Mark Carney’s decision to quit the Bank of England in June 2019 may seem like an elegant compromise. But scratch the surface and the deal isn’t as good for Britain as it looks. Carney’s decision to leave in 2019 rather than stay the full course until 2021 undermines the Bank of England’s independence.
One of the main ways of safeguarding central banks from political interference is to give their governors fixed terms. This makes it harder for governments to bully them to change their policies or ease them out of office.
Carney’s early departure – six years into an eight year term – breaches this principle. This is especially worrying given that a series of prominent Brexiters, including Daniel Hannan MEP and Jacob Rees-Mogg MP, called for him to go. Even more worrying is the fact that Theresa May gave a speech at the Tory party conference that appeared to be telling the Bank to change its ultra-loose monetary policy.
Would Carney have decided to quit so soon if he hadn’t faced such political brickbats? It’s hard to know for sure. But the circumstantial evidence doesn’t look good.
Carney had, of course, signalled when he took the job that he would only serve for five years, taking him until 2018. But last December, he indicated that he was open to continuing the full eight years in an interview with the FT.
If the governor had said now he would leave in 2018, the pound would have taken another hammering. Since he announced his compromise, it has barely budged. Investors seem reassured by the fact that Carney will still be at the helm until after Brexit. Given that the government is committed to trigger Article 50 by end March next year and the exit process is only supposed to last two years, it seems likely we will quit by end March 2019.
But Carney’s early departure doesn’t end uncertainty in the pre-Brexit period, as the government will need to look for a replacement to Carney from around mid-2018. That means the debate over Britain’s future monetary policy will be raging in the months running up to Brexit – and that hardliners in the Tory party will see a chance to put somebody to their liking into the job.
The Brexiters will also be pleased that their bullyboy tactics were at least partly effective – and may now seek to train their fire on others who don’t share their views.
Hugo Dixon is co-founder of CommonGround as well as editor-in-chief of InFacts. You can sign up as a supporter here.
I agree 100%. It was already shabby the idea that he would serve 5 years in first place. Now there are three possible dates, 2017, 2019, 2021. It measn that he can resign when he likes, or he can be pushed out more easily. He would have behaved better if announced that he’s going right now.