That leads directly into the fifth area; the direction of monetary policy itself and the future scrutiny of the central bank. In this regard, Mark Carney has done a lot to make monetary policy more approachable to the general public. The last thing we want is an academic who can’t communicate or someone who doesn’t know how the City works. The House of Commons Treasury Select Committee does a good job in scrutinising the Bank, but I think we need even more of a debate about the future direction of travel of monetary policy.
Some commentators have reacted with fury to the Prime Minister Theresa May questioning monetary policy during her conference speech. What nonsense. She was spot on. The consequences of low interest rates have a profound effect: it incentivises people to borrow to buy property, and does not reward savers.
There needs to be a debate about an eventual future rebalancing of policy with higher interest rates and no more quantitative easing, to go alongside a weaker pound. We also need to discuss how much of the heavy lifting needs to be done by fiscal policy, as opposed to the Bank of England. At the moment the economy might not be able to handle higher rates, but at some stage it will.
When the Labour Government made the Bank of England independent in 1997 it was well received by the markets. Since the 2008 financial crisis, monetary policy has not been as independent as many previously thought. For instance, Quantitative Easing, or “printing money” depends upon an underwriting from The Treasury and hence taxpayer support.
Also, last year, Mr Carney outlined five new research areas for the Bank of England’s policy. The first was the interaction between monetary, macro prudential and micro prudential policy. This may sound technical, and it is, but it takes the Bank right into issues at the heart of politics. In other countries, macro prudential policy and preventing a housing bubble involves the Government directly.
The issue is not to make the Bank less independent: instead it is to recognise how important monetary policy is to people’s lives. Perhaps, we need even greater scrutiny of the Bank of England and a more robust debate about monetary policy. If Mark Carney stays he has to be fully committed to ensuring Brexit is a success, as does his successor.
Dr Gerard Lyons is chief economic advisor at the Policy Exchange think tank