Examination of witnesses (Questions 140-159)|
TUESDAY 6 FEBRUARY 2001
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.
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
(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?
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
(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 whereand it is not quite clear
where we are at the momentthe 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 incompetentwe have actually suggested
that one person (let me choose my words carefully) was not fit
for the joband 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 areand Professor Buiter used the
distinctionreal confirmatory hearings.
151. We always put them in inverted commas because
it is accepted we have no power.
(Mr Flemming) I do believeand this is perhaps
getting close to the tea and biscuits and sympathyit 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.
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
(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.
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 forbecause
he had asked for an apologyand we were just doing our duty.
Is there not something odd, Mr Flemming, and something wrongand
maybe this is at the bottom of some of the criticisms of this
Committee, from the Governor and otherswhen 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
(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.
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.