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The Steely Resolve of Andrew Tyrie

Andrew Tyrie urges a still resentful public to recognise that Britain needs a thriving – not an over-regulated – financial sector. KEITH AITKEN discovers the agenda of the man who chairs Parliament’s Treasury Select Committee.

You might imagine that, after a year that included a general election, a historic shift to coalition government, sundry international currency crises, a Budget, an emergency Budget, a pre-Budget statement and a Comprehensive Spending Review, the Treasury Select Committee of the House of Commons might be inclined to take things just a mite easier in 2011. Nothing could be further than the truth.

It’s not just that the committee has two long-running and substantive reports in the pipeline, on financial regulation, and competition and choice in the banking sector. Interviewed by Chartered Banker as the Commons rose for the winter recess, its new chairman, Tory MP Andrew Tyrie, also revealed plans to lead it into largely uncharted territory in 2011 as a source of proactive input to economic policy-making.

He has already scored a significant coup by persuading an apprehensive Treasury that his committee should exercise a right of veto on removal of the chairman of the new Office of Budget Responsibility. “The most important thing for a head of the OBR is to know that his job isn’t vulnerable should he produce a forecast or projection with which the Chancellor might be unhappy,” Tyrie says. This, he is confident, is now achieved by providing that the chairman can only be fired with committee approval: an unprecedented power for a select committee, and one which Tyrie hopes may become a model for safeguarding the operational independence of other public agencies.

No less audaciously, the committee plans to take evidence on tax structure, ahead of reforms expected to be announced by the Chancellor in his Budget. Tyrie calls this pre-emptive approach positive and constructive: “Rather than be reactive to what the Government is doing, I think the committee should have an input to the framework by which decisions are taken.”

Yet, despite these interventionist ambitions, Tyrie is by no means an instinctive maker of regulation. Indeed, he urges a still resentful public to recognise that Britain needs a thriving, and not over-regulated, financial sector to consolidate recovery.

“I think the time has come to bring an end to the concerted banker-bashing,” he says. “There are things for which the banks deserve criticism and we shouldn’t shrink from making these criticisms. But people should now temper their enthusiasm for having a go with the knowledge, first, that this crisis wasn’t created just by the banks: that all sorts of individuals and institutions played a part in making mistakes – Chancellors, auditors, credit agencies, non-execs, regulators, individual and corporate lenders and many more.

“Second, what has happened has happened. What we now have to do is work out a way of re-establishing a stable and prosperous banking sector for the future. Is it possible to sustain a long-term recovery in the British economy without a return to normality? We are some way short of that at the moment – you only have to look at the lending numbers or the securitisation market.

“Let us be realistic about what can be achieved by regulation. It’s not going to solve all the financial world’s ills, nor are you ever going to change human nature. It’s an argument for caution about what can be achieved, and for a sense of balance.”

Like his opinions, Tyrie’s background is an often interesting mix of the conventional and the unconventional. On the predictable side of the equation is an education that took in a minor public school (Felsted in Essex), Trinity College Oxford and Wolfson College Cambridge; spells as a special adviser to two Chancellors, Nigel Lawson and John Major; and election in 1997 for the safe Tory seat of Chichester, followed by a couple of years as a junior front bench spokesman under Michael Howard and a purposeful if unglamorous climb up the Commons committee ladder.

But there are also surprises embedded in his career path. He is the son of a self-made, small businessman-furniture retailer and was his family’s first university-goer, which lends lustre to an eventual Woodrow Wilson scholarship and Fellowship of Nuffield College, Oxford. He found time while building a political career to make a success of grown-up jobs too, including a spell as senior economist at the European Bank for Reconstruction & Development.

While much of his output as a special adviser and a busy pamphleteer was fairly predictable free market fare, he was also active in forcing an Ombudsman’s inquiry into the Equitable Life scandal, which had adversely affected many of his constituents.

