DERMOT MURNAGHAN: And the top job at the Bank of England today and then tomorrow the Canadian Mark Carney will take over. It’s fair to say, expectations are exceedingly high, so can Mr Carney carry the country into more prosperous times? I’m joined now by the Lib Dem MEP, Sharon Bowles, who was short-listed for Mark Carney’s job; also by the former Labour city minister, Kitty Ussher, and by the economist and former head of the Government Economic Service, Vicky Pryce. Very good morning to you all and Vicky, first of all, I must say it must feel good to be back and back on the TV?  

VICKY PRYCE: It does indeed, thank you very much.  

DM: Well thank you very much for coming along. Give me your assessment then of the weight of expectation upon Mark Carney, has it gone too far here?  

VP: It probably has but we’ve seen already though that a number of people are writing bits in the paper saying, let’s cool a little bit about this and we are actually perhaps have put an awful lot on what he might or might not do and of course he needs to come in the job properly; he needs to familiarise himself even more than he’s done so far with the MPC workings and of course he’s going to be at the first MBC meeting that he will attend, just in a few days’ time. I would suspect he’s going to be very cautious early on.  

DM: Okay, it will be interesting when we do get to read those minutes. I mean, Kitty Ussher, he’s also gonna have a lot more to do isn’t he than Sir Mervyn King, the whole remit of the Bank of England has been expanded, particularly when it comes to regulation.  

KITTY USSHER: I’m not sure he’ll have more to do hoping that we won’t have another serious financial crisis; I think Mervyn King was kept pretty…  

DM: There’s always responsibilities, let me put it that way.  

KU: …busy. Well yes, he needs to within the next month or two come up with a view as to how the Bank of England will respond to the sort of tweaked remit that the Chancellor has given him. And this will include sort of formulating a view on how you can have sort of what’s called intermediate targeting i.e. looking at what kind of forward signal you can send to the market about the path of interest rates which has been hailed as the policy device that will cure all Britain’s ills but is a rather sort of complicated and slight, but significant, shift to the bank’s remit and he’ll need to come up with a very sort of straightforward way of interpreting it, that does what it says on the tin without leading to confusion about what it means, for example for inflation.  

DM: Well exactly, I mean it may be a simplistic question but come in on this Sharon Bowles, I mean how would that actually work given that you have to adapt to circumstances. So you give the signals out that interest rates are going to stay like this for the next two or three years so companies and individuals go out and borrow a lot of money on the basis then there’s an external shock, interest rates go through the roof and everyone says, well you lied to us, you didn’t tell us the real truth.  

SB: Yes I mean it’s always necessary, I think, for central bankers to keep a certain amount of mystery. We have problems with this in Europe when we have central bankers sometimes saying different things from the ECB and causing a lot of confusion and that’s something the Bank of England has avoided so I think that’s one thing that I perhaps wouldn’t change. But we are hoping, I think, for a different kind of culture, a more communicative culture that’s partly why he’s been chosen. But that needs also to permeate down through the bank to all the other different layers so that there isn’t this being treated as god, seen as god and perhaps that plays into the fact that he isn’t god and so he can’t …  

DM: I wanted to ask you about that, I mean clearly you thought you would have at least been as good that you were up for the role but we’ve got this from the Chancellor when he snagged him, saying he’s brilliant, he’s simply the best. It’s back to this weight of expectation again isn’t it? That’s a big write-up. 

SB: It is, I mean he had a good run in Canada and they’re very happy with him and maybe he’s going to get out before things in Canada don’t look quite so rosy. But I mean he is well liked, I know he’s very well liked on the stage amongst the other central bankers and there is a lot of appreciation for his skills. So I think that he is good but whether he is 200 times better than everybody else is another matter.  

DM: I mean Vicky Pryce on this also, I mean you mention the Canadian experience and there are so many differences between the economies, Canada’s and the UK’s and even the hole that their banks were in compared to ours in 2008 and 2009. He didn’t have it as hard there, how would he have dealt here if he was here in 2008?

VP: Well perhaps he would have understood the banks a little bit better. I think one of the issues that the city has always had against Mervyn King, if one can possibly say anything against him right now. When people leave one always says very good things about them of course, is that he didn’t quite understand what was going on, well perhaps I’m exaggerating a bit, he didn’t really have the feel of the banking sector, he wasn’t that interested in what was happening there. They were complaining that they didn’t have enough visits, they certainly didn’t have an ear which in anyway sort of comforting or encouraging from him…  

DM: So you think Mark Carney’s got a lot of banking experience?  

VP: Well yes, absolutely, and I think they will like that. Now that doesn’t mean that they are going to go to him always with special pleadings because of course that time has sort of passed but at least he will understand a lot better what needs to be done.  

DM: So when he cracks the whip, which is what he’s got to do, that’s what the Government wants to see as well, cracking the whip over the banks. They’re going to say, okay, well we’ll accept that because you understand the way we work?  

