Mr Carney the proposed new Governor of the Bank made clear in his recent lecture that a bit more inflation might be a price worth paying for more growth. I doubt that more inflation helps in that way. Past UK experience shows that when the authorities become cavalier about inflation it is possible to lose control of it, with bad consequences for output and jobs in due course.
However, Mr Carney has certainly got off to an inflationary start when it comes to his own salary and housing allowance. A total package of more than £870,000 is generous in a public sector and regulatory job. The basic pay of £480,000 is 57% higher than the present Governor’s basic. Then there are arguments over how the rest of the package compares to the present Governor’s generous pension arrangements. Even allowing for this, the Bank seems to be exempted from the public sector pay feeze policy.
As a supporter of free enterprise, I have no problems with people in the private sector earning large sums. All I ask is that their customers, shareholders and other providers of finance pay for it and accept it, and that none of it comes from tax revenues. There should be no recourse to state subsidy. I do have issues with people charging the taxpayer for very large salaries.
The worry about Mr Carney is already that he will not be hawk enough on inflation. He will need to send clear anti inflaiton signlas when he arrives, to avoid losing confidence in the authorities’ resolve on these matters. He also needs to woo, not undermine savers.
I wish him well when he arrives in this country. I hope when here he listens carefully to those of who want him to succeed. There is much he can do, but being careless about inflation or public sector value for money would not be a good idea. Savers have had a poor deal in recent years, yet we are trying to recover from a borrowing crisis, where people did not save enough.
He also needs to examine what he can do as Governor to create stronger banks sooner, in a position to finance a decent recovery from here. The exisiting Bank’s policy towards commercial banks has left some of them pensioners of the state, and unwilling or unable to finance a normal recovery.