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Q362 Mr Ruffley: You have painted an interesting picture-and I agree with it-of English exceptionism, contrasting the Bank of England's position on things like inflation targets compared with the ECB or the Open Market Committee at the Fed. I just wondered, having referenced the February Treasury document, A New Approach to Financial Regulation, what you make of the following ways in which it seems to me the Government is made responsible. I will just read out some examples from this report. "There will be a twice-yearly publication that the FPC produces, which will be submitted to the Treasury ministers." "A twice-yearly update from the Governor to the Chancellor of the Exchequer." "A flexible mechanism to allow the Treasury to ensure for each macroprudential tool provided to the FPC that the appropriate engagement by the FPC is carried out." Then we also have, in relation to the PRA, "A power for the Treasury to order an independent inquiry into the PRA's economy, efficiency and effectiveness." There are more, but it seems to me there are quite a lot of lines of accountability for the operation of this proposed system to Government Ministers. I wonder if you could tell us: is there anything comparable to that in your experience in other jurisdictions?

Dr Bingham: The United Kingdom has a very long shadow. There are many countries that look to the United Kingdom, partly because of their own history, so you can find other countries in the Westminster tradition where the finance minister has a significant say in the operation of the central bank. Outside of this tradition, the presidential system, the ECB, the Nordic tradition, that is less common.

There are two things I would say. First of all, it is compatible with a system of checks and balances. The other thing that I think is important to note is financial stability policy, unlike monetary policy, is one that involves a number of different authorities. You will need co-operation with competition authorities, public money might be put at risk so the need for consultation and collaboration in this area is greater than, for example, in the area of monetary policy where the central bank can operate on its own. So having in place mechanisms that very clearly specify who does what and when is-

Q363 Mr Ruffley: -desirable, but no one will have quite copied yet the English model because what I read out, of course, are proposals which are new. So it is not part of the British system now. What I am getting at is that, from what you have seen of the proposals in the February Treasury document, and I listed some examples, where the Treasury has its finger in the pie in quite a big way, that implies ministerial accountability when things go wrong. What I was asking you is: are there other examples in the world where the politician, the finance ministers, when things go wrong, take express accountability for any failings in the system. Could you give real live examples of countries or systems?

Dr Bingham: Yes, I will give you an example.

Mr Ruffley: Because I want to try and test whether anything similar to the proposals in this document, which we are all here to discuss and disinter, has occurred in any jurisdiction. More to the point, do politicians take responsibility by resigning? Are there any examples of that?

Dr Bingham: Well, let me cite an example outside, if you will, the Westminster tradition. I will refer to Indonesia. This is, in fact, legislation that is being considered. It is not put in place, but the proposal is that there would be a clear transfer of responsibility at the time of a crisis to the Minister of Finance. That is a proposal that is being considered in Indonesia. Obviously, in the situation where public money is being put at risk, this has to be the case. You ask: are there instances of? Well certainly, there are instances of Governments falling in failed economic performance and-

Q364 Mr Ruffley: Anything on all fours, where there is a financial regime that the Government is responsible for, where it goes wrong? Again what I am driving at is: where is the political accountability? We know this model-it is a stupid question to ask of the Fed or the ECB because there is English exceptionism at work in relation to the Bank of England, I understand that, so forget those countries, but is there anything comparable to the proposals that the Treasury in the UK published this spring in operation? Your answer is no. Is there anything that entrenches political accountability, ministerial accountability? You seem to be saying the answer is no, nowhere in the world, although Indonesia are looking at it.

Dr Bingham: This is virgin territory, the arrangements have not been set up. There was a reference to the FSOC arrangement where in fact the Secretary of the Treasury does chair the body. Now, of course, it is the presidential system whereby he is the Secretary of the Treasury so the political system is slightly different. The Government would not necessarily stand or fall. He himself would be held to account.

Q365 Mr Ruffley: Again, separating out the proposals in the UK from the ECB or the Fed, putting those on side, would you say for those systems that already veer towards more ministerial accountability, i.e. the Anglo-Saxon approach, that the newer proposals in the February document are tough?

