Mark Carney Defends Bank Governor Pay Package
The next governor of the Bank of England has been forced to defend his pay and perks package under questioning from MPs.
Mark Carney - the head of Canada's central bank - insisted his more than £800,000-a-year settlement was "equivalent" to that of the current boss, Sir Mervyn King.
He was speaking at his first hearing before the Treasury Select Committee before replacing Sir Mervyn on July 1 following his retirement.
The pay deal, which includes a £250,000 housing allowance, was in line with that of the current governor's on a "pay and pension" basis, Mr Carney said.
He added: "I'm moving from one of the least expensive capital cities in the world - Ottawa - to one of the most expensive capital cities in the world."
Mr Carney, who will become the first foreign governor of the Bank of England in its near 320-year history, will be paid the accommodation allowance on top of a £480,000 salary - well above the £305,000 pay level of Sir Mervyn.
But Erith & Thamesmead MP Teresa Pearce questioned whether he was concerned about "resentment" among Bank of England staff, given that their pay has been frozen for two years.
His comments come as the Bank of England's Monetary Policy Committee (MPC) kept the UK's interest rate at 0.5% and left its bond purchase programme, known as quantitative easing, on hold.
Inflation in the UK has remained above the 2% target since the financial crisis began in 2007, and raising interest rates would be one way of helping to bring it down.
But this would hit businesses and consumers in an economy that is struggling to recover - UK GDP contracted by 0.3% in the final three months of 2012.
Mr Carney hinted at more quantitative easing when he took over at the Bank.
"Unquestionably when I come to table there will continue to be considerable slack in the UK economy as evidenced by the labour market and more broadly across industry," he said.
"Unquestionably that will be a situation which merits - for a period of time - considerable monetary policy stimulus."
Mr Carney told MPs he was open to reviewing the UK's monetary policy framework, but said the bar to change should be "very high".
"The flexible inflation-targeting framework should remain broadly in place, but details need to be reviewed and could be changed," he said.
A review happens every five years in Canada, he said, and helps those within the government and bank understand the implications of the current policy.
The incoming governor was asked whether he thought nominal GDP - the cash value of national output without adjusting for inflation - should be targeted instead of just inflation.
But he answered: "I am far from convinced of the merits of moving to nominal GDP targeting.
"But it is a valid as part of the debate if one's looking at a framework."
Mr Carney was also asked for his thoughts on the Libor fixing scandal, a day after RBS was fined £390m by regulators for manipulating the rate.
"The behaviour that's been exhibited and confirmed this week particularly around for example Libor is reprehensible and should be prosecuted to the full extent of the law in the various jurisdictions that are affected," he said.