BOE race could turn on who heads the UK government

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 of 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:

BREXITEER PM
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 UK’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.

LABOUR PM
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 UK is Nicholas Stern, author of the 2006 Stern Review Report on the Economics of Climate Change.