Why diversity matters at the Bank of England

The Bank of England’s mission is to ‘promote the good of the people of the United Kingdom’, but it won’t be able to do so until it is more representative of the population at large. That’s why we’re supporting the Treasury Select Committee’s call for the Chancellor to appoint a more diverse range of candidates to its most important policy-making committees.

Shortly after Mark Carney was appointed as Governor, he described the lack of women on the Monetary Policy Committee as “anomalous” and “striking”. Yet appointments to the committee since then have continued to be disproportionately male. The recent replacement of Charlotte Hogg with Dave Ramsden leaves the MPC with eight men and just one woman. The Financial Policy Committee is universally male. Out of 23 positions in the Bank’s three major policymaking committees, women fill just two.

The Bank doesn’t publish any information about the number of positions on its policymaking committees filled by black and minority ethnic (BAME) groups. BAME people face specific economic challenges such as growing labour market disadvantage, which are important for the Bank to understand. But among senior staff positions, where the data is available, the proportion of BAME people is only 6.2%. This is below the civil service average and is significantly below the population as a whole.

Committee members also continue to be drawn from a narrow range of occupational backgrounds. Our research found that an overwhelming majority of members of the three major policymaking committees are drawn from finance and corporate sectors. Over 75% of MPC members were working in the City or in large companies before taking up their post. Despite the important role they play in representing the interests of working people, not one member of these committees worked for a trade union or not-for-profit organisation before joining the Bank.

The impacts of the Bank of England’s decisions are far-reaching and affect every person in the economy. This lack of diversity creates a risk that some effects will be overlooked. Last year, the Prime Minister raised concern that the Bank’s quantitative easing programme had disproportionately benefited homeowners at the expense of those who are not yet on the property ladder. The Bank’s policies have helped those with assets at the expense of those without, and unless the views of this latter group are adequately represented, the Bank may ignore these distributional consequences. In order to understand all of the impacts of monetary policy and financial regulation on all communities participating in the economy, the Bank needs to be able to draw on a broad range of perspectives.

The current challenges facing economic policymakers mean that real-world experience is hugely important. While committee members have access to an abundance of quantitative data, this may tell only part of the story. For example, while the headline unemployment rate might be declining, a rise in self-employment, flexible and part-time work and zero-hours contracts mean that for many people, being in work no longer guarantees a steady income. Without sufficient understanding or experience of a full range of different sectors in the economy, committee members will have an insufficient view of the forces at work.

Solving the long-term structural problems with the UK economy depends on drawing on a range of different viewpoints. Policymakers face tough questions about how to respond to stagnant productivity, weak wage growth and widening inequality. These challenges require radical solutions and will require the Bank’s policymaking committees to confront orthodoxies and break taboos. While the narrow makeup of the current committees risks propagating group-think and bias, diversity would instead promote more creative thinking.

The Governor has acknowledged the benefits of greater diversity, and the Bank has made some progress towards improving the representation of women and BAME staff in senior positions. According to a recent National Audit Office report, it is on track to meet its 2020 target of women accounting for 35% of leadership positions. We welcome these moves to ensure that the Bank’s staff represents the diversity of the UK as a whole. But the progress in internal appointments has not been matched with those made externally.

It is in the Chancellor’s gift to choose the majority of members of the monetary and financial policy committees. There is no shortage of talented potential candidates who are women, BAME or from trade union or civil society backgrounds. Appointing members from a broader range of backgrounds will improve the committees’ abilities to understand and support the UK economy.  

Please sign our petition calling on the Chancellor to appoint a more diverse range of candidates to the Bank of England’s policy-making committees now: