Former colleague played key role in Lambert's MPC job

Richard Lambert, the ex-journalist appointed by the Chancellor, Gordon Brown, to the Monetary Policy Committee, attacked the Treasury's recruitment process, saying it should be more open and transparent.

His criticism came as he revealed he was headhunted for the key Bank of England post by a Treasury official to whom he had given a key job on the Financial Times when he was its editor.

Mr Lambert was forced to deny a conflict of interest over the way he was selected and over the fact he was paid by the Treasury to carry out a study into business and universities that was commissioned by another official who was involved in his recruitment.

He was also grilled by MPs over his qualifications for the job as a non-economist in the light of his newspaper's criticisms of other MPC members who did not have sufficient academic training in economics.

Mr Lambert, who edited the FT until 2001, told MPs on the Commons treasury committee that he was approached for the job by Ed Balls, Mr Brown's chief economic adviser, and was interviewed for the post over the telephone while he was in Japan. Mr Lambert hired Mr Balls as an FT leader writer.

He said he was asked to keep the negotiations confidential because of the market-sensitive nature of his appointment.

Pressed on the way he was appointed, he said: "My default position is that appointments should be open and transparent. I know the Treasury view that they are market-sensitive but I personally think that there would be a way of dealing with that.

"The bottom line is that what matters is the credibility of the committee and if the process does not work then it would be worth considering changing the process. If the concern is that a change in an individual would be price-sensitive, you might build a pool of candidates."

His views are likely to rile the Treasury, which has traditionally made the appointment process to the MPC, which sets interest rates, highly secretive.

Mr Lambert was challenged by Conservative MPs over a potential conflict of interest because of his selection by Gus O'Donnell, the permanent secretary to the Treasury, to write a report on the relationship between business and the universities.

"I thought about that and discussed it with the Treasury and the Bank but I don't think there's a conflict," he said. "It was a one-off project that has no bearing on monetary policy and its link to economic policy is remote." The atmosphere became tenser when he was questioned over his lack of any academic training in economics. He won a history degree from Balliol College, Oxford, and started at the FT as a trainee straight afterwards.

In a particularly tense exchange, he was asked to justify a story in the FT, written under his editorship, in which Kate Barker, the MPC member, was criticised by un-named City sources for not having a master's degree in the subject.

At one point the Labour MP Angela Eagle accused him of sanctioning a sexist attitude towards women as being unable to carry out monetary policy. "It is unimaginable that anyone should hold such a view," he said.

Mr Lambert said he would bring a "broad view" to the committee and add his knowledge of the derivatives based on his role on the board at the LIFFE market. "There are reasons to be uneasy about some of the trends," he said.