Mark Carney, as Governor of the Bank of England, allowed himself to become a pin-up for the Remain campaign during the EU referendum. In one sense this was no surprise – Carney spent 13 years working with Goldman Sachs, which gave financial backing to the “Stronger In” campaign. He is the embodiment of the sort of corporatist establishment figure we could expect to be devoted to the European Union. The world of crony capitalism is his world.
Bank of England Gov. Mark Carney defends BOE monetary policy after Brexit vote https://t.co/6CdomUPvA8🔓
— Real Time Economics (@WSJecon) September 9, 2016
Yet it was still pretty shocking that the Bank of England’s reputation for professionalism and impartiality was so casually squandered. There are two problems. First of all, the Bank of England shouldn’t get involved in telling us how to vote. Secondly, the prediction that voting for Brexit would mean voting for an immediate recession has been proved false.
What makes it all the worse is the lack of any hint of contrition from Carney for his misjudgment. He told the Treasury Select Committee last week that he is “absolutely serene”. But his behaviour means that subsequent decisions by the Bank have been distorted.
Rather than accepting the reality of the economic data, there has been a face-saving exercise. Although there is no recession, decisions on interest rates pretend that there is. So we had the unnecessary cut to an artificially low level last month and the refusal to put rates back up this month despite the abundant evidence of the Bank’s Monetary Policy Committee action being unnecessary.
Vanity, vanity, all is vanity.
Mark Carney: 'I'm absolutely serene about the comments made' https://t.co/fYVhzaUx4C
— BBC Business (@BBCBusiness) September 7, 2016
“It is our responsibility to give these assessments; we have an obligation to make these assessments,” Carney told the Treasury Select Committee. But do they have a responsibility to come up with assessments that are a load of old rubbish? Shouldn’t there be some accountability for the accuracy of the assessments? If Carney was clueless as to the impact a Brexit vote would have, it would have been better for him to say so. The procedure is well established. Some comment about being “prepared for any eventuality” and contingencies in place to take “whatever measures” would be required.
This was a big call. George Osborne, the Chancellor of the Exchequer, was emphatic about the “immediate” recession that “would” be caused by a Brexit vote; he produced a Treasury dodgy dossier; and insisted an “emergency budget” would be imperative. But at least Osborne has gone.
Carney might have put in a few caveats in the small print but he was on the same campaign. He gave full encouragement to the message that the Bank of England believed that a vote for Brexit was a vote for recession. Carney said a recession was “likely” and then allowed Osborne to spin this as Brexit meaning that Britain”would be poorer” and that such a vote would be rapidly followed by a “DIY recession”.
Two former Chancellors of the Exchequer – Lord Lawson and Lord Lamont – challenged Carney’s behaviour: “There has been startling dishonesty in the economic debate, with a woeful failure on the part of the Bank of England, the Treasury, and other official sources to present a fair and balanced analysis,” they said. “They have been peddling phoney forecasts and scare stories to back up the attempts of David Cameron and George Osborne to frighten the electorate into voting Remain.”
The former Governor of the Bank of England, Lord King, said the “scaremongering tactics” meant it was “the most dispiriting campaign in my lifetime”. After the referendum result King added: “We are now in a better position to rebalance the UK economy.”
As the Conservative MP, Jacob-Rees-Mogg, told Carney last week: “The difficulty, it seems to me, is that the Bank in its dire warnings created a sense of that concern. The inflation report from May thought that households, after the vote, would defer consumption, asset prices could fall and unemployment would rise. So far, retail spending and the stock market are up and unemployment has fallen.
You yourself predicted that there might be a technical recession. The Bank of England was contributing to a fear in the markets about what would happen in the event of Brexit, which it is now saying that it has corrected, and that seems to me to be at the heart of the problem.”
— Sky News (@SkyNews) September 7, 2016
Yet even if Carney had not been humiliated by his predictions being so discredited he still showed poor judgment interfering in political decision making. If for a referendum why not a General Election? If he can give (false) warnings against Brexit why not (valid) warnings about the harm that would be caused to the economy by a Corbyn Government? If he pompously claims a “responsibility” to provide one than why not the other? I would hope that the British people would have the good sense not to put Jeremy Corbyn into Downing Street – but we certainly don’t need Carney telling us what to do.
Just after the EU referendum result the Bank of England’s annual report was published. It said that: “The Governor’s salary was set at £480,000 p.a. with membership of the Career Average section of the Bank Pension Fund or 30% of salary in lieu.” He would “receive no bonuses or other performance-related pay” (which is just as well) but that he had been paid “relocation support” for coming over for Canada.
If only we could offer him “relocation support” to go back. The British economy could flourish with a new Bank of England Governor who actually believed in making a success of Brexit. We can manage very well without this discredited figure. We don’t need someone who smugly and falsely talks down the economy and charges as half a million a year for the privilege. Let him go back to Goldman Sachs where his contempt for free market competition and self governing democracies means he would fit in so well.
Carney must go.