Charlotte Hogg, a week ago, could not have been clearer. “I am in compliance with all of our codes of conduct. I know that. I helped to write them,” declared the Bank of England’s new deputy governor to the Treasury select committee.
Now comes the excruciating apology. Actually, no, she was not in compliance because she didn’t declare to the Bank when she joined in 2013 that her brother, Quintin, has a senior job in strategy at Barclays, a bank regulated by Threadneedle Street. In fact, the first time she mentioned her brother was in a questionnaire she filled out for the Treasury committee itself. She takes full responsibility for this regrettable oversight.
Astonishing would be better description. At a push, one might say that Hogg comes from such well-connected stock (her grandfather, Lord Hailsham, was Lord Chancellor and both her parents are serving members of the House of Lords) that a sibling at Barclays is easy to overlook. But that doesn’t wash. The codes are designed to cover all potential conflicts of interests, plus perceptions of conflicts. Her brother’s gig clearly met the threshold.
Thus Hogg, in her previous role of chief operating officer at the Bank, had been commanding others to follow a code while failing to do so herself. There were at least two occasions when she could have corrected the omission in the records but didn’t.
For two-and-a-half hours the Treasury committee chewed over these revelations and only one member came to a firm conclusion. Hogg’s position is “untenable” and she should resign, said John Mann. Chairman Andrew Tyrie said the committee as a whole would only give its view after “a period of reflection.”
Let’s hope that reflection goes wider than just Hogg’s foul-up. Her mistake seems to have been honest and there is no suggestion that information passed improperly between her and her brother. Rather, it’s the Bank’s reaction that is alarming.
Anthony Habgood and Bradley Fried, chairman and deputy chairman of the governing Court of the Bank, gave a hapless performance in front of the MPs. If they were aware that governor Mark Carney gave Hogg a verbal warning on Monday, they didn’t mention the fact. Neither man seemed to have tried to establish what Quintin Hogg’s loosely-defined job at Barclays actually involves. And the MPs made mincemeat of the suggestion that Charlotte Hogg’s undeclared potential conflict of interest didn’t matter terribly in her previous operational role.
The sense of closing ranks around an “impeccable” individual whose error was serious but merited only “grumpiness,” as Fried put it, was unmistakable. Jacob Rees-Mogg, for the MPs, got it right. The Court’s investigation lacked rigour. It accepted “bland reassurances and passed them on,” which is not good enough if you’re in the business not only of avoiding conflicts of interest but also the perception.
Hogg, almost certainly, will survive the affair, albeit with her authority dented. But the whiff of complacency in the Court is harder to overlook. After the financial crisis, the outside world was promised firm 21st century governance led by commanding outsiders. Tuesday’s show looked old-style cosy.
House prices: bring on the slowdown
Encouraging news from the housing market: cooler winds are blowing. The rate of growth in prices fell in February to the lowest for three-and-a-half years, according to the Halifax’s index. This development may not delight homeowners looking to sell in a hurry but, for anybody with a wider or longer perspective, a slowdown is exactly what the UK needs.
Annual house price inflation a year ago had reached the silly level of 10%, far too fast for an economy growing at about 2%. A correction was overdue and the steady decline to 5.1%, down from 5.7% in January, restores a degree of sanity. A rate of 5% is still too high given that average earnings are currently growing at 2.5%, but most economists think house price inflation should slow to 2% by the end of this year. Bring it on.
To see why, look at Halifax’s ratio of house prices to earnings, as reliable a guide as any to affordability, froth and danger. The current level is about six times (pdf), which was last seen in 2007, just before the banking crash and recession. If 10% house price inflation had continued, the UK would have been heading into dangerous waters.
The Bank of England’s monetary policymakers, already fretting about the rise in unsecured credit card debt, should be relieved. Their working plan this year and next, one assumes, will be to keep interest rates at ultra-low levels and ignore the inflationary effects of the 15% fall in the pound against the dollar.
It is a sensible plan to address the Brexit uncertainties, but it is horribly exposed to the risk of a house price bubble fuelled by cheap money. If that risk is receding, the Bank has a freer hand and the Brexit obstacle looks slightly less daunting.
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