MNI POLICY: UK Hammond: Open To Shorter Term For New BOE Head

By David Robinson

     LONDON (MNI) - UK Chancellor of the Exchequer Philip Hammond said Wednesday

that he would prefer that the next Bank of England Governor serves a full eight

year term but that he was prepared to consider a shorter appointment for an

exceptional candidate.

     Current Governor Mark Carney's eight year term runs until 30 June 2021 but

he has chosen not to serve the full term and he is set to leave on 31 January

2020. Hammond announced earlier in the day that the open recruitment to appoint

Carney's replacement was now underway.

     The following are key points from Hammond's evidence session to the

Treasury Select Committee:

     -Hammond made it clear that Carney's successor would be an established

figure. He said that it was very important that "we have someone who commands

respect in the international arena." While he wanted the new governor to serve

for eight years he noted that Carney had negotiated special terms when he was

appointed and he left the door open for his successor to do  the same.

     -He noted that it was clear Brexit uncertainty was hampering business

investment. "It is definitely the case that business investment is significantly

below where we would expect it to be at this stage of the cycle," Hammond said.

Both the anecdotal evidence given to the Treasury and the reports of BOE agents

supported the view that business were holding back on investment because of

Brexit, Hammond said, while calling on lawmakers to resolve the Brexit impasse.

"The sooner we can resolve this by giving citizens and businesses clarity, the

better," he said.

     -Hammond made clear that the UK fiscal rules are set to be changed yet

again. The Institute for Fiscal Studies has noted that there have been a dozen

different fiscal rules since 1997 and 10 of these have been broken or abandoned.

Hammond's current goals are to achieve a balanced budget by the middle of the

next decade with public sector net debt falling as a share of GDP in 2020-21 and

public sector net borrowing coming in below 2% of GDP in the same fiscal year.

     Hammond said that "pretty soon" the Treasury would need new rules to cover

the period beyond 2021. He said that the finances were on track to meet the

current net debt and balanced budget goals. Figures out Wednesday showed that in

March the budget deficit was 1.2% of GDP.

     -The Chancellor said that his planned three year government spending review

could be delayed if Brexit uncertainty continued. If there was no solution to

Brexit in coming months, with the end October deadline looming, he said that it

would not be appropriate to set out medium term spending plans. If it was

unclear if the UK was going to get a deal with the EU or "crash out with no

deal" Hammond said that fixing spending plans for the next three years "would be

an unwise thing to do."

--MNI London Bureau; tel: +44 203-586-2223; email: david.robinson@marketnews.com

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