Liberal Democrats call for clear demarcation lines between governor and parliament to maintain Bank’s independence
The incoming governor of the Bank of England, Mark Carney, has been warned to stay out of British politics when he arrives next summer after he was found holidaying with a prominent opposition minister in his native Canada.
Carney, who was appointed by George Osborne last month to succeed Sir Mervyn King, was cleared on Monday by the Bank of Canada of breaching conflict of interest rules after reports that he considered running for leader of the Liberal party.
Matthew Oakeshott, the Liberal Democrat treasury spokesman, said there needed to be clear demarcation lines between the governor and parliament to maintain the Bank’s independence. “He’ll have to be far more careful over here – no riding with Cameron or skiing with Osborne,” he said.
Paul Myners, a City minister in the previous Labour administration, said he expected Carney to face tough questioning when he appears before parliament at his confirmation hearing. “I guess it would have been taken into account by the chancellor but will also no doubt feature strongly in his interview with the treasury select committee,” said Myners, who was also a member of the Bank of England court, which acts as its governing body.
“We delude ourselves if we try to pretend that the governor does not take political questions – the current one has pursued policies that have had a profound impact on the distribution of wealth, favouring those in debt over those who have saved, and favouring the well-off retired over the poor. The important thing is to be accountable to a credible and transparent court, which is not the case at the moment, and accountable to parliament.”
Carney is serving the last six months as chairman of the Bank of Canada before taking up his post as the UK’s central bank chief and arguably the country’s most powerful non-elected official. He was cleared of breaching rules after a report that he stayed for a week in the home of a senior Liberal politician while the Canadian party was seeking to recruit him.
Carney’s flirtation with party politics may ruffle feathers at the Bank of England, where officials are expected to maintain their reputation for independence. According to reports in the Toronto-based Globe and Mail newspaper, Carney and his family stayed at the home of Scott Brison in Nova Scotia during part of their summer holiday.
The Bank of Canada spokesman, Jeremy Harrison, said Carney and Brison had been personal friends for about a decade. “The Bank of Canada’s general counsel, who is responsible for enforcing the bank’s conflict of interest policy, has assessed that this visit does not breach its conflict of interest guidelines in any way,” Harrison said.
“Neither the Bank of Canada nor Governor Carney have an actual or potential commercial or business relationship with Mr Brison. Mr Carney’s acceptance of hospitality provided by a personal friend does not arise out of ‘activities associated with official bank duties’. Nor can it be defined as partisan or political activity.”
The Globe and Mail reported that Brison, along with other senior party members, had expressed an interest in seeing Carney lead the Liberal party.
Carney was a surprise appointment last month when Osborne said he had turned down applications from senior UK regulators and bank officials in favour of the Bank of Canada governor. The chancellor said Carney was “the outstanding central banker of his generation” and “a person of real quality” who would serve at the Bank of England for five years from July.
Little was known about his record, other than he spent 13 years at the investment bank Goldman Sachs before rising to the top of the central bank of Canada.
In public, Carney has repeatedly batted away questions about his political ambitions, saying at a news conference in October: “Why don’t I become a circus clown? I appreciate the great concern about my career but I have gainful employment and I intend to continue it.”
But the latest revelations have led to criticisms from some commentators, who say there are risks that the central bank’s impartiality could be called into question if officials are linked too closely to politics. The bank’s conflict of interest guidelines urge employees to avoid the appearance of impropriety in accepting hospitality or gifts.
“It does show a complete lack of judgment,” said Mike Moffatt, an economist at the Ivey school of business at the University of Western Ontario. “The larger issue here is that Carney is being seen as the guy who can do no wrong. For the most part, he’s been a very strong governor. There’s some point where you start to believe that anything you do is justified because you’ve been doing such a great job, and that’s where these sort of ethical lapses get in.”