Introduction

1. In October 1997, in our report Accountability of the Bank of England,[9] we announced our intention to hold confirmation hearings to establish whether those nominated to the Monetary Policy Committee (MPC) of the Bank of England[10] fulfilled the criteria which we specified, namely demonstrable professional competence and personal independence of the Government. We believed that such hearings will not only encourage the Government to appoint people with the qualities required, but will also underline the independence, credibility and competence of the Bank, and involve Parliament more closely in an important process.

2. In our report, we said that if confirmation hearings were not written into the Bank of England Act 1998 (which in the event they were not),[11] we would hold them on a non-statutory basis. We subsequently discussed further the form which the hearings should take, and reported our conclusions to the House in our report Confirmation Hearings in February 1998.[12]

3. Among our decisions were that questioning should be restricted to the two criteria of professional competence and personal independence; that candidates should be asked to complete a preliminary questionnaire; and that a suitable time to hold the first hearings would be after the MPC appointments were made on a statutory basis under the Bank of England Act, which was brought into force on 1 June 1998. Accordingly, we took evidence from all nine of the Monetary Policy Committee members on 16 and 18 June and reported that, on the basis of the evidence, we found no reason to doubt that all the MPC members fulfil the criteria of demonstrable professional competence and personal independence.[13] In May 1999 we reported similarly on the re-appointment of Mr Ian Plenderleith and the appointment of Dr Sushil Wadhwani.[14] We reported more generally on the performance of the MPC in July 1998 in our Seventh Report, Bank of England: Operation of Accountability—One year on[15] and in July 1999 in our Eighth Report, The Monetary Policy Committee—Two years on.[16]

4. The terms of two of the four members appointed by the Chancellor, namely Professor Willem Buiter and Professor Charles Goodhart, expire on 31 May 2000. On 11 February and 4 May respectively, the Chancellor announced the appointment of two replacement members, Professor Stephen Nickell and Mr Christopher Allsopp.[17]

Conclusions

5. We took evidence from Mr Allsopp and Professor Nickell on 22 May; this evidence will be published shortly, together with their answers to the questionnaires and the CVs submitted. We are satisfied that Professor Nickell fulfils our two criteria for appointment. In the case of Mr Allsopp, however, we were disappointed in his answers to our questions, and believe that this casts doubt on whether he possesses the skills required to take part in meetings of the Monetary Policy Committee. We therefore call on the Chancellor of the Exchequer to think again about Mr Allsopp's appointment.

6. We continue to take regular evidence on the MPC's quarterly Inflation Reports, and plan to report further on the MPC within the next year.