Select Committee on Treasury Minutes of Evidence

Examination of witnesses (Questions 140-159)



Mr Cousins

  140. Since you have made some written comments, Sir Alan, I thought it would be helpful to say this. When you appeared before the Committee, and you will realise I am not trying to personalise it unduly, you did make those comments. You always gave the appearance of somebody (a) who did not want to be here, (b) did not want to answer any questions, and (c), if you were called upon to answer questions, you were going to bat all day, even if you did not score a single run.
  (Sir Alan Budd) I admit that in that article to which you allude. Of course people will always go for an easy life. I start by saying I had a lower public profile as a member of the Monetary Policy Committee than any of my colleagues, and this suited me perfectly well. I behaved as if I were still a civil servant and never gave on-the-record interviews and never spoke to the press and so on. I kept very quiet, but that was because I was allowed to do so, and of course you will be up against this type of defensive behaviour. The other thing I would do while sitting here would be to think, "Well, this is good, they are going on about the euro again and this will last half an hour and then there will be some other discussion about something else and that will last half an hour".


  141. To be honest, it is only one member.
  (Sir Alan Budd) Whatever, and of course one will avoid hard questioning if one possibly can. That is only understandable but I do think it is your task to make life uncomfortable.

  142. There is one problem for us, the Governor is chairman of the Monetary Policy Committee and inevitably questions are directed to him and he quite likes questions being directed to him. How do you suggest we avoid that?
  (Sir Alan Budd) I think it is perfectly reasonable that there are questions which are a chairman's type which are rightly addressed to the person whose role is chairman, but all the time you must remember that the Governor is for most of the time a single voting member of the Committee, with exactly the same voting power as others. From time to time, of course, he can exercise a casting vote.

  143. That is possibly true but we do note that the full-time members of the Bank are slightly apart from the independent members and they do exercise a kind of discipline. That is not true?
  (Professor Buiter) No, I do not think that is true. You have the power to direct the questions. This is a ball which ought to be in the Committee's court, if you do not want the Governor to speak all the time, ask somebody else a question.

Mr Cousins

  144. Do you not think that the Governor and the Deputy Governor are playing a deliberate double act and political game in which the Deputy Governor acts as the counter-inflationary hawk so that the Governor can seen amiable and consensual?
  (Professor Buiter) No, I do not think so.

  145. You do not think so?
  (Professor Buiter) Definitely not.

  146. You think that is a real difference of approach?
  (Professor Buiter) What you see is the Governor and the Deputy Governor and they are just who they are. They do not play any games.
  (Sir Alan Budd) If I may, Chairman, I cannot allow Mr Cousins to leave unanswered his view that I did not want to be here. Of course I was always delighted to be here, there is nothing I would prefer than to spend my time here in this Committee.

  Chairman: I note that. Mr Sedgemore?

Mr Sedgemore

  147. Picking up on that, in a bit of a whinge the Governor has made it clear both in the House of Lords and before this Committee that when people come before us at the confirmation hearings instead of offering them tea, two sugars and a biscuit, we ask them questions, some of them awkward, and he does not think that is right. Clearly, Professor Buiter has made it clear we should ask tough questions, I think Sir Alan wants tough questions but does not want to answer them. What is your view on this, Mr Flemming? Do you think the Governor's approach is we should not upset people?
  (Mr Flemming) I do not know about upsetting them being a virtue, but asking tough questions is a virtue. There is no point in inviting them along here and giving them tea and biscuits, unless you want to get to know them so that next time you see them and do ask them tough questions you have a slightly better rapport with them than might otherwise be the case. I have nothing against tough questions. If I can just go on a little, I think Professor Buiter when he referred to real confirmation hearings was considering a situation where—and it is not quite clear where we are at the moment—the taking-up of the appointment would be formally conditional on approval by the Committee. I think that that could actually blur the lines of accountability, and I am rather in favour of not doing that, partly because I believe the extent of the delegation by the Chancellor to the Bank of England and the Monetary Policy Committee is or should be actually rather limited, and the extent to which he can dissociate himself from the consequences of the Monetary Policy Committee pursuing the target he has given them is all part of the package. This links on also to the question of the consequences of monetary policy, reactions to exchange rates or fiscal policy. I think part of that, holding the Chancellor responsible to this Committee and the whole House and the people, is that it is highly desirable that the people who are doing the implementing should be unambiguously his nominees, and if he appoints incompetent people that will show up in the performance for which he should be held accountable by this Committee and the House. So I would have mixed feelings about making the hard questions lead up to a thumbs-up or thumbs-down by this Committee which would be decisive.

  148. That strikes me genuinely as a bizarre answer. First of all, because you say you have got mixed feelings, well we cannot deal with mixed feelings, we are grubby politicians, we have to take a decision one way or another. Secondly, you say that it would be a good idea if the Chancellor puts up somebody who happens to be grotesquely incompetent and we actually spot the person who is incompetent—we have actually suggested that one person (let me choose my words carefully) was not fit for the job—and he makes a mess of it. That really would abuse the system. "Chancellor appoints nutter, Committee sanctions nutter", we really cannot have a system like that, can we? Am I not right in saying, and this is my question, that there is no point in our holding confirmatory hearings if in fact when, on the very rare occasions, we conclude somebody is not fit for the job, the Chancellor of the Exchequer and I am sure in conjunction with the Governor of the Bank of England both get the sulks, do not accept our decision and in effect hold Parliament with contempt? That is not a desirable position.
  (Mr Flemming) I did not say it would be a good idea if a lunatic were nominated, what I did say was if the Chancellor were to go outside the central range of appointees that is something that the Committee might note, but if the effect of that were to prevent the appointment it would provide the Chancellor with an excuse at some stage, if he was held to account for some of these things, that he had not been able to get the decisions he would have hoped from the Monetary Policy Committee because his hands were being tied in relation to appointments.

