Andrew Tyrie: The Bank of England needs to be more accountable to Parliament
By Matthew Barrett
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Mr Tyrie advocated making Mervyn King, the Governor of the Bank of England and Chairman of the Monetary Policy Committee, more accountable. Mr Tyrie said:
"Well, there might be nothing wrong with [greater powers for the Bank of England] but if we're going to do that we've got make sure that he's accountable to Parliament and to people who are actually going to be affected by his decisions. Take for example the decision to take out a mortgage: he's going to be given the power to decide loan-to-value ratios, as they are called. He's going to effectively have the power to decide whether you or your kids can have a mortgage, and if you're going to hand that sort of power to an unelected official, then we have got to find a way of making sure he's fully accountable. There's a second, big issue there too, which is that so much power is now going to be vested into this Bank of England super-quango to end all super-quangos that we might create a position where we have a governor who is a single point of systemic risk to the whole economy if he starts making the wrong decisions."
"...when a crisis starts to break, or we get near a crisis, we must have one person in charge, and they must be democratically accountable"
Mr Tyrie offered the Monetary Policy Committee's current level of scrutiny as a well-functioning policy:
"The scrutiny of the Monetary Policy Committee, the body which decides how we keep control on inflation, that has worked. And it's worked mainly, I think, not only because that committee comes before the Treasury Select Committee and explains very fully what it is doing, but also that all the key papers are provided."
Also appearing on Radio 4 to talk about the Bank of England today was David Laws, the Lib Dem former Chief Secretary to the Treasury. Although he wasn't re-appointed to ministerial office at the last reshuffle, Mr Laws will still have hopes of office at some point in the future, and his appearance will count as part of his rehabilitation towards that end.
Laws' remarks focused on bubbles in the market - Laws said new agencies set to replace the Financial Services Authority will give governments the tools...
"...to intervene, to deal with the problem in one part of the economy, rather than using the rather blunt club of the interest rates because in the period after 2003, where we had a build-up of credit in the private economy as well as the public economy, there was a view that we couldn't put up interest rates because we were meeting the inflation target and because it would have hit businesses, so we've now devised a system where, in an ideal world, this new organisation will be able to target those specific parts of the economy where there appear to be bubbles being created, particularly the housing market."