The hon. Gentleman was one such Member.
We are in agreement with all their lordships’ amendments, and this first group demonstrates that the Government have listened to Parliament’s concerns and have amended the Bill accordingly.
The governance of the Bank of England was one area of concern, and it was debated at length in this place and the other place. The Government agreed that the Bank’s expanded responsibilities warranted taking another look at its governance arrangements. The Treasury Committee produced an excellent report on this subject just over a year ago—I note that the Committee Chairman, my hon. Friend the Member for Chichester (Mr Tyrie), is present—recommending that the Bank’s non-executive directors be given a greater role in scrutinising the Bank’s work, including the ability to commission and publish reviews of the Bank’s performance.
The current version of the Bank of England Act 1998 does not actually describe the non-executive directors as non-executive, but various amendments before us in this group will finally clarify the terminology in respect of the Bank’s court of directors by distinguishing explicitly between the non-executive and executive members.
On more substantive governance matters, amendments 3, 6 to 9, 148, 149, 151, 152, 154, 155, 169, 172 and 173 fulfil the substance of the Treasury Committee’s recommendations in this area via the creation of a powerful new oversight
committee made up of the non-executive directors of the Bank’s court of directors. The oversight committee’s remit covers the entirety of the Bank’s objectives and strategy. This remit is already broad enough to allow the oversight committee to look at any aspect of the Bank’s work it believes appropriate to examine, including the effectiveness of its crisis management co-ordination with the Treasury, as suggested in an amendment proposed by the hon. Member for Nottingham East (Chris Leslie). I am sure he will comment on that.
The oversight committee will have a statutory right to access the meetings and papers of the Financial Policy Committee and the Monetary Policy Committee, and it will have the power to commission reviews of the Bank’s performance from external experts or from the Bank’s own policy makers, and publish the reviews and monitor the Bank’s response to them. In line with the Treasury Committee report, these performance reviews will be undertaken retrospectively. The Committee recommended that they should take place at least a year after the period to be reviewed, in order to avoid second-guessing at the time of the policy decision. Just to be absolutely clear, the oversight committee’s remit to review the Bank’s performance is limited to the Bank’s objectives and strategy only; it does not extend to the Prudential Regulation Authority. The only role of the oversight committee in respect of the PRA is to determine the remuneration of the members of the PRA board. Because the PRA will be operationally independent in carrying out its statutory functions of regulation, it will be directly accountable to Parliament. The Government expect that the Treasury Committee will wish to summon the senior PRA executives and, where necessary, the non-executives to account for the PRA’s actions.
Amendment 167 will require the court of directors to publish a record of each of its meetings, fulfilling another of the Treasury Committee’s recommendations from its report. We have also listened to concerns in respect of the Financial Policy Committee, which focused on the role of economic growth in its decision making and the balance of its membership. Amendment 10 gives the FPC a secondary objective to support the Government’s economic policies, including growth, which will sit alongside existing requirements, such the brake on the FPC taking action that would damage long-term sustainable growth. Amendments 4, 5, 150, 156 and 157 aim to rebalance the FPC by removing one of the Bank members, leaving a voting membership of 10 people—five Bank members and five non-Bank members.
Amendments 16, 17 and 19 to 21 go further to increase the transparency and accountability of the FPC. The FPC will be required to prepare an explanation of each of its actions, setting out publicly the reasons for its decision to take the action and its reasons for believing that the action is compatible with the FPC’s objectives, including to contribute to economic growth, and the various factors to which it must have regard, including proportionality. The FPC is also required to include an estimate of the costs and benefits of the action, where it is reasonably practicable to do so.
Amendment 17 requires the FPC to review the decisions that it has already taken in order to consider whether the actions are still necessary, or whether they should be revoked or removed. That will help to ensure that the FPC’s directions and recommendations do not remain
in place for any longer than is necessary. The FPC must publish the explanations of its actions and a summary of its reviews in the next financial stability report.
The remainder of the amendments in this group represent further agreements made in the House of Lords in response to points raised in debate. Amendment 168 makes it absolutely clear that the Chancellor must always appoint a non-executive member of the court to be its chair. Amendments 174 to 176 continue the immunities from liability for damages that the existing regulators have and extends them to the new regulators. The Government have made amendments in the House of Lords to ensure that if the PRA or FCA commissions the other regulator, or the Bank of England, to carry out an investigation or produce a formal report on its behalf, the body that has been commissioned is also covered by the immunity.
This group of amendments represents a significant package of changes to the legislative framework for the Bank and the FPC, in response to points raised both in this House and in the House of Lords, and I commend them to this House.