some default text...

Previous Section Back to Table of Contents Lords Hansard Home Page

Lord Stewartby: My Lords, I, too, hope that the Minister will welcome this amendment for the reasons that my noble friend gave. I cannot think of any other organisation that I have ever come across where a sub-committee of a board or a court does not have control over its own procedures. For the Chancellor of the Exchequer to have authority in that way, penetrating down into the affairs of the Bank of England, seems a perverse form of governance. I hope, if the noble Lord has not yet arrived at the view that this change needs to be made to the Bill, that he has not yet completed his process of reflection.

Will the Minister also place on record a definitive answer to the point that I raised in Committee as to whether or not the Governor and deputy governors are directors of the Bank? From the way in which Clause 3 is framed it seems that the only directors of the Bank are the non-executive members of the court; whereas Clause 1 states that the Governor and the two deputy governors are among those who comprise the court of directors. The natural interpretation would therefore be that they are directors. If they are not directors, there are problems.

In Committee the Minister said that it was intended that the Bank of England should be run as far as possible in the format of a company subject to the Companies Act. If the Governor was not a director of the Bank of England, he would not be able to sign the accounts; he would not be responsible for all the normal duties that a director is liable to perform under the Companies Act. On the other hand, if the Governor and the two deputy governors are directors of the Bank, then the wording at the beginning of Clause 3 is misleading. The rubric refers only to the:

yet the text refers to the sub-committee consisting of the directors of the bank and under those circumstances would include the executive members in the form of the Governor and the two deputy governors. I hope that the noble Lord can clarify that point on this occasion.

Lord Boardman: My Lords, I too support the amendment. It seems to me that the Government are trying to have it both ways. Under the Bill the Chancellor retains all the appointments. It is as though the committee is purely a subsidiary of the Government, to respond to and do what the Chancellor says. When challenged about events that happened last week in regard to the conflict between interest rates and taxation, which have been a constant source of debate in the past few days in the press, the Chancellor takes the view that "The Bank of England has nothing to do with me". Yet he makes quite sure that it has everything to do with

23 Mar 1998 : Column 969

him under this Bill. He will have complete control of every appointment and whatever happens. For him to turn round and say, "It has nothing to do with me", is unfortunate.

I hope that this small concession which would result from the amendment would achieve the logical sequence of a committee appointing its own chairman and not having him imposed on it. As my noble friend said, and as was said throughout the debate, that is what would follow. The Chancellor would not impose his appointment upon the committee. That would go one step towards making the Bank appear to have some independence from the Treasury.

Lord McIntosh of Haringey: My Lords, first I wish to deal with the point raised by the noble Lord, Lord Stewartby. I indicated to him informally between the Committee stage and today that I might have been wrong in the advice I gave the Committee. I was not wrong. The Governor and the two deputy governors are not directors of the Bank. If I carried the analogy with the Companies Act far enough to convince the noble Lord that it was a good idea that they should be directors of the Bank, then I carried it too far.

The Bank of England is established under a Royal Charter of 1694, as we have already heard. There is no need for the Governor and deputy governors to be called directors of the Bank because the role of directors is different from that which applies under the Companies Act. Therefore, the wording of the Bill is consistent throughout in Clauses 1, 2 and wherever else the issue occurs.

There may be some possibility of confusion in understanding the role of the chairman of the sub-committee of non-executive directors. The chairman of the sub-committee not only chairs the sub-committee but also the court when the Governor is not present. So the responsibilities of the chairman of the sub-committee go beyond that sub-committee itself and cover the court as a whole.

In effect, the senior non-executive member is acting as a deputy chairman of the board and in the discussion it has been seen and should be seen as an important appointment. It is in that light that I invite noble Lords to adhere to the view which I adhere to, that it is right for such a person to be appointed by the Chancellor of the Exchequer rather than by the members themselves. The non-executive members of the court will have important review functions with respect to the performance of the Bank, including the procedures of the Monetary Policy Committee and the Bank's internal financial controls. They will also set the remuneration of the Governor and deputy governors.