  149. So what is the point of the hearings? I have to say I did not go to the last confirmatory hearing because I was appalled at the Chancellor's and the Governor's response to the fact that we, the Committee, collectively decided Mr Allsopp should not be on the Monetary Policy Committee. What is the point of us turning up?
  (Mr Flemming) I am not quite sure, and I am not sure to whom that question should be addressed.

  150. It is being directed at you at the moment.
  (Mr Flemming) I know, but I am not sure I am in a position to justify this particular feature of the institutional arrangements. I am not sure, when they are called confirmatory hearings, whether they are—and Professor Buiter used the distinction—real confirmatory hearings.


  151. We always put them in inverted commas because it is accepted we have no power.
  (Mr Flemming) I do believe—and this is perhaps getting close to the tea and biscuits and sympathy—it may be very useful to the Committee when there is a new member being appointed to have a discussion with that person, to get some idea of where they are coming from, to get some idea of their competence, which would provide a basis for some of the subsequent hard questioning which my colleagues have suggested it is entirely appropriate should be directed to members of the Monetary Policy Committee. To have a preliminary discussion, among other things, provides a basis of how they look at the world and their analysis against which you can test the explanations they give subsequently of their voting record, when it was suggested that the coherence of their positions would be an important part of the whole process.
  (Professor Buiter) I agree. I agree with the Governor on the issue of tough questions. I am in favour of tough questions about monetary policy and about accounting for why one voted the way one did. I am not in favour of the sort of verbal muggings which are not connected to the substance of monetary policy. It is not a question of giving people a hard time but I am in favour of hard questions about monetary policy issues.

Mr Sedgemore

  152. Our brief is actually to find out whether people are (a) capable of independence and (b) competent.
  (Professor Buiter) I agree.

  153. That crosses over with the question of monetary policy but it clearly has a slightly wider implication. Is there something wrong with that brief, that we should find out whether people are going to be genuinely independent?
  (Professor Buiter) Of course not.

  154. Or find out whether they are going to be competent?
  (Professor Buiter) No, of course not.


  155. As it happens, I did not agree with the collective decision made by the Committee on that person, but do you not think frankly that members of the Monetary Policy Committee, part of whose remit is to explain their decisions, ought to be able to deal with questions of any nature from this Committee, or any other questions? That is part of the job. It is not just sitting there in an ivory tower making good decisions about monetary policy, it is also then being able to explain them in public. I accept we have to have a responsibility as far as our language and the tone of our language is concerned, but, on the other hand, we are not choosing a lot of shrinking violets.
  (Professor Buiter) That is true but there are ways of doing things, that is all.
  (Mr Barrell) Can I comment on that, as in some senses an outsider from some of these institutions? Obviously this Committee should have a role and I would argue a stronger role than it has in confirmatory hearings, but I am sure the Committee would also remember that the ability to answer questions quickly and fluently is either something you have or you can learn but not everybody has it. For instance, if that was the only test of membership, Sir John Hicks, who was a Nobel Prize winner, would have been excluded from the Monetary Policy Committee because he thought slowly. He would never answer a question immediately, he would think about it, sometimes for a day, but he would have been a very valuable member of the Monetary Policy Committee. There are many more characteristics of a good economist and a good decision-maker in the monetary arena than being able to answer questions quickly and fluently. Sometimes quick and fluent can be glib.

Mr Sedgemore

  156. Could I put a question to Mr Flemming who I see is the Warden of Wadham College, Oxford and could I preface it by saying that after the Committee had turned down Mr Allsopp, I got a letter from John Eatwell, the President of Queens' College, Cambridge, who said in his letter that he was shocked that we had rejected Mr Allsopp, that he had a brilliant career at Oxford, that he was academically more distinguished than Professor Goodhart and that he was more distinguished than Professor Nickell, who John Eatwell had assumed we had let go through on the nod. I wrote back and said basically that we could not base our decisions on people's academic careers at Oxford 30 years ago, we had to look at the people in front of us, we were not mesmerised by the old Oxbridge establishment and we did what we thought was best for Parliament, for democracy and we had nothing to apologise for—because he had asked for an apology—and we were just doing our duty. Is there not something odd, Mr Flemming, and something wrong—and maybe this is at the bottom of some of the criticisms of this Committee, from the Governor and others—when Lord Eatwell, one of New Labour's elite, a former adviser to a Leader of the Labour Party and a member of the old Oxbridge establishment, writes to me in defence of Mr Allsopp, another of New Labour's elite, another former adviser to a Leader of the Labour Party and another member of the old Oxbridge establishment? There is an impression here of the Oxbridge old boy network pervading Parliament, the Bank of England and even the Labour Party, and is that not a bit distasteful?
  (Mr Flemming) Yes. I should, of course, declare an interest as a long-time—

  157. That is why I was asking you.
  (Mr Flemming) Maybe you declared it for me.


  158. Mr Sedgemore was also at Oxford.
  (Mr Flemming) I was not merely at Oxbridge but I am a long-time friend and colleague of Christopher Allsopp.

Mr Sedgemore

  159. I was staggered when he said that Mr Allsopp was academically more distinguished than Professor Goodhart.
  (Mr Flemming) I would not have written in those terms.

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