5  All speeches are available online at www.bankofengland.co.uk/speeches  5  And its performance against that remit can be assessed month in month out with published inflation numbers. It can be held to account easily for delivering Parliament’s good intentions. If only it were quite so simple in financial stability. The creation of the Financial Policy Committee required two major challenges to be overcome to ensure we remained citizens in service. But overcome them we have. Let me describe how. Challenge 1: the difficulty of specifying a clear mandate  At the heart of this difficulty is a trade-off between stability and growth. A stable financial system is resilient to a range of bad shocks. It doesn’t respond to them by causing further material economic harm. But beyond a point at least, raising that resilience hampers the ability of finance to take risks and drive investment and growth in the good times. It’s possible to over-insure. So there is a balance to be struck. And it is right that Parliament should decide where it should be struck. However, a target like: “make sure the system can withstand a repeat of the 2008 recession and no more” wouldn’t work. Such a target wouldn’t be fit for purpose all the time or for all of the financial system. For some parts of the system, whose failure might not cause much economic damage, such a target might be too severe. At some times, such as after a credit boom, such a target might be too loose.
And so, when the downturn came along, it was turned into disaster as the financial system collapsed. A taxpayer bailout and a million more people unemployed up and down the country. Financial instability is something for which everyone, and especially the most vulnerable, pays the price. An independent committee to take the long view  Against that backdrop, few would disagree with an intention to build a stable, resilient, financial system. But the road to disaster is paved with good intentions. There will always be pressure to live for the moment. A little loosening of standards can bring many years of small gains before the big price is paid. So in the aftermath of the crisis, Parliament did not just declare its intention to build a stable financial system. It chose also to commit to sticking to that intention. And there was, of course, a model for how to commit not to live for the moment in economic policy. In 1997, the Monetary Policy Committee of the Bank of England was established to deliver the clear intent of sustained low inflation. Successive governments had lived for the moment by pushing the economy to expand beyond its potential. Each time, that worked in the short term. But ultimately it brought no benefit and only a price: inflation and recession to get inflation back down again. Recognising that the pressure to live for the moment had resulted in serious costs, government and Parliament sought to entrench the long view in economic management. The results have been impressive.