(Bloomberg) -- The race to lead the Bank of England could turn on who heads the government by the time the decision is made in October.
Much has been made of Chancellor the Exchequer Philip Hammond’s comments that he seeking a governor with international stature, prompting a flurry of speculation around former Reserve Bank of India chief Raghuram Rajan. Still, the precarious state of British politics means that the U.K could have a new prime minister any day now.
“A change of leadership ought not to affect the new governor choice -- you’d wish it was made on sober, technocratic grounds,” said Tony Yates, a former senior adviser at the BOE. “But right now you’d have to suspect that change of government might well have an effect.”
Here are two scenarios for how a new leader could shake things up:
If a disastrous result in upcoming European Parliament elections means Theresa May is ousted by her own party this summer, and a Brexiteer succeeds her, there may be more pressure to appoint a sympathetic governor. That might deter some candidates from applying -- a risk Hammond has previously mentioned -- while opening the door for some unexpected names.
One such example could be Gerard Lyons, a previous economic adviser to Boris Johnson and co-founder of Economists for Brexit. Lyons, a former chief economist at Standard Chartered who now works for Netwealth Investments, has written a book advocating a “clean” Brexit, and has likened the U.K.’s membership of the European Union to a prison.
Still, Brexiteers could also back a more orthodox candidate. Jacob Rees Mogg, an arch critic of current governor Mark Carney, suggested last year that Andrew Bailey, the chief executive officer of the Financial Conduct Authority, and BOE Chief Economist Andy Haldane -- two men regularly cited as potential replacements -- could take the job.
The MP also mentioned former Conservative lawmaker Andrew Tyrie, who chaired the panel that scrutinized the BOE during Rees-Mogg’s time on the committee and backed the remain side during the 2016 vote.
If the leadership battles in the ruling Conservative Party push the nation into a general election, the opposition Labour Party -- and their finance spokesman John McDonnell -- could seize power for the first time in almost a decade.
With a new government could come a new mandate for the BOE. Labour has been linked to proposals including targets for house-price inflation, productivity and climate change, with McDonnell placing particular emphasis on the environment. He would favor “someone who is willing to be radical” and champion the fight against climate change.
That means a long shot might be Graham Turner, chief economist at GFC Economics, who was commissioned by McDonnell last year to make proposals for the BOE’s mandate.
One Labour-supporting economist familiar with environmental activism in the U.K. is Nicholas Stern, author of the 2006 Stern Review Report on the Economics of Climate Change. The 73-year-old now teaches at the London School of Economics.
Another potential candidate with strong environmental credentials is Ann Pettifor. As well as previously serving as an economic adviser to the Labour Party, she was one the co-authors of the 2008 Green New Deal framework that aims to use the financial sector and economy to benefit the ecosystem, which has gained fresh prominence this year through the work of Alexandria Ocasio-Cortez in the U.S.
If McDonnell decides for a more established candidate he may also look to Haldane. The current chief economist is known for his colorful speeches that reference everything from Dr Seuss to frisbees, and his tour of the country talking to “real” Britons at a series of town halls at venues including curry houses and synagogues.
Adair Turner, chairman of the Institute for New Economic Thinking and former head of the Financial Services Authority, may also be in the frame if Jeremy Corbyn becomes prime minister. Turner also has strong climate credentials, and is an advocate of helicopter money.
“If we had a Corbyn government, personalities who had been more openly radical and expressed support for left-leaning politics would have a greater chance of getting the job,” Yates said. “On the other hand, if a more right-wing leadership took over the Tories, perhaps that would mean no chance for these more leftist candidates, and no chance for a foreign candidate as picking such people would antagonize nationalist Tory MPs.”
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