Labour Won’t Fight New U.K. Leader's BOE Successor to Carney
Labour Won’t Fight New U.K. Government’s BOE Successor to Carney
(Bloomberg) -- Whoever replaces Bank of England Governor Mark Carney can probably rest assured they’ll keep their job even if a Labour government takes office.
John McDonnell, the party’s finance spokesman -- and likely chancellor if the opposition party wins power -- would absolutely respect the process for appointing the governor, according to a person familiar with his thinking.
McDonnell’s views on the governorship could become important even before Carney’s slated departure at the end of January if a snap election takes place later this year and brings Labour to power. That’s a possibility should the incoming prime minister fail to win parliamentary backing for their Brexit plans. Conservative party members will choose a new leader, who becomes prime minister, next month.
U.K. Chancellor Philip Hammond has started the process to replace Carney, with plans for a decision in the autumn, though Hammond himself is likely to be replaced before it’s complete. Labour backing for the selection would offer some stability at a time of political and economic volatility, with the U.K. currently due to leave the European Union at the end of October.
McDonnell’s pledge should also ease any concerns among the 30 or so individuals currently interviewing for the position. While it’s legally tricky to remove a BOE governor, whose monetary-policy credibility depends on their independence from politicians, a new government with different ideas on the economy could make life very difficult for Carney’s successor if it wanted to.
Labour has already floated radical plans for the BOE that the next governor might have to take on board. Those including expanding its remit to include a productivity growth target and climate change.
There hasn’t been a recent example of a U.K. central bank chief hounded from office, though clashes with the government of the day can cut their careers short. Carney’s predecessor, Mervyn King, was only reluctantly reappointed by a Labour government in the midst of the financial crisis.
There are several cases in Europe of nominally independent central bank chiefs being pushed aside. Spanish central bank governor Miguel Angel Fernandez Ordonez, appointed by the Socialist government in 2006, left office one month early in 2012 after intense criticism by the People’s Party that had since come to power. Central bank governors in Cyprus and Slovenia both quit their jobs early in recent years after falling out with those countries’ leaders.
U.S. President Donald Trump’s administration has explored options for demoting Federal Reserve Chairman Jerome Powell. On Wednesday, Trump told Fox Business that he has “the right” to demote or fire Powell and the U.S. should have European Central Bank President Mario Draghi “instead of our Fed person."
Candidates considered to be in the running for the BOE include Andrew Bailey, currently head of the Financial Conduct Authority, and Raghuram Rajan, former head of the Reserve Bank of India.
A spokesman for McDonnell said he wants to maintain the full independence of the central bank from the government and political decision making.
Carney doesn’t have any role in the appointment of his replacement, he told lawmakers in a parliament hearing on Wednesday, where he called the position “a unique role” in central banking.
“It requires a very varied set of background and skills,” he said. “Fortunately, whoever serves in the role here can draw on the background and skills of the members of the policy committee.”
To contact the reporters on this story: Jessica Shankleman in London at jshankleman@bloomberg.net;Craig Stirling in Frankfurt at cstirling1@bloomberg.net
To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Brian Swint
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