Clause 221
Banking Bill
2:45 pm
Mark Hoban (Shadow Minister, Treasury; Fareham, Conservative)
The amendments refer to the tenure of the Governor of the Bank of England. The clause limits how many terms the Governor can serve—he can serve no more than two terms. It is the view of my party that those arrangements work against the perception of the Governor of the Bank of England as independent. The fact that the Governor has to be—can be—reappointed could create in the minds of observers some doubt as to whether he is independent of the Chancellor. The Governor may wish to be reappointed, and there may be a sense that he tempers his decisions so as to improve the chances of his reappointment. To be absolutely clear, I do not believe that that has occurred so far, but there is potential for that risk in the future.
As a consequence, on several occasions we have proposed that the Governor should serve a single, non-renewable term of eight years. That is in line with the term served by the governor of the European Central Bank, who serves a single eight-year term. Such a provision would enhance people’s view of the independence of the Governor. Other processes too could be used to strengthen the independence of appointments, to ensure, for example, that the process is open and transparent. There have been cases in the past where appointments to the MPC have not been made openly and transparently; we think that that should change. The Chancellor of the Exchequer has recognised that in connection with other appointments to the MPC.
We also felt that, when it comes to the reappointment of the current Governor, at the time of the current period of financial instability, there could be a concern that the Governor may have been put under pressure, because he was awaiting reappointment. It would be better to have much greater clarification about Governor status than is the case at the moment, where it is possible for the Governor to be appointed for a second term. We therefore believe that a longer single term is in the wider interests of the Bank of England and of ensuring that the Governor is seen to be independent of the Treasury.