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Dr Adam Posen Post Monetary Policy Committee Debrief

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Dr Adam Posen Post Monetary Policy Committee Debrief House of Commons Treasury Committee Dr Adam Posen post Monetary Policy Committee debrief Oral evidence Tuesday 22 January 2013 Dr Adam Posen, former external member of the Monetary Policy Committee and President of the Peterson Institute for International Economics Ordered by the House of Commons to be printed Tuesday 22 January 2013 HC 897 Published on 14 February 2013 by authority of the House of Commons London: The Stationery Office Limited £6.00 The Treasury Committee The Treasury Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of H M Treasury, HM Revenue and Customs and associated public bodies. Current membership Mr Andrew Tyrie MP (Conservative, Chichester) (Chairman) Mark Garnier MP (Conservative, Wyre Forest) Stewart Hosie MP (Scottish National Party, Dundee East) Andrea Leadsom MP (Conservative, South Northamptonshire) Mr Andy Love MP (Labour, Edmonton) John Mann MP (Labour, Bassetlaw) Mr Pat McFadden MP (Labour, Wolverhampton South West) Mr George Mudie MP (Labour, Leeds East) Mr Brooks Newmark MP (Conservative, Braintree) Jesse Norman MP (Conservative, Hereford and South Herefordshire) Teresa Pearce MP (Labour, Erith and T hamesmead) David Ruffley MP, (Conservative, Bury St Edmunds) John Thurso MP (Liberal Democrat, Caithness, Sutherland, and Easter Ross) Powers The Committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk. Publication The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the Internet at www.parliament.uk/treascom. The Reports of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in printed volume(s). Additional written evidence may be published on the internet only. Committee staff The current staff of the Committee are Chris Stanton (Clerk), Lydia Menzies (Second Clerk), Jay Sheth and Adam Wales (Senior Economists), Hansen Lu, Matthew Manning (on secondment from the FSA) and D uncan Richmond (on secondment from the NAO) (Committee Specialists), Steven Price (Senior Committee Assistant), Jo Cunningham and Lisa Stead (Committee Assistants) and James Abbott (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Treasury Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 5769; the Committee’s email address is [email protected] List of witnesses Tuesday 22 January 2013 Page Dr Adam Posen, former external member of the Monetary Policy Committee and President of the Peterson Institute for International Economics Ev 1 cobber Pack: U PL: COE1 [SO] Processed: [12-02-2013 12:28] Job: 026897 Unit: PG01 Source: /MILES/PKU/INPUT/026897/026897_o001_db_corrected transcript.xml Treasury Committee: Evidence Ev 1 Oral evidence Taken before the Treasury Committee on Tuesday 22 January 2013 Members present: Mr Andrew Tyrie (Chair) Mark Garnier Mr Brooks Newmark Andrea Leadsom Jesse Norman Mr Pat McFadden Mr David Ruffley Mr George Mudie John Thurso ________________ Examination of Witness Witness: Dr Adam Posen, former external member of the Monetary Policy Committee and President of the Peterson Institute for International Economics, gave evidence. Q1 Chair: Thank you very much for coming in to FSA folded back in under its new name in the Bank give evidence to us this morning and, of course, some of England it is just going to get worse. of us had the benefit of some very interesting exchanges with the Banking Commission only a few Q3 Chair: What is the solution? Have you looked at hours ago. the accountability proposals of this Committee? Can I begin by asking you a question in relation to Dr Posen: Yes, I have, and I think— the appointment of Dr Carney? You said on that, and I quote, “You just don’t want to put too much power Q4 Chair: Specifically, the proposal that the court be in one person’s hands. And the new rules means the turned into a more meaningful board, which can UK Governor has enormous amounts of power and perform more of the corporate governance duties that discretion”. Is that too much power? most other institutions’ have boards to do. Dr Posen: In my opinion, yes. I want to say again for Dr Posen: Yes. If one takes the current structure as the record, Chairman, that I am very grateful for the largely given, I think that is a very big improvement Treasury Committee inviting me back. It is important you can make and the Committee is right to push that. to me to be able to continue to try to contribute to As you made clear in the hearings with the court—I your discussion, so thank you very much for that. think, roughly a year ago—the court has been excessively weak and has let the present Governor, Q2 Chair: We are grateful to you for coming, as was but whoever was Governor, get away with whatever— the Commission yesterday, bearing in mind you have considerable responsibilities over at the Peterson Q5 Chair: Is that an institutional weakness, the fact Institute these days. that they are not given tools institutionally and by Dr Posen: I have to make sure that the lights stay on statute, or does it have other sources? but yes, thank you for that. In terms of too much Dr Posen: It is related to the discussion we had power in one person’s hands, Mr Chairman, let me be yesterday with the Banking Commission. With any of clear, it is not so much anything to do with Mr Carney these things there is a cultural issue, which reinforces specifically. It is to do with the description of the job, the institutional matter and then the personnel matter. and then the amplification of the sense that it is this I think the important place to start is with the one individual through the contracting process—for institutional measures you and the Committee are want of a better word—that the Government engaged pushing. If you put the right people in with such a in with this person, but I think the fundamental thing setup that then will create the culture. Without is the design. One has to hope that the combination of wishing or hoping for any problems, there might have the FPC and the MPC together puts some sort of to be some incident early in the new court’s term check on any one individual having too much power. where they publically draw a line on something and It is not “power corrupts” in a trivial sort of clichéd send a message—not just for the sake of doing it; I sense. It is that, as I think I said to some of you at am sure there will be a reason for doing it—and that some point, I know full well that the Governor and will be an important precedent. the current two Deputy Governors basically work 18- If I may add one more sentence, Chairman Tyrie, that, hour days, seven days a week, 365 days a year. That in addition to empowering court in the ways you are does not give them time to reflect. That does not give talking about doing, a key thing for you to tell the them time to assimilate. That makes them Court of the Bank of England is that, for many of the understandably grateful, when they are in a good state operations of the Bank, the Governor should conceive of mind, for outside opinions, and resentful for being his job as more of a chairman than as an executive. harassed by outside opinions, in their perception, The Governor should be delegating to Deputy when they want to just get something done, and there Governors. Be it in the PRA area, the financial have been instances where, understandably, that has stability area or the monetary policy area, the run up against the Committee. I think now, with the Governor should be delegating more to the Deputy cobber Pack: U PL: COE1 [E] Processed: [12-02-2013 12:28] Job: 026897 Unit: PG01 Source: /MILES/PKU/INPUT/026897/026897_o001_db_corrected transcript.xml Ev 2 Treasury Committee: Evidence 22 January 2013 Dr Adam Posen Governors and the staff. That is well within the remit few major banks, which kept getting more of a refined court to say that is how they want the concentrated, and very few alternatives to that Bank to run. banking system for funding business. In fact, one could argue that, as bad as that was, at present the UK Q6 Chair: Given the current statutory framework, system is even more concentrated, with fewer banks, the new framework that gives the Governor so much and has fewer alternatives for funding in domestic executive leadership and authority, what is the currency for its companies. To me, that is a major prospect of this self-abdication you are proposing in worry going forward and a major part of the reason the long run? the UK has not recovered as well as it should have. Dr Posen: I view it not as self-abdication. I view it as The second thing, taking from the fiscal side of that imposed job definition, which a strong court, with the article, which is obviously very much in the news backing of this Committee, can impose. given today’s announcement about borrowing, is that the UK is not going to wake up one day and be Q7 Chair: Notwithstanding the Governor’s formal Greece.
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