My Lords, I thank the noble Lord, Lord Tunnicliffe, for his introduction to his amendments. We discussed the Bill’s changes to the arrangements for the financial stability strategy at Second Reading. I hope to address the issues raised during that debate and some of the points that the noble Lord has just raised again. As I said earlier, legislation generally confers powers and duties on the Bank of England in two ways: either directly on the Bank or on a statutory committee of the Bank, such as the Financial Policy Committee. Consistent with this approach, Clause 5 moves responsibility for determining and revising the Bank’s financial stability from the court to the Bank. I reassure the noble Lord and the Committee that the court, as the body responsible for managing the Bank’s affairs, will retain ultimate responsibility for determining the financial strategy. But by naming the Bank instead of the court, we would grant the court the ability to delegate production of the financial stability strategy to those best placed within the Bank.
I argue that this flexibility is important given the broad range of policy that the financial stability strategy covers, which obviously extends beyond the responsibilities of the Financial Policy Committee. For example, responsibility for resolution policy, regulation of financial market infrastructure, note issuance and macroprudential policy are held within separate parts of the Bank, but the financial stability strategy will need to cover all these areas and others to be truly comprehensive. The clause as drafted does not affect the court’s ultimate responsibility for determining the Bank’s strategy, while granting the court additional flexibility as to who within the Bank undertakes the work to pull together
the actual document. As I have said, the court will be able to delegate production of the strategy within the Bank but, as the noble Lord, Lord Tunnicliffe, asks, who will be left holding the pen? It is for the court to determine who is best placed to produce the strategy, and this may shift over time as the Bank decides to prioritise particular elements of its responsibilities. However, it is clear that a document of this importance will require significant engagement by the Bank’s senior management. I expect that the Bank’s governors will all be heavily involved when the strategy is determined or revised. I should add that there is no intention to increase the role of the Treasury in the Bank’s financial stability strategy. As I have just said, the court will be responsible for the strategy, although it will be required to consult Her Majesty’s Treasury, as now.
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Amendment 5, put forward by the noble Lords, Lord Tunnicliffe and Lord Davies, would undo the changes I have outlined. The amendment would limit the court’s powers to delegate the production of the strategy elsewhere within the Bank, as the court may not delegate any duty or power expressly conferred on it by statute. As the ultimate responsibility for determining the strategy would rest with the court in both cases, the amendment would have little impact on the governance or accountability of the Bank, but would curtail the flexibility of the court in determining who should produce the strategy. I hope that my remarks have reassured your Lordships that the court—I repeat, the court—will remain ultimately responsible for determining the Bank’s financial stability strategy and that all concerns about “amorphous entities” have been purged. For that reason I ask the noble Lord to withdraw the amendment.
The second amendment tabled by noble Lords seeks to ensure that the Chancellor must be consulted before the strategy is set or revised. The existing provision requires the Treasury to be consulted, and this is the more usual provision. This does not mean that the Chancellor is not consulted: the Chancellor would obviously be kept fully informed of anything as important as the adoption of a new financial stability strategy by the Bank. However, where the Bank is proposing a minor revision of the strategy, it may be more appropriate for a junior Treasury Minister to take the lead in considering the Bank’s proposals. Retaining the existing drafting provides this element of flexibility. The Bank is required to produce a financial stability strategy not every year but every three years, so the 2013-14 strategy is still current. Given that, the amendment is unnecessary, and I ask that noble Lords do not press it.