COMMONS

Many public appointments need more rigorous scrutiny, say MPs

26 February 2016

The Treasury Committee publishes 'scrutiny of appointments' report in the same week that Members of the Committee table an amendment to the Bank of England and Financial Services Bill. The amendment would give the Committee a veto over the appointment and dismissal of the Chief Executive of the Financial Conduct Authority.

Chair's comments

Rt Hon. Andrew Tyrie MP, Chairman of the Treasury Select Committee, said:

"Public appointments to quangos need more rigorous scrutiny. They have needed it for years. More of the most powerful appointments – of the Chief Executive of the FCA and the Governor of the Bank of England – should be subject to full pre appointment scrutiny. The Government continues to disagree, appealing to the ‘market sensitivity’ of these appointments. That is not an adequate explanation.

The time has come to entrench the independence of the post of Chief Executive of the FCA. On behalf of the Treasury Committee, I have tabled an amendment to the Bank of England and Financial Services Bill to give this effect. The Chief Executive of the FCA should be able to operate with the confidence that he or she cannot be dismissed without Parliament’s – the Treasury Committee’s – approval. The public, too, need to have confidence that the Government is not interfering with independent supervisors and regulators.

The OBR provides an appropriate precedent. In 2010 the Chancellor agreed that the appointment and dismissal of the head of the OBR should be subject to Select Committee approval. He also agreed that this would bolster the independence – and the perception of independence – of Robert Chote, to the benefit of both the Chancellor and the country. And so it has proved. The Chancellor has frequently alluded to the Chairman of the OBR’s independence from the Treasury to reinforce the credibility of the forecast. A similar arrangement should also be put in place to entrench the FCA's independence.

The OTS' independence certainly needs to be bolstered. The OTS cannot achieve much if it appears – whether fairly or not - to be a creature of the Treasury. It is crucial that the scope and limitations of its independence are fully understood by HM Treasury, the OTS, Parliament and the public."

The report

Appointments to the Office of Tax Simplification

The placing of the Office for Tax Simplification (OTS) on a statutory basis is welcome. To secure the independence of the Office for Tax Simplification's senior staff, the Government should ensure that those nominated as the Chair and Tax Director of the OTS are available for pre-appointment hearings before this Committee. The legislation should ensure that such appointments, and any dismissals, should only be made with the consent of the Treasury Committee. This will mirror the processes adopted for appointments to the Budget Responsibility Committee of the Office for Budget Responsibility. This is all the more important given that the OTS will be classed as an independent Office of the Treasury. (paragraph 12)

It is crucial that the scope and limitations of that independence are fully understood by HM Treasury, the OTS, Parliament and the public. (paragraph 13)

Appointment of the Governor of the Bank of England

This Committee agrees with its predecessor that giving Parliament the effective veto over the appointment and dismissal of the Governor of the Bank of England would bolster his or her independence. We therefore recommend that the draft Bank of England Bill be amended to reflect this.  (paragraph 20)

Appointments to the Prudential Regulatory Committee

The Bank of England and Financial Services Bill will create a Prudential Regulation Committee (PRC). Should the Bill be enacted, it is the intention of this Committee to hold appointment hearings with those who will sit on the PRC, in line with the present arrangements for those who sit on the Monetary Policy Committee and the Financial Policy Committee. The Treasury Committee will use the same criteria of personal independence and professional competence to assess appointments to the PRC as it does to the other policy committees of the Bank of England. (paragraph 23)

The Chief Executive of the Financial Conduct Authority

The previous Treasury Committee have recommended that there should be pre-appointment hearings for the Chief Executive of the FCA. We agree, and therefore the Government should ensure that it nominates its preferred candidate for the current vacancy in good time so that this Committee can undertake a pre-appointment hearing. However, in line with our recommendation on the appointment of the Governor of the Bank of England, to ensure their independence this Committee should have a statutory veto on appointments and dismissals to the post of Chief Executive of the FCA. (paragraph 26)

Overall

It has been the practice of previous Treasury Committees to consider two criteria when considering appointments to the Monetary Policy Committee, the Financial Policy Committee, the Budget Responsibility Committee and the Office of Tax Simplification. These criteria are personal independence and professional competence. The Committee will continue with that practice for all appointments to these bodies during this Parliament. (paragraph 42)

In considering the appointment of the Governor of the Bank of England, the 2010-15 Treasury Committee acknowledged the additional executive responsibilities of the position, reflected in its questioning and reporting. Governors and Deputy Governors of the Bank of England, or those who hold executive functions within an organisation may also expect additional commentary, along with the Committee's consideration of their personal independence and professional competence. (paragraph 27)

Consideration by the Treasury Committee of appointments to the Chair of the Court of the Bank of England or to the Chair of the Financial Conduct Authority will be more wide-ranging, and the Committee may set out a more detailed conclusion in its Reports on appointments to these posts. (paragraph 28)

Should the Treasury Committee disagree with any appointment which it has scrutinised, and should the person making the appointment, whether the Chancellor or another, not be swayed by its disapproval, it may refer its Report on that appointment for a debate by the whole House, as the previous Treasury Committee stated it might do when considering the appointment of the Governor of the Bank of England.  (paragraph 29)

Further information

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