OTTAWA – Mark Carney wanted to make one thing perfectly clear Thursday before submitting to his unofficial, and ultimately successful, job interview for governor of the Bank of England — “I do not have political ambitions.”
The proof, Carney said, is in his choice of taking on the extremely challenging post as England’s top banker.
The statement before his 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.
The issue arose after it was revealed in December that Carney had been courted for — and in some eyes appeared somewhat interested in — the Liberal leadership, as well as having vacationed in the summer home of the Liberal finance critic during the summer.
The speculation in Canada is that Carney would be ready to jump into the political ring after returning from England in 2018.
“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.
“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.”
The committee confirmed Carney’s appointment just hours after hearing his testimony.
“The committee wishes Dr. Carney every success for his term as governor, and looks forward to its future meetings with him,” it said in a release.
In a written submission to the committee, released simultaneously to his testimony, Carney said he considers the Bank of England position the “pinnacle of my career.”
In what appeared a shocking decision last fall, Carney was hand-picked by 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 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.
Carney was asked if he realized that Bank of England staff were under a pay freeze, and would he have taken the job for less?
The outgoing Bank of Canada governor responded he did not know about the wage freeze, but added he did not feel the remuneration was excessive.
Carney said such pay is consistent with arrangements made for executives who move to Britain, or elsewhere, in order to “equalize in broad terms their living standard from where they’re coming to where they arrive.”
“I’m moving from one of the least expensive capital cities in the world, Ottawa, to one of the more expensive.”
As for changing his mind, Carney said it came after he was told 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.
Asked if he would be willing to stay longer, Carney would not commit, saying he intended to fulfil his task in the five-year window.
The hearing, which was expected to last two hours but went on for closer to four, was broken into two sessions to give the witness time to catch his breath and collect his thoughts.
At times, Carney appeared to be working diligently to live up to his reputation for candid thoughtfulness, while steering clear of traps the MPs had laid down for him.
How did he feel about the bank’s board being called by a “court?” A bit antiquated, no?
As a foreigner, Carney said, it would be presumptuous to meddle in centuries-old traditions.
At another point, he was grilled about his leadership style — “Emperor or constitutional monarch?”
Not emperor, he responded — “My view would be more of a managing partner.”
Sensing a trip-wire on another line of inquiry dealing with internal court procedures, Carney chuckled: “I’m sure there is something I’m missing.”
Three hours in, chairman Tyrie congratulated the Canadian on having passed the “three tests that have tripped up candidates” before. The remainder of the morning and the shorter afternoon sessions were devoted to policy issues and how Carney planned to govern the Bank of England.
In his testimony, the Canadian 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.”
Scotiabank economist Derek Holt said Carney had succeeded in dampening wild expectations that he would bring a radical shift to monetary policy at the Bank of England. And none to soon, because the speculation risked triggering upward pressure on borrowing costs in the U.K.
“He had only mentioned nominal GDP targeting as one of a number of hypothetical options in a Toronto speech, yet it was being wrongly taken as gospel that he would pursue such a measure,” Holt explained.
“He has now clarified his policy bias by reaffirming faith in flexible inflation targeting. This is positive for the U.K. economy.”
Carney told the committee there is already 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.
Note to readers: This is a corrected story. An earlier version quoted Carney as saying Ottawa was one of the least expensive cities in the world, rather than one of the least expensive capital cities.