UK Government ‘Undercutting’ Key Economic Institutions: Former Central Bank Governor

Mark Carney, former governor of both the Bank of Canada and Bank of England, and U.N. special envoy for climate action and finance, attends the opening of Finance Day at the COP26 U.N. climate summit in Glasgow, Scotland, on Nov. 3, 2021. Daniel Leal/AFP via Getty Images

The UK government has been working at “cross-purposes” with the central bank and “undercutting” the country’s key economic institutions, a former governor of the Bank of England has warned.

Sir Mark Carney, who served as governor of the Bank of England from 2013 to 2020, criticised the government’s mini-budget, which has led to turmoil in the financial markets.

Chancellor Kwasi Kwarteng on Sept. 23 unveiled the biggest package of tax cuts in half a century, which was aimed at spurring growth in the UK economy but sparked panic among investors concerned about increased government borrowing, causing the pound to fall and borrowing costs to soar.

Chancellor of the Exchequer Kwasi Karteng arriving in Downing Street, London, on Sept. 7, 2022. Victoria Jones/PA Media

Talking to BBC Radio 4’s Today programme on Sept. 29, Carney acknowledged that the objective of the government plan was correct.

“The objective of the government’s economic strategy is a right one, which is to improve the rate of growth in the country,” which “has been weak for a while,” he said.

But he criticised the timing of the measures, as “there is a lag between today and when that growth might come.”

‘Dramatic’ Consequences

Carney added that market confidence was affected by the lack of scrutiny of the government’s plans by the UK’s independent economic forecasters—the Office for Budget Responsibility (OBR).

“There was an undercutting of some of the institutions that underpin the overall approach—so not having an OBR forecast is much-commented upon,” he said.

The government initially refused to let the OBR issue forecasts linked to the mini-budget, though the chancellor has since confirmed the OBR will publish full projections by November.

Carney said that the government’s announcements of £45 billion in tax cuts, without any credible plan to get borrowing back on a sustainable footing, was “working at cross-purposes” with the central bank.

He told the BBC: “Unfortunately having a partial budget, in these circumstances—tough global economy, tough financial market position, working at cross-purposes with the Bank—has led to quite dramatic moves in financial markets.”

‘Long-Term Growth’

But the government has shown no intention of changing course.

Prime Minister Liz Truss defended her tax-cutting plans on Thursday, saying that her government will put the UK on a “trajectory for long-term growth.”

She wrote on Twitter: “We are facing difficult economic times globally. We must put this country on a trajectory for long-term growth whilst maintaining fiscal discipline.

“Cutting taxes will boost investment, creating jobs and opportunities for all. That is what our Growth Plan will deliver.”

PA Media contributed to this report.