Fair Judgement or Overstepping the Mark? The Bank of England and EU Referendum

Amidst all the furore over Brexit, an interesting side story has been developing over the last few months concerning the Bank of England, and not its coinage of new notes.

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MP Jacob Rees-Mogg (LadyGeekTV via Flickr)

Tory MP Jacob Rees-Mogg, affectionately known as the ‘Honourable Member for the early 20th Century’, has robustly criticised the Governor, Mark Carney, in a recent Treasury Committee hearing over the Bank’s stance during the EU referendum campaign. In quite a heated exchange, the pro-Brexit MP accused Carney of breaching the Bank’s independence after it passed judgement last month on the economic impacts of leaving the EU.
The Bank’s independence is, of course, well-established. Gordon Brown (remember him?) ‘set the Bank free’ in 1997 upon granting them the ability to set interest rates independently, whereas the previous arrangement involved a monthly meeting between the current Chancellor and Governor. From there on, monetary policy remained solely within the domain of the Bank, and not at the behest of short-term meddling by politicians. Its political impartiality and objectivity, similar to the expectations of Civil Servants, is therefore an enshrined principle of the Bank’s operations.

Rees-Mogg’s comparison with general elections was compelling: if, he argued, the Bank does not make economic forecasts for the outcome of elections based on party manifestos, then it should not be politically involved in a referendum campaign either. Referendums are, of course, very different from general elections. They offer a binary outcome, as opposed to elections where numerous parties can run for office, and the result is effected immediately, whereas the winning government’s manifesto pledges are often more slowly to come into effect. However, I find this defence rather puzzling. The EU referendum, though restricted to either a ‘remain’ or ‘leave’ choice, is as infinitely complex and far-reaching as any general election. As Patrick Wintour and Jennifer Rankin rightly pointed out this week, the consequences of Brexit will be with us for up to twelve years; longer than two election cycles. The choice may be binary, but any conversation with a pro-Brexit Labour or UKIP member indicates that people’s visions for a future Europe vary substantially, and the course of events proceeding the vote on June 23rd are neither clear nor obvious. As David Cameron has himself indicated, a vote for ‘remain’ certainly does not put the issue of Britain’s relationship with Europe to bed. Membership of the EU effects our democracy, our industries, our taxation, our energy policies, and our freedom of movement. To simplify that to a discrete matter of ‘positive or negative’ is profoundly reductive.

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Governor Mark Carney (Policy Exchange via Flickr)

This is not to say that the Bank should withdraw from any complicated decision – that would be disastrous. But the difference between taking precautionary actions to administer their responsibilities to the British people in any given situation, and issuing prospective judgement on a deeply-politicised issue is important. It is not convincing to argue that the EU referendum is substantially distinct from a general election to thereby warrant the intervention of the Bank.

I do not share many opinions with Rees-Mogg at the best of times, but I have to say I found his criticisms over this issue fair, incisive and quite refreshing.

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