6 July 2012 : Column 1189

6 July 2012 : Column 1189

House of Commons

Friday 6 July 2012

The House met at half-past Nine o’clock


[Mr Speaker in the Chair]

Jeremy Corbyn (Islington North) (Lab): I beg to move, That the House sit in private.

Question put forthwith (Standing Order No. 163).

The House proceeded to a Division.

Mr Speaker: I ask the Serjeant at Arms to investigate the delay in the No Lobby.

The House having divided:

Ayes 0, Noes 58.

Division No. 46]

[9.34 am


Tellers for the Ayes:

Jeremy Corbyn and

Stephen Pound


Ali, Rushanara

Baker, Norman

Bellingham, Mr Henry

Blunt, Mr Crispin

Bradley, Karen

Brady, Mr Graham

Brennan, Kevin

Brown, Lyn

Brown, rh Mr Nicholas

Burns, rh Mr Simon

Carmichael, Neil

Clark, Katy

Coffey, Dr Thérèse

Dorrell, rh Mr Stephen

Durkan, Mark

Fabricant, Michael

Fitzpatrick, Jim

Freer, Mike

Goodman, Helen

Green, Damian

Gyimah, Mr Sam

Hammond, Stephen

Hancock, Matthew

Harrington, Richard

Heath, Mr David

Hendry, Charles

Hoban, Mr Mark

Hollobone, Mr Philip

Johnson, Joseph

Jones, Andrew

Jones, Helen

Jones, Mr Kevan

Kirby, Simon

Kwarteng, Kwasi

Leslie, Chris

Lewis, Brandon

Loughton, Tim

Love, Mr Andrew

MacShane, rh Mr Denis

McDonnell, John

McGuire, rh Mrs Anne

McLoughlin, rh Mr Patrick

Morris, Grahame M.


Mudie, Mr George

Nuttall, Mr David

Randall, rh Mr John

Rees-Mogg, Jacob

Robathan, rh Mr Andrew

Robertson, Hugh

Sharma, Alok

Sheerman, Mr Barry

Skinner, Mr Dennis

Slaughter, Mr Andy

Tyrie, Mr Andrew

Watkinson, Angela

Webb, Steve

Wheeler, Heather

Wilson, Phil

Tellers for the Noes:

Greg Hands and

Stephen Crabb

Question accordingly negatived.

6 July 2012 : Column 1190

Bank of England (Appointment of Governor) Bill

[Relevant documents: The Twenty-first Report from the Treasury Committee, Session 2010-12, Accountability of the Bank of England, HC 874, and the Government response, contained in A new approach to financial regulation: securing stability, protecting consumers, Cm 8268, and the First Report from the Treasury Committee, Financial Services Bill, HC 161.]

Second Reading

9.49 am

John McDonnell (Hayes and Harlington) (Lab): I beg to move, That the Bill be now read a Second time.

I have had the good fortune of coming top of the ballot for private Members’ Bills for two Sessions running, which is unheard of. The BBC calculated the odds at 58,000 to one. I wish I had put a bet on—I certainly will next time the ballot comes up.

Hon. Members can choose to use private Members’ Bills to promote a minor good cause or to redress a small anomaly in the law, but they can sometimes use them to send a message to the Government about the need for reform in the interests of good governance. If Parliament wishes to send such a message to the Government, it is best that the message is conveyed with a cross-party voice.

The Bill is an attempt to send such a message to the Government, and I have sought a strictly cross-party support base for the Bill, hence the Bill’s sponsors include the hon. Member for Chichester (Mr Tyrie), the Conservative Chair of the Treasury Committee; my hon. Friend the Member for Leeds East (Mr Mudie), the Labour vice-Chair of the Committee; the hon. Member for Bury St Edmunds (Mr Ruffley), a Conservative; my hon. Friend the Member for Edmonton (Mr Love), a Labour Member; the hon. Member for South Northamptonshire (Andrea Leadsom), a Conservative member of the Committee; my hon. Friend the Member for Bassetlaw (John Mann), a Labour member of the Committee; the hon. Member for Dundee East (Stewart Hosie) of the Scottish National party; the hon. Member for Foyle (Mark Durkan) of the Social Democratic and Labour party; and my hon. Friend the Member for Erith and Thamesmead (Teresa Pearce), a Labour member of the Committee. Two senior Members expressed an interest in the issue—the hon. Members for Cities of London and Westminster (Mark Field) and for Altrincham and Sale West (Mr Brady)—and sponsored the Bill. I am grateful for their support for the measure. I would have been able to demonstrate wider cross-party support if more sponsors were allowed. Support was expressed by the leaders of Plaid Cymru and the Green party. There is balanced and wide-ranging cross-party support base for the proposal.

The message that the Bill conveys to the Executive is straightforward. The Government’s Financial Services Bill is creating an immensely powerful post in the Governor of the Bank of England. The new Governor will be given a vast range of new powers and responsibilities. The Financial Times has said that the Bill will create the most powerful Governor in the history of the Bank of England.

6 July 2012 : Column 1191

Mr Denis MacShane (Rotherham) (Lab): It is often said that the European Parliament is powerless because it cannot initiate legislation. Although the House approves, votes on and debates legislation, it can never actually initiate it—the House does not have law-initiating powers. My hon. Friend is trying to initiate a law, but I worry that the Bill will be talked out and walked out by lots of whipped Conservative colleagues. Parliament is powerless. Mr Speaker calls Ministers to the House so they can be held to account by hon. Members, but is it not worrying that Parliament is powerless to initiate legislation?

John McDonnell: This is one of the few opportunities when the House has the opportunity to initiate legislation. I take what my right hon. Friend says as a caution that we should take that initiation role seriously. We should take all our activities seriously, but Back Benchers should be especially serious when the onus falls on them to make a change in the nature of our governance.

Karen Bradley (Staffordshire Moorlands) (Con): If the hon. Gentleman does not mind, I should like to make a public service announcement. The Procedure Committee is holding an inquiry into private Members’ Bills, and would welcome all comments from hon. Members in the Chamber.

John McDonnell: That is a really useful advert—it might be one of the most constructive things said this morning.

I shall be as brief as I possibly can. The message contained in the Bill is that the appointment of the new, powerful post of Governor of the Bank of England should not be left solely to the Executive, and that Parliament, on behalf of the people, should also play a decisive role. The appointment is too important to be left in the hands of a single Minister.

Mr Andrew Tyrie (Chichester) (Con): As the hon. Gentleman knows, his Bill has the support of the Treasury Committee—it is similar to the Committee’s proposals. The principle of greater parliamentary engagement that he is articulating is a strong one, but does he agree that it could be enacted in a number of ways? Does he also agree that we need flexibility from the Government on accomplishing that engagement while the Financial Services Bill is in the Lords?

John McDonnell: That is an incredibly constructive proposal, and I hope the Minister heard it. There are other ways of approaching this matter and we should be open to considering them. Yesterday, the Government entrusted the hon. Gentleman with a major inquiry—the inquiry Committee will comprise members of the Treasury Committee and Members of the other House. If the Government have the confidence in Treasury Committee members to undertake that inquiry, it should have the confidence in their having a decisive role in the appointment of a new Governor of the Bank of England. I therefore welcome the hon. Gentleman’s constructive comments.

May I thank Kate Emms, the Clerk, and Gordon Nardell QC for their assistance in drafting the Bill and the explanatory notes? I am extremely grateful for their assistance. The Bill amends the Bank of England Act 1998 to give effect exactly to the recommendation of the Treasury Committee from its report of October 2011

6 July 2012 : Column 1192

that the appointment of the Governor should be subject to the approval of the Treasury Committee.

Between the time of choosing the appointment of the Governor of the Bank of England as the subject of my private Member’s Bill and debating it, the world has changed somewhat. Last week’s revelations about the role of Barclays bank—and, more than likely, others—in the LIBOR scandal have given the Bill a new context, and there is a new significance in the appointment of the Governor of the Bank of England. Mervyn King will retire in the next year, and the new Governor will play a pivotal role in what, it is increasingly clear, will of necessity be a radical reform and reconstruction of our financial system.

Mike Freer (Finchley and Golders Green) (Con): From the debate yesterday, the Opposition seem to hold the view that the Treasury Committee is not qualified to investigate banking and banking reform, yet the hon. Gentleman today argues that the Committee is qualified to appoint the Governor.

John McDonnell: I am pleased that consensus was eventually reached yesterday and that the Chair of the Treasury Committee will now be able to perform his role in that inquiry. The Government’s confidence in the Treasury Committee Chair and its members in respect of that inquiry contrasts with their lack of confidence in respect of allowing the Committee a decisive role in the appointment of the Governor.

It is increasingly clear that the new Governor will have significant responsibility, and it is becoming obvious that we need root-and-branch reform of our financial services and our banking system. Therefore, whatever recommendations come out of the various inquiries, and especially the inquiry that was established yesterday, much of the work of implementing reforms will fall on the shoulders of the new Governor.

Richard Harrington (Watford) (Con): The hon. Gentleman mentions the Treasury Committee’s role in the inquiry into LIBOR, but does he accept that inquiries are the traditional role of Select Committees, and that making Executive appointments is a very different role?

John McDonnell: The roles are different, as I will mention later, but the Chancellor did give the Treasury Committee responsibility, in the way it is asking for here, for the appointment of senior members of the Office for Budget Responsibility. Obviously, then, he had sufficient confidence in the Committee to involve it in appointments.

The Financial Secretary to the Treasury (Mr Mark Hoban): Of course, there is a distinction between the chairman of the OBR and the Governor of the Bank of England. The former does not have an Executive role; their role is more akin to that of the Comptroller and Auditor General.

John McDonnell: I shall come to that almost Jesuitical distinction between Executive roles.

It is critical that the right person be appointed to the crucial role of Governor of the Bank of England in this coming period. The new Governor will need to demonstrate not only that he or she is professionally competent, but

6 July 2012 : Column 1193

that they can exercise sound ethical judgment. They must be able to convince the public and the markets that they can turn the liner that is financial services around. To have any credibility they will need to demonstrate that they have the confidence of not only the Chancellor of the Exchequer but of Parliament as a whole, and that they are independent—no crony, no place person, no political appointee—and able and willing to give robust independent advice. Given the scale of the task facing the new Governor and the heightened political atmosphere and context in which the banking reforms are to be developed, now, more than ever, this critical appointment cannot be left in the hands of a single Minister.

Dr Thérèse Coffey (Suffolk Coastal) (Con): I understand what the hon. Gentleman is saying, but there is a significant difference between having confidence in the Treasury Committee and having its consent. At the moment, Select Committees have the power to suggest changes, but I am not aware that they have a veto.

John McDonnell: The hon. Lady needs to recognise that the Treasury Committee has a veto over the appointment of senior members of the OBR, but I will come to that point, because it is a valid one and was also raised by the hon. Member for Watford (Richard Harrington).

Katy Clark (North Ayrshire and Arran) (Lab): I am a member of the Business, Innovation and Skills Committee, where recently there was a political divide over whether to approve the appointment of the director of the Office for Fair Access for higher education. Does he agree that ideally we would have a political consensus over the appointment of the Governor, so that the person knows they have the full backing of Parliament, at least when they are appointed?

John McDonnell: If Members keep on intervening and reading parts of my speech, I will not get very far. I fully concur. It is exactly as my hon. Friend describes it; she makes an important point.

Let me press on. I want to return to the question of probity, because there are issues outside the House this morning that we need to take into account. Given the scale of the task facing the new Governor, the heightened political atmosphere and the banking reforms, now, more than ever, this appointment cannot be left in the hands of one Minister. Leaving it solely in the gift of the Executive in what is, unfortunately, a tense political context, runs the risk of allegations of a political appointment, a lack of independence and even cronyism.

In the cold light of day, after yesterday’s ferocious party political knockabout and, at times, unfortunately very personal debate, it is important that calmer judgments now prevail and that we seek a consensus, as far as possible, over the key decisions, such as this one, that the House needs to take in reforming our financial system. This is a time for consensus building and a display of magnanimous behaviour on all sides, if we are to get through this crisis and restore confidence in our financial system. Sharing responsibility for the appointment of the new Governor and seeking consensus on this appointment would ensure the credibility of the appointment process and the appointee themselves.

