Bank of Canada Governor Mark Carney will receive an annual housing allowance of 250,000 pounds ($407,000) a year when he takes over from Mervyn King next year and becomes the first foreigner to run the 318-year-old Bank of England.
The allowance, which will be taxed at the top rate of 45 percent, will be in addition to a salary of 480,000 pounds, according to a statement today from the Bank of England’s non-executive directors. After tax and social-insurance contributions of 2 percent, the allowance means Carney will have about 11,000 pounds a month to spend on a property.
Chancellor of the Exchequer George Osborne named Carney as King’s successor on Nov. 26. The Canadian will lead an institution taking on enhanced powers to regulate banks at a time when trading scandals have tarnished London's status as the world's leading financial center. Carney’s basic salary is about 57 percent higher than King’s, while he also gets an allowance of 30 percent of salary in lieu of access to a pension plan that is now closed.
“He’s universally acknowledged as one of the world’s preeminent central bankers and could have got multiples of that in the private sector,” said John Purcell, chief executive officer of Purcell & Co., a London executive-search firm. “If you compare it to the size of the job he’s been asked to do, it’s fairly small beer so long as he gets it right.”
Average rents in the U.K. were at 969 pounds a month in the third quarter, according to property service company Move With Us. The average in London was 2,273 pounds. While Carney’s housing allowance is almost five times that, he has four children and that sum on its own may not cover a suitably-sized property in London’s most expensive locations.
“A five-bedroom house will always start at 3,500 pounds a week, and four-beds are always 2,000 pounds and above” to rent in the Knightsbridge and Chelsea area of London, said Charlie Woods, a real-estate agent at a WA Ellis office in that area of the capital.
The average asking price for a home in London was 464,398 pounds this month, according to property website Rightmove Plc. Kensington and Chelsea was the most expensive district, at 2.15 million pounds, followed by Westminster at 1.41 million pounds.
According to the consulting firm Mercer, London was the world's 25th most expensive city in 2012, while Montreal, the closest city on the list to the Bank of Canada's home city of Ottawa, was 87th.
Carney, 47, will become the first foreigner to lead the central bank and his appointment ended the bids of candidates including Deputy Governor Paul Tucker and Financial Services Authority Chairman Adair Turner.
In a Financial Times article published on Dec. 1, former Bank of England policy maker Adam Posen said Carney’s salary means he may have to work harder to win public support.
“Anyone who needed to be wooed with promises of a 60 percent salary rise over his predecessor’s, as well as London living expenses in order to have the honor of serving as governor, will have an uphill climb to be perceived as a British public servant rather than a globe-trotting corporate free agent,” said Posen, an American who served on the Monetary Policy Committee until August.
The Bank of England is in the second year of a pay freeze that’s due to run until March, in tandem with the government's wider curbs on public-sector pay. The bank said in its annual report in July that it will review its approach to pay after highlighting the struggle to hire and retain staff.
Explaining Carney’s pay, the BOE non-executive directors said that although it is “considerably higher than the salary of the current governor -- 305,000 pounds -- the cost to the bank of enrolling him in the now closed pension scheme previously available to the governor and deputy governors would approximate to more than 100 percent.”