In a four-page letter to Andrew Tyrie MP, chairman of the Treasury select committee, Sir Andrew – who was deputy governor of the BoE and a member of its monetary policy committee between September 2002 and January 2006 – outlined his concerns over the duality of the FPC, saying the current set-up may not be the best approach.
Sir Andrew wrote that the FPC had not only a remit to ensure financial stability but also “a secondary objective of economic policies and growth, which threatens a tortuous path for the FPC to take as circumstances alter over time”.
The letter was a response to a request from Mr Tyrie to outline why Sir Andrew felt the FPC could not fulfil its obligations.
Sir Andrew wrote: “The result of the dual mandate is the danger of a perception of interference by government, who will naturally be anxious to insist of the primacy of their growth or other policy endeavours.
“But it is also confusing for the public, which can be forgiven for being unsure as to what the FPC is really meant to be doing: pursuing financial stability or promoting growth.”
He suggested letting the FPC focus on financial stability, but giving the Treasury ultimate “power of override”, while the government focuses on growth.
Derek Bradley, founder of online advisory forum Panacea Adviser, said: “The FPC works until it does not, but for whom? Politicians only, I suspect, as I have little doubt the average guy on the street will neither care nor feel they have any influence. Rather like Blackadder’s General Melchett sending troops over the top to meet their fate, they meet the outcome with stoicism and nothing else.”