6 July 2012 : Column 1194

Mr Hoban: In seeking that consensus, how would we avoid the risk highlighted by the hon. Member for North Ayrshire and Arran (Katy Clark) of the politicisation of an appointment, as happened in the situation to which she referred?

John McDonnell: I suggest that people listen to my speech. I will get to that point, but if I miss it out, perhaps the Minister can intervene again.

The wider engagement of Parliament in the appointment process is more likely to result in the appointment of a talented and competent professional whose independence is demonstrable and protected, and who will therefore have the authority to drive through the reforms and change of culture in our banking system for which we are all calling.

This is not a revolutionary proposal. To allow Parliament, via the Treasury Committee, to have a decisive say in the appointment of key posts is nothing new. If Members read the Institute for Government’s excellent report “Balancing Act”, by Akash Paun and David Atkinson, which the Committee recommended, they will see that the Bill stands in an evolutionary line on the growing role of Parliament in public appointments. In the past 30 years, there has been an evolution from all public posts historically being appointed by prerogative of the Executive through to pre-appointment hearings, confirmation hearings for the Monetary Policy Committee, to the current Chancellor granting the Treasury Committee a veto over the senior posts in the OBR. That was enshrined in the Budget Responsibility and National Audit Act 2011, the wording which I have simply transferred into my Bill.

The OBR is not the only area where appointments are made subject to the approval of a Select Committee. For example, last year the Ministry of Justice announced that the appointment of the Information Commissioner would not be made if the Justice Select Committee opposed it. The proposal in today’s Bill, then, is nothing new or revolutionary but simply part of the evolving relationship between Parliament and the Executive.

In line with the evolutionary progress in that relationship, when the Treasury Committee undertook its investigation into the accountability of the Bank of England, the report of which was published in October 2011, it examined parliamentary involvement in the appointment and dismissal of the Governor and concluded:

“The power of veto with respect to the OBR was given to ensure the independence and accountability of that body. The Governor of the Bank’s independence from Government is crucial for his or her credibility. Given the vast responsibilities of the Governor, the case for this Committee to have a power of veto over the appointment or dismissal of the Governor is even stronger than it is with respect to the OBR.”

The Committee recommended, therefore, that it be given a

“statutory power of veto over the appointment and dismissal of the Governor”.

That was a fair, appropriate and responsible submission from the Committee.

Neil Carmichael (Stroud) (Con): I wonder whether the Bill is really necessary, given that the process, which we discussed yesterday—oddly enough—in the Enterprise and Regulatory Reform Public Bill Committee, for decisions on public body appointments vis-à-vis Select Committee

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endorsement is already well enshrined. There is a list, which was last reviewed by the previous Labour Government in 2009, to which we can add or subtract.

John McDonnell: If there was a way of moving forward by that process, I would use it, but the problem is that we have now debated this matter in the Financial Services Bill, both in this House and the other place, and the Government have refused to accept the Treasury Committee’s recommendation. I hope that once I have sent this message today, the Government will shift their position and use whatever device is possible—either an amendment to the Financial Services Bill, the route the hon. Gentleman suggests, other routes that the Chair of the Treasury Committee has suggested exploring or the acceptance of this Bill.

At the time of the Treasury Committee’s recommendation and the debates on the amendments here and in the other place, the Government set their face against the proposal. I shall deal with the five basic objections and arguments that Treasury Ministers have put forward. First, there is the argument made by the Chancellor to the Committee that the Governor must be independent. He said:

“I think it is proper that the Government of the day chooses the Bank Governor, is held accountable for that choice, but also that the Governor is given some protection, some independence, so it is quite difficult, to put it mildly, or extremely difficult, to get rid of them.”

Ironically, the Committee fully agreed that the Governor should be independent and that this independence should be protected, but concluded that the best way of securing that independence was to ensure that the appointment was not solely in the hands of the Executive or one single politician. It further concluded that dismissal should also be determined more widely. Logically, then, the Governor is more likely to be seen as a creature of the Executive if he or she is solely appointed by the Executive. Making appointments and dismissals subject to the Committee’s approval must logically increase a post’s independence from Government and free the appointee from any charge of being a political appointee.

The second issue, which the Minister raised, was potential politicisation.

Stephen Hammond (Wimbledon) (Con): The hon. Gentleman is making the point that the Bill would make the Governor more independent of the Executive. However, one of the things that I am sure several of my hon. Friends will be exploring in their speeches is that it may, in fact, interfere with his independence from the Treasury Committee.

John McDonnell: It is a matter of striking a balance and, at the moment, the Governor’s independence is undermined by association with appointment by one Minister and the Executive. My Bill would spread the burden of accountability and responsibility for the appointment.

On the issue of politicisation, the argument was that the Committee veto would politicise the post of the Governor. However, spreading the decision, to include all parties in determining the appointment, would avoid the charge that the person had been appointed by one

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party or one coalition grouping and was therefore a party political appointee. The charge of politicisation also neglects to acknowledge that our Select Committees have, over decades, developed a good culture of cross-party working. Where there have been disputes over a ministerial appointment in the past, they have not been on political lines. There have been only two rejections of a Minister’s recommendation, and they were cross-party rejections. Having to secure the approval of the Treasury Committee would override any charge of a single-party or party political fix.

Mr Hoban: Will the hon. Gentleman explain what would happen, then, if a Committee voted on party lines and a minority party opposed the appointment? Would it not impair the Governor’s credibility if a bloc was against him?

John McDonnell: That charge was laid before, but when the Institute for Government examined it in detail, it found no example of that happening, because the Select Committee system—

Mr Hoban indicated dissent.

John McDonnell: The decision in the case that my hon. Friend the Member for North Ayrshire and Arran (Katy Clark) raised was not accepted. The Select Committee system has worked remarkably well, and when people have served on them, they have done so on a cross-party basis. However, the point the Minister makes still does not undermine the argument that it is better to have a group examining, interviewing and then coming to a decision about an appointment on a cross-party basis than to leave it in the hands of a single, party politician.

Mr Sam Gyimah (East Surrey) (Con) rose

Mr Graham Brady (Altrincham and Sale West) (Con) rose

John McDonnell: I have allowed large numbers of interventions. If I can press on, I will see whether I can allow further interventions later.

Let me go through the other arguments that the Chancellor has made. He also argued that involving the Treasury Committee in determining the appointment of the Governor would blur the lines of accountability, saying that

“it is proper that the Government of the day chooses the Bank Governor,”


“is held accountable for that choice”.

However, the reality is that the Governor’s term of office rarely coincides with a Government’s term of office. Many Governments inherit the Governor appointed by the previous Government and can therefore barely be held accountable for that appointment. The involvement of Parliament in the appointment would simply mean that both the Executive and Parliament would be held accountable for it. That is perfectly proper and appropriate.

Let me turn to Executive functions. When challenged over his decision to allow the Treasury Committee a veto over an appointment to the OBR, but to refuse it one over the appointment of the Governor, the Chancellor argued that

“the Governor…is carrying out executive functions on behalf of the State,”

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such as setting monetary policy and monitoring financial stability. In the evidence session on 5 July 2011, the Chair of the Treasury Committee pointed out to him the contradiction between that argument and the argument that the Committee should have a veto over the OBR appointment precisely because it would be carrying out Executive functions. The Chancellor then made a rather bizarre distinction between different Executive functions, which was beyond the Committee’s comprehension.

The other argument, which was raised in the other place, concerned market sensitivity. The argument was that the appointment of the Governor was market sensitive and that involving the Committee in the process could have a detrimental impact on the markets by creating uncertainty over the appointment. It could just as easily be argued that OBR appointments are extremely market sensitive. However, whether the appointment of the new Governor is undertaken behind the closed doors of the Treasury or openly and transparently in the Committee, there will still be speculation in the markets about which candidate will be appointed and what the impact will be. If the post is so market sensitive, it is even more important that the appointee is seen to have the approval and confidence of both the Executive and Parliament.

Mr Gyimah: Let me take the hon. Gentleman back to his point about the Governor’s term of office, which would be a single, eight-year term. In other words, once appointed, the Governor does not have to seek reappointment and so can act independently. Therefore, we do not really need the Treasury Committee to be involved to ensure that independence.

John McDonnell: The key aspect is independence at the point at which that person is appointed, so it is critical that the new Governor, when they are appointed, is seen to be completely independent, and also carries the House as well as the Executive. That is the point I am making.

I have spoken long enough and many other Members wish to speak, so let me conclude. Over the coming period a new Governor of the Bank of England will be appointed. The new Governor will not only have more powers and responsibilities than any Governor before him or her, but will face the immense challenges of reforming and restoring confidence in our banking system and financial services. My view—and, I think, the view of others—is that it is therefore critical that the person appointed to this vital post has the credibility, independence and authority to meet those challenges. Engaging Parliament in determining the appointment, along with the Executive, will ensure that the new Governor has that credibility, independence and authority.

Those are the arguments, but let me say this to the House. I hear that there has been organising among Back Benchers to filibuster today and talk this Bill out. We have been here before, so let me say this to hon. Members. That is an extremely short-sighted approach, and it is not in the interests of the Government or good governance. If we get into the puerile antics that we have seen before, it just brings Parliament into disrepute and increasingly encourages people to judge this House to be degenerating into an irrelevant farce, especially on today of all days, when, outside this House, there are flood warnings across the country. Many hon. Members

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will want to return to their homes and their constituencies to be with their constituents. I therefore urge Members to take this matter seriously and ensure that their speeches are as brief as possible—I apologise for speaking too long myself—to enable the House to come to a decision that the Government can then consider. If the Bill gets talked out today, I will deeply regret that, but let me say this to the Government and to the House. This issue will not go away; it will return at a later date. I ask the Government and the House to seize this opportunity to make this reform. I hope that wiser counsels will prevail. I therefore commend this Bill to the House.

10.17 am

Stephen Hammond (Wimbledon) (Con): I commend the hon. Member for Hayes and Harlington (John McDonnell) for the way he has introduced his Bill. He has made some thought-provoking remarks, but I would gently say to him that I am sure that Members on both sides of the House have been asked whether they would like to make a contribution today. I have cancelled a lot of things in my constituency to be here today, and I am now being called puerile and unprincipled, yet had I been speaking from the Opposition Benches or supporting his Bill from the Government Benches, I would now be principled and upstanding. Let me gently say to him that that is not entirely fair.

John McDonnell: The hon. Gentleman has never engaged in filibustering that I have been aware of, but he knows that last year it occurred on several occasions, and was publicly and roundly condemned for bringing the House into disrepute.

Stephen Hammond: I am grateful to the hon. Gentleman.

The Bill is supported by large numbers of Members from both sides of the House, including many right hon. and hon. Friends whose judgment and intellect I respect and admire. However, let me start by setting out the four points on which there are internal contradictions in the hon. Gentleman’s argument or where there are reasons to oppose the Bill. First, the role is unique, and its extension increases that uniqueness. Secondly, the Government are already putting safeguards in place through the Financial Services Bill. Thirdly, despite what the hon. Gentleman has argued, a lot of people would accept that what he proposes is a fairly major constitutional change. Moreover, an underlying point he made is that this Bill somehow fits with the principle “for the people, by the people” so that anything other than that would be unacceptable.

I recently participated in a transport debate and gave what I thought was a fairly good detailed speech; indeed, one or two people were kind enough to say it was useful. I was pleased to note that my hon. Friend the Member for Preseli Pembrokeshire (Stephen Crabb) who was the duty Whip at the time, said something like, “That was one of the dullest speeches I have ever heard; more time limits, please”! I hope the Whips will find my speech today to be equally dull; perhaps there is a case for time limits in debates such as this.

It might bring a little colour to the debate as well as a sense of purpose if we look at one or two of the Governors of the Bank of England over the last century who have been extremely powerful figures on the economy and powerful figures in respect of their independence

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from Government. We could reflect on how their appointments were made. Montagu Norman, for example, the Governor of the Bank of England from 1920 to 1944 was described by many as more of a bohemian artist than a banker. He liked to wear Sherlock Holmes-type clothing, was prone to nervous breakdown, regarded politicians as asses and openly said so. I just wonder what the Treasury Select Committee might have said to him when he was appointed.

