Mark Carney extolled the benefits of staying in the EU in a speech delivered alongside a staff report explaining how exit would affect the ability of the BoE to deliver monetary and financial stability.
Repeating a theme familiar to readers of this blog, I don’t think any of these interventions were necessary, and that they would better not have been made.
Even in the context of the leak of the existence of an internal project to study Brexit, all that need have been undertaken and disclosed was a dry report on the BoE’s contingency plan to deal with the referendum period, and its plans for dealing with the transition to a possible exit. And that would really boil down to stating the obvious, that the BoE stood ready to lend and inject liquidity where appropriate.
This latest intervention included, we have, in the last 2 years, listened to BoE officials opine on the future of the voluntary sector; on the desirability of ‘inclusive capitalism’; urge action to mitigate climate change; and now, implicitly, urge Britons not to vote for Brexit.
The Bank is led by clever economists and financiers who have interesting things to say about all aspects of public life, no doubt, but there are disadvantages to speaking on topics outside the mandate.
First, the BoE already has an enormously powerful role in the state, powers delegated to it so that ‘democratic control’ [as John McDonnell termed it] over day to day monetary and financial policy is not possible. Appearing to encroach even further on political life risks stoking hostility towards the Bank that would ultimately erode support for the independence it properly enjoys now.
Second, it attracts unwelcome attention over the amount of resources it has and how it is using them. How many studies into monetary and financial policy do these speeches cost? If you were a think tank or an ESRC grant applicant on the economics of EU trade and banking, you might feel aggrieved that the funding that this BoE sojourn into your territory could have been better spent diverted to you as a specialist in the field. Or if you were an EU sceptic you would simply prefer that HMT had taken back a larger share of the seigniorage that the BoE lives off. Operational independene requires, at some level, budget/resource-use independence. Preserving that in the face of a sceptical polity means bending over backwards not to mis-use the money and freedom you have currently.
Third, senior officials politicise their offices by these interventions. In thinking of the next appointments, politicians might decide, if they think Carney’s successor is going to weigh in on climate change, to choose someone politically like-minded, rather than someone simply expert in money and finance. And those jockeying for position for that job may feel obliged to behave politically in order to gain advantage, rather than focusing on their economics.
Fourth, the Bank speaks with authority on matters within its mandate that is partly conferred by convincing us that it has no political axe to grind, and it is simply giving the best technical advice. Interventions like this erode that authority. Journalists already pointed to the neat coincidence between the views of Carney and Cameron and Osborne on EU and EU reform. This could create a cynicism around future financial or interest rate policy decisions that appear to make life easier for one set of politicians over another.
On Twitter, I wondered out loud whether it might be possible to frame legislation to restrict what BoE officials speak on in public. I don’t imagine it would be easy to do this, especially in a way that could not then be abused by the government itself. But it might be worth thinking about in the context of the Labour BoE Mandate Review conducted by McFall/Blanchflower/Posen/Wren-Lewis.