Bank of England mulls pay rise for its court

"Just" £15,000 for three days work a month.

The Financial Times' Patrick Jenkins reports that Bank of England officials are considering boosting the pay of the non-executive directors in the Bank's "court" (its governing body):

The eight external non-executives in the 12-seat “court” – as the BoE’s governing body is named – are paid just £15,000 a year for a time commitment of three days a month. The chairman of the court, Sir David Lees, who works three to four days a week in his role, is paid £30,000.

“This needs to change,” said one person who is backing the reforms. “£15,000 is pitiful. It suggests people are only turning up for tea.”

Although "just £15,000" is actually a pro-rata salary of over £150,000 per year, hard for most to reconcile with the phrase "pitiful", there's a new urgency to getting this sorted out sooner rather than later. With the demise of the Financial Services Authority, which was disbanded at the end of March, financial regulation has been split between the new Financial Conduct Authority, which is operated under the aegis of the Treasury, and two bodies run by the Bank of England: the new Prudential Regulation Authority, and the Bank's own Financial Policy Committee.

On top of that, the Bank also now has an explicit remit to protect financial stability in the UK. All of those changes have made the danger of regulatory capture (when a regulator begins serving the interests of the industry they are regulating over the interests of the state) a more pressing issue than it has been for much of the bank's past; and one of the key ways of avoiding that capture is to pay the regulator enough that they don't find themselves beholden to those they are regulating.

Of course, that's less of an issue in the Bank of England than it is elsewhere. For one, sitting in the court remains a part-time job. A number of the members have other work which hardly leaves them penniless. The managing director of Lloyds Banking Group, the chairman of Legal and General Group and the managing partner of Grovepoint Capital are unlikely to find themselves suddenly corruptible because they spend a few days each month working for less than their normal pay; and regulatory capture is less of an issue if the industry being regulated already has half the seats at the table.

Which is probably why the key argument being made internally is one of perception. As one reformer tells Jenkins:

Continuing to call this body the court and paying people so little conveys the wrong impression externally.

But perception differs inside and outside the industries the Bank regulates. While it may be important in conversations with other people working in the city, there's a markedly different perception of the bank in the real world. While it's insulated from public opinion to a certain extent, it may still be a good idea for the court to let the new financial regulatory regime bed in before awarding themselves pay rises – because right now, the crash is still firm in people's minds, and that is something which doesn't justify a large salary at all.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty
Show Hide image

As long as the Tories fail to solve the housing crisis, they will struggle to win

The fall in the number of homeowners leaves the Conservatives unable to sell capitalism to those with no capital. 

For the Conservatives, rising home ownership was once a reliable route to government. Former Labour voters still speak of their gratitude to Margaret Thatcher for the Right to Buy scheme. But as home ownership has plummeted, the Tories have struggled to sell capitalism to a generation without capital. 

In Britain, ownership has fallen to 63.5 per cent, the lowest rate since 1987 and the fourth-worst in the EU. The number of private renters now exceeds 11 million (a larger number than in the social sector). The same policies that initially promoted ownership acted to reverse it. A third of Right to Buy properties fell into the hands of private landlords. High rents left tenants unable to save for a deposit.

Rather than expanding supply, the Tories have focused on subsidising demand (since 2010, housebuilding has fallen to its lowest level since 1923). At a cabinet meeting in 2013, shortly after the launch of the government’s Help to Buy scheme, George Osborne declared: “Hopefully we will get a little housing boom and everyone will be happy as property values go up”. The then-chancellor’s remark epitomised his focus on homeowners. Conservative policy was consciously designed to enrich the propertied.

A new report from the Resolution Foundation, Home Affront: housing across the generations, shows the consequences of such short-termism. Based on recent trends, less than half of millennials will buy a home before the age of 45 compared to over 70 per cent of baby boomers. Four out of every ten 30-year-olds now live in private rented accommodation (often of substandard quality) in contrast to one in ten 50 years ago. And while the average family spent just 6 per cent of their income on housing costs in the early 1960s, this has trebled to 18 per cent. 

When Theresa May launched her Conservative leadership campaign, she vowed to break with David Cameron’s approach. "Unless we deal with the housing deficit, we will see house prices keep on rising," she warned. "The divide between those who inherit wealth and those who don’t will become more pronounced. And more and more of the country’s money will go into expensive housing instead of more productive investments that generate more economic growth."

The government has since banned letting agent fees and announced an additional £1.4bn for affordable housing – a sector entirely neglected by Cameron and Osborne (see graph below). Social housing, they believed, merely created more Labour voters. "They genuinely saw housing as a petri dish for voters," Nick Clegg later recalled. "It was unbelievable." 

But though housebuilding has risen to its highest levels since 2008, with 164,960 new homes started in the year to June 2017 and 153,000 completed, this remains far short of the 250,000 required merely to meet existing demand (let alone make up the deficit). In 2016/17, the government funded just 944 homes for social rent (down from 36,000 in 2010). 

In a little-noticed speech yesterday, Sajid Javid promised a "top-to-bottom" review of social housing following the Grenfell fire. But unless this includes a substantial increase in public funding, the housing crisis will endure. 

For the Conservatives, this would pose a great enough challenge in normal times. But the political energy absorbed by Brexit, and the £15bn a year it is forecast to cost the UK, makes it still greater.

At the 2017 general election, homeowners voted for the Tories over Labour by 55 per cent to 30 per cent (mortgage holders by 43-40). By contrast, private renters backed Labour by 54 per cent to 31 per cent. As long as the latter multiply in number, while the former fall, the Tories will struggle to build a majority-winning coalition. 

George Eaton is political editor of the New Statesman.