What to expect Mark Carney to be grilled about by the House of Lords today - from Brexit to current account, inflation and Panama Papers

Jake Cordell
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Mark Carney comes up against the House of Lords Economic Affairs Committee this afternoon
Mark Carney comes up against the House of Lords Economic Affairs Committee this afternoon (Source: Getty)

The most watched man in Threadneedle Street will trundle over to SW1 today to face his annual grilling from the House of Lords Economic Affairs Committee.

That’s right, the governor of the Bank of England, Mark Carney, will be up against 13 of the Lords’ sharpest minds, all desperate to peer into the soul of the governor and get him to spill the beans on his innermost thoughts.

The agenda is - to say the least - comprehensive. The official billing outlines that Carney will face questions on:

  • Brexit

  • The UK’s current account deficit

  • China

  • The housing market

  • The financial industry

  • Inflation

  • The Panama Papers revelations

The action kicks off at 3.35pm, but if you can’t wait until then, here’s a snapshot of what the governor might say...

Brexit and the EU referendum

The Bank of England has become quite loud about the EU referendum - which it clearly sees as a threat to the UK economy - over the past few months. In the minutes accompanying last week’s decision to hold interest rates at 0.5 per cent for another month, the Bank issued one of its starkest warnings yet about the risks of voting to leave the EU.

However, in a question presumably posed by one of the more eurosceptic Lords, the committee is set to ask Carney, “what risks are there to remaining in the European Union?”

The governor will be keen to focus more on the risks of leaving, though he has previously spoken about the downsides of being entwined with the European Union. Back in October 2015, he said:

Increased economic and financial openness means the UK economy is more exposed to economic and financial shocks from overseas. As a result of closer integration within the EU and, more recently, with the Eurozone crisis, this may have increased the challenges to UK economic and financial stability.

We shouldn’t assume this makes Carney a secret Brexiteer, however. He has also said such “financial openness … reinforces the dynamism of the UK economy” and helps secure more stable - and faster - growth.

Current account deficit

This is an area that could cause metaphorical sparks to fly.

The UK’s current account deficit stretched to a gaping seven per cent of GDP in figures out last month - the highest on record.

Back in January, when it was running at less than four per cent, the governor warned a vote to leave the EU could result in Britain relying on the “kindness of strangers” to fund its overseas financial obligations. With so much uncertainty, this is not a situation Carney would like Britain - or the Bank - in.

That might explain why the government has been building up its foreign currency reserves in recent months. At the end of March they stood at $104bn (£73bn) - the highest on record, and up one-fifth since the general election.

Although the level of foreign holdings is managed by the government, Carney has been vocal in warning about the damage a vote to leave the EU could do, especially as he believes it will result in a run on the pound.

Expect more warnings about what he sees as the UK’s precarious financial position in the run-up to the vote, as Carney dances round some tricky questions from the seasoned House of Lords committee.


Fears about a hard landing in the world’s second-largest economy have abated somewhat in recent weeks. China was one of the only countries to have its growth forecasts upgraded by the International Monetary Fund (IMF), and the Bank of England itself has begun to reassess its outlook on China.

Last week, the monetary policy committee (MPC) said: “Downside risks around near-term Chinese growth had lessened”. In other words, things are less likely to go pear-shaped than they thought a few months ago.

Nevertheless, “the achievement of a smooth rebalancing of the Chinese economy would remain a challenge”, the MPC said.

Last year, amid sharp volatility on the Chinese financial markets, Carney made clear that Britain’s direct exposure to China is relatively low and the country will have little impact on the Bank’s policymaking. He’ll likely tell the peers that the Bank is keeping a watching brief on all things China, but that the UK is relatively isolated.

The housing market

Carney has been worried about the property market for some time - particularly the vulnerability of landlords to a slowdown in either the seemingly inevitable rise of house prices or a change in wider economic circumstances.

Buy to let mortgage holders are much more likely to have an interest-only deal, leaving them exposed if prices go down. These fears are what prompted the Bank to act just three weeks ago to help safeguard the industry.

Read more: Buy to let clampdown explained

The Bank has tightened the minimum standards it expects landlords to meet to be granted a loan and has also instructed lenders to take into account a borrower's non-property income to determine how financially secure they are, should rental income slump.

Carney will use today to outline these changes and explain why he thinks they are enough to stave off a crisis in the buy to let sector.


The Bank of England’s official remit, lest we forget, is to target inflation of two per cent - a level it has not been at since December 2013. The Bank sets interest rates to ensure this kind of price stability, so low inflation, despite any and all other indicators, effectively stops it from raising interest rates.

With oil prices gradually stabilising and sharp falls over the past 18 months dropping out of the inflation calculations, the Bank expects inflation to be back at two per cent within a couple of years.

There is probably not much new Carney can say today in terms of inflation that the MPC didn’t cover last week - but that won’t stop the Lords from trying to squeeze it out.

Panama Papers

It’s anybody’s guess what he’ll be asked on this one. Was Carney embroiled? What does he make of the scandal? Will he be forced to publish his own tax return? By teatime this afternoon we could have answers to all of these questions - and much more...

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