Mark Carney won’t have to wait long to find out just how much scrutiny he’ll face as the new Governor of the Bank of England.
The first test will come on Feb. 7, when the head of the Bank of Canada appears before the House of Commons Treasury Committee in an unprecedented hearing. It will be the first time Members of Parliament in Britain have been allowed to question and vet a prospective head of the country’s central bank. And it’s not entirely a formality.
While the 13-member committee can’t veto Mr. Carney’s appointment on its own, it can write a report recommending rejection, and it could force a vote in the House of Commons if necessary, though that rarely happens.
One of the first questions Mr. Carney can expect is why he will only take the job for five years instead of seven, as recommended by the government. In the past, governors have served renewable five-year terms, but as part of the government’s recent overhaul of financial regulations and the Bank of England, it wanted the governor to serve a single seven-year term.
“I think that will be one of the issues that will come up,” said committee member Andrew Love, a Labour MP. Mr. Love said most members have read reports in The Globe and Mail about Mr. Carney’s possible interest in politics, and heard speculation that is the reason he wants a five-year term. “We haven’t as yet received an explanation,” he said.
Mr. Love noted that the Bank of England is receiving far more powers, including regulating banks as well as setting monetary policy. Melding that into one efficient organization won’t be easy, he added. Mr. Carney “certainly comes well qualified, but there’s a major challenge and we will want to hear from him why he believes he can achieve that in five years rather than seven.” Mr. Love said he is not wedded to the idea of a seven-year term and is prepared to hear Mr. Carney’s rationale.
Mr. Carney will also be grilled on his suggestion that central banks abandon inflation targets in favour of nominal-gross-domestic-product targets. “We hope that he will lay out in some detail how he sees that developing and where he sees us moving,” Mr. Love said.
Mr. Carney can expect to appear before the committee on many more occasions. Britain’s government has been expanding the powers of parliamentary committees in recent years, and the Treasury Committee has become one of the more powerful ones. It holds hearings on a variety of issues and reviews several appointments, including members of the Bank of England’s monetary policy committee and members of the government’s Office of Budget Responsibility. It also pushed to have Mr. Carney appear in February.
Committee chairman Andrew Tyrie initially wanted veto power over Mr. Carney’s appointment, which was formally made by George Osborne, the Chancellor of the Exchequer. Mr. Osborne refused but agreed to allow the committee to examine Mr. Carney.
Mr. Tyrie declined to comment Tuesday, but he told the Times of London Monday that committee members would pursue issues raised by a recent Globe and Mail story, including approaches by the Liberal Party and Mr. Carney’s stay at Liberal finance critic Scott Brison’s home in Nova Scotia. The Bank of Canada has cleared Mr. Carney of any conflict of interest.
A source close to Mr. Osborne’s office said the Treasury Department remains convinced Mr. Carney is an outstanding candidate for the post.