INCOMING Bank of England governor Mark Carney will face a grilling from MPs on Thursday as an influential backbench committee makes the most of its first ever chance to question an incoming governor.
Carney is set to take up the role this summer just as the Bank receives huge new powers over finance firms.
That makes Carney the most powerful unelected official in the land and means the Treasury Select Committee is keen to ask him how he will manage the role.
Earlier comments from the Bank of Canada governor sparked a debate around the very nature of central banking. Towards the end of last year he discussed the possibility of abandoning inflation targeting in favour of nominal GDP targets.
Sir Mervyn and former monetary policy committee (MPC) member Adam Posen have attacked the idea as it could lead to higher inflation particularly at times of crisis.
And Carney also appears to have disagreed with senior Bank of England figure Andy Haldane over the complexity of banking rules.
But more personal matters will also be discussed, including Carney’s pay.
At £480,000, the governor elect has a much bigger basic salary than outgoing governor Sir Mervyn King, as well as a large housing allowance, and will receive another 30 per cent of his salary in lieu of a pension.
Labour MP John Mann has criticised the compensation package as “puzzling” at a time when the Bank is missing its two per cent inflation target, squeezing incomes. And the impact of money printing on pensions is also likely to be raised as MPs fear the poor and vulnerable are being harmed by the inflationary policy.
FIVE BIG QUESTIONS FOR CARNEY
Is inflation targeting the best way to run monetary policy? Carney has suggested either ignoring the two per cent inflation target until growth recovers or scrapping it in favour of nominal GDP targeting. Both mean higher inflation even after years of above-target price rises so Carney faces a challenge to convince MPs he has the UK’s best interests at heart.
How will you cope with the Bank’s major new powers? Ex-policymaker Adam Posen said the governor and his deputies already works 18 hours every day of the year. Carney will have to explain how he thinks he can manage the extra burden of regulatory powers.
Are you going to help savers? The Bank of England’s Funding for Lending Scheme has driven down savers’ interest rates in the last six months, but only had a small impact on lending so far – and mainly mortgages. That comes after years of low rates and high inflation have hit savers hard. Carney will be asked how he plans to help this hard pressed, prudent group.
How can you ease tensions between you and other senior policymakers? Carney and rising central banker Andy Haldane have appeared to criticise each other in recent months. The Canadian will be keen to show the committee he can defuse any rows and manage a tight ship when he takes over at the Bank of England, to present a united and stable front.
How can you justify your pay packet? At a time when the Bank’s policies are pushing up prices and hitting those on low wage or living off savings, a huge pay packet and housing allowance will attract a lot of attention, potentially making the session uncomfortable for Carney.