Monetary Policy Committee: procedure

Bank of England and Financial Services Bill [Lords] – in a Public Bill Committee at 2:00 pm on 9 February 2016.

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Question proposed, That the clause stand part of the Bill.

Photo of Harriett Baldwin Harriett Baldwin The Economic Secretary to the Treasury

The clause is the last one to do with the governance of the Bank of England; the others we covered this morning.

The clause amends the existing statutory requirement to publish the Monetary Policy Committee minutes within six weeks of the occurrence of the meeting so that they will be published as soon as is reasonably practicable. That, too, was a recommendation of the Warsh review, which set out that it would improve “effective communication” of the MPC’s policy judgment and stated:

“Publishing the details of the vote contemporaneously would bolster individual members’ independence and accountability.”

The MPC accepted the recommendation and since last August has published the minutes of its policy meeting at the same time as its policy decision. The clause simply formalises that arrangement, enhancing the transparency and accountability of MPC practices.

The clause also reduces the number of times that the Monetary Policy Committee is required to meet each year, changing the requirement to meet at least once a month to a requirement to meet at least eight times in each calendar year and at least once in every 10-week period. That, too, is implementing a recommendation of the Warsh review, which concluded that the change would bring the Bank’s practice into line with that of

“other leading advanced-economy central banks” and support effective policy making.

The clause also amends the quorum rules in line with the changes to the MPC membership that I set out in my remarks on clause 7. Finally, clause 8 formalises processes and strengthens procedures on conflicts of interest for the MPC that are already delivered in practice.

Photo of Richard Burgon Richard Burgon Shadow Minister (Treasury)

Clearly, the decisions of the MPC are important for the financial markets. In essence, those markets may react immediately upon seeing the detailed minutes of the MPC meetings. A system in which all discussion between committee members was made public would be the ideal, because financial markets and, importantly, the general public would then understand the discussions being held behind closed doors. Running as a distant second to that is the less desirable policy of simply producing minutes of the meeting. The minutes, however, record only a general sense of the participants’ contributions. However, we have tabled no amendments to the clauses on the Monetary Policy Committee while the former committee member David Blanchflower conducts a review commissioned by the shadow Chancellor. We look forward to returning to debate the MPC in another forum at a future date, when we will be pursuing our amendments on the measure.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clause 9