Jacob Rees-Mogg (North East Somerset) (Con): When Montagu Norman was Governor of the Bank of England it was a private company, so I do not think it would have been right, prior to nationalisation, for a Select Committee to have had any involvement in the appointment.

Stephen Hammond: Indeed. We could have a long discourse about the fact that Montagu Norman was the initiator of sound monetary policy, but in view of the strictures set out by the hon. Member for Hayes and Harlington, I shall not go down that course today.

It might be worth referring to two more modern Governors. Lord Kingsdown, who was Robin Leigh-Pemberton at the time he was Governor, was in some ways a classic figure. He had been a lawyer for many years and had no banking experience. He was appointed chairman of Nat West bank and was then invited to become Governor of the Bank of England. I am sure we could envisage the Treasury Committee saying, “But you are a lawyer, and we want a banker or someone with financial services experience”. The current Governor’s predecessor, Baron George, went from Cambridge to the Bank of England and never left it. Again, can we not hear the Treasury Committee saying, “But you are an insider in the Bank of England. You have no experience anywhere else. How on earth”—

Jeremy Corbyn (Islington North) (Lab): So this is a filibuster.

Stephen Hammond: Let me finish the point. The Treasury Committee might have said, “How on earth can you as an insider bring insight into the rest of the system?”

Mike Freer: My hon. Friend makes a valid point about the Governor being likely to come from the world of banking. Given the close integration of all our major UK banks and the Treasury, how could we possibly find an independent banker?

Stephen Hammond: In this case, it would be for the judgment of the Treasury Committee or the Government. Someone with some financial experience might well be helpful in the current world.

This is not a filibuster, because this is exactly the point at which I am going to leave the history of the Governors of the Bank of England, merely making the point that the Treasury Committee might have rejected some of the candidates who have been appointed, even though they have been among the most excellent Governors of the Bank of England.

Brandon Lewis (Great Yarmouth) (Con): Under the current system, with a Select Committee able to provide a view, if not exercise a veto, is it not the case that any

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concerns could be made very public and very clear to the Government? That can already happen in the present system.

Stephen Hammond: I can only concur.

The Financial Services Bill, now in the other place, is designed to redress the inadequacies of the current regulatory regime. As the hon. Member for Hayes and Harlington noted, the new proposals view the Bank of England as absolutely at the heart of the regulatory system. It will now be charged, which it was not previously, with the protection and enhancement of the UK’s financial system. I do not need to rehearse in detail the fact that the Bank of England is therefore charged with looking at the working of the Financial Policy Committee and, underneath it, the Prudential Regulatory Authority and the Financial Conduct Authority.

Mr Hoban: To clarify, let me point out that the Financial Conduct Authority is not part of the Bank of England; it is an independent body. Failure to understand that is a mistake that the hon. Member for Nottingham East (Chris Leslie) regularly made in Committee, and I would not want my hon. Friend to make the same mistake.

Stephen Hammond: The Minister is technically correct, but I think he would agree that there is a line, dotted or otherwise, between what the Financial Policy Committee and the Financial Conduct Authority would do and their respective impacts.

Mr Hoban: My hon. Friend is correct, but I would not want to say that that makes the Financial Conduct Authority a part of the Bank of England. It will have an independent board. Martin Wheatley, the chief executive designate, has been appointed and is leading the review of LIBOR. The FCA is very much an independent body. Engagement with the Financial Policy Committee is relevant only when the FPC identifies a threat to financial stability that requires some action from the FCA. The circumstances in which the Prudential Regulatory Authority can veto acts of the FCA are limited. It is very clear in this approach that the FCA is not part of the Bank of England family.

Stephen Hammond: I bow, of course, to my hon. Friend’s greater knowledge of this matter. My key point was that the Bank of England and its family, cousins and outside friends will now have a much greater role at the centre of the regulation of our financial system and, indeed, of our overall economy.

It is in some ways understandable that the immediate drive of the Bill before us is to increase the powers of parliamentary accountability, but I think there is some confusion between accountability and independence. Parliament will gain further powers of control, scrutiny and accountability under the Financial Services Bill. The exact powers are clearly defined, with reference made to the new financial stability objective, to the position of the deputy governor and the Financial Policy Committee, to the Governor’s appointment for eight years and to the fact that the Treasury Committee and, indeed, Parliament can hold the Bank of England to account. That being so, it is not necessarily the

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case that giving the Treasury Committee the power of veto over the appointment of the Governor would enhance that accountability, although it might impede the Governor’s independence. It is right for Parliament to have greater accountability and greater scrutiny, but we need to be clear that the Governor, who is at the centre of the operation of macro-economic policy and macro-financial and prudential control, must be independent.

The Bill before us contains not only a power of veto but a power of appointment, which could be seen as a step backwards in the whole argument about independent policy making. The Bank of England Act 1998 took a momentous step forward in respect of the independence of the Bank and the Governor by giving the power of decision over interest rates to the Monetary Policy Committee. That was, and will remain, the historic achievement of the Labour Government. It followed from and was a continuation of what the previous Governor had introduced, in tandem with the then Chancellor, my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), with the publication of the minutes of the interest rate-setting committee.

Jacob Rees-Mogg: Does my hon. Friend believe that the conduct of monetary policy from 1998 to 2008 was any better than it was when the Bank of England was not independent and when previous Conservative Governments from 1979 onwards were interfering in monetary policy very considerably?

Stephen Hammond: Again, my hon. Friend presents me with a tempting line of debate. It is reasonable to suggest that the period between May 1993 and May 1997 will be regarded as one of the golden eras of the operation of monetary policy. It was the period that drove the first 12 quarters of growth before 1997, and it was the period during which my right hon. and learned Friend the Member for Rushcliffe and Baron George—who, as I said earlier, might not even have been appointed by a Treasury Committee—operated monetary policy. I am sure that my hon. Friend and I could enjoy a happy morning discussing monetary policy, but, as I have said, I will not go down that line.

The protections and requirements introduced by the Financial Services Bill seem to me to be exactly the same as those introduced by the Bank of England in terms of independence. What concerns me is that if the Treasury Committee can hold the Bank responsible for its actions in the past as well as its immediate decisions, it does not necessarily need a power of veto over the Governor’s appointment. It has the power of accountability and of scrutiny.

Matthew Hancock (West Suffolk) (Con): My hon. Friend has just made the interesting claim that the Treasury Committee would not have approved the appointment of the late Baron George, one of the great former Governors. What evidence has he to back up that claim?

Stephen Hammond: My contention was not that he would not have been appointed, but that he might not have been, simply because he had been a Bank of England insider all his life and had no experience of other parts of the financial system, or indeed of the

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economy. I am merely suggesting that if we empower the Committee to appoint the Governor, it may not take account of a number of the salient factors that the Chancellor can consider. It may take a narrower view.

The hon. Member for North Ayrshire and Arran (Katy Clark), who has now left the Chamber, made an interesting point about a split along political lines. In the case of Lord George, Committee members on both sides of the political divide might have taken the view, as a caucus, that a Bank of England insider would be entirely inappropriate as a Governor. I am not saying that he would not have been appointed; and my earlier remarks were not a filibuster, but a deliberate attempt to show that the appointments of some of the greatest Governors might have been called into question.

The Financial Services Bill rightly confers increased powers of scrutiny, but I do not understand how this Bill would safeguard independence, and I did not hear the hon. Member for Hayes and Harlington explain that this morning. When he kindly allowed me to intervene earlier, I suggested that it would safeguard the independence of the Governor from the Government, but did not necessarily take account of his independence from Parliament. I think he should bear in mind the possibility that the independence of both the appointee and the institution itself would be undermined if the Treasury Committee were given the power of veto.

Brandon Lewis: Could it not be argued that if the Committee had such a direct power of appointment and veto, that in itself could bring into question its ability properly to scrutinise an independent Governor for whose appointment it was responsible in the first place?

Stephen Hammond: That is an interesting and valid point, and one that I had not intended to make myself. I look forward to hearing my hon. Friend’s views in more detail.

Joseph Johnson (Orpington) (Con): Having spoken to my hon. Friend the Member for Chichester (Mr Tyrie), the Chairman of the Treasury Committee, in a private capacity, I think that he would be content for the Committee not to have a statutory veto, but merely to be consulted and to have an advisory role in the Governor’s appointment. I think it important for his private views also to be reflected in the debate.

Stephen Hammond: I am grateful for the opportunity to hear the private views of my hon. Friend the Member for Chichester (Mr Tyrie), but as he is not present to justify them, it would be wrong for me to comment on them. I will say, however, that if those are indeed his private views, I am surprised that he supports this Bill. The Committee is already able to attend pre-commencement hearings with appointees to the Monetary Policy Committee and will be able to do the same in future with appointees to the Financial Policy Committee. Obviously that could potentially involve agreement with the Government.

Let me return to the issue of the independence of both the person and the institution of the Governor of the Bank of England from the Treasury Committee.

Mr Andrew Love (Edmonton) (Lab/Co-op): Will the hon. Gentleman give way?

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Stephen Hammond: Does the hon. Gentleman want to make a point about the issue of independence?

Mr Love: I apologise for intervening at this point, but having just spoken to the Chairman of the Treasury Committee, I think that he would want his attitude to be exemplified as a belief that the Committee should have a role in the Governor’s appointment. What he seeks, as does the hon. Member for Hayes and Harlington (John McDonnell), is a signal from the Government that they would be receptive to that idea.

Stephen Hammond: As I am not in the position of my hon. Friend the Financial Secretary—nor could I ever have the talent or ability to be so—that is not in my gift. We shall have to wait and see whether my hon. Friend chooses to make such a move later in the debate.

It seems to me that there are three crucial points to be made about the independence of the institution of the Governor of the Bank of England. Let me begin by saying that if the Governor were indeed appointed by the Treasury Committee, which would have the right of veto, the institution could be perceived to be tainted if the appointment reflected the politics or the political make-up of the Committee. That point was addressed by the hon. Member for North Ayrshire and Arran. The hon. Member for Hayes and Harlington said that it was not relevant in the United Kingdom, citing the report from the Institute for Government, but anyone with even a cursory knowledge of American politics knows that appointment by committee in the American House is supremely political, and therefore potentially damaging to the role of institutions in that country. I shall make the same point shortly about the role of the individual, as opposed to the institution.

As my hon. Friend the Member for Great Yarmouth (Brandon Lewis) pointed out, there is a question mark over the ability of the Treasury Committee to scrutinise the Governor, but there is also the possibility that the Governor, or the institution, might be perceived as being subservient in will to the Committee. There might come a time when there would be an impasse between the will of the Executive and that of the Committee, and that in itself could undermine the institution.

Mr David Nuttall (Bury North) (Con): Surely exactly the same argument would apply if the appointment continued to be made by the Executive. Surely what matters is that Parliament—through the Treasury Committee—has the final say.

Stephen Hammond: I agree that Parliament must have the ability to scrutinise and that the body must be accountable, but I want the Governor to be independent as well. I am presenting some of the arguments that must be considered, or countered, if the Governor is to be independent in his operations. It is also true that the circumstance that I have just described would not arise if the Executive continued to make the appointment, because if the Treasury Committee did not have the power of veto, there could not be an impasse between the Committee and the Executive. However, my hon. Friend was probably referring to a point I made earlier.

Mr Love: The confirmatory hearings currently held by the Treasury Committee employ the criteria of competence and personal independence. Does the hon. Gentleman accept that the existence of a framework

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within which decisions must be made by Select Committees, minimises—although it does not exclude—the chance of political interference?

Stephen Hammond: It might and it could. I accept that point. But equally it might and it might not, and it could and it could not. That is the point I am trying to make.

The hon. Gentleman’s intervention leads me into the next part of my argument. My hon. Friend the Member for Orpington (Joseph Johnson) says the Treasury Committee Chairman wants to see some flexibility. There is already some flexibility in the system. The Committee has pre-commencement hearings for members of the Bank’s policy committees, which include both the Governors and deputy governors. The pre-commencement hearing is a process that allows parliamentary engagement, parliamentary scrutiny of appointments and parliamentary comment on appointments, but does not allow parliamentary veto. That is an evolving process that the Government have put in place and continue to support. It is, for a variety of reasons, the right mechanism.

