The next Bank of England governor must be prepared for a political storm
When Dame Helena Morrissey revealed she was standing down from Legal & General last week, the City rumour mill was sent into overdrive. The Square Mile veteran and champion of boardroom equality said only that “in a changing Britain” she had “a lot of ideas and other things to achieve”. This rather enigmatic sign-off will do little to quell City speculation that her candidacy is attracting support at the highest levels.
The race for the Threadneedle Street top job will always spark excitement in the Square Mile, but the Bank is gearing up for one of the most significant appointments in its 325-year history. In keeping with the UK’s wider political and economic outlook, the process has been beset by uncertainty. Current governor Mark Carney has already had his tenure extended twice and is now set to stand down at the end of January. But with a further extension to the Brexit deadline looking increasingly likely and a potential general election in the offing, many City watchers believe Carney could be asked to stay in place even longer. He’s let it be known that he would consider any request to do so.
The short-list of potential candidates is drawn up by civil servants but the chancellor, Sajid Javid, is not bound by it. Perhaps that explains why new names kept cropping up, even as the expected announcement date of September passed. With City grandee Sir John Kingman said to be out of the race, Morrissey has now moved squarely into the limelight alongside Financial Conduct Authority chief executive Andrew Bailey. Gerard Lyons, former economic adviser to Boris Johnson, is said to be still in the frame, while Santander UK chair Baroness Shriti Vadera and London School of Economics boss Minouche Shafik are also tipped for the job and are said to be among the favourites of senior figures at the Bank.
But with Brexit on the horizon, the choice of governor will resonate far beyond the Square Mile. The role has fallen victim to a wider trend of central bank politicisation that has given rise to President Trump’s sustained criticism of the Federal Reserve’s interest rate decisions and Labour’s radical plans to shake up the Bank’s official remit. If a Brexiteer such as Morrissey is selected, it will be seen by some as an outrageous attempt by ministers to steer the political direction of the Bank, and if a bureaucrat like Bailey lands the job then doubtless others will criticise a predictable establishment stitch-up. The Bank has done nothing to politicise itself, but a political storm swirls around it nonetheless.
Contrary to what his critics maintain, Carney has kept out of the political fray. Brexit has ensured that his pronouncements are viewed through a political lens, but it’s inaccurate to paint him as a combatant. One of the consequences of our ongoing and unresolved Brexit debate is that whoever takes command of the tiller at Threadneedle Street, a political reaction is inevitable. The next governor is going to have to learn how to handle that.
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