Perhaps it was that same sense of right and wrong that led him to found and chair the All-Party Parliamentary Group on Extraordinary Rendition, in which he formed an improbable double act with Labour’s Chris Mullin, ex-Tribune editor and maverick injustice campaigner, who describes Tyrie warmly in his Diaries as “dynamic, bright and sharp”.

His conscience was also evident as a forthright voice for reform on the committee set up to draw lessons from the MPs’ expenses scandal, and as a rigorous interrogator of banking witnesses on the Treasury Select Committee, which undoubtedly helped deliver his succession to the chair when his feisty Labour predecessor, John McFall, retired at the 2010 election.

It denotes a steely belief that those whom the system holds accountable had better submit to account. Tyrie scored a notable coup in December 2010 when he succeeded where others had failed in persuading the Financial Services Authority chair, Lord Turner, to promise to publish the FSA ’s confidential report into the circumstances surrounding the failure of RBS . The report has yet, at time of writing, to see the light of day. But Tyrie, recounting a robust exchange of correspondence with Turner, left no room to doubt that he would remain on the case until it does.

When we spoke, Tyrie was hoping to issue some committee thoughts on financial regulation early in 2011, reflecting the Government’s impatience to push ahead with its reforms. The central thrust of these is to replace the FSA with two new bodies, the Prudential Regulation Authority (PRA ), a branch of the Bank of England; and the Consumer Protection & Markets Authority (CPMA). There will also be a new Financial Policy Committee, formed from the Bank’s Court of Directors.

“Whether ours is an interim or a final report depends on the Government,” says Tyrie, with what some might interpret as genteel menace. He contrasts last summer’s breezy Green Paper with the vast legislation that created the FSA (he sat on the Bill committee), and remarks: “This is just as big, and it requires a great deal of careful thought – it’s strewn with important consequences. Seemingly minor changes could have very big effects on the industries involved and the livelihoods of the thousands of people who work in them. A seemingly small mistake could cost dear!”

Ministers have yet to indicate a formal timescale for implementing the reforms, but Tyrie is girded to resist impetuous haste. The committee has already expressed puzzlement as to who will be in charge of the new tripartite structure, and how the necessary oversight will be maintained on systemic risk. It is also demanding clarity on the new institutions’ relationships with one another and with other bodies.

“As a committee, we have already started asking questions about Bank of England accountability,” says Tyrie. “Our Central Bank and its Governor are about to become arguably the most powerful among the major democracies.

“We have to think very carefully about that – these issues are of huge economic significance.” Characteristically, he adds: “To his credit, and I mean that, the Governor has taken these issues of accountability to Parliament very seriously.”

The committee’s second major report, on competition in the banking sector, is also being timed carefully. Tyrie has quietly liaised with Sir John Vickers’ Independent Commission into Banking, and been assured that the Commission would regard it as complementary rather than intrusive to have sight of select committee evidence ahead of publishing its own interim report in spring. Tyrie sees the issue as being crucial in the coming year to securing the future of the UK as a world-class financial centre.

Though unwilling to pre-empt his committee’s formal findings, he is at pains to distinguish two separate questions on structural banking reform: whether to counter the concentration of ownership left by the bail-outs; and whether to reduce the exposure of savings to unreasonable risk by restructuring operations.

On the former question, he says: “It is clear to me that we need to find ways of ensuring that consumers get enough choice,” adding pointedly: “There is a tension for Government between what might secure maximum revenue and what might secure maximum competition.”

On the latter, he seems intuitively uneasy about calls for formal partition between the routine retail responsibilities and the investment functions of the banks. But, he says, there are several mechanisms that might achieve similar ends, such as contingency capital for bail-ins.

Tyrie sums up his approach to political reform thus: “What actually matters for a legislature, when holding an executive to account, isn’t just power. What’s required is government by explanation – we need sufficient leverage to force those in power to explain in detail what they are trying to achieve.” Financial institutions shouldn’t be too surprised if proposals emerge to subject them to a not dissimilar rubric.

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