Serious issues surrounding accountability are likely to emerge due to the increasing powers of the Bank of England and the European Union, former chancellor Alastair Darling has warned.
In a speech at Westminster on Monday evening Darling said he broadly supported the Coalition's plans to transfer supervision powers from the Financial Services Authority to the Bank of England, but warned that doing so would raise some "pretty interesting issues," because "chances are, we will, at some stage, have turbulence within the system."
Darling previously documented tension between the Treasury and the governor of the Bank of England, Mervyn King, in his memoir of the Gordon Brown administration, Back from the Brink. Speaking before an audience of MPs and parliamentary staff on Monday, he said of King's enhanced role under Coalition plans:
"At some stage when it starts to get into territory when he's doing something controversial and difficult, I just wonder whether routine appearances by the governor before the Treasury committee will be sufficient. "
The Coalition plans to end the so-called "tripartite" system which has existed since 1997, and give the Bank of England powers to regulate the City whilst also retaining its current powers to set interest rates. Darling warned that: "The system is only as safe as the people who are in it," adding that the Bank of England has no "formal accountability".
But Darling spared the bulk of his criticism for the European Union, saying even though it was being given more powers to run the continent's financial affairs, "if left to its own devices, will have more power still".
He lamented the trend towards finance ministers in Europe, and in the case of the Italian PM Mario Monti, actual leaders, having no formal accountability towards voters. He said that even during the financial crisis of 2008 he often found himself in the minority at meetings of EU financial ministers, in that he was directly elected as an MP.
Most finance ministers "appear to be partners in Goldman Sachs" and part of an exclusive club, he said, warning: "If we ever do get to a situation where EU countries are submitting their budgets for approval by the European Commission, that will fly in the face of constitutional accountability.
"The system needs to be a servant of us, not the other way around, and I'm not sure we are heading in the right direction," he said.
In a broad speech as part of a series of lectures convened by the Commons speaker, John Bercow, on the relationship between ministers and parliament, Darling lamented that the Labour governments of Blair and Brown had often "neglected" the Commons.
In his introductory remarks Bercow described Darling as a "real man of government" but said he was someone who had always shown great courtesy and respect towards Parliament.
Towards the end of the speech Darling was asked how accurate the 1970s sitcom Yes, Minister was having served in so many Whitehall departments.
"I now realise that 'Yes Minister' was a documentary," Darling replied. "'The Thick of It' is good, but not quite in the same league as 'Yes Minister'."
Darling said he had "no plans to be a minister in the foreseeable future." He is widely tipped to be a significant advocate for the "No' campaign in the forthcoming referendum on Scottish independence.
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