In September, Positive Money coordinated a joint letter from a cross-party group of MPs calling on the government to publish the shortlist of candidates to be the next Bank of England governor. We argued that doing so would ensure greater public trust in the appointment process.
The letter received widespread media attention and has now prompted public responses from the current governor Mark Carney, and chancellor Sajid Javid who both agreed the shortlist should remain secret.
In a letter to Catherine West MP, which we’re publishing today, the chancellor defended his decision, saying that ‘scrutiny in advance of the appointment stage must be proportionate’, and that there is a need to consider the potential for ‘destabilising speculation within financial markets associated with this decision’.
Javid also points to the ‘established practice’ of candidates being able to apply in confidence. It’s true that in the past, this decision has been made behind closed doors. But past precedent has not prevented other powerful financial institutions from modernising. Just as the World Bank and IMF now publish the shortlist of candidates for their top jobs in a bid to increase transparency, the appointment process for the Bank of England governor should be updated to reflect the significant expansion of the Bank’s powers over the last decade.
As our letter makes clear, the shortlist should only be revealed after the candidates’ consent has been sought. The names of those being considered is already subject to leaks and media speculation; for example, the BBC reported last week the government had settled on former deputy governor and LSE director Minouche Shafik as its preferred candidate, while the FT was told that several candidates are still in the frame.
It would be much fairer on those involved to publish this information as part of a formal process, rather than have their names released by anonymous sources at the Treasury. It would also give the public greater confidence that the decision is being made in an equitable and orderly way.
Mark Carney was asked whether the shortlist should be made public during his most recent hearing with the Treasury Select Committee. Although he didn’t express support for the idea, he did point out that parliament is unable to veto the government’s choice for his successor, whereas the appointment of the chair of the US central bank; the Federal Reserve, is subject to democratic approval by Congress.
Our recent paper ‘Seeking Legitimacy: a new settlement for the Bank of England’ envisages a greater role for the Treasury Select Committee in the appointment process. This would include allowing the committee to comment publicly on the shortlist of candidates prior to appointment, helping to ensure that the government considers a broad range of candidates with different backgrounds and perspectives.
This is just one part of a range of measures we believe are needed to improve the Bank’s democratic legitimacy and accountability. We’ve shared the report with all political parties ahead of the general election, and will continue to champion the report’s recommendations once the new government takes office.