The Treasury Committee (the Committee) has published reports on the appointment of the Governor of the Bank of England, and on the budget.
On 7 February 2013, Dr Mark Carney, chosen by the Government as the next Governor of the Bank of England, gave evidence to the Committee in what was effectively a pre-appointment hearing. The Committee concluded that Dr Carney has the necessary professional skills, qualities and experience, and personal independence, to be Governor of the Bank of England, and has now published a report on his appointment.
The Government had declined to give the Committee “a statutory power of veto over the appointment and dismissal of the Governor of the Bank of England” as the Committee had recommended in its 2011 Report into the Accountability of the Bank of England.
Interestingly, however, Dr Carney indicated that he wished to appear before the Committee before taking up his appointment, and that he would not otherwise be commenting at length on British economic policy until he took up his post. This was the first time a Governor of the Bank of England had given evidence to Parliament in advance of taking office.
The Committee considers that the examination of Dr Carney’s views in this hearing, and the attendant wider public scrutiny, should assist the Governor in explaining his approach to the public, and the Committee intends to follow a similar pre-appointment process for the appointment of subsequent Governors.
The Committee has said that it also plans to maintain its scrutiny once Dr Carney has taken up his appointment, and that the incoming Governor made clear that he would speak to the Treasury Committee before making other statements. This seems to have been interpreted as some form of self-denying ordinance on the part of the Governor, and it is not clear what the implications of this will be in practice.
In addition, the Committee has reported its conclusions on monetary policy issues, based in part on Dr Carney’s evidence, in its report on the budget. It considers that the changes to the monetary policy remit announced by the Chancellor at the time of Budget 2013 create uncertainty and could be seen as providing greater flexibility to the MPC than had been the case previously, allowing it more discretion to respond to events. The MPC’s response could include allowing more time for inflation to come back to target, or using new monetary policy tools – with the potential for a major impact on the UK economy. Although the committee felt that the initial indications are that the MPC’s approach would tend towards continuity rather than change, the Committee intends to use its regular hearings with the MPC to elicit greater clarity about the effects of the change and to launch an inquiry into the conduct of monetary policy.
The Committee is concerned about whether there was sufficient justification for change, the potential for such changes could adversely impact public perception of the independence of the MPC, and the fact that the remit was changed in this case without resorting to legislative amendment. The Committee considers that it would be appropriate to amend The Bank of England Act 1998 to require parliamentary approval of remit changes.