Turning to the question of independence, there is a real risk in respect of the credibility of the individual concerned. While I am sure that all candidates will be of the highest ability and there will be no possible suggestion in the fourth estate or anywhere else that the successful candidate had been chosen on the basis of some odd criteria or that he was the only candidate the Treasury Committee would pass, others less generous than I might think that. That would lead to a credibility gap. It is also therefore clear that the person being appointed might be open to the charge that they were being appointed for their politics, not their economics. The Governor of the Bank of England must be free of the charge of being a political candidate.

Mr Brady: I know my hon. Friend is keen to move to a conclusion, so I apologise for delaying him, but I am concerned that he appears to be setting a very low standard of expectation for a Committee of this House that is elected by this House. In electing the Chairman and members of the Treasury Committee, we should choose people we have confidence in to make such decisions. If we do not have that confidence, we should remove them and elect different Members.

Stephen Hammond: The chairman of the 1922 committee is right on one thing and wrong on the other. It is very rare that I get to speak without a time limit, so I was not necessarily intending to conclude now—although I will, of course, do so very soon. As my hon. Friend will have noted from my argument, I was not trying to impugn the Treasury Committee or its candidate. I was merely pointing out that sometimes the outside observers of this House do not share the same faith in our institutions and decisions as we do. I was raising the possibility that a newspaper might impugn the reputation of a candidate by saying he is the only available candidate because he was the only one passed by the Treasury Committee. That would create a credibility gap in respect of that candidate, not only in the operation of financial regulation, but, more importantly, in the crucial international negotiations he will have to conduct on behalf of our country.

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Kwasi Kwarteng (Spelthorne) (Con): Is there not a danger that this whole process will create a media circus of the kind we see in the United States, and undermine the man or woman appointed as Governor before they even take up their position?

Stephen Hammond: My hon. Friend is absolutely right, and that is one of my concerns. I have tried to lay out some arguments suggesting that giving a veto to the Treasury Committee does not necessarily enhance the independence of the position of Governor.

Moving on now to my concluding remarks—my hon. Friend the Member for Altrincham and Sale West (Mr Brady), the chairman of the 1922 committee, will be pleased to hear that—I just want to bring the hon. Member for Hayes and Harlington back to his contention that this would not be a major change to our constitution. The Bill would put in place a legislative requirement for the Treasury Committee to have a veto over this appointment. The hon. Gentleman talked about the evolution of this role, but if he truly believed that, why does the Bill not seek to give Select Committees the power to veto all appointments—for there might be a number of Members of this House who would like to have parliamentary control of the appointment of the governor of the BBC, or the chief executive of Network Rail, or, closer to our hearts, the chief executive of the Independent Parliamentary Standards Authority? The hon. Gentleman said that private Members’ Bills give Members an opportunity to suggest changes to the Government. He might have had even wider support than he already has if he had introduced a Bill giving Select Committees the power of veto over appointments, so we could have had that more general discussion. To give that power of veto over this one appointment gives rise to considerable concerns, however, and it would create a major change in the constitutional position.

John McDonnell: I think that is the ideal argument for giving the Bill a Second Reading, so it can be amended appropriately.

Stephen Hammond: The hon. Gentleman and I disagree on that. I think it is the ideal reason why we should not give this Bill a Second Reading. We should be giving a Second Reading to the principle. We should be discussing the principle, not this specific case.

In my short speech this morning, I have tried to draw out a few reasons why it is absolutely right for there to be increased accountability and parliamentary scrutiny of the operation of the Bank of England and of its Governor. Although the Bill might appear to guarantee the independence of the Governor, it does not necessarily do so, and it would create a major extension of the constitutional position of Select Committees. Therefore, I hope Members will decline to give it a Second Reading.

10.47 am

Chris Leslie (Nottingham East) (Lab/Co-op): The hon. Member for Wimbledon (Stephen Hammond) is clearly keeping a fine Wimbledonian tradition going: when it rains, a great national treasure stands up to opine or sing for a very long time. I have always thought of him as the Cliff Richard of the House of Commons.

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Stephen Hammond: Will the hon. Gentleman give way?

Chris Leslie: On the Cliff Richard point, yes I will.

Stephen Hammond: Only last year I was a backing singer for Cliff Richard at the opening of the Wimbledon fair.

Chris Leslie: I am glad I was not there.

The Bank of England was established in about 1694, and we obviously must not rush these reforms. I commend my hon. Friend the Member for Hayes and Harlington (John McDonnell) for introducing this sensible proposition. If, as I hope, the Bill moves into Committee, we can refine some of the details of the accountability mechanisms. The Opposition are of the opinion that there is a need for stronger parliamentary accountability in respect of the appointment of the Governor. That ought to be done by the House of Commons as a whole, on the recommendation and advice of the Treasury Committee, rather than simply be delegated to the Treasury Committee to decide.

The arguments have already been enunciated. It is important that pre-confirmation hearings take place, that recommendations can be made by the Treasury Committee, and that then Parliament as a whole can decide. That would be the best way to proceed.

I do not want to speak for long because I want my hon. Friend to have the chance to secure his Bill’s Second Reading and to pass it on to Committee, where we can talk about these details. The Government’s proposals will vest the Bank of England with significant and radical new powers, particularly over what is known as macro-prudential policy making, through the new Financial Policy Committee and the Prudential Regulatory Authority. The Minister rather coyly suggests that the Financial Conduct Authority does not have a dotted line to the accountability process within the Bank. We all know that this is not just about a powerful bank, but about the immensely powerful Governor of the Bank of England. Some have described that person as a superhuman individual and the appointment will clearly be of major national significance to our economy and to the finances of our constituents and businesses up and down the country.

We debated the question of improving internal checks and balances for the Governor of the Bank of England when we considered the Financial Services Bill. The Opposition said at the time that the court of the Bank of England needed radical improvement and that its role should be more supervisory. That recommendation came from the Treasury Committee, yet there was resistance from the Government. It is now not unreasonable to want to improve and enhance the external checks and balances on the Bank of England and I do not think that would in any way compromise the independence of the operational monetary policy decisions over interest rates. I do not think that those things are at all incompatible.

It would have been nice if the Financial Services Bill could have been amended in the Lords in such a way, but the Government resisted that. We need to ask why they are so frightened of giving Parliament—in which, by the way, they have a majority—the opportunity to have that debate on pre-confirmation hearings and given

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to give the Treasury Committee the power to make a recommendation that the House of Commons could make on its own.

It is important to note that other central banks in other jurisdictions have similar arrangements. In the United States, for example, Congress has oversight over the appointments.

Kwasi Kwarteng: The contrast with the United States of America is very interesting, but surely the point is that Congress in America has jurisdictional right of veto over a whole range of appointments. That does not apply to this House, so to focus simply on the appointment of the Governor of the Bank of England without considering other appointments seems to be slightly bizarre, if that is the development the Opposition want to see.

Chris Leslie: It is strange to hear ambitious and thrusting Government Back-Benchers seeking to continue to be neutered, saying, “No, please don’t give us any more of a say or any more powers. We don’t need any and it would be wrong for us to have any involvement whatsoever, even if that simply meant rubber-stamping the recommendations made by the Treasury Committee.” I am baffled that hon. Members should want to continue to hobble their role in such a way.

Mr Gyimah rose

Chris Leslie: I will give way to the former employee of Goldman Sachs.

Mr Gyimah: I thank the hon. Gentleman for being so well versed in my career history. I want to ask him about the substance of the issue that he is supposed to be discussing. Let me go back to his point about the United States: the big difference is that in the United States the Executive is not part of the legislature. Here, the Executive are part of the legislature, so when the Chancellor and the Treasury Committee appoint the Governor of the Bank of England, we still have a route of accountability via the Executive and the Select Committee. We do not need the same veto as Congress given how our constitution works.

Chris Leslie: We could have a long constitutional discussion, but essentially I do not think that anything is lost by airing more openly and transparently the background and the thinking of candidates for appointment as the Governor of the Bank of England in the Treasury Committee and then giving Parliament a say.

Mike Freer: The hon. Gentleman referred to openness and transparency and to my hon. Friend the Member for Spelthorne (Kwasi Kwarteng) as neutered—although I am sure he is not. As a former Minister in the previous Government, the hon. Gentleman will have been privy to discussions on openness and transparency. Can he share with us the views of the previous Government on openness and transparency in the appointment of previous Governors?

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Chris Leslie: Of course, the previous Government did not vest in the Bank of England such significant macro-prudential powers and we had a different regulatory approach, although that is a debate for another day. The fact that the Bank of England is so supremely powerful under this Government’s proposals makes the case better than I could for giving Parliament this say and this oversight. That is why it is eminently sensible to give the Bill a Second Reading. We can talk about detailed improvements to it in Committee. I personally do not believe that we should leave the responsibility entirely with the Treasury Committee, with only 12 members, and think that all Members should have a final say guided by the Committee’s view. That would be the best thing to do. I commend my hon. Friend the Member for Hayes and Harlington for making this proposal.

10.55 am

Brandon Lewis (Great Yarmouth) (Con): I oppose the Bill. Based on the principles and the ethos expressed by the hon. Member for Hayes and Harlington (John McDonnell), I share one or two common interests with him. I understand that he attended the local grammar school in my constituency of Great Yarmouth in his formative years, and I am sure that he still holds our town in great affection, as do I as its Member of Parliament. His reason for introducing the Bill is to ensure that there is full and proper scrutiny and an open and transparent approach to the appointment of such an important position, but I fear that that is the only principle on which, for this morning at least, the hon. Gentleman and I are likely to agree.

The Bill threatens us with direct parliamentary interference in the appointment of the Governor of the Bank of England and, through that, unnecessarily jeopardises the wider political independence of the Bank. I want to address two particular elements of how the Bill approaches the problem, on which some comment has already been made. First, does it provide the right mechanism in how it goes about considering an appointment? I will come to that point in a few moments. Secondly, what effect would such a change have on how the Select Committee works and on the role of a Select Committee? As a member of the Select Committee on Work and Pensions, I fully appreciate its scrutiny role, and we have also considered appointments and commented on them. To my knowledge, there has not yet been a cry from our Committee to have the direct power of veto or appointment. It is simply important that the Committee has the chance to interview, take a view and make clear our opinion on a particular appointment.

I understand that the Bill was drafted in response to the comments made in wider circles, including by the Treasury Committee, about the need to have a greater say in the appointment of the Governor of the Bank of England. That has arisen partly through the extension of powers provided by the Financial Services Bill. That Bill, as we know, is being examined in Committee in another place at this very moment and I am sure that that scrutiny will involve comment on whether there is any need for direct parliamentary involvement in the appointment of the Governor of the Bank of England.

Mr Hoban: I want to offer some assistance to my hon. Friend and to the House. The subject was debated in the other place recently and the noble Lord McFall

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withdrew his amendment suggesting that the Treasury Committee should have such a role, in recognition of the fact that many in the other place felt that that was going far too far.

Brandon Lewis: I thank my hon. Friend for that intervention, which highlights the fact that when this subject was considered in depth in the other place the view was taken that the Bill might not be the right way forward. When their lordships considered whether the non-statutory arrangements for scrutinising the appointment of the Governor and the deputy governors were adequate, they will have done so in the light of the extensive new powers in the Bill and will have considered whether the Treasury Committee might or might not require a more formal role in the process. They have clearly commented on that. That process and involvement would require legislation to enshrine it in law and the Bill endeavours to formalise that process within the law. I am sure the hon. Member for Hayes and Harlington will have read carefully the Lords deliberations in Committee to see whether there are any pronouncements in favour of the course of action that he prefers. So far, as we heard from the Minister, the Lords seems to have taken the view that that is not necessarily appropriate.

I shall listen carefully to the views expressed today and those expressed in another place. At present my view is that the Bill would interfere with, rather than strengthen, the Select Committee’s scrutiny. The current system used for the non-statutory hearings that precede the appointment of members of the Monetary Policy Committee is working and should continue to be used for the appointment of the Governor of the Bank of England. The Treasury Committee has held those hearings since 1997 and has carefully scrutinised, reviewed and commented on appointees.

Members of the Select Committee have disagreed with the Government’s nominee. They urged the then Chancellor of the Exchequer to think again about appointing the economist Christopher Allsopp to the MPC. Well known in some circles for his flexibility on policy, the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown) promptly took no notice of the Committee’s recommendation and went ahead with that appointment. That was his ministerial prerogative, as he was exercising the powers that he was given as a member of the Executive. A Treasury Committee report after that incident was still able to observe that the hearings played an important role nonetheless.

