Clause 2 — Cases where Treasury's powers are exercisable
Banking (Special Provisions) Bill [Ways and Means]
Michael Fallon (Sevenoaks, Conservative)
I beg to move amendment No. 1, in page 2, line 2, leave out "Treasury consider" and insert "Bank of England considers".
This amendment is simple and does not require a lengthy explanation, but it is important and I alluded to it on Second Reading. The amendment proposes that the Bank of England rather than the Treasury should advise on whether there is a serious threat to the stability of the UK financial system. The Bank has a detailed knowledge of that system and can better judge it from inside than some civil servants at one end of Whitehall.
By replacing the Treasury with the Bank of England in that key role, we would also remove the Chancellor and his Ministers from any perception that they were making a political judgment when they decided to intervene. There have been scurrilous accusations that Ministers' intervention last September was perhaps designed to assist their friends in the north, or, indeed, to prepare the ground for a general election, which appeared imminent. It is essential to remove, as far as possible, any perception that the decision on whether systemic risk is present and how it is defined is being taken by Ministers.
The Treasury Committee gave this matter a lot of thought while looking into a special resolution procedure, and we recommended that the Bank's deputy governor for financial stability should become the Chancellor's principal adviser. Of course, the Chancellor has to take the final decision. He is the guardian of the taxpayer's interests, and the amendment is not attempting to evade that fact, but we need to put that position at one remove from any suspicion of political judgment. The best people to advise on whether there is a serious, systemic threat to the stability of the UK financial system are those in the Bank of England.