Next month sees the long-awaited arrival of Mark Carney as the new governor of the Bank of England. Much is expected of the Canadian central banker, so what's the best advice he could be given?
Welcome to Britain Mark – I learned my economics at Queens in Canada and love the country. But the first thing you need to realise is Britain is not Canada. Don’t assume anything works the same.
It’s not clear what more monetary policy can do at present to get us out of the hole we are in: don’t hold back from saying that. If we want to boost the economy, then fiscal policy has to play its part, and you need to say that loud and clear.
Don’t just say what George Osborne wants – having appointed you, you are now practically untouchable. You are only there for five years but you can set up the right legacy now.
Do look at nominal GDP targets and other approaches to monetary management – especially important so we do not raise interest rates too early in the cycle.
You need to make sure we have decent governance at the Bank and that the Monetary Policy Committee and the Financial Stability Committee work together – otherwise a fatal tension will develop.
Growth is crucial, but don’t let the banking sector lobby for any weakening of the moves towards higher capital ratios and the like on the basis of it.
Listen to your independent MPC members – do not ignore and sideline them as your predecessor tended to do. Create an atmosphere of challenge and creativity in the Bank, not just a bureaucracy there to support what the boss thinks.
Be a transparent institution and publish more on the Bank’s forecasts, modelling and thinking. The Bank is very powerful now, with few countervailing forces or centres of expertise on macroeconomics. Accountability demands openness.
Get out around Britain and smell the coffee (and the labour market). There are massive regional inequalities emerging and the Bank must make – and be seen to make – decisions for the whole country, not just for London and the south east. Good luck!
This post first appeared in Juncture, the Institute for Public Policy Research's journal of politics and ideas
