TSC to question Osbourne over regulatory reforms
This afternoon the Chancellor will report to the Treasury Select Committee to answer fears about new legislation which will make the Bank of England the single most powerful institution in the country, the Telegraph reports.
Under the reforms, the bank is set to take responsibility for financial regulation, as well as gaining powers to prevent the next housing bubble and prohibit high-risk banking. However it appears that this will return Britain to the era of credit controls.
The Treasury Select Committee has considered much information regarding accountability, as the new laws will give immense economic powers to one unelected individual.
Many former rate setters believe that power should be given to the Chancellor not the Governor, as it would be taxpayers’ funds which would be at risk in a crisis.
Under the new system, a regulatory committee called the Financial Policy Committee (FPC) would be established, and would be accountable to the Court of the Bank of England. The FPC will make policy decisions and recommendations to the Prudential Regulation Authority, the replacement for the FSA.
Many believe that the FPC chairman should be separate from the Bank and Treasury to prevent any conflict of interests, while reinforcing its independence.
However, it is unlikely that Mr Osborne will get an easy ride today, especially from Labour members of the TSC, who are likely to question whether austerity has killed economic growth.
During the six months before March, growth stagnated, and growth forecasts in the last quarter are for just 0.3% to 0.4%.