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Banking Bill

As the noble Baroness has explained, her Amendments 199 and 200 would change the duration of the governor’s appointment from five years, as it is at present in Schedule 1 to the Bank of England Act 1998, to eight years. They would also limit the governor to serving only one term of office rather than a maximum of two, as provided for in Clause 233 of the Bill. The amendments would change the tenure of the governor. The current five-year term for the governor and deputy governor, as it was at that time, was set at the time of nationalisation in 1946 and has proved itself perfectly effective ever since. If the amendments stem from a concern that the governor is subject to additional influence or pressure as a result of the possibility of reappointment, I shall try to offer some comfort. As noble Lords are likely to be aware, governor and deputy governor appointments are made by the Crown on the advice of the Prime Minister and the Chancellor. The term in office is fixed in legislation, and Clause 233 would limit the appointments to a maximum of two terms. Such a restriction is quite common in the realm of public sector governance. The powers to remove a governor or deputy governor from office are captured in the Bank of England Act 1998, and, while such a removal requires the consent of the Chancellor, the reasons for doing so are limited and are effectively for the Bank to determine. Again as detailed in the Bank of England Act 1998, the remuneration and pension arrangements of the governor and deputy governors are set by the Bank, free of ministerial involvement. In future, vacancies for governor and deputy governor are to be advertised and to be conducted in a manner consistent with the principles of open competition, which were put in place for the recent recruitment of the deputy governor for financial stability. All of the elements relating to selection, duration of term, removal from office and level of remuneration are already subject to, at most, limited ministerial involvement. Having a maximum of two five-year terms in office offers a strong balance between certainty and continuity on the one hand and flexibility on the other. A five-year term for the governor with the possibility of a second term gives the individual a natural break point at which to consider whether they wish to continue in the role. It also gives them something to work towards and provides an opportunity to consider their performance. In contrast, a single eight-year term might discourage some strong candidates from applying, as they might not feel that they can make such a long-term commitment. I hear what the noble Baroness says in that respect, and she is absolutely right that the governorship of the Bank of England is a coveted position that carries great respect and esteem. But in an environment in which people increasingly seek flexibility in their life and the capacity to move between sectors—to move out of academia, perhaps, into the private sector and then back into academia or a banking institution—we should not lightly dismiss the idea that an eight-year term might be a deterrent, particularly if one is considering an applicant from outside the bank who, regardless of how well he or she conducts their research, may not be able to achieve absolute clarity as to whether it is a role they are truly going to be able to do well. As such, a five-year appointment with an opportunity to exit at that stage may well persuade a candidate to step forward, which they may not wish to do if they have to commit to a period of eight years. I agree that it is a matter of judgment. It is six of one and half a dozen of the other. I simply would not lightly reject the idea that a longer period of appointment might be a deterrent. To stretch it to absurdity, it if were a 15-year appointment, one would imagine that candidates of extraordinarily high quality simply would not accept. Where is the tipping point? Is it at five years or eight years? That must be a matter of judgment and experience. For that reason, I disagree with the amendments tabled by the noble Baroness, and I ask her to withdraw this one.