John Mann MP: Is Mark Carney overrated or just unlucky?
Treasury Committee member John Mann MP believes it is time for a fresh look at what Mark Carney has brought to the Bank of England, as he weighs up whether or not to stay in post for a further term.
Mark Carney’s appointment in July 2013 was heralded as a real coup not only for George Osborne but also for the City of London which had yet to recover its swagger following the crash in 2008. Young, ambitious and good on tv, he seemed a much needed breath of fresh air for the Old Lady of Threadneedle Street which had been damaged by its handling of the Barclay’s Libor Scandal.
However, almost three years on from his appointment and as economic storm clouds appear to be gathering, is it time for a fresh look at what he has brought to the bank given he has once again had to revise his estimates for GDP and wage growth?
In August 2013 with unemployment at 7.6% the Governor introduced us to forward guidance. This he claimed would provide businesses with a clear understanding of the bank’s intentions when it comes to the raising of interest rates. Interest rates wouldn’t move until unemployment fell from its then level of 7.6% to 7%, a feat he forecast wouldn’t happen for sixteen months. Yet within six months he was issuing “further” guidance and new conditions were added in an attempt to buy him and the MPC more time.
One wrong forecast sadly was followed by others, with the Governor being forced to revise his estimates for GDP and wage growth in 2015 and for 2016 and forced to write to the Chancellor five times explaining why he has missed his 2% inflation target. In his January 2016 press conference the Governor now indicted that rates would not rise for at least another year as the British economy was being buffeted by an “unforgiving global environment and sustained financial market turbulence.” Forward guidance, like an unwelcome guest at Christmas, is no longer mentioned.
With every missed target and revision credibility in both the Governor and the Bank is dented and at a time when thanks to the Bank of England Bill it is more powerful than it has been for decades this is deeply troubling. After all, it’s not the Governor who feels the effect of this but the ordinary British worker whose wages aren’t rising and who will be forced to accept deeper cuts by the Chancellor as he remains wedded to his deficit reduction plans.
By concentrating solely on this area I believe the Governor has missed the problems going on in the real economy. During his time in post he has said nothing on the condition of infrastructure in the UK or the level of spending on things like broadband and he has not yet got to grips with the chaos in the UK’s housing supply.
The Governor will shortly announce to the Chancellor whether or not he wishes to remain in post for another term but the question we should be asking is, if he does stay, will his projections and forecasts get any better and if not, is it time for a different approach for the Old Lady of Threadneedle Street?
John Mann is the Labour MP for Bassetlaw and a member of the Treasury Committee
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