The government has refused to reveal what is discussed at “secret” meetings where senior hedge fund executives advise the Chancellor on economic policy.
Jeremy Hunt established the Economic Advisory Council (EAC) not long after becoming Chancellor, but the group has been criticised for representing only a very small and specific set of interests within the finance sector.
A former shadow chancellor has criticised the council, saying it confirms “the capture of this government by finance capital,” while campaigners have called for greater transparency around the group’s activities.
Calls for greater transparency on EAC’s activities
One of Jeremy Hunt’s first acts as Chancellor was to set up the EAC, in what was taken at the time as a signal that the new occupant of No 11 would be returning to economic orthodoxy after Liz Truss and Kwasi Kwarteng’s disastrous mini-budget.
The council is made up of four former officials who now all work in the private sector at hedge funds and asset managers including BlackRock and JP Morgan. The Treasury has stated that it will add members to the council in time.
Members of the council are unpaid and the council’s terms of reference state that “care will be taken to ensure council members will not be given access to or provided with material non-public information or anything which raises issues of anti-competitive behaviour or market abuse”.
The terms also state that if there is a conflict of interest members of the council should recuse themself from the meeting.
A Freedom of Information request by NationalWorld shows that the council has met on three occasions since being established in October last year. The membership of the council remains unchanged, and there has not been any instances of a member recusing themself from a meeting.
Departmental transparency releases show that two of these meetings took place in the latter months of last year, on 25 October, prior to Hunt’s autumn statement, and again on 8 December.
Former shadow chancellor John McDonnell said it was “surprising” that there have been no recusations so far, given that the council members are “obviously active players in the market and economy”.
He said: “The composition of Hunt’s advisory council reconfirms the capture of this government by finance capital and it hardly inspires confidence in its independence when it meets in secret and if surprisingly no conflicts of interest have been declared from its members who are obviously active players in the market and economy.”
The Treasury would not share any details of what was discussed at each meeting, saying only that the council meets to discuss “current issues in the economy, including the growth outlook and market conditions”.
Rose Whiffen, Transparency International UK Senior Research Office said the establishment of the council was understandable, “close attention needs to be paid to the management of conflicts of interest”.
She said: “As a bare minimum, the Council should maintain a published register of interests and meetings, rather than transparency being dependent on responses to freedom of information requests.”
While former Lib Dem MP Tom Brake, of Unlock Democracy, said: “Consulting with and receiving advice from such a narrow range of experts whose companies have a direct interest in Treasury decisions, and withholding details of their deliberations cannot be in the interest of UK plc. We need to understand how conflicts of interest are addressed and the secrecy surrounding these meetings makes that impossible."
Two of the firms with staff on the council, BlackRock and JP Morgan, have met with ministers several times in the last year, including with Rishi Sunak when he was serving as Chancellor.
BlackRock met with ministers from various departments on at least 28 occasions in 2022, while JP Morgan had at least 26 meetings with ministers.
Who is on the Economic Advisory Council?
Rupert Harrison served under George Osbourne for almost a decade, throughout the period when Osbourne was shadow Chancellor and then Chancellor. As such, Harrison is considered one of the key figures behind the austerity measures put in place by David Cameron’s government in the years following the 2008 financial crisis.
The deep cuts to public spending are now considered by many economists to have been applied too rapidly and to an unnecessary extent. Many economists cite austerity as one of the reasons the UK still suffers from low growth and has seen inequality rise in recent years.
Harrison is now a portfolio manager at the investment management firm BlackRock, which manages pensions for more than 10 million people in the UK.
Karen Ward also served as an adviser to a recent Conservative chancellor, before joining JP Morgan Asset Management as chief market strategist for Europe, the Middle East and Africa.
Ward was Philip Hammond’s chief economic adviser, having previously worked as an economist at HSBC.
The two other members of the EAC, Gertjan Vlieghe and Sushil Wadhwani, are both former members of the Bank of England’s Monetary Policy Committee who now work in private finance. Vlieghe is chief economist at the US hedge fund Element Capital, which trades based on global political and economic trends, while Wadhwani set up his own investment firm, PGIM Wadhwani.
Simon Youel, head of policy and advocacy at Positive Money, called for the Chancellor to take advice from a wider set of interest groups and criticised the over-reliance on the financial sector.
He said: "Though the government has put finance-led growth at the heart of their agenda, an oversized financial sector simply extracts wealth from the rest of the economy. It’s easy for Hunt to miss this though if the only voices he listens to are from the City of London. Both Hunt and the country would be better off if his advisory panel had voices representing workers and civil society rather than just big finance."
The government already has a stakeholder engagement group for the asset management sector, the asset management taskforce, which meets with Treasury ministers to discuss issues impacting the sector and wider economic issues. BlackRock and JP Morgan are both represented on the taskforce.
A HMT spokesperson said: “All due care is taken to ensure members of the Economic Advisory Council – who attend in an independent capacity - are not privy to any material non-public information, or market sensitive information. Members are required to declare any relevant interests. ”
“The confidential nature of discussions at the forum enables free, frank and substantive dialogue on the economic challenges facing the U.K., supporting the Chancellor to deliver this government’s priorities.”