In a parliamentary democracy it is right for Ministers to make Executive decisions and it is also right for Parliament to scrutinise those decisions. I stress the word “scrutinise”. There is a clear line of differentiation in the current structure between the Executive and Parliament’s ability and role in scrutiny, and it is one that we should protect. It would be wrong for Select Committees to have Executive power, in effect, and such a change would create an Executive power for a Select Committee in an appointment.

Neil Carmichael: I am in huge agreement with my hon. Friend, who is making exactly the point that if a Select Committee is involved in decision making, no matter how slightly, it becomes less inclined or less able to scrutinise ruthlessly the decisions and outcomes. Does he agree?

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Brandon Lewis: Indeed. One of the problems with the Bill, as I noted a few moments ago, is that it focuses on one appointment from one Select Committee. What would be more interesting is a debate in the House on the role of Select Committees in the public appointments that they scrutinise.

Mark Durkan (Foyle) (SDLP): Is the hon. Gentleman therefore saying that Parliament got it wrong on the Office for Budget Responsibility?

Brandon Lewis: Not at all. I shall come to that in a few moments. That is not the point that I am making. There is a clear difference between a role in making an appointment to the OBR and a role in making an appointment to a position that has Executive powers and makes Executive decisions. If this were a Bill that considered the role of Select Committees, there would be an interesting debate to be had about whether Select Committees should have a power of appointment or veto, but that would apply equally to all Committees and all appointments, particularly where they have an Executive role. That is an important delineation, of which we should be aware.

It would be wrong to give one Select Committee, as important as the Treasury Committee is, a power of Executive appointment over and above that of other Select Committees, which I am sure would take the view that they have equal power and an equally important role in the House, but which would thereby potentially be put in a second category of Select Committee. Creating divisions and different types of Select Committee would impede the function of all Select Committees.

Mr Love: The Public Administration Committee had a debate on Executive agencies and appointments. The Public Accounts Committee has included its Chairman in the decision on the appointment of the Comptroller and Auditor General. The Treasury Committee has developed the chairmanship of the Statistics Commission. In other words, piecemeal change is going on. Does not the hon. Gentleman accept that the proposal is part of that piecemeal change, and that we ought to give the Bill a Second Reading not so that we can pass it in its current form, but so that Parliament can have an honourable debate about the arrangements between the Executive and the legislature in relation to major appointments?

Brandon Lewis: The hon. Gentleman makes a very strong point. I do not entirely agree because there is a clear difference between the type of appointments we are talking about and the role that those appointees take on and the powers that they have. However, a good argument can be made for the House to consider the role of Select Committees in public appointments, the associated power and at what level it sits. Perhaps he would like to come to business questions one week and make the case to the Leader of the House for time for such a debate, or make a case for it to the Backbench Business Committee.

The hon. Member for Hayes and Harlington argued that part of the aim of a private Member’s Bill such as this is to get the Government to listen, to hear a message, to take a view. The Minister will hear the points made in the debate. He will hear various arguments from various Members about the role of a Select

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Committee, its power or lack of power to appoint or veto an appointment, and will take that into account as part of the Government’s plans for the future. That is quite different from whether the Bill should have a Second Reading, when it is fundamentally flawed by giving priority and special treatment to one Select Committee over and above others. As much as I respect the Treasury Committee and all its members, I, as a member of the Work and Pensions Committee, do not think it fair that the Treasury Committee should be seen in a premier league, above the other Select Committees.

The Treasury Committee has argued for a role in appointing the Governor of the Bank of England by using as a precedent, as the hon. Gentleman did, the establishment of the OBR and the Budget Responsibility and National Audit Act 2011. The provisions of that Act give a statutory role, I agree, to the Committee in the appointment of the chairman of the Office for Budget Responsibility. Additionally, they give a statutory role to the Public Accounts Committee when a new Comptroller and Auditor General is appointed. However, that argument ignores a fundamental and crucial difference between the roles undertaken by those organisations and the role of the Governor of the Bank of England.

The Bank of England sets policy. Although the Office for Budget Responsibility is important, it primarily has an analytical or forecasting role, not an Executive ability to set monetary policy. It provides independent information to Government. That information is a powerful tool for Parliament to use in its scrutiny role and it is right, therefore, for Parliament to protect that role from political interference.

The Government’s position on the issue has been sensibly pragmatic. They have encouraged the involvement of the Treasury Committee in the appointment of the Governor. It has been interesting to hear from two speakers the private views of the Chairman of the Treasury Committee, my hon. Friend the Member for Chichester (Mr Tyrie), in his comment that what he thinks the Treasury Committee is looking for is the ability to have a clear and open influence on the role, which indicates that there is not necessarily a strong view from the Chair—it is a shame that he is not in his place, but he made a comment earlier—about having the power of veto or appointment. That is an important distinction from such an eminent Member of the House, who would be the Chairman who benefited from any change.

The Government made a commitment in the coalition agreement to

“strengthen the powers of Select Committees to scrutinise major public appointments”.

The key word is “scrutinise”. That emphasises a right to examine, challenge, query or inspect closely and thoroughly appointments to major public bodies. My Select Committee has done that as well. However, it rightly makes no mention of a right to appoint or veto. As my hon. Friend the Member for Wimbledon (Stephen Hammond) said, that would be a substantial constitutional change to the way in which Select Committees work.

It is worth exploring what would happen if there were a right of veto and the Government and the Treasury Committee reached a stalemate in the appointment of a

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new Governor. If the Government—the Treasury—were unwilling to back down, and the Treasury Committee were determined to uphold its right to veto, given to it by this Bill, that could lead to uncertainty, creating turmoil in the markets, and at the moment we do not need any more of that. We can certainly see what such turmoil means for international relationships as much as internal markets. It could lead to a loss in international confidence in the Bank of England and the United Kingdom, which we benefit from at the moment. The result would be untold economic chaos and damage.

Kwasi Kwarteng: What does my hon. Friend think about the lengthy process for Supreme Court appointments in America, where people very often wait for months before an appointment is made? What might be the repercussions for our financial position in such an instance?

Brandon Lewis: My hon. Friend makes a good point. The way in which the American system can create turmoil is the very point I am making. As my hon. Friend the Member for Wimbledon said, we in this House know that the Treasury Committee would deal with the issue properly. The problem is the perception outside of such turmoil. We have seen in the press how such matters have been dealt with in the United States, which shows that what matters is what the public and the markets would think of such an impasse, particularly if there is a lengthy process.

Mr Love: The hon. Gentleman uses the term “turmoil” and makes lurid comparisons with the United States. The US Congress endorses literally hundreds of appointments every year. The Treasury Committee has had confirmation hearings, and on only one occasion has it vetoed an appointment. The Committee has no buy-in; they are only confirmation hearings. Is not the so-called turmoil that the hon. Gentleman suggests vastly overstated?

Brandon Lewis: The argument that something has not happened so it will not happen could have been put some years ago about the present financial turmoil in the eurozone. The argument that something will not happen because it has not happened before has unfortunately been proved wrong time and again. As has been said, one sees regularly in the press and hears in the markets in America the argument that a particular appointment has been made purely because it will get through a committee. There is no disrespect to the successful applicant, but it can give the impression that the appointment is a second choice. It is a matter of the most acceptable common denominator rather than the person wanted by the Executive or any other body; it is the person they can get through the door. That in itself detrimentally affects the individual’s credibility and authority to do their job. Such an impasse here, if the Treasury Committee and the Treasury were at loggerheads for any prolonged period in deciding on the appointment of the Governor of the Bank of England, could result in chaos in international markets and our markets.

I appreciate that it is unlikely that an impasse would result in an unfilled post. It is almost unthinkable, but, as we have seen in recent years, too often now the unthinkable can become the reality. I hope that, in reality, the Treasury and the Select Committee would

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reach a compromise, such as extending the tenure of the incumbent Governor until a successor was confirmed. Although before my time, some hon. Members will have seen how a person’s authority wanes as soon as it is known that they are about to go. Continued uncertainty about the next appointment, with no decision and no sign of an end to the impasse, would damage the Bank of England’s credibility, which would be hugely detrimental to the role, not just of the Governor but of the Bank of England itself, in both our internal and external markets.

The constitutional quagmire would be further exacerbated if the Treasury Committee adopted the procedure proposed by the Institute for Government. After a Select Committee hearing with the proposed candidate, the Committee would deliberate before announcing its verdict. Then it would have the opportunity to call the Chancellor before it to tell him why the nominated candidate was unsuitable, expecting him to justify why it should change its mind and agree with his proposal. Then we would be into further deliberation before the Committee decided that it did not wish to change its mind. Potentially, the appointment would then be referred to the House for resolution. If, after that lengthy process, the original candidate were confirmed, there is no doubt that their credibility and authority would have been fatally undermined by the whole political ping-pong between the Government and Parliament, never mind the trouble that that would cause to the markets during the weeks or months that passed while parliamentary time was made available.

Even if the Treasury and the Select Committee could agree on a compromise candidate quickly—regardless of this morning’s examples, we all know what “quickly” can really mean—the new appointee would be undermined before they had even taken up the post. The media would portray a second-choice candidate as not having the confidence of the Treasury, the Chancellor of the Exchequer, the Government or the Select Committee, whichever had originally been against the appointment. In those circumstances, what confidence would the wider banking and financial sector have that the new Bank of England Governor would be able to fulfil their role while working closely with the Government?

As I said earlier, the very Select Committee that scrutinises the role of the Bank of England and the Governor might be the Committee that appointed the Governor. For that reason there is a strong argument for allowing the Executive to appoint the Executive-imbued role of the Governor, and for allowing the Select Committee to scrutinise and comment on it, rather than having a Bank of England Governor who is answerable to the Committee for their job in the first place. As was said earlier, we in the House know that the integrity of members of Select Committees is strong enough and powerful enough to deal with that properly, but what matters is not necessarily what we in the House think about the role of the Governor of the Bank of England, but what people outside think, and what the markets think. It is the perception that becomes the reality, and we need the markets to have confidence and faith in the Governor and in his ability and independence, which the House can scrutinise.

Why stop with the Governor the Bank of England? The Bill’s purported aim is to preserve the Governor’s independence, to remove the appointment from political considerations and pressures. As I have said, it would

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do quite the opposite, but why stop there? Surely if there is a suspicion that the system is sullied by political interference because the appointment is made on the recommendation of the Chancellor, the appointment of the deputy governor or any members of the court of the Bank of England are likewise politically contaminated. Yet we hear little suggestion that their appointment process politically compromises those positions. In fact, these people act as a powerful check and balance within the Bank of England’s internal governance structure, to prevent any Governor of the Bank of England acting in a politically motivated way. At the moment he does not have to be concerned about the views and role of those on the Select Committee who appointed him.

There is also a substantial list of other public appointments made by her Majesty the Queen following recommendation by the Prime Minister or other Ministers. The Bill’s supporters could end up advocating that the relevant Select Committees should have an opportunity to veto or to make those appointments too. As the hon. Member for Edmonton (Mr Love) said, with the changes that have already happened there is a drip, drip effect, and we gradually see the evolution of change around such appointments. If the Bill were to be enacted there would be a big jump, and bigger jumps would follow. Perhaps members of the Culture, Media and Sport Committee should have the ability and opportunity to veto or choose the appointment of the chairman, vice-chairman or other members of the BBC Trust. Perhaps members of the Defence Committee should have an opportunity to veto the appointment of the Chief of the Defence Staff. I have no doubt that members of the Environment, Food and Rural Affairs Committee would enjoy the power to veto the appointment of the chairman of the Forestry Commission or any of the other 10 forestry commissioners, particularly in the current climate.

Where should we stop? It is a valid question, and one that I think deserves some time in this House. Indeed, the power that Select Committees have to veto appointments might be a good topic for the Backbench Business Committee to put forward for debate. However, I do not think that it is right for a single private Member’s Bill to give that Executive power to a single Select Committee. The Minister is here and has heard the views expressed and no doubt will take those thoughts forward. Should Parliament have the final say on the president of the Valuation Tribunal for England, or on which judges are elevated to the Supreme Court, or even on who is installed as the next Archbishop of Canterbury, a debate that I am sure would be of great interest to Members on both sides of the House?

