Bank of England ‘failed’ UK during financial crisis, says Andrew Tyrie
The former MP has warned against ‘groupthink’ at the central bank.
The Bank of England “failed” the UK during the last financial crisis, a former MP tipped to head Britain’s financial watchdog has said, as he cautioned against “groupthink” at the central bank.
Andrew Tyrie, best known for his time as chairman of the influential Treasury Select Committee, said it was important to encourage dissent among Bank policymakers.
“The Bank failed us when the crash came. There was groupthink. They were part of the same groupthink as everybody else.”
His criticism raises further questions over the Bank’s handling of the crisis under Lord Mervyn King, who served as governor from 2003 to 2013.
“It’s Parliament’s job above all to make sure that groupthink – ever present in any organisation – does not take root and to do everything they can to hack away at it where they see fit.”
But there is a fine balance to be struck, Mr Tyrie warned, saying that politicians must also avoid micromanaging the Bank’s process for setting monetary policy and maintaining financial stability.
“It’s also the responsibility of the Treasury committee, and Parliament generally, to give the Bank a chance – to avoid grandstanding and to accept ‘I don’t know’ as an answer, to accept subsequent detailed written explanations as a substitute for oral requests.
“All of those, I think, are reasonable things for the Bank to hope for from Parliament.”
Mr Tyrie – who is expected to throw his hat into the ring to lead the Financial Conduct Authority – made the comments during a panel at the Bank of England’s independence conference in London.
The former Tory MP, who stood down from Parliament at the General Election earlier this year, also pointed the finger at politicians for saddling the central bank with unwanted responsibilities.
“The Bank should publicly, if necessary, resist overload of responsibilities.
“I think the Bank is very vulnerable to politicians who have a problem and then decide, well let’s hand it over to someone else to try and handle it.
“The FCA (Financial Conduct Authority) and FSA (Financial Services Authority) before it were victims of that political culture, and the Bank might become so, indeed it might have already have begun to some degree.”
It echoed comments made during an introductory speech by Bank governor Mark Carney, who reminded leaders that the Bank could not be relied on to solve housing problems and to mitigate the impact of Brexit on its own.
The London conference marks 20 years since the Bank of England became independent from government control in 1997.
It was suggested that left-wing government in particular may risk compromising the Bank’s autonomy.
“While the removal of independence itself might be unlikely, some change in the remit could in practice greatly compromise independence. It’s certainly not implausible.
“I think ‘people’s QE’ (quantitative easing) might fall into this category.”
Labour leader Jeremy Corbyn floated the idea of launching “people’s QE” in 2015, which would theoretically see the Bank print money to back UK infrastructure, rather than buying up assets to support lending and the banking sector.