File photo dated 11/08/14 of the Bank of England in London, as policymakers are set to keep interest rates on hold again this week, while economic growth slows sharply after a stock-building boost at the start of 2019. PRESS ASSOCIATION Photo. Issue date: Sunday June 16, 2019. The Monetary Policy Committee (MPC) is seen keeping rates at 0.75% once more in Thursday's noon decision, which comes after the latest official figures showed the economy shrank by a worse-than-feared 0.4% in April. See PA story ECONOMY Rates. Photo credit should read: Yui Mok/PA Wire
Some Eurosceptic MPs believe the Bank of England has become a 'creature of government' © PA

Chancellor Philip Hammond has distanced himself from an attempt to speed up the search for the next Bank of England governor, which would have prevented the appointment from being made by Theresa May’s successor as prime minister.

About 30 candidates have applied to succeed Mark Carney as BoE governor in January. Officials in Downing Street, the Treasury and the central bank have discussed whether Mr Hammond might force through the appointment before he leaves office.

Mr Hammond is expected to depart from the Treasury when Mrs May steps down as prime minister next month, and Eurosceptic Conservative MP Boris Johnson is fighting it out with foreign secretary Jeremy Hunt to be her successor.

The choice of the next BoE governor is highly sensitive. Eurosceptic MPs regard Mr Carney as a principal opponent of a no-deal Brexit and Jacob Rees-Mogg, a leading Brexiter and supporter of Mr Johnson, has claimed the bank has become a “creature of the government”.

“There has been a discussion about whether to move quickly to avoid the [BoE governor] appointment becoming dragged into an ideological discussion about Brexit,” said one Whitehall insider.

The Commons Treasury select committee, which is required to hold a hearing with the new BoE governor, had been on standby for a possible emergency session before the summer break in case the appointment was made quickly.

But Mr Hammond, backed by his permanent secretary Tom Scholar, has decided it would be wrong to rush the process and inappropriate for an outgoing administration to make such a big decision.

A Treasury spokesman said: “As we said when we launched this process, we expect to make an appointment in the autumn.” Another Treasury insider that the decision had to be taken by “the new guys”.

British Chancellor of the Exchequer Philip Hammond delivers a speech at the annual Mansion House dinner in London, Britain June 20, 2019. REUTERS/Simon Dawson
Philip Hammond at the Mansion House on Thursday: he is expected to step down when Theresa May goes © Reuters

The next prime minister and his new chancellor will therefore be faced with an early decision on who to appoint to the £480,000-a-year job at a crucial moment in the Brexit saga.

Under the latest deadline, the UK is scheduled to leave the EU on October 31.

Mr Hammond and some Downing Street insiders examined ideas that taking a decision on Mr Carney’s successor before the autumn might be better for continuity at the BoE, especially if a “standout candidate” emerged.

Such a gambit would have prevented Mr Johnson, the frontrunner in the Tory leadership contest, or Mr Hunt, from appointing a candidate who would be less vocal than Mr Carney in opposing a disorderly Brexit.

But the idea was rejected. Treasury officials feared that a speedy appointment might have been challenged on the basis that “due process” was not followed.

Any rapid move on Mr Carney’s successor might also have given the impression that Mr Hammond was adopting double standards.

The chancellor is currently locked in a fight with Mrs May over her attempt to spend billions of pounds on “legacy” projects, including funding for schools, before she steps down. Mr Hammond believes such big decisions should be left to the new administration.

The sifting of candidates for the BoE post has already begun but no interviews have taken place.

The front-runners include Andrew Bailey, chief executive of the Financial Conduct Authority; Raghuram Rajan, former governor of the Reserve Bank of India; Shriti Vadera, chair of Santander UK; Minouche Shafik, a former BoE deputy governor; and current bank deputy governors Ben Broadbent and Jon Cunliffe.

The candidates have kept their heads down in recent weeks but several of them are known to be unsettled by the Brexit crisis and the Tory leadership change.

There has been talk that Janet Yellen, former chair of the US Federal Reserve, would be interested. Mr Hammond has repeatedly said he wanted a bank governor who could turn heads and command respect at international meetings.

If Mr Johnson secures the premiership, other candidates could come into the frame. As London mayor, he was advised by Gerard Lyons, who is currently the chief economic strategist at Netwealth and supporter of a hard Brexit.

It is not known if Mr Johnson, who has called for an “internationalist” Brexit, would be as keen as Mr Hammond on a BoE governor who already had a presence and following on the world stage.

Letter in response to this article:

All bets on for the next Bank of England governor / From Costas Milas, University of Liverpool, UK

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