VP: Well I think to a certain extent yes but of course in terms of whether the new Governor is going to be particularly successful or not, there’s a huge amount that will depend on whether he’s lucky or not. If the economy did start to recover and the problems with the banks ease a bit, because in reality we’re still in the middle of a banking crisis, we haven’t got over that, whether you look at the UK, whether you look at Europe, up to a point also whether you look at the US, that still needs to be dealt with and that’s going to be a big world crisis that somehow will have to be dealt with.  

DM: And that’s what he needs to be then is it?  

VP: Well absolutely, if he’s lucky though in terms of how the economy starts moving ahead then of course he will be hailed as a hero. If he’s unlucky and things actually don’t go as the Chancellor right now hopes they will, then we will turn to him very quickly.  

DM: Well that was the point Kitty Ussher wasn’t it, I mean it seemed when the Chancellor announced this and it really was seen as a real coup, there was no leaking about it was there really? That there were different times almost, there’s seems to be a slight parting of the clouds, the idea when Mark Carney, when the announcement was made was that we need a shed load more of quantitative easing, we need this forward guidance on interest rates. Perhaps we don’t need that now?  

KU: It’s a rather tricky situation isn’t it? If you think about the politics of this, George Osborne has very clearly personally identified himself with the appointment of Mark Carney and so now it could go either way. Either we don’t actually need a dramatic shift of policy because the clouds have opened slightly and the economy is beginning to look a little bit more resilient in parts at least, in which case Mark Carney’s faced with a situation that he shouldn’t change the policy to start. So all they have to do is sit there and Osborne will say, look I’ve appointed Mark Carney and everything’s great, or Mark Carney feels that he needs to show that he is different and make some kind of policy change but then the question is open as to whether it is actually needed or not and, as I said previously, it’s a rather kind of complicated thing to do to say you’re looking at things other than inflation but what will you do if there is pressure on inflation and creating some kind of way through that will be hard.  

DM: He might be there long enough mighten he to have to start the unraveling and we saw what happened when Ben Bernanke mentioned in the United States the week before last just saying that, well okay we have to unravel this eventually and the bond market fell apart. This might happen to Mark Carney, he’ll have to work out what to do with all these innovative monetary matters.  

KU: To be able to guide the market through that does need somebody with credibility and if he can sort of use his honeymoon period to get the British economy over that hump that will be a good thing to do.  

DM: But I mean what we’re talking about is putting up the interest rates.  

VP: Absolutely, I mean the interesting thing about the US is that we didn’t even talk about unraveling, we just talked about slowing the purchases from bonds and that of course would immediately have an impact on yields because in reality quite a lot of theequity markets, commodity markets, any other asset that you look at has been kept alive because of quantitative easing in the US and elsewhere. Of course the US actions have repercussions all around the world; if that even slows down, if there isn’t any underpinning for the increase in equity prices we’ve seen or any other sort of house prices and so on, then that can all collapse. We see what’s happened to commodities already as a result of this.  

DM: Yeah, Sharon Bowles on that, if he is, Mark Carney as Governor has to start pushing up interest rates pretty quickly because the economy is recovering and all kinds of other things going on, perhaps some of that sheen will come off pretty quickly?  

SB: Well I’m sure that that’s the case but he also will have to show that he can be firm and that he won’t be pushed from the course that he needs to take and we all know, and it’s just been said, it is very difficult to unwind the quantitative easing, you hope that maybe you can do that more slowly so the pain is spread.  

DM: And how does he send that signal out, Kitty Ussher was touching upon it, that he’s not George Osborne’s creature, he has to prove also, doesn’t he, that he’s his own man and almost reassert the independence of the Bank of England again.  

SB: I think, well, I think that should be something that he’s able to do. I mean his hearing went quite well with the Treasury Select Committee; he’s shown that he knows the right tone to take with politicians, the fact that he had his own political ambitions and maybe still has; he’s more comfortable perhaps in that frame than Mervyn was. But I mean there is something else big political that is going to go on and that is the whole issue of Europe is rumbling on, and of course all the financial services legislation comes from Europe, tell me about it, I’ve done forty pieces of it, and we are doing this banking union and so the relationship between the Bank of England and the European Central Bank is going to be really important and it’s got to be seen to be important and that they’re getting on in order for there to be confidence that we can operate on the outside of the banking …  

DM: But should he look for an issue where he can just say to the Government, here I am, saying I’m Mark Carney, I’m my own man and this is an independent organisation?  

VP: Well the interesting thing for him is going to be that he now has so many more things to worry about than Mervyn King did because he’s taken over also the potentialregulation of the banks and so on and so he’ll just have to watch it so he doesn’t say something which he will then regret quite significantly but in those hearings with the Treasury Select Committee he did say that we might actually need new instruments as well in terms of influencing the economy because he’s worried about economic growth so we made indeed see something come about.  

DM: Okay, watch this space! Vicky Pryce, Sharon Bowles, Kitty Ussher, thank you both, thank you all very much indeed, all three of you. And that’s all for this week, don’t forget you can now catch up with …  

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