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Bank of England and Financial Services Bill [Lords]

Part of the debate – in the House of Commons at 6:46 pm on 1st February 2016.

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Photo of Mike Wood Mike Wood Conservative, Dudley South 6:46 pm, 1st February 2016

Thank you, Madam Deputy Speaker. I shall try to compensate for some of the earlier speeches that went a little beyond your guidance.

It is seven years since the most devastating financial crash of our lifetime. Since the crash, regulations have rightly been updated by the Chancellor and Treasury Ministers. They have put responsibility and accountability at the heart of the UK’s financial system. Because of the Government’s long-term economic plan, banking in the UK is now far more robust, but it is clearly not invincible. I shall support the Bill this evening so that we can build on that progress, continuing all the valuable work that the Treasury has done so far and improving on the status quo, strengthening the way the Bank of England is governed, increasing accountability in the financial services sector, and extending the role of the Pension Wise advice service, which I know is used and valued by many of my constituents.

The Bank of England has been a cornerstone of global finance since 1694. Its structures and governance must adapt to the needs of the 21st century so that it can continue as such. Some of the Bank’s historic practices have not been in line with current international standards, but the Bill helps to redress the balance. Strengthening the role of the Bank of England’s court of directors will enable the Bank to function with an effective and modern unitary board, a more effective structure to allow the Bank to deliver on its vital regulatory and policy roles.

To most of our constituents, the key role of the Bank of England, other than issuing bank notes in England, is to set interest rates. The Monetary Policy Committee currently meets 12 times a year but, as we have heard, a single month is rarely long enough to properly review, consider and change a macro-economic assessment, so moving the MPC to eight meetings a year would have many desirable outcomes. Most obviously, policy making at that level requires time for reflection, which a longer period between meetings would allow. Such a sensible change will merely bring the Bank of England into line with other central banks, such as the Federal Reserve and the European Central Bank. Allowing the results of votes and the reasoning behind them to be published alongside decisions over interest rates will open up that opaque process, granting access to the MPC’s thinking.

The crash of 2007-08 highlighted the irresponsible behaviour of some individuals working in the financial services industry. Thankfully, the days to which my hon. Friend Mr Mak referred, when the Labour party allowed people such as Fred Goodwin to take huge bonuses while allowing their banks to freefall, are behind us.

The senior managers and certification regime legislated for by the coalition will come into force in March. However, although the existing legislation will apply to banks, building societies, credit unions and PRA-regulated investment firms, it will not extend to other authorised financial services firms. Expanding the regime’s scope will help to create a fairer, more consistent, more effective and more rigorous regime for all authorised financial services firms.

The Government have already made revolutionary changes to improve and support the pensions system. Allowing our constituents to access their pension pots—their annuities—without being penalised for doing so has given people more flexibility and more choice over how they spend their own money. As a result of those changes, the Pension Wise scheme was introduced following the 2014 Budget. Expanding the service’s scope will mean that more people receive impartial, high-quality financial advice and guidance, which will allow them to discuss their new options.

I encourage all hon. Members to join me this evening in voting in support of a Bill that will bring the Bank of England and financial services into the 21st century—a Bill to allow transparency and accountability to reign in the financial sector.