Dr Bingham: Yes, I would say they are compatible with that provision.

Q366 Mr Ruffley: You approve of them? You think that the direct line up to the Chancellor of the Exchequer in fact is implied, or indeed express, in these proposals?

Dr Bingham: Yes, this is certainly compatible with ministerial accountability. It is implicit or even explicit in the proposals as they are put forward.

Q367 Mr Ruffley: Could I tempt you? Would you say of all the jurisdictions and regimes in all the rest of the industrialised world this entrenches more accountability in respect of finance ministers than anywhere else?

Dr Bingham: As I was saying before, the role of the Chancellor is correspondingly-I said that the Bank of England's discretion is constrained. The counterpart of that is a greater role for the Chancellor. It is very difficult to rank countries in terms of the degree of accountability, but certainly ministerial accountability in the current and proposed UK arrangements is present.

Q368 Mr Ruffley: Let us try to measure it. The last Labour Government, as a matter of fact-I am not being party political here-set in place a tripartite structure and took away the supervisory banking powers from the Bank of England in 1997-98 and gave it to the Financial Services Authority. Then when everything blew up in the financial crisis, everyone was pointing at everybody else. In the end it was, of course, the FSA, but the Bank of England said that they had a more inchoate responsibility to oversee financial stability. It was a mess, but it seemed to me that no question was ever really asked seriously as to why the Chancellor of the Exchequer did not resign and take responsibility for a fouled up, deficient form of financial regulation and banking regulation. That model failed, did it not? The politicians, the Treasury ministers, in the last Government did not take responsibility as you would rather have expected them to take responsibility. Would you agree with that?

Dr Bingham: I would certainly say that analysis goes beyond central bank governance. This is the question of accountability of ministers and governments.

Q369 Mr Ruffley: I am not sure that follows from what you were saying. You said something very interesting at the start of your evidence, which was that it is important to discover who is in control when public money is at risk. It seems to me you were pointing in the direction of finance ministers, whatever jurisdiction it is, ultimately being responsible. I agree with that, but it appears to me that even before 2010 in this country there were quite clear lines of accountability leading up to the Chancellor of the Exchequer of the day, under the tripartite system. I am just asking for your view on whether that should have resulted in some mea culpa.

Dr Bingham: Yes, that is the way of the UK political system and that is the operation of the UK political system. The Government did change but perhaps the facts speak for themselves.

Q370 Mr Ruffley: Yesterday we took evidence regarding how the FPC should carry out its work, and you mentioned frequency of meetings. They pointed to what is being put in place in America for an FPC-style secretariat, so the secretariat would be specialists in financial policy and they would be permanent staff and they would be working each day. Could you just confirm what your views are on that, because our understanding is that that is not particularly envisaged under the Government proposals in the February document?

Dr Bingham: No, I think that is right. It is not because the Bank will be providing that. It goes back to what I was saying before. Where you have a clearly separate body, whether it is an oversight body or a regulatory co-ordination body like FSOC, you need some mechanism for providing support, and if it is separated from, for example, the central bank, you need to provide this arrangement. For example, as I mentioned, in Norway they have a support mechanism for their oversight board. The FSOC will have its support mechanism. In the case of the ESRB, there is a support mechanism embedded within the ECB. In the case of FPC, it will be the Bank of England that provides this.

Q371 Mr Ruffley: What do you think of that?

Dr Bingham: I think that is a good way to extract synergies. It may be a cost-efficient way to-the Bank will have a spectrum of experience over the macroeconomic financial system. I can see that being a very viable model.

Mr Ruffley: Right, thank you.

Q372 Chair: Thank you very much for giving evidence today: very interesting. We understand your reticence given your job on the Government's forum, but if, on reflection, you are able to come off what a number of colleagues might feel is the odd fence here and there in response to questions, we would be particularly interested in that in writing. Thank you very much for coming today.

Dr Bingham: Thank you.