Appointment of Bank of England bodies and independence of FPC

Explaining its decision to inquire into these issues, the Committee issued the following statement:

These appointments have drawn attention to the fact that the rules governing the appointment and conduct of members of the Financial Policy Committee, the Monetary Policy Committee and the Court of the Bank of England differ widely. This reflects the wider serious inconsistencies and complexities in the structure of accountability of the Bank of England, on much of which the Treasury Committee has already reported. Only partial and piecemeal remedies have been put in place in response to our recommendations. Many defects remain.

The Treasury Committee will examine the scope for safeguarding independence, and the appearance of independence, through codes, with the intention of bringing clarity, consistency and effectiveness to this aspect of Bank of England governance.

The Treasury Committee has also recently been concerned at developments which have raised questions about the independence of the FPC. These include: the non-renewal of a number of incumbent external members of the interim FPC, who had expressed independent views, to the statutory FPC; the de facto creation of a remit for the FPC by the Chancellor’s letter to the FPC; and the delay in, and lack of certainty about, the FPC being given a time varying leverage ratio tool.

The Treasury Committee will also examine the independence of the FPC as it is affected by its working relationship with other committees.

Chairman Andrew Tyrie MP, said:

The FPC is still finding its feet. It is crucial that its independence is safeguarded from the start.

It is therefore particularly important that the appointment process and early exchanges between the Treasury and the FPC don’t give the appearance that it has been compromised.