Friday 13 May 2016 12:03 am

Carney ignites recession row with Brexit warning

​Bank of England governor Mark Carney sparked an intense political row yesterday after he said that a vote to leave the European Union could plunge Britain into recession.

Former chancellor Lord Lamont slammed Carney’s “unwise” choice of words, while two Conservative members of the influential Treasury Select Committee – which is appointed by Parliament to examine the Bank’s policies – were furious with the governor's intervention.

"The Bank of England governor has made himself a political partisan and should be fired,” Jacob Rees-Mogg MP told City A.M.

“His comments were of such a highly speculative nature; it is unusual for a central bank governor to be so politically partisan.”

Read more: Former chancellor says Carney's Brexit intervention could trigger an economic crisis

Speaking after the launch of its latest Inflation Report, Carney had said the effects of Brexit “could possibly include a technical recession”. He added that a vote to leave would lead to a “material” slowdown in growth, and warned that sterling would fall “sharply”.

Lord Lamont responded: “The governor should be careful that he doesn't cause a crisis. If his unwise words become self-fulfilling, the responsibility will be the governor's and the governor’s alone. A prudent chancellor would simply have said ‘we are prepared for all eventualities’.”

Facing accusations of political interference earlier in the day, Carney insisted that it was the Bank’s “responsibility to analyse these risks … This is the biggest risk [to the UK economy].”

Carney added: “We have to communicate this. The political choice would be to suppress the analysis.”

Tory MP Steve Baker, who backs Brexit, disagreed. “The governor and the Bank now risk causing a crisis by talking down the very currency and economy they are charged to protect,” Baker said.

“If the bank continues down this highly political path they will themselves become the biggest risk to economic stability.”

Read more: Carney denies he is making pro-Remain comments

Labour’s Wes Streeting MP, who also sits on the Treasury Select Committee, backed Carney: “The governor and the Bank have a responsibility to ensure the public can make an informed choice.”

Former Bank rate-setter Dame Barker told City A.M. last night she was “a bit surprised at how strong it [Carney’s language] was”, but added: “Some of the criticism has been really overdone.”

Earlier, Barker had told Sky News: “You’d have to be a very unusual person to think that the short-term effects of a vote to leave wouldn’t be negative for the economy, and it’s really the short term the committee has focused on. In the long term, I think the effects of leaving or not leaving are much more uncertain.”