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Osborne rejects TSC call for extra independents on FPC

Chancellor George Osborne has rejected a call from the Treasury select committee to appoint another external member of the interim Financial Policy Committee.

The interim FPC has been established to prepare the ground, in advance of legislation, for the creation of the FPC as the body responsible for the stability of the financial system.

The committee made the call in June after the Chancellor appointed Alastair Clarke as an external member. The committee says having worked at the Bank of England and the Treasury for nearly 40 years raises questions about being able to consider Clarke external.

Speaking at a Treasury select committee hearing on the accountability of the Bank yesterday, Osborne defended Clarke’s “considerable experience” saying it meant he knew “the tricks of the trade”.

He said: “If the recommendation is to appoint an extra external member then I am not accepting that recommendation.”

However, he seemed to accept the committee’s concerns over Clarke’s lack of independence by suggesting that he would not be kept on the FPC proper.

He said: “I have not yet announced the statutory FPC although I hope some of the members enjoying being on the interim FPC and agree to be on the statutory committee, I do not think it is likely Alastair will be a member of the permanent, statutory FPC.”

During the session Osborne also announced the appointment of former Investment Management Association chair Robert Jenkins as an external member of the interim FPC to fill the vacancy left after Sir Richard Lambert turned down the position.

Osborne defended the Bank’s court of director’s after its chairman Sir David Lees appeared before the committee in March with three board members. They were Confederation of British Industry president Sir Roger Carr,  ex-Lloyds TSB Scotland managing director Lady Rice and TUC general secretary Brendan Barber.

After the hearing, TSC member and Labour MP Chuka Umunna said he was “distinctly unimpressed” with their performance and that it appeared Bank governor Sir Mervyn King had the board ”under his thumb”.

Osborne said: “They clearly had a challenging session, and that is not a complaint about how you asked your questions. But I would point out that there are people of very considerable financial services expertise and you happened to have the people with non-financial services experience.”

Osborne said that the regulatory switch was on course to be in place by the end of 2012.

At the British Bankers’ Association international banking conference in London last week TSC chairman and Conservative MP Andrew Tyrie said the committee would continue to push for competition to be placed “at the heart” of the regulators.

However, Osborne told the committee that he had given the Financial Conduct Authority a duty to promote competition “so far as it is compatible with its main objectives” as a result of the committee’s recommendation, suggesting that he is unlikely to move further.

He said: “We have listened to recommendations of the TSC and given the FCA a duty to promote competition.”


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