Mark Carney has agreed to hand notes of private meetings he had with the chancellor in the run-up to the EU referendum to MPs, after a Treasury select committee hearing where the governor of the Bank of England faced questions about whether he had “peddled phoney forecasts” about the risks of a vote for Brexit.
In his first appearance at the Treasury select committee since the referendum, the Bank’s governor faced questions about whether he had tried to scare the electorate by warning of the economic shock – and possible recession – that a vote to leave the EU would cause. Andrew Tyrie, the committee’s chairman, citing two former chancellors and two former leaders of the Conservative party, said the Bank had also been accused of “startling dishonesty”.
Tyrie, a Conservative MP, told Carney that the accusations, if true, would be a “very robust assault on the Bank’s credibility” and also of the independence from government it was granted in 1997 that could not be recovered under the Canadian’s tenure.
Carney said he had held private meetings with George Osborne before the 23 June vote. He agreed that the MPs could appoint someone to review the notes of those meetings but said he would be reluctant for them to be made public.
Carney was also asked by Jacob Rees-Mogg, a prominent Brexit campaigner, whether the Bank should be, like Caesar’s wife, beyond suspicion in terms of being influenced by politicians. The governor, who said politicians had sought to inform him rather than influence him, replied: “Those who cast it [the independence] into question should consider their motivations and their judgments.”
Carney, who was asked by Tyrie whether he had been swaying policymakers inside the Bank to adopt the view of George Osborne who campaigned to remain, said: “We have an obligation to give these assessments.
“If we view something as the biggest risk to financial stability, we have an obligation to parliament and to the people of the UK to make that clear.”
The accusations were “extraordinary” said Carney.
Carney was giving evidence in his capacity as chairman of the financial policy committee (FPC), which looks for risks to the financial system, rather than as chairman of the monetary policy committee (MPC) which on Thursday could move interest rates for the first time since March 2009. He is in purdah ahead of the MPC meeting this week but said in the week after the referendum result that he expected interest rates would be cut during the summer.
Asked about the Bank’s warnings before the 23 June vote, Carney said: “Things have changed. We don’t keep things under wraps. We don’t look to have exchange rate crises, we look to have exchange rate adjustments.”
The former chancellors that Tyrie referred to are Lord Lamont, the chancellor at the time of the exchange rate mechanism crisis in 1992, and Lord Lawson. The two peers, together with ex-party leaders Iain Duncan Smith and Michael Howard, wrote to the Daily Telegraph during the referendum campaign to criticise the Bank and Treasury officials.
Other members of the FPC also gave evidence following the publication last week of the half-yearly assessment of financial risks, which warned of the risk of a shock to commercial property prices, and also relaxed bank capital rules to make it easier for them to lend another £150bn to households and small businesses.
Richard Sharp, a former Goldman Sachs banker, and Donald Kohn, a former member of the US Federal Reserve, also insisted the forecasts had not been phoney.
MPs also asked about a congressional report that showed the US government decided not to pursue criminal charges against HSBC for allowing terrorists and drug dealers to launder billions of dollars after Osborne and the UK banking regulator intervened to warn that prosecuting Britain’s biggest bank could lead to a “global financial disaster”.
Carney said the Bank did not have discussions with US judicial authorities. But he added: “Central banking authorities, when there are serious cases of misconduct, consult with their foreign peers to discuss the financial stability implications.”
The governor said the move to ease bank capital rules was intended to address “potential concerns about credit supply. This is not 2007/8/9. The risk environment has shifted, we’re in a situation of increased uncertainty. How long that will last is a subject of debate. During this period there may be reductions in credit demand, reductions in risk taking”.
But, Carney said, it was not a “silver bullet” and demand for credit would depend on the economy.
