OTTAWA – Mark Carney is making it clear he has no political ambitions, telling a British parliamentary committee that his decision to take the top job at the Bank of England is proof of that.
The statement before his unofficial confirmation hearing in London was perhaps the most categorical disavowal of any political interest for now, or when he is expected to return to Canada in five years.
“I’m surprised it has been suggested that taking one of the most challenging jobs in central banking in another country would be politically advantageous in my home country,” he told the Treasury Select committee Thursday morning.
“If I had political ambitions, I would have pursued them in Canada and so I think this is revealed preference. I do not have political ambitions.”
In what appeared a shocking decision last fall, Carney was hand-picked by the U.K. chancellor George Osborne to take charge of the storied, 319-year-old institution on July 1, the first foreigner to ever do so.
But unlike in Canada, Carney at first needs to pass through the gauntlet of the U.K. Treasury Select Committee. Although the committee does not have veto powers over Carney’s selection, it could still make it difficult for the government to proceed with the unconventional choice.
The session began with some uncomfortable questions from chairman Andrew Tyrie, a Conservative MP, including why the Canadian changed his mind after first refusing the offer and whether he was worth his estimated 874,000-pound ($1.36 million) pay packet, including a 250,000-pound ($390,000) housing allowance.
Did he realize that Bank of England staff were under a pay freeze, he was asked.
Carney responded he did not, but that he did not feel the remuneration was excessive.
“It is consistent with many executives who move to this country or other countries and in order to equalize in broad terms from where they live to where they arrive. I’m moving from one of the least expensive cities in the world, Ottawa, to one of the most expensive,” he said.
As for changing his mind, Carney said it came after he was told that the term of the office could be shortened to five years rather than eight to suit him.
He had personal reasons for wanting to return in 2018 to Ottawa, where he has kept his home in the affluent Rockcliffe Park neighbourhood — his family.
“I have a young family and the transition of countries in schools here and back was in the end decisive,” he said.
A five-year term would allow his eldest daughter to finish high school in London, and his second eldest to have two years to re-integrate into the French-language system in Ottawa upon returning.
As the first three-hour morning session wrapped up, chairman Tyrie congratulated the Canadian on having passed the “three tests that have tripped up candidates” before. The remainder of the morning session was devoted to policy issues and how Carney planned to govern the Bank of England.
In his testimony, Carney repeatedly referred to his experience at the Bank of Canada, but also showed that he had been doing his homework about the British bank and current economic difficulties in the U.K.
A key point of contention focused on a speech Carney made in December in which he appeared to entertain a change in approach, during extraordinary times, from tying monetary policy from inflation to the performance of the economy.
The speech got plenty of attention in England, including an endorsement from the influential Economist magazine.
But Carney suggested the idea had less merit than the attention it has drawn, noting that the risks of confusing financial markets with a new uncertain measure may not be worth the benefits.
“I start from a position where flexible inflation targeting is the most successful monetary framework that has been in existence, so the bar to change is very high,” he said.
“I’m not convinced it’s a risk worth taking,” he said.
Carney said there is enough flexibility in the inflation targeting scheme — which calls the bank to keep inflation at two per cent over the medium term — to achieve the benefits of job creation and output growth.
He gave the example of the Bank of Canada’s use of flexibility to extend the duration where the bank will allow inflation to hover above or below target from the normal 18-24 months to as long as three years.
Another tool that has proved effective, he said, was the Canadian bank’s conditional commitment during the recession to keep interest rates near zero for 15 months, saying the clear guidance gave business and consumers the confidence to make financial decisions in a risky environment.