Chancellor can direct BoE in crises

The Chancellor will have the power to direct the Bank of England during future financial crises, under new proposals.

Guidance on the Financial Services Bill, published last week, says: “The Chancellor may deploy the power of direction following notification by the governor of a material risk to public funds. Such a change will enhance accountability for the use of public money in a crisis by putting beyond legal question where responsibility lies – with the Chancellor and the Treasury, accountable to the wider public through Parliament.”

The Government says the power is unlikely to be needed.

The Treasury select committee and the joint committee on the draft bill were both concerned that the powers were not clear enough on who would be in charge during a crisis.

Writing in his memoirs about the 2008 banking crisis, former Chancellor Alistair Darling wrote: “My frustration was I could not order the Bank to do what I wanted. Only the Bank of England can put the necessary funds into the banking system.”