As odd as some of those examples might be, they are all appointments made by Her Majesty following recommendations from her Ministers. I could list many more examples, but I assure hon. Members that they will not have to listen to that right now. Those are all positions of which the holder has a responsibility for making decisions that affect people’s lives.

Matthew Hancock: Is it not odd that one of the previous Government’s last acts was to give the Prime Minister only one recommendation to Her Majesty on who should be Archbishop of Canterbury, which effectively took away from the Government and from Parliament a real choice over who would take that role and, therefore, moved appointments away from the proposal before us today, rather than towards it?

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Brandon Lewis: My hon. Friend makes a valid point, and one that counters the argument made a few moments ago on the continual drip, drip in that direction. He highlights the fact that that has not been happening. There have been some changes in some areas, but in others things have moved in a different way. It is also interesting that that decision was made potentially by the same Member who decided not long ago to ignore the Treasury Committee’s comments on the appointment of a member of the Bank of England’s Monetary Policy Committee.

We must be clear that in all the positions I have mentioned the holder has responsibility for making decisions that affect people’s lives. As has been commented on a few times now, there is a clear and precise line between those positions and the appointments in which some Select Committees have been involved—the Public Accounts Committee and the Treasury Committee, with the Office for Budget Responsibility and the Comptroller and Auditor General—because those Committees have a different type of role. They have a scrutiny role and a statistics role, but they do not have Executive powers to make decisions affecting people’s lives. That is what we in this House are elected to do through legislation and the appointments that flow from Ministers.

Mr Love: The OBR is responsible for bringing forward an economic forecast on the basis of which the Government must set out their public expenditure plans. That makes it an incredibly important body that can have significant influence on the direction of the Government’s economic policy.

Brandon Lewis: It is a joy to be able to agree wholeheartedly with the hon. Gentleman, who makes a good point. He highlights and confirms the argument I am making. The OBR makes forecasts, but it does not have Executive power to set monetary policy. As he has just pointed out, it is the Government, following those forecasts, who make Executive decisions on how to move forward. Indeed, the Governor of the Bank of England might use Executive powers to decide the Bank’s monetary policy. There is a difference between the role of making forecasts and scrutinising and the Executive power that the Government hold.

Mr Love: The Government, through the Chancellor, set the inflation target for the Monetary Policy Committee, so it is the Government who set the benchmark. It is for the Governor and the Monetary Policy Committee to try to target that benchmark.

Brandon Lewis: I thank the hon. Gentleman for further enhancing my point about where Executive power actually sits, in contrast to the scrutiny and forecasting role, as important as it is, which is very different from the Executive power wielded by the Government and some of the Executive bodies we are talking about.

If we are to extend the right to veto the appointment of one public official to any given Select Committee, the natural extension is to do so for other public appointments. In doing so, we would turn our Select Committee system and this House into a new form of Executive recruitment agency. Our Select Committees were established to scrutinise, investigate, consider, report and recommend. Principally, our Select Committee system is there to

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hold the Executive and other public officials and bodies to account. It was not created to veto the Executive, and it was not envisaged that the Committees would be used as quasi-recruitment advisers.

We should be striving to make the Bank of England more accountable to Parliament—I have no disagreement with that—but we should be looking to do so without shackling its sovereignty with more direct control over certain aspects by Parliament. Current concerns from constituents about the Bank of England do not focus on how the Governor is appointed. I certainly have not had in my postbag any letters, let alone a deluge of letters, on that.

Kwasi Kwarteng: I want to hear my hon. Friend’s view on my suspicion that constituents simply want the Bank of England to do its job and do not want the process to be politicised any more than it needs to be. A move towards a Treasury Committee veto would make it more political and less appealing to the very constituents to whom he has referred.

Brandon Lewis: I agree wholeheartedly with my hon. Friend. I attended a business forum meeting only 10 days ago and talked with businesses about the financial situation in our country. They were very optimistic and upbeat, but they were talking about what more we can do to make it easier for them to grow their businesses and create more jobs. Residents want to know what the Government are doing to allow more jobs to be created and to match the skills with the jobs that are available. They are not talking to me about how we choose the Governor of the Bank of England. They see a very clear difference—this relates to the interventions I have been enjoying from the hon. Member for Edmonton—between the Executive powers and the scrutiny powers and see that it is the Government’s job to set policy that will allow our economy to grow and, therefore, do not necessarily see, understand or have an interest in how the Governor of the Bank of England is appointed. They want to see that job being done properly and the Government setting out the economic policy correctly.

Mr Gyimah: On that point, is there therefore a risk that if the Treasury Committee were included in this process, to the extent of having a veto, ministerial responsibility could be blurred in relation to the appointment of the Governor of the Bank of England?

Brandon Lewis: My hon. Friend makes an interesting point, and not one that I had planned to make, so I hope that he will expand on it later.

In addition to the risk of having a Governor who is perceived to be a second choice or a lowest acceptable common denominator, which I hope I have outlined graphically, there is also the risk that that politicisation itself is part of the problem. In recent weeks many Members have made the point that we should focus our time and effort less on the process, which our constituents are not interested in, and more on the result and how we deliver for them and for our country. Suddenly giving a Select Committee the power to veto an appointment would detract from its ability, power and credibility to scrutinise what the Executive are doing to improve our country, because it would actually be focusing on being part of the Executive.

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As I have said, the concern that our constituents might have about the Bank of England’s role in the banking and financial sectors, which is particularly prominent at the moment, is that its decisions are transparent. Any concerns they have about the Bank’s enhanced role under the Financial Services Bill focus on whether those functions are open to proper public scrutiny through Parliament. The inalienable political independence of the Bank of England is something that we, as Member of the House of Commons, should cherish, defend and uphold, which I think we do. When the former Chancellor of the Exchequer, the right hon. Member for Edinburgh South West (Mr Darling), published his insider’s account of the financial crisis that beset this country in 2008, I was alarmed at his suggestion that he considered overruling decisions made by the Governor of the Bank of England. He so seriously considered that course of action that he sought advice from Treasury officials to ascertain whether it was within his competences to do so as Chancellor of the Exchequer. If he had done so, the political uproar would have been enormous. The media and other commentators would and, no doubt rightly, could have criticised it as a blatant attempt at political interference, and, as Members will know, we had a debate along those lines just yesterday.

I urge Members to create no similar furore through this Bill, which blatantly attempts to assert direct parliamentary control over the appointment of the politically independent Governor of the Bank of England. Such unnecessary interference risks turning the appointment into a political football between the Executive and the legislature, which our financial markets would not tolerate or consider a sensible way forward. Indeed, they would, I believe, go into complete turmoil again, and our constituents would not thank us for being the ones who put them in that potential position.

The hon. Member for Hayes and Harlington said earlier—I made a note—that the Select Committee would seek consensus on the appointment, but our current system allows for that. The threat of a veto or the power to appoint moves things in a different direction, to an Executive role, and the appointment would therefore become an Executive one. It would be a mistake for the House to go down that route. Select Committees rightly have the power to scrutinise, but we must be clear about where the line is between the ability to scrutinise and comment as a critical friend and, from time to time, a non-friend, and the ability to adopt a decision-making power in an Executive role. That is something which rightly lies with the Executive—the Government—themselves, and I therefore oppose the Bill.

11.31 am

Mark Durkan (Foyle) (SDLP): I support the Bill, to which I have attached my name, and I hope it will be supported in the Chamber today.

Many arguments have been made, and I have listened closely to those made by the hon. Member for Great Yarmouth (Brandon Lewis). I did not agree with many of them, and indeed, as he developed some of them, he seemed not to agree with what he had previously said. None the less, several points have been made and some touched on yesterday’s business, too.

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Brandon Lewis: The hon. Gentleman will not be surprised to know that I must challenge that comment. The core point I was making throughout my speech, from start to finish, was that there is an important distinction between what the Executive do and their power, and that we should not give a Select Committee an Executive power to make Executive recruitment decisions.

Mark Durkan: The hon. Gentleman made a long contribution, and I am sure that that top-up will add value to it.

At the start of this debate and in a number of interventions, reference was made to yesterday’s motions and debate, and a challenge was laid down: “How could anybody support this Bill if they didn’t vote for the parliamentary inquiry yesterday?”. The argument was that the Bill seeks to give an enhanced role to the Treasury Committee and that we cannot support it if we did not support yesterday’s motion for a parliamentary inquiry.

I did not support the vote for the parliamentary inquiry yesterday; my name was on the other motion, precisely because I really value the role of the Treasury Committee and the service it provides to the House. People have talked about the dangers to the Committee if its gets the powers in the Bill, and that it will fall apart and start to divide along party political lines, but there is more danger to the Treasury Committee from the decision that the House took yesterday, because its Chairman will find himself committed to a significant inquiry, which we are told will be time-intensive and extensive.

The Chairman said yesterday that he wanted the membership of the inquiry Committee to be heavily drawn from the Treasury Committee, so a select number of the Select Committee will also be absorbed by the inquiry throughout the autumn when what the Treasury Committee needs to do is concentrate on many other things, not least following up what emerges from the Wheatley review, which the Chancellor has announced. That review will recommend amendments to the Financial Services Bill, so the Government have recognised that in the light of what has happened with Barclays and the whole LIBOR issue, significant amendments to that Bill will need to be considered.

In essence, the Bill that my hon. Friend the Member for Hayes and Harlington (John McDonnell) has tabled today is a prompt, which canvasses for a fairly modest amendment to the Financial Services Bill—a modest amendment that might have its case reinforced by whatever recommendations emerge from the Wheatley review and the amendments we make to that Bill. As hon. Members on both sides have said, it already creates significant added powers, responsibilities and potential difficulties for the Governor of the Bank of England, the Bank and the whole hinterland of authorities and agencies around it.

Parliament has devolved more responsibility to the Bank and the Governor, and the appointment of the Governor will remain an appointment of government, although, as the Minister in the Financial Services Bill Committee, when correcting me and others, insisted on saying, “It is not appointment by the Government or the Treasury, but by the Crown.” I understand the distinction; I do not believe the fiction; and it is quite

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clear from his hon. Friends’ contributions today that they do not, either. They are ruthlessly defending the appointment as an Executive—ministerial—appointment.

Kwasi Kwarteng: The hon. Gentleman talks about modest amendments, but what is his view of the Bill before us and the large constitutional change that it embodies?

Mark Durkan: The hon. Gentleman tries to take up a point that the hon. Member for Wimbledon (Stephen Hammond) made earlier, when he talked about the Bill representing “a major constitutional departure”, a phrase that he used, I think, three times. But he ended up criticising the Bill for not going far enough or ranging wide enough. He wanted a Bill to give all Select Committees responsibilities and powers of appointment in relation to all sorts of other things. Hon. Members can have it both ways in their own contributions, but they are not going to have it both ways in mine.

Brandon Lewis: The hon. Gentleman is being generous with his time, but he misunderstands the point that my hon. Friend the Member for Wimbledon (Stephen Hammond), and certainly I, was making. We do not necessarily think that a Bill that changes the whole structure of Select Committees and how they work is the right thing to do or that we would vote for it; we just think that it would make more sense, if people feel that way, than a Bill that focuses on one Committee and on one particular power.

Mark Durkan: That is not what the hon. Member for Wimbledon said and certainly not what I heard. We seem to be hearing a lot of interventions from Government Members interpreting what each other said. Several Members have mentioned what the Treasury Committee Chair, the hon. Member for Chichester (Mr Tyrie), is saying in private, and that it is different from what members of the Committee have said and different from the fact that the hon. Gentleman’s name is on the Bill.

Matthew Hancock: I do not want to ask about the hon. Gentleman’s interpretation of somebody else’s point. I want to ask about his view, because given the point that he made before the two recent interventions, I do not quite understand whether he thinks that the Bill is a major constitutional innovation.

Mark Durkan: I do not think that it is a major constitutional departure; I think that it would be a significant step and gain for Parliament. I do not go as far as my hon. Friend the Member for Nottingham East (Chris Leslie) in saying that the appointment of the Governor of the Bank of England should be subject to a full debate and vote in this Chamber, however, because that would cause all sorts of difficulties. Many of the difficulties that people allege could occur if the Treasury Committee had the role given to it by the Bill would certainly become risks in a highly charged debate and Division in this Chamber on the appointment of the Governor of the Bank of England. The issue would

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become highly political and potentially partisan, and it would cause market shakes and do nothing for the reputation of this House.

