Clause 61 - Memorandum of understanding: crisis management

Part of Financial Services Bill – in a Public Bill Committee at 9:30 pm on 20th March 2012.

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Photo of Chris Leslie Chris Leslie Shadow Minister (Treasury) 9:30 pm, 20th March 2012

I beg to move amendment 188, in clause 61, page 137, line 40, at end insert ‘and ensure that the Governor and all Bank of England Deputy Governors and the Chief Executive of the FCA may consult with the Treasury directly.’.

Clause 61 will make a number of changes where we believe that the voices of the Governor, the deputy governors and the chief executive of the FCA should be more explicitly and clearly heard by the Chancellor of the Exchequer. We are seeking to amend clause 61(2) to add a further point to the provisions of the memorandum. In particular, it should ensure that the Governor, all the Bank of England deputy governors and the chief executive of the FCA may consult the Treasury.

We have already voiced our concerns about the concentration of power in the hands of the Governor, so it will not surprise the Committee when I say that relying on one person’s opinion is not the best way to proceed when so much rests on it. The amendment would ensure that the deputy governors or the chief executive of the FCA can have their voice heard by the Chancellor if they have concerns. That might be especially relevant if the Governor does not share their view, and it is easy to envisage such a situation.

Such an amendment would benefit the Government of the day and the Chancellor, not Her Majesty’s Opposition. We simply seek to ensure that as many voices as possible can be heard and that there is no doubt that they will be heard clearly, particularly if there is a difference of opinion. As the Bill stands, there is a risk that the Governor might not judge it appropriate to inform the Chancellor that a deputy governor or the chief executive of the FCA, or indeed both, believes there is a material threat to stability or the use of public funds. If the Governor, for whatever reason, makes a personal judgment to dismiss their views in the belief that there is no such danger, the Chancellor will not hear those important voices. It is not beyond the wit of man to imagine such a scenario, and the amendment would address it.

In the current situation, the Chancellor hears from the head of the FSA, Adair Turner. Under the new system and the memorandum of understanding, he will hear from no one other than the Governor. I therefore have to ask again whether the Minister is not in the least concerned that the current drafting of the MOU might not only prevent the Chancellor from hearing such important voices in a crisis, but undermine important relationships and create tension between key post holders in the new regulatory architecture. Would there not be a greater likelihood of leaks if certain people felt they could not voice their concerns to the Government and that leaks were the only way to get information out? We have already seen in the Budget process that leaks often occur on financial policy, and it would be a shame if we ended up instituting a set of circumstances that made that worse.

To help ensure that the right voices are heard at the right time in a crisis, we should enshrine in the Bill a provision to ensure that the deputy governors and the chief executive of the FCA have a right to voice their concerns to the Chancellor of the Exchequer.