Some time in the next couple of weeks the Minister of Finance will be announcing the members of the new (statutory) Monetary Policy Committee which assumes responsibility for monetary policy on 1 April. There will be seven of them, and only one serves ex officio (the Governor), so there will be six names to be announced. Almost certainly, the Deputy Governor Geoff Bascand will be one of them, and the new Assistant Governor for economics and financial markets, Christian Hawkesby, will be another. The fourth internal member is likely to be the new Chief Economist, but that position hasn’t been filled yet, so perhaps that is the source of the delay. And then there will be the three mystery part-time external appointees.
When I said that the Minister will announce the appointments, that shouldn’t be read as suggesting the Minister will have had much say (at least if the legal process has been followed). The appointments will all have been sorted out between the Governor and the Bank’s board – most of whom were appointed by the previous government. The Minister can reject nominations, but can’t impose his own candidate (although I have heard suggestions of him trying to inject names into the process). Those were the same rules that applied when the Governor was appointed.
(In addition, of course, the outgoing Secretary to the Treasury has nominated himself to be the first Treasury observer on the Monetary Policy Committee. It is a strange choice, both because the Secretary’s term expires very shortly (you’d have thought some continuity might be a good idea) and because any Secretary to the Treasury has perhaps 300 issues to keep on top of, and spending up to 50 days a year – the advertised expectation for external members – as a non-voting observer at the Reserve Bank suggests an odd sense of priorities. It looks like the sort of role one would normally expect a second or third tier person to take on.)
And thus monetary policy will be in the hands of a group of people not only themselves unelected, but appointed (in effect) by people who are not only unelected but are (a) typically faceless, known by hardly anyone, (b) lacking in much technical or policy capability and (c) largely unaccountable. Monetary policy may not seem overly important right now – it is over two years since the OCR changed – but it matters a great in serious downturns, and preparations for the next such downturn should be a significant issue for the Bank and the new MPC now.
And these people will take up their new statutory roles without a chance for us, or our elected representatives, to grill them, and to understand the thinking around monetary policy that they might bring to the role. That is, of course, so even for the Governor, because although he has now been in that job for almost a year, he’s not yet given a substantive speech on monetary policy (more concerned, it appears, with tree gods and the like).
In principle, the members of Monetary Policy Committee can agree to do speeches and interviews (under quite tight constraints, but still better than the nothing the Minister first intended). But you are very unlikely to hear any distinctive voice from the internal members of the committee (they after all, owe their pay, resources, and promotion prospects etc to the Governor). And I’m still expecting that the external members will be chosen in part for their willingness to come quietly and not rock (as he sees it) the Governor’s boat.
How much better if, before you take up office as a policymaker – and that is what the MPC are, exercising considerably discretion – you had to front up at an open hearing of a parliamentary select committee and explain your qualifications for the job, your views on monetary policy and macroeconomic management, and any questions about your background, potential conflicts etc, that MPs might think relevant. It is, of course, what happens in the United States. There, members of the Federal Reserve Board of Governors have to win Senate confirmation. That has some appeal, but I’m not proposing that – the US has a quite different system of government.
But in the United Kingdom, where the statutory Monetary Policy Committee system is relatively new (about 20 years old) they have something very much like what I’m proposing. Before taking up their appointments, new members of the MPC have to undergo a Treasury Select Committee hearing. The Committee can’t veto the appointment, and the whole House of Commons doesn’t get a vote. But an adverse report from the Committee can be a considerable embarrassment. In one case in the last couple of years, someone appointed as Deputy Governor actually stepped down after the report by the select committee. That she stepped down was probably better for the Bank of England and better for a sense of serious democratic scrutiny and accountability. Ministers might, in the end, be able to appoint pretty much anyone, but there is another layer of open scrutiny which they – and the nominee – have to be prepared for.
Sceptics will cast doubt on what value our local version, the Finance and Expenditure Committee, might add in the process. The UK Treasury Select Committee is regarded as one of the better scrutinising select committees around (in the economics and finance field), and isn’t just full of people champing at the bit to be the next Cabinet minister (our system is particularly bad at present, in that both the chair and deputy chair are already parliamentary undersecretaries, in effect part of the executive already). Committee scrutiny of Reserve Bank MPSs and FSRs is already perfunctory and typically more focused on point-scoring and that evening’s news bulletin. So my expectations of pre-appointment scrutiny hearings aren’t that high. But just because MPs are often pretty useless doesn’t mean we just give up on democratic scrutiny and accountability. Just possibly, given a new and responsible role some might see it as an opportunity to demonstrate their chops.
I hope that the Minister of Finance and his officials, in considering Phase 2 of the Reserve Bank Act review – likely to deliver us another new policy committee – will keep this possible innovation in mind.
It isn’t just a model for the Monetary Policy Committee though. I reckon it should be much more seriously considered for a range of other key appointments, currently totally in the gift of ministers, where the appointee concerned will exercise huge discretionary power – often reflecting a personal ideology, personal character – sometimes for decades.