This Bill, which would give a parliamentary stamp of approval to the appointment, is a modest measure, because it would involve the relatively contained, constrained and considered forum of the Treasury Committee. In yesterday’s debate many hon. Members told us how special the Treasury Committee is. They said that it was a partisan-free zone where people are wise and worthy and do not go into it with any ulterior agendas. Then suddenly we are told today that if it were given the extra role that it seeks for itself in the context of the Financial Services Bill, all that would change. I do not believe that it would. This is not the power of appointment that Conservative Members are describing; it is a power of consent and confirmation. The Treasury Committee would not be doing the interviews, drawing up the shortlists, and so on.

Kwasi Kwarteng: Will the hon. Gentleman give way?

Mark Durkan: No. I have already been generous enough, and some Members were too greedy in terms of the length of their speeches.

The Treasury Committee would have a power of confirmation. Some hon. Members are saying that it would have a power of veto, but what appear to be powers on paper would not be exercised in that way.

Earlier we heard reference to appointments to the National Audit Office. Some appointments are notionally appointments by Parliament because they are subject to votes in this House—for example, appointments to bodies such as the National Audit Office and the Electoral Commission—and my hon. Friend the Member for Nottingham East would say that there could similarly be a vote on the appointment of the Governor of the Bank of England. However, I do not believe that that is a comparable situation. Given the significant extra powers and functions that the Governor will have, particularly after our experiences over the past few years and the allegations that we heard yesterday about the whole murky interface between the Government, the Bank of England and the City, it would be remiss of Parliament to say “We’re quite happy to leave this in that odd black box that exists somewhere between Whitehall and the City. We as Parliament do not want to step up to the plate and say, yes, when this appointment is made in future there will be a parliamentary stamp on it.” That is all that the Bill is asking for, and it would entrust and delegate that parliamentary stamp to the Treasury Committee.

Mr Gyimah: The hon. Gentleman seems to be ignoring the fact that the Treasury Committee already scrutinises the work and operations of the Bank of England. In fact, only last week the Governor gave evidence to the Committee. There is already parliamentary scrutiny of the substance of what the Bank of England does, and I do not see why we need to give the Treasury Committee this major constitutional power to veto the appointment as well.

Mark Durkan: I am not ignoring anything that the Treasury Committee does, but nor am I here to filibuster and rehearse everything that it does. The hon. Gentleman needs to recognise that the Committee itself has unanimously recommended this change.

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We heard in yesterday’s debate, and we heard from the Chancellor on Monday, about the importance of a parliamentary Committee of inquiry being able to produce a unanimous report and about its being worth nothing if it is not unanimous. Here we have a unanimous recommendation from the Treasury Committee, and the very people who have been telling us about the power and significance of parliamentary Committees and the compelling power of unanimity are saying, “We don’t care about it, we don’t want to know.”

Kwasi Kwarteng: Will the hon. Gentleman give way?

Mark Durkan: No. The hon. Gentleman will have plenty of time to come back to this or any other point.

It has been argued that the Bill could be dangerous because it might enable the Treasury Committee or other Committees to go on shopping sprees for all sorts of other powers or abilities. I do not believe that this is a vanity trip on the part of the Committee. Most people would think it odd if the parliamentary Committee that was considering a change of the scale and importance of the new architecture in the Financial Services Bill did not say that Parliament wanted to have at least a bit more of a role regarding the key appointment to this fixed eight-year term. I will not get into the arguments that we had in the Bill Committee about the Putin clause whereby a Governor might be reappointed as a deputy governor for certain reasons.

In yesterday’s debate we heard people who supported the call for a parliamentary inquiry say that it was about Parliament stepping up to the plate. In many ways, the Treasury Committee seeking this role is about Parliament stepping up to the plate. If there is another financial crisis or banking scandal in a few years’ time and the new regulatory regime is seen as confused and difficult to understand—as we heard earlier, even hon. Members who support the Financial Services Bill do not understand what it means and are confused about its architecture—people will turn round and ask, “Who’s to blame this time?” Of course, the current Government will simply blame the previous Government for the way in which legislation has come about. In my view, yes, legislation can be blamed on the Government who sponsored it, but when it is wrong and flawed, that is also the fault of Parliament. Parliament, as well as the Government, should take its fair share of the blame when we get legislation wrong. We will be to blame, as a Parliament, if there are mistakes in the current Government’s legislation such as those that I hope they will remedy when they make further changes to the Financial Services Bill after the Wheatley review in the autumn.

We cannot turn round in future and say “It was all the fault of the Government—it was their legislation. The Bank of England got it wrong and the regulatory regime did not work. It is the Governor’s fault and the Bank appointed him.” The public are fed up with politicians washing their hands of responsibility—with all of us being in the business, as we saw in yesterday’s debate, of trying to fix the blame rather than trying to fix the problem and taking responsibility. If hon. Members trust the new arrangements in their Financial Services Bill, they should be prepared to trust Parliament to take its stake in the key decisions that will be made. We are told that Governor of the Bank of England is a key appointment, but it is odd that it should not receive a

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parliamentary stamp of involvement and approval despite the fact that people want that parliamentary stamp on many other appointments.

That is why I support the Bill. It is not a starter for 10 whereby we then go on to say that we will appoint the deputy governors and others. It is modest even on its own terms. It does not even say that the Treasury Committee should have the power of consent over the appointment of the deputy governors. Those are also key appointments given the distinct roles that they will play. Conservative Members need to stop exaggerating in their arguments against the Bill. They need to listen to the compelling case for it and to remember that this would be a much more modest amendment than the significant changes that we will probably have to make to the Financial Services Bill in the autumn.

11.48 am

Richard Harrington (Watford) (Con): I congratulate the hon. Member for Hayes and Harlington (John McDonnell) on bringing forward the Bill. I was slightly worried earlier when I looked up and he had moved over to this side of the House and was having a conversation with my hon. Friend the Member for Altrincham and Sale West (Mr Brady). I thought that perhaps the arguments of my colleagues had been so compelling that he had decided to move. I was concerned about his cynicism—he has been in the House for longer than I—that some of today’s contributions might be intended to filibuster and drag out proceedings. I hope that he does not think that I have that intention, because I have thought carefully about his Bill.

When I read the Bill and the words,

“the appointment and dismissal of the Governor of the Bank of England be subject to the consent of a Committee of the House”,

it seemed to me that it was okay. On the face of it, the Bill would add the Select Committee to the process that is nominally in the name of Her Majesty the Queen, but is really conducted, as we all know, by the Prime Minister, the Chancellor of the Exchequer and so on. It was only when I continued reading and thinking about the subject that I thought that there were a number of compelling reasons not to support the Bill. I do not say that because of dogma or because I have been told to by the Whips or anybody else. I am pleased to have the opportunity briefly to put those arguments forward.

The Chancellor of the Exchequer has announced quite a few improvements in the process for selecting the Governor of the Bank of England. Traditionally, it has been done behind the scenes, nobody has known quite how it has been worked out, and in the end there has just been an announcement. Some of the changes might seem superficial, such as the post being advertised. However, as far as I know, in no other democracy or comparable economy is a post of this magnitude advertised openly in publications such as The Economist. It is also clear who is on the selection panel. It will comprise members of the Treasury and No. 10, and will take the advice of the court of directors, which is effectively the board of the Bank of England. That is not dissimilar to the process for appointing chief executives in most major companies and other significant organisations.

The changes perhaps reflect the way in which society is moving. Every Member of the House to whom I have spoken generally welcomes the increasing transparency in these systems and procedures. I realise that that

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comes nowhere near the veto power that the hon. Member for Hayes and Harlington is proposing in the Bill, but I do not think that it can be taken as insignificant; it is a step forward.

Secondly, there is the question of how public the scrutiny can be for an executive position. Governor of the Bank of England is an executive position, not a scrutiny position or a non-executive position. It is effectively the chief executive of the Bank of England. I have tried to compare the Bank of England to a business, because most of my experience in life has been in business, from quite small businesses to larger ones, while reading about and observing public life. I am not one of these people who are obsessed with business and who say that everything is like a business. However, some matters of governance are comparable.

This proposal is comparable to the chief executive of a major company being appointed and ratified not just by the board of directors, but by its shareholders, with Parliament as the shareholders. I know that we act on behalf of the general public, but we are a shareholder-type body. There is market sensitivity in big appointments in businesses, but it is as nothing to the market sensitivity that there is when a country’s financial system is involved. I do not think that it would ever be feasible to have this kind of open, televised, broadcast scrutiny for a chief executive’s position, even in a large company. I therefore do not think that it is suitable for the Bank of England.

Another significant point is that the Select Committee system is evolving. There is no doubt about that. The coalition agreement calls for an enhanced role for Select Committees. Most Members from both sides of the House have sat on Select Committees that have scrutinised appointments. As a member of the Select Committee on International Development, I have taken part in the appointment process for the independent scrutineer of the activities of the Department for International Development. An example that has been mentioned often by colleagues, including in this debate, is the appointment process for the Office for Budget Responsibility, in which a veto was used for the first time. However, those are all matters of scrutiny. They are all extensions of the Select Committee’s role in relation to bodies or individuals involved in scrutiny. They do not relate to executive appointments.

If I may use a DFID analogy, it would be difficult to reason that because Oxfam is a major beneficiary of DFID’s money, the International Development Committee should have a veto on the appointment of its chief executive. I do not say that to suggest that the roles of Oxfam and the Governor of the Bank England are of the same magnitude, but the principle is the same. Select Committees scrutinising the responsibilities of people or institutions is one thing, but their deciding on executive roles is completely different.

Parliament is perfectly free to decide that we need an American-type committee system, in which almost every appointment, including to the equivalent of ministerial roles, is approved in public committee hearings. I do not support that view, but I can understand it.

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Jacob Rees-Mogg: Historically, there was a much better check on appointments to the Executive, because its members had to resign their seats and stand in a by-election. The public scrutinised appointments to the Cabinet, which was a fantastic system.

Richard Harrington: For once in my political career, I am completely speechless. I cannot claim before I scrutinise Hansard tomorrow that I fully understand my hon. Friend’s point, but I am sure that, being the person he is, he is absolutely right.

A further extension of the role of the Select Committee would make a fundamental difference to our system. It is not just a question of extent, as is the spreading practice of giving various Committees different scrutiny roles. Select Committees getting involved in hearings on major executive posts would be a fundamental change, and Parliament should discuss it if Members believe it is the right thing to do. That would an interesting and significant debate.

I would oppose the change. We have all seen the hearings that take place in America on the appointments of judges, Secretaries of State and so on, which are watched live all over the world. Although I do not feel that such hearings add anything to the democratic process, a valid argument can be made for them. However, they should not be introduced on a one-off basis in the case of the Governor of the Bank of England, because that would represent a fundamental change to our system. I do not think many people in this country would support judges being publicly appointed, and the same is true of many other roles including, I believe, the Governor of the Bank of England.

Select Committees are very good for scrutiny—that is their role. The Standing Orders, which I probably do not read enough, state that a Select Committee is

“appointed to examine the expenditure, administration and policy of the principal government departments”.

However, the control of executive appointments is quite different. The importance of that point should not be underestimated.

In 2000, in the report “Shifting the Balance”, the Labour Government stated:

“Any indication that a Ministerial appointment relied upon the approval of a Select Committee or was open to a Select Committee veto would break the clear lines of accountability by which Ministers are answerable to Committees for the actions of the executive”.

That is true. I ask the hon. Member for Hayes and Harlington to consider the fact that the Treasury Committee having a veto over the Governor of the Bank of England might allow a Chancellor or Prime Minister to say, “Well, it wasn’t my doing. That wasn’t the candidate I wanted”. That would give them an excuse, whereas now there is direct and clear accountability to Parliament.

I hope that no one, least of all the hon. Member for Hayes and Harlington himself, thinks I am saying that he has introduced the Bill with anything other than the best intentions, but the point about accountability should be considered. I believe in direct accountability, not in our senior elected politicians—or indeed junior ones such as myself—having an excuse to blame somebody else. I fear that that could be an unintended consequence of the Bill.

