independence, credibility and competence of the Bank, and involve Parliament more closely in an important process. In the event, provision for confirmation hearings was not written into the Bank of England Act 1998 and they were therefore held on a non-statutory basis. In their Eleventh Report of Session 2000-01,[3] our predecessors summarised the work they had done in relation to both confirmation hearings, and the MPC more generally. They had previously concluded[4]:

"We think that confirmation hearings, even on a non-statutory basis, act as a stimulus to the Chancellor to choose candidates who are competent and independent. We also believe that our questionnaire and hearings provide essential information about the background of the appointees which is not otherwise readily available. Above all, the hearings underline the fact that MPC members are accountable to Parliament and to the public."

2. It is right that Select Committees should scrutinise major public appointments. We agree with our predecessor's conclusions about the value of conducting hearings with prospective MPC members and we are therefore continuing the practice.[5] We also intend to continue our predecessor's practice of restricting questioning relating to their suitability for appointment to this important role to the two criteria of professional competence and personal independence, and of asking each prospective member to complete a preliminary questionnaire.

3. The composition of the MPC is prescribed in the Bank of England Act 1998[6], and its members include, ex officio, the Governor and the two Deputy Governors of the Bank. The Act also provides that the Governor and the Deputy Governors are members of the court of directors of the Bank. Persons are appointed to those offices by Her Majesty for a period of five years.[7]

4. On 31 August 2002, the term of office of Mr David Clementi as Deputy Governor of the Bank of England expired, and he did not seek an extension. We would like to thank him both for his service as Deputy Governor with responsibility for financial stability and for his contribution to the work of the MPC, in which capacity he has given evidence to us and our predecessors. We wish him well for the future.

5. On 3 September, the Treasury announced[8] that Her Majesty had been pleased to appoint Sir Andrew Large as Deputy Governor (Financial Stability). The appointment had immediate effect, thus filling the vacancy, but Sir Andrew did not attend the September meeting of the MPC, which was held on 4 and 5 September. The Treasury has, at our request, submitted a note on the appointment process for the new Deputy Governor. This is reproduced as an Appendix to this Report.

6. We took evidence from Sir Andrew Large on 25 September. This evidence, for which we are most grateful, will be published shortly, together with his curriculum vitae and his response to our questionnaire.[9]



7. Sir Andrew brings to this appointment extensive experience of the operation of the financial markets. He was cautious in his response to a number of our questions relating to monetary policy, in effect reserving his position in a number of key areas. This is, perhaps, understandable given the limited time he has been able to devote to this matter since he was offered his current appointment. We are sure that, as he gets greater experience of his role at the Bank, and on the MPC, and greater involvement in monetary policy matters, he will feel able to be more forthcoming, both when appearing before us and when acting as a public representative of the Bank. He has an important part to play in the latter context in ensuring that its policy, and that of the MPC, is disseminated clearly and effectively. We look forward to seeing him again in the near future in his capacity as an MPC member.

8. We are satisfied that Sir Andrew Large fulfils our criteria for appointment. We wish him every success in his new roles as a Deputy Governor of the Bank of England and a member of the MPC.

9. We are, however, concerned about the way the appointment process was handled by the Treasury. Mr Clementi gave several months notice that he did not wish to seek an extension of his term of office as a Deputy Governor of the Bank. This should have provided adequate time for the Treasury to identify a suitable successor, and for the appointment to be announced, before Mr Clementi's term of office expired. The failure to do so meant that the Bank was left without a Deputy Governor, albeit only for a few days, and ruled out any possibility of us following our preferred course of examining Sir Andrew Large before, rather than after, he took up his appointment. The delay could also have led to operational difficulties for the MPC, as there is a statutory requirement for its quorum of six to include two holding office as Governor or Deputy Governor.[10] Given Sir Andrew's absence from the September meeting, the MPC would have been unable to proceed to business had either the Governor or the other Deputy Governor been unexpectedly absent.


10. We recommend that all future appointments and re-appointments to the posts of Governor or Deputy Governor of the Bank of England should be announced before the expiry of the previous appointment, except in unavoidable circumstances.

1   First Report, Session 1997-98, HC 282, paragraphs 46 and 48. Back

2   The MPC's role is to set monetary policy so as to deliver price stability as defined by the Government's inflation target, currently 2½% for RPIX (retail price inflation excluding mortgage interest payments), and subject to that, to support the Government's economic policy, including its objectives for growth and employment (sections 11 and 12 of the Bank of England Act 1998 and see Official Report, 4 June 1998, col 329). Back

3   Eleventh Report, Session 2000-01, HC 449-I Back

4   Ninth Report, Session 2000-01, HC 42, paragraph 52 Back

5   There has so far been one hearing with prospective MPC members, on 22 May 2002, when Ms Marian Bell and Mr Paul Tucker gave evidence. See Fourth Report, Session 2001-02, HC 880. Back

6   Section 13. Back

7   Bank of England Act 1998, Section 1 and Schedule 1. Back

8   HM Treasury Press Notice 82/02 (3 September 2002). He will also be a non-executive member of the board of the Financial Services Authority. Back

9   See HC 1189-II (2001-02) Back

10   Bank of England Act 1998, Schedule 3, paragraph 11. Back

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2002
Prepared 30 September 2002