For example, today (12 March) is Dame Sian Elias’s 70th birthday. That means she finally has to retire as Chief Justice, after a couple of months short of twenty years in office. The higher courts are now pretty transparent – certainly by the standards of the Reserve Bank – but she, and her colleagues of the Supreme Court, have exercised huge amounts of discretionary power, and there isn’t anything citizens can do about that. (Parliament could, of course, legislate to reverse the effect of some egregious ruling.) And for a term for which I’m not aware of any parallel in New Zealand (most other statutory appointments, from the Governor-General down, are for no more than five years).
Sian Elias is replaced as Chief Justice, on the Attorney-General’s sole choice, by Helen Winkelmann. She is 53 and most probably will end up as Chief Justice for 17 years. The government announced plans last year to extend the power of the Supreme Court, so as explicitly allow the courts to make declarations of inconsistency of individual peices of legislation with the New Zealand Bill of Rights Act, while mandating Parliament to reconsider and respond. Sure, the declarations would not overturn existing legislation, but it is a further chipping away at the sovereignty of Parliament, entrusted to a committee of ex-lawyers, appointed by the Attorney-General (typically an active senior politician, usually holding other portfolios as well) and with no serious scrutiny of (say) the judicial philosophy, personal ideology, or background of the appointees (indeed, it is almost regarded as lese-majeste for anyone to raise such doubts).
And there is no point pretending that judges just “read the statute” (or the Bill of Rights) – they interpret (shaped in part by their own background and predispositions) and thus themselves create the law. And yet there is no prior scrutiny whatever – rather the Attorney-General of the day sorts out his/her candidates, using whatever criteria they choose (Chris Finlayson got to appoint most of the current senior judges with no scrutiny or transparency at all). And once appointed, neither the Chief Justice nor individual Supreme Court judges ever have to account for their approach, philosophy or whatever. Politics (not specifically partisan politics) and ideology are almost inevitably at work in how higher court judges operate (anyone doubting this, refer to the US experience, and here we don’t even have the checked of a hallowed constitutional text.)
Attorneys-General and judges seem to like this approach (unsurprisingly). As they put it on the courts website
From time to time it has been suggested that a more formal method for appointment of judges should be adopted but that course has not been followed. There is no suggestion that the present procedure has not served the country well.
Well, they would say that wouldn’t they. For Supreme Courts judges (including the Chief Justice in particular) I think there is a pretty good case for (a) a fixed term appointment (say, 10 years without the right of renewal) and (b) for proper parliamentary hearings, at which nominees could be seriously grilled, before taking up any appointment. Perhaps most of our top judges have been as good as we could get – although one Supreme Court justice has already had to step down – but no one should hold that much power for that long, and certainly not without serious and open scrutiny before taking up the position.
The position of Commissioner of Police is being advertised at present. That appointment is in the gift of the Prime Minister of the day (with only as much scrutiny of the appointment as the Prime Minister chooses to give – not much apparently in recent case of the Deputy Commissioner. In some respects, it is less concerning that the situation of the Chief Justice – the appointment is only for three years at a time, and in the end the courts hold more power than the Commissioner. On the other hand, when you hold a three year appointment, and want to be reappointed, there is quite an incentive not to rock the boat in ways that might make the Prime Minister look askance. The Police have gained an, apparently well-earned, reputation for preferring to look the other way when complaints or issues involving politicians and political parties are involved.
And if you think the Commissioner of Police doesn’t really exercise much power, I’d remind you of the current incumbent’s claim last week that he alone – not elected politicians – had the power to decide whether or not the Police should routinely carry fire-arms. If someone you love ends up dead at the hands of a police officer acting rashly, it won’t be much comfort if the IPCA eventually raps Police over the knuckles (and things carry on much as usual). At a more mundane level, Police exercise discretionary power. In effect, marijuana has been decriminalised, not by Act of Parliament, but by the choice of the Police Commissioner (you might or might not support decriminalisation, but everyone will recognise that it is a significant choice). There are all manner of other areas where Police discretion is at work – or could be revoked on an individualised basis.
And it isn’t as if the Commissioner has been without blemish, whether in office (think Haumaha) or prior to taking it up (that historic drink-driving conviction that only come up several years after he took office, or the eulogy at the funeral of a former police officer found to have planted evidence in a major case). Perhaps he really is, or was, the best person for the job, but it might be more reassuring if, instead of just being appointed by John Key, he’d had to face some open hearings, including around his views on the sorts of areas where the Police might either just stop policing, or greatly step up policing. Add in a non-renewable five or seven year term, and we’d be considerably closer to a system that balanced operational independence (in the narrow areas where that is appropriate) with democratic accountability, and a reminder that ultimately the Police are supposed to work for the people, not for the Prime Minister of the day.
I’m sure there are other positions where a similar degree of open parliamentary scrutiny would enhance confidence in the appointments made to powerful public positions, espcially roles in which the holders exercise significant discretion – either policymaking, or in holding other officeholders to account. I had a list of senior positions in this post, and quite a few of those (eg Human Rights Commissioners, and head of the IPCA) look like candidates for pre-appointment parliamentary hearings. The Chief Justice and the Police Commissioner are much more fundamentally important roles than those at the Reserve Bank, but the sort of change I’m proposing would also be more unconventional for those roles. The UK approach, for the Bank of England appointees, is already established and has proved its worth. I’d commend it to the government.