The senior non-executive, as the representative of this group, has an important role in safeguarding the interests of the shareholder--that is the Government and ultimately the taxpayer--in the management of the Bank. I am sorry to repeat myself, but it is important to remember that the Bank is not a private company; it is a public corporation carrying out public policy functions. Its sole shareholder is the Government. It is

23 Mar 1998 : Column 970

sensible for the Chancellor, who represents the shareholder interests of the Bank, to designate the senior non-executive member because the Chancellor can be held fully accountable for his choice.

The noble Lord, Lord Mackay of Ardbrecknish, made a point about the word "may". The value of the choice being made by the Chancellor is particularly strong at this time because immediately after the Bill comes into force, the initial selection of the senior member could be difficult. There could be non-executive members who do not know each other well. Under those circumstances, the Chancellor, having recommended their appointment, is well placed to choose a senior member to head the sub-committee. Indeed, he has done so.

Noble Lords have not referred to the appointment of Dame Sheila Masters as the senior non-executive member. I remind the House that she is a partner at KPMG and vice president of the Institute of Chartered Accountants of England and Wales. She has been a director of the Bank since 1994. She has had a distinguished public service career as well, having been seconded to the Department of Health as director of finance of the NHS management executive for the period 1988 to 1991. She has been a member of the Inland Revenue Board since 1992, a member of the Chancellor's Private Finance Panel since 1993 and a commissioner of the Public Works Loan Board since 1995. So she has substantial experience, in both the public and the private sectors. In case there may be some fears about control on the part of the noble Lord, Lord Mackay of Ardbrecknish, her experience has not been predominantly in the Treasury or the Bank itself. So we have a good precedent for a sensible choice by the Chancellor of the Exchequer, being the shareholder representing the taxpayer and being accountable to that extent.

I do not recognise the statement that some noble Lords made that it is normal for sub-committees to decide on their own procedures. If I am involved in an organisation, whether it is in the private or the public sector, and I am involved in setting up a sub-committee, I make sure before it is set up that its objectives, procedures and timescale are set out and that its chairman is appointed in advance. Otherwise it will not perform the function that the main committee requires. I think the analogy is sound and I invite the noble Lord not to press his amendment.

3.45 p.m.

Lord Barnett: My Lords, before my noble friend sits down, will he reflect on something else that was said? The words now in subsection (4) are:

    "The Chancellor of the Exchequer may designate one of the directors to chair the sub-committee".

I understood that to mean that he may also not designate one of them. Is that what the Bill says?

Lord McIntosh of Haringey: Yes, my Lords, I said that at Committee. I repeat that "may" allows the possibility of "may not". If a future Chancellor of the Exchequer wishes to delegate that power, because

23 Mar 1998 : Column 971

he knows that he has a team of non-executive directors who know each other well and work well together, he can do so.

Lord Mackay of Ardbrecknish: My Lords, the intervention by the noble Lord, Lord Barnett, brought us back to the real puzzle. It is that if the defence put up by the Minister today of the position that the Chancellor appoints the chairman of the sub-committee has validity, the subsection ought to read "The Chancellor of the Exchequer shall designate". We were told how important it was that it should be done at the hands of the Chancellor of the Exchequer. He will chair the court when the Governor is not present. I will wager that there are not too many occasions on which the Governor is not present. He will act as a deputy chairman of the board. But there are two deputy governors who will do much of the work of the Governor. So I do not think it can be quite likened, as the Minister said, to any other kind of company. It is a special organisation.

It seems to me that if the Minister's argument were valid, this subsection would say "shall appoint". The Minister told us whom the Chancellor has appointed. I have no problems with that and would expect the Chancellor to appoint someone first-rate to the post. I would expect him to appoint someone first-rate to every position in the court of directors of the Bank. So I am still less than satisfied with the answer. I should be more satisfied if the Minister were to tell me that the case was that on all occasions, because of the importance of the job, the Chancellor "should appoint". There would be no "may" about it.

However, given what the Minister said at Committee and again today, when he did not detract in any way from what he said at Committee, I am still bemused as to why the Chancellor is not taking the power, without any qualification; or alternatively why the sub-committee itself is not allowed to do so. In fact, I am so unconvinced by his argument that I shall seek the opinion of the House.

3.50 p.m.

On Question, Whether the said amendment (No. 2) shall be agreed to?

Their Lordships divided: Contents, 48; Not-Contents, 78.

Next Section Back to Table of Contents Lords Hansard Home Page