Chancellor of the Exchequer George Osborne will announce today who will be the next Bank of England governor, managing Britain’s economy and supervising its banks for the rest of the decade.
Osborne will make a statement in the House of Commons in London at 3:30 p.m. today. He’s been looking at a final list of candidates to replace Mervyn King drawn up by Treasury officials. Deputy Governor Paul Tucker is the favorite, according to bookmakers.
The announcement will be Osborne’s most important personnel appointment and follows public advertisements for the role in September. Comments by Tucker and a rival in the past week have focused the final days of the race on bank supervision, allowing the chancellor to consider just how aligned their thinking is with his as he expands the future governor’s powers.
“It’s necessary to have someone with a lot of practical experience of banks, and who is actually reasonably friendly to banks,” said Patrick Minford a professor of economics at Cardiff University and a former U.K. Treasury adviser. “Paul Tucker is much closer to that sort of thing, and much more experienced.”
The announcement comes nine days before the chancellor’s Dec. 5 autumn statement on the state of the economy and the public finances. European Parliament Economic and Monetary Affairs Committee Chairwoman Sharon Bowles, one of the candidates for the job, said on Nov. 23 she expected the result to be made public that day.
Osborne expanded the Bank of England’s powers in the wake of the financial crisis to make it the overarching regulator of banking and the financial system, ensuring his quest for a candidate was harder than when the institution’s main function was to set interest rates.
“The scale of the job is so big,” said Peter Hahn, a professor of finance at Cass Business School in London and a former managing director at Citigroup Inc. “They have realized that there’s almost an impossible range of requirements and they are trying to find the best balance.”
Speculation on who will succeed King in June and start a single eight-year term has centered on Tucker, Adair Turner, who leads the Financial Services Authority, and John Vickers, who headed the Independent Commission on Banking. Others linked to the race this year have included Bank of Canada Governor Mark Carney and former Treasury Permanent Secretary Terence Burns, now chairman of Banco Santander SA’s U.K. unit.
Turner, Osborne and Tucker testified on successive days last week to a panel of lawmakers looking at how to overhaul regulation of Britain’s financial system. Osborne told them to stick with legislation proposed by Vickers to erect firewalls around banks’ deposit-taking operations.
Tucker said that he would back the government’s plans, and said he did “not completely” agree with King over the need to eventually break up banks. Turner, like King, takes a tougher stance on banks and favored the threat of full breakup to prevent lenders watering down existing proposals.
The episode gave Osborne further food for thought as he studied the final list of candidates recommended by a panel comprising Treasury Permanent Secretary Nicholas Macpherson, Second Permanent Secretary Tom Scholar and David Lees, chairman of the central bank’s court. They conducted interviews with shortlisted applicants in late October, two people familiar with the matter said at the time.
Osborne will have shared his choice with Prime Minister David Cameron. Deputy Prime Minister Nick Clegg from the junior coalition Liberal Democrat party also had a say. Queen Elizabeth II has had to give formal approval.
Osborne broke with a 30-year convention by looking outside the Bank of England for a successor to King. Widening the pool beyond bank insiders followed strains with the Treasury dating from 2007 that center on how King responded to the financial crisis, people with knowledge of the matter said in February. The bank gained independence to set monetary policy in 1997.
The Libor scandal has buried the chances of a senior banker getting the job. It almost torpedoed Tucker’s bid too when his questioning by lawmakers in July over his knowledge of Libor rate-rigging raised concerns about his suitability.
Tucker re-emerged as a frontrunner in the past three months as he gained potential support from Business Secretary Vince Cable, a Liberal Democrat. Cable said in a Sept. 24 interview that Tucker’s chances hadn’t been hurt by the Libor probe and that the governor needs to be someone who “understands banking but who isn’t captured by banking.”
That left Tucker, 54, favored by bookmaker William Hill Plc for the job. The bookmaker was offering odds of 1-4 today, meaning a 4-pound ($6.40) wager would return a 1-pound profit. Other odds were 6-1 for Vickers, 7-1 for Burns, 10-1 for Turner and 20-1 for Bowles.
“If money talks, and it should do in this instance, it is telling us Tucker is home and dry,” William Hill spokesman Graham Sharpe said in an e-mail.
Osborne is facing further pressure before his autumn statement after the Institute for Fiscal Studies said today he may have to extend his austerity program by another year to 2018 after a deterioration in Britain’s economic prospects.
The London-based research group said Osborne is on course to miss his target to see the burden of government debt falling by 2015, and further tax increases and spending cuts may be needed to erase the structural deficit in five years, the mainstay of his economic strategy. It means the total squeeze may last eight years. Osborne had originally planned for the cuts to end by the time of the 2015 general election.
In Brussels today, euro-area finance ministers will try for the third time this month to clear an aid payment to Greece and forge a blueprint to keep the country a solvent member of the currency bloc. A breakthrough hinges on coming up with funding to fill the financing gap that emerged when Greece this month got two more years to meet deficit-reduction targets.
Efforts to resolve the European debt crisis have stumbled after the European Central Bank gave leaders more time with its September pledge to purchase sovereign debt.
In Spain, pro-independence parties in Catalonia won a regional vote yesterday, sparking concern political uncertainty may force the country to delay seeking aid. Elsewhere in Europe, German consumer confidence fell for the first time in seven months in December, dropping to 5.9 from a revised 6.1 in November.
In the U.S., economic activity fell in October, according to the Federal Reserve Bank of Chicago. The Chicago Fed national index, which draws on 85 economic indicators, was minus 0.56 in October versus 0 in September. An index of Texas manufacturing by the Federal Reserve Bank of Dallas probably rose for a second month in November, a Bloomberg survey showed before a report later today.