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Brexit: Mark Carney defends Bank of England over 'Project Hysteria' claims after EU exit forecast published

Bank governor hits back at suggestions its Brexit forecasts are politically-motivated

Benjamin Kentish
Political Correspondent
Thursday 29 November 2018 09:39 GMT
Mark Carney: 'Our job is to have a system ready. Parliament will decide'

Mark Carney has defended the Bank of England over Tory Brexiteers' claims that it is engaged in "Project Hysteria".

The Bank's governor said his staff were "doing our job" by publishing economic analysis of Brexit, despite claims that the forecasts were politically-motivated.

He said the organisation "doesn't have a position" on the type of Brexit it wants to see, but warned that businesses are not ready for a no-deal outcome.

It comes after the Bank's assessments showed that a no-deal Brexit would be catastrophic for the economy.

In the worst case scenario, the economy would shrink by 8 per cent, house prices would fall by almost a third, the pound would plummet and unemployment and interest rates would soar.

The publication of the analysis triggered an angry backlash from Brexiteers, who questioned the Bank's independent and launched a scathing attack on its governor.

Mr Carney dismissed the claims, saying the Bank did not think its worst case scenario was the most likely outcome but that it had a duty to consider all possible eventualities.

He told BBC Radio 4's Today programme: "There is an expectation that we're doing our job and part of this is communicating that if you're ready for what we just laid out, this worst case scenario, then you're certainly ready for what's much more likely to happen."

Rejecting claims that he was "playing politics" in order to foster support for Theresa May's Brexit deal, he said: "We have a responsibility to have the system ready for whatever happens. In order to do that we need to do this type of analysis.

"We have been doing this type of analysis and getting the banks ready since the day after the referendum.

"We didn't want to be pulled into exactly these types of conversation, but that's us doing our jobs. Parliament demanded this analysis but it is analysis with a purpose, and the purpose is to get the system ready."

He added: "I don't have a preference in this. The Bank doesn't have a position on what type of Brexit the country should take...Our job is to get the system as ready as it can be."

While the Bank of England is ready for any Brexit outcome, Mr Carney said, many businesses and parts of the economy are not.

He said fewer than half of businesses have initiated their contingency plans for a no-deal Brexit, adding: "All the industries, all the infrastructure of the country, are they all ready at this point in time? As best as we can tell, the answer is no."

It comes after Jacob Rees-Mogg, leader of the European Research Group (ERG) of Eurosceptic Tories, accused Mr Carney of having "politicised the Bank of England" and engaging in "Project Hysteria".

He told the BBC: "You've got to think of the predictions that we got before the vote to leave the European Union, at which point Mr Carney said we would have a technical recession.

"He's said this sort of thing before, he's been wrong before, and now the forecasts are so hysterical that they're very hard to take seriously."

Of the Bank's governor, he added: "Unfortunately he's a second-tier Canadian politician - having failed in Canadian politics he's got a job in the UK, which he isn't doing well."

Brexit: Britain will be poorer if MPs back Theresa May’s deal to leave EU, Chancellor Philip Hammond admits

Former Tory cabinet minister Priti Patel said: "The Bank is undermining its credibility and independence by giving such prominence to these extreme economic forecasts and scenarios."

Andrew Sentance, a former member of the Bank's monetary committee, also criticised the analysis.

He wrote on Twitter: "The Bank of England Brexit analysis is highly speculative and extreme. It will add to the view that the Bank is getting unnecessarily involved in politics and that will further undermine perceptions of its independence and credibility."

And Nobel Prize-winning economist Paul Krugman said the Bank's figures for a no-deal scenario seemed "extremely high" and suggested the organisation had "really gone pretty far out on a limb".

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