Carney in hot water over EU-exit email gaffe
Canadian fiscal heartthrob Mark Carney is set to face awkward questions from the U.K. Parliament after the embarrassing revelation that his Bank of England is secretly planning for Britain’s exit from the European Union.
The disclosure of “Project Bookend,” which threatens to undermine Carney’s pledge of transparency, came on Friday when his chief spokesman, whom he brought to London from the Bank of Canada, accidentally emailed strategy documents to an editor at The Guardian newspaper, including guidance for how to rebuff questions from the public.
Even Bank of England staff were to be kept in the dark about the project, in which a senior executive was to lead a secret team planning for the so-called “Brexit.” A referendum on leaving the EU was a major platform plank for the newly re-elected Conservative government, and is expected by 2017.
Parliamentarians are likely to wonder when Carney was going to tell them about this major review of Britain’s economic prospects, and how many other secret projects he may have. Already, the Labour Party has called on George Osborne, the finance minister, to reveal what, if anything, he knew.
“Were the chancellor and the Treasury in on the secret?” Chris Leslie, Labour’s shadow chancellor, said in a BBC interview. “If so, when did they know and did they advise the Bank of England to publish it and, if not, are they undertaking their own assessment and will that be published, too?”
It is an awkward predicament for Carney, a star of central banking, who made his name steering Canada through the global economic crisis, leading to speculation about a possible future in politics, and became Governor of the Bank of England on a promise to increase transparency. In December, for example, he started releasing details of votes and interest-rate decisions, and he has ended informal “fireside chats” with bankers designed to suss out market intelligence.
He has been on a roll of good press, including an admirable time of just over three and a half hours in the London Marathon, and he is spearheading a popular campaign to put an artist on a new 20-pound note.
But devising strategy on such a major political issue as the Brexit and then leaking it to the media is likely to raise questions about how rigorously the bank avoids interference in political matters.
As news broke of the leak, Carney was at a conference in Portugal with Mario Draghi, head of the European Central Bank, who was speaking, incidentally, against the idea that central banks have become too political.
Britain’s newly re-elected Prime Minister David Cameron has said he wants the country to remain in the EU, but only if it reforms, and he campaigned on a promise to put the question to a national referendum. The Labour Party campaigned against a referendum, saying it would support it only if more powers were to be transferred to Brussels, but since its defeat it has changed policy, and now supports the referendum.
Carney has previously spoken in support of the referendum plan, saying it should take place “as soon as necessary.”
Planning for the future is, of course, part of a central bank’s role, and the Bank of England often plays “war games,” such as an exercise last year when the U.S. and U.K. acted out their responses to a crisis at a major bank. But as the Brexit moves from hypothetical to reality, the bank’s role as a source of economic guidance becomes ever more precarious.
In the lead-up to the recent Scottish referendum on independence, for example, Carney kept his cards close to his chest, later saying he needed to maintain “careful communications” in order to preserve the bank’s independence and to “avoid inadvertently triggering the very risks the contingency planning was designed to mitigate.”
The leak of Project Bookend may not be a firing offence for Carney’s chief spokesman, Jeremy Harrison, who has been a trusted aide. But it does rank with the best accidental email stories of recent years.
In a statement, the Bank of England pointed out that a Brexit referendum is government policy, and an obvious thing to plan for.
“It should not come as a surprise that there are a range of economic and financial issues that arise in the context of the renegotiation and national referendum. It is one of the Bank’s responsibilities to assess those that relate to its objectives,” the statement said.