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I believe in extra accountability and in making Select Committees strong, but I cannot support the Bill, because it goes totally against our current system. It is that system itself that Parliament should discuss and debate at length.

12 noon

Heather Wheeler (South Derbyshire) (Con): I congratulate the hon. Member for Hayes and Harlington (John McDonnell) on introducing the Bill, but unfortunately I shall speak against it. My first 10 years in business were in the City, but living for the past 25 years up in South Derbyshire far away from City issues has given me an ability to reflect on other things—I now deal with everyday issues such as potholes, farming, milk prices and goodness knows what else in South Derbyshire. The debate is somewhat esoteric: funnily enough, they are not talking about it at great length at The Dog and Duck in Shardlow—[Interruption.] The hon. Member for Hayes and Harlington and his hon. Friends are having a conversation about it, and perhaps about withdrawing the Bill. If they withdraw it now, we could all go home.

That the Bill has any legs at all is frightening, because it changes the Select Committee role from one of scrutiny to one of appointment. I do not believe that that is what Select Committees are for. We should not go down the American route—there is a bun fight every time anybody tries to be elected to courts or other positions. That is demeaning, and I am disappointed that the hon. Gentleman felt he needed to introduce the Bill. Select Committees confirming rather than vetoing appointments is a better way to enhance their authority, and perhaps we should have a conversation on that basis.

I should chuck into the mix the question of how the Treasury Committee came to its conclusion. I sit on two Select Committees, but I do not know what machinations took the Treasury Committee to that point. Perhaps a member of the Committee could tell the House how that came about. The proposal sounds a little bit like land grabbing, as if members of the Committee have said, “We’re terribly important and we know it, so we want one more power to show how important we are.” That could be true—my hon. Friend the Member for Sevenoaks (Michael Fallon), another member of the Committee, has arrived at the Bar of the House—but I am concerned that Select Committees sometimes overreach.

As all hon. Members know, Select Committee reports come to the Chamber—they are not accepted on the nod, but debated. The nonsense of the appointment role—this bun fight—could go on and on, which would be demeaning to Parliament.

The public are not talking about this issue, and it is a shame that we have got to this stage. I appreciate why we have private Members’ Bills—one day I hope to be lucky enough to come high in the ballot and to do something about wind farms—but we have an opportunity and a duty to talk about the really important things going on in the world. It is not appropriate to consider a land grab from certain Select Committees, and I shall oppose the Bill.

12.3 pm

Mike Freer (Finchley and Golders Green) (Con): I, too, thank the hon. Member for Hayes and Harlington (John McDonnell) for introducing the Bill. He has a

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reputation as a firebrand in Parliament, so I was surprised and pleased at his thoughtful speech. He almost got me to cross the line and support him. However, I was somewhat surprised to realise, as the debate continued, that the Bill is a Trojan horse. It is not about the Governor of the Bank of England; it is about appointments in general and the power of Parliament in making them. The Bill should do what it says on the tin. If it is meant to be a prod for us to debate reforming the role of Parliament in making appointments, it should say so, but it does not. It is specifically about the power of appointment and dismissal of the Governor of the Bank of England.

Matthew Hancock: Is my hon. Friend surprised to hear some Members argue that they do not support the Bill as it stands but would vote for it on different grounds?

Mike Freer: I never fail to be surprised at the ability of hon. Friends and hon. Members to vote for what they do not really believe in, as we might see next Tuesday. [Laughter.] The Whips do not need to write that down.

Before I read the substance of the Bill, I thought I would look at the history of the Bank of England. I promise not to go too far back, but I glanced to see whether there was a precedent for Parliament’s being involved in the appointment of the Governor. The Bank of England was formed to raise money for the Government of the day, who could not raise the princely sum of £1.2 million themselves because they were not credit worthy, even though they had sought to attract money by offering 8% interest rates—an eerie echo of the problems of the Greek and Spanish Governments 318 years later. It is not the time, while we are dealing with sovereign debt crises, to discuss whether Parliament should appoint the Governor of the Bank of England, and I will talk later about what would happen if we had to appoint someone in the middle of a crisis.

The Bank was originally a private bank paid for by private subscriptions. I read through its book of subscriptions from 1694—in fact, I have a copy of it with me. I was tempted to read it all out. I have the scars on my back from introducing the London Local Authorities Bill. I am pleased to see my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) here, because he taught me that the way to prolong a debate was to read out, in detail, the coat of arms of all the London boroughs, so it was tempting to read out the list of original subscribers.

Jacob Rees-Mogg: I am delighted to note that the time spent debating that Bill was not wasted.

Mike Freer: I can assure my hon. Friend that I learned a huge amount from the painful experience of taking that Bill through the House.

I wanted to find out whether anything could be learned from seeing who were the original subscribers to the Bank. One of them was the Receiver of Their Majesty’s Customs. I thought it was rather odd that a tax collector—a modern day Treasury Minister—was a founder of the Bank of England. Under the column headed “Quality” are listed merchants, widows, haberdashers, scriveners, grocers and apothecaries. Even clerks were allowed to subscribe to the original Bank of England.

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John McDonnell: As extremely entertaining as the hon. Gentleman’s speech is, may I suggest that it is an example of the filibustering that, in the eyes of the general public, demeans the House? May I suggest that he addresses the Bill instead of using this mechanism in this way to embarrass himself and degrade the proceedings of the House?

Madam Deputy Speaker (Dawn Primarolo): Order. That might be the hon. Gentleman’s opinion and the opinion of people outside the House, but the hon. Member for Finchley and Golders Green (Mike Freer) is in order. If he was not, I would prevent him from speaking. I appreciate that that is the view of the hon. Member for Hayes and Harlington (John McDonnell), and that he has now put it on the record, but the hon. Member for Finchley and Golders Green will be in order if he wishes to advance this argument.

Mike Freer: Thank you, Madam Deputy Speaker. I shall indeed turn to the substance of the debate, but I find it rather sad that an hon. Member seeking to restore the rights of Parliament should seek to deprive another hon. Member of the right to continue the long-established tradition in the House of speaking at length, if they so choose.

I was talking about the original subscribers, so I—[Interruption.] I cannot hear what the hon. Member for West Ham (Lyn Brown) is chuntering about. If she wishes to intervene, she should please do so. [Interruption.]

The Lord Commissioner of Her Majesty's Treasury (Michael Fabricant): She’s moving!

Lyn Brown (West Ham) (Lab): I am moving places. Let me gently say to the hon. Gentleman that talking at length on a Bill is indeed an honourable tradition, and it is called filibustering.

Michael Fabricant: He’s been on for five minutes!

Lyn Brown: It felt longer.

Mike Freer: As did that intervention.

Madam Deputy Speaker (Dawn Primarolo): Order. I am sorry to interrupt the hon. Gentleman again, but let me say to the hon. Member for West Ham (Lyn Brown) that she can either sit on the Benches behind the Front Bench or sit on the Front Bench. I am afraid that she cannot go backwards and forwards as and when she wishes to intervene.

Mike Freer: With the forbearance of the House, I will come to the substance of the Bill, but I want to set out the historical perspective for a few more minutes, if the House will indulge me.

Looking at the original subscribers, I was surprised to see the clerk of Eton college. Nothing changes: those Eton chaps get everywhere. Sadly, however, I could find no forebears of the Eton alumni who serve in the current Executive, but I did find a Mr du Bois, a Mr Gape and a Mr Wollaston, so I wondered whether there was an historical link to my hon. Friends the Members for Enfield North (Nick de Bois) or for Totnes (Dr Wollaston) or the hon. Member for Ilford South

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(Mike Gapes). The index of subscribers was clearly a list of butchers, bakers, candlestick makers, tinkers, tailors and soldiers, but sadly I could see no spies—although, suspiciously, there was a rather large number of French names.

Although the Bank was not a modern-day co-op, it was owned by ordinary people until nationalisation in 1946. At the Bank’s inception, the original subscribers—the original owners—could appoint an agent to act on their behalf. That brings me to the present day—I am grateful to the House for indulging me to this point. The Bank is now technically owned by the people and, through the people, this House. Acting for the people, we have appointed the Prime Minister and his Ministers to act as our agents. The appointment of the Governor of the Bank of England by the Executive is therefore entirely in accordance with the tradition of the Bank from its original founding fathers—the original subscribers.

I have listened to the hon. Member for Hayes and Harlington and to the arguments of other Members—specifically, those on the Treasury Committee, whom I admire greatly. When considering whether to speak in this debate, I noted that my hon. Friend the Member for Chichester (Mr Tyrie) had put his name to the Bill, which gave me pause to wonder whether it had some merit. I appreciate the view that the way in which the Governor has been appointed has not changed substantially since the Bank was nationalised in 1946 and that some feel that reform is required. I also appreciate the wider point that the relationship between the Executive and the legislature in this House should be rebalanced. I welcome the current Government’s moves to do so thus far. Others have compared the appointment of the Governor of the Bank of England with appointments to the Office for Budget Responsibility, but there is a huge difference between bodies that can advise and people with the power to intervene. There is a big difference between the Bank of England and the Office for Budget Responsibility.

A consensus appears to be developing that Select Committees are an under-utilised parliamentary tool. However, we have recently seen a national focus—indeed, an international focus—on the Select Committee on Culture, Media and Sport and, this week, on the Treasury Committee, which is so ably chaired by my hon. Friend. Although new to these Benches, I have sensed a shift, both inside and outside the House, in the role of Select Committees. They no longer simply scrutinise expenditure or the performance of Departments; they now have an investigatory role. That is valued, but there is a huge difference between scrutinising and investigating, and getting involved in appointments. I am particularly worried by the parallels with congressional committees in the United States, because of the precedent set by the vitriolic stand-offs and deadlocks between the Executive and Congress over appointments. I vividly remember the appointment—or the non-appointment—of Clarence Thomas. Whatever the merits of that particular case, the whole drawn-out saga and the blood on the political floor were deeply damaging to the institutions involved. I fear that if this Bill passes, we will go down the same path.

I welcome reform, but I have a number of concerns about the Bill. The Treasury has already agreed new powers for the Governor, and I remind the House that the Governor is one of the most important financial

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figures not just in this country but in global finance. He or she—as it might well be in the future—is of vital importance not just to the UK economy, but to the world economy. Tinkering with our constitution has ramifications not just for us, but across the world.

My concern about constitutional tinkering is that it is like a thread. If we pull that thread, we will not know where it leads. As my hon. Friend the Member for Wimbledon (Stephen Hammond) said, why stop at appointing the Governor of the Bank of England; what about other public bodies? The thin end of the wedge argument carries a lot of weight, as does the argument that we are tinkering with the constitution.

I refer hon. Members to what will happen next Tuesday. If it comes to pass, the House of Lords will be abolished or “reformed”, as it is euphemistically called. We will have a new elected body at the other end of the building. How long will it be before that body starts to—

Madam Deputy Speaker (Dawn Primarolo): Order. I have to tell the hon. Gentleman that what he is saying now is not in order. He is speculating about something that has not yet happened. I suggest that he concentrate on this Bill, either on a historical or contemporary basis, and not refer to Bills that we have not yet debated.

Mike Freer: I am grateful for your advice, Madam Deputy Speaker.

My worry is that the other place, in whatever form, will seek to flex its muscles and say, “If the Commons has a role in appointment and dismissal, why not us?” There could be a deadlock not only between the Executive and the House of Commons but between the House of Commons and the other place.

The Treasury Committee’s role is vital. I have no doubt that its role in expressing a voice in the appointment of a Governor of the Bank of England is crucial. Let me deal, however, with the issue of deadlock. In reality, if there were a deadlock, we are told that it could come down to an opinion being expressed on the Floor of the House. Given the potential for such an impasse to create instability in the markets, I remain unconvinced that this Bill provides proper safeguards to prevent this from occurring. In reality, a vote on the Floor of the House is likely to be whipped, and the Chancellor of the day would get his candidate. The Chancellor would have his way, but only after a delay and a bruising stand-off between the Committee and the Chancellor. How would the markets react if there were such a delay?

Jeremy Corbyn: Does the hon. Gentleman not accept that whoever was appointed would have greater legitimacy because they would have the authority of having been appointed by Members of Parliament and there would be a route of accountability to the appointment?