Neutrality matters: Bank of England

Ah yes, a blog about the Governor of the Bank of England, Andrew Bailey, and his comments on UK/EU relations. Procrastination at its finest—I’m dodging my other drafts because this feels more worth talking about. Andrew Bailey recently gave a speech at Mansion House about growth, and you can find the transcript here. The UK government has made growth a cornerstone of its platform. Without growth, we can’t have better public services.

There’s loads to say about this speech, but journalists have been a bit naughty by not publishing the full section that’s causing headlines. Here it is, quoted in full:

Now, as I have said many times, as a public official I take no position on Brexit per se. That’s important. But I do have to point out consequences. The changing trading relationship with the EU has weighed on the level of potential supply. The impact on trade seems to be more in goods than services, that is not particularly surprising to my mind. But it underlines why we must be alert to and welcome opportunities to rebuild relations while respecting the decision of the British people.

But, we should not focus just on the effects of Brexit. The picture is now clouded by the impact of geopolitical shocks and the broader fragmentation of the world economy. I will own up to being an old-fashioned free trader at heart. It’s a British characteristic, I like to think. My point is this: amidst the important need to be alert to threats to economic security, let’s please remember the importance of openness. Openness is an important determinant of productivity. There is nothing new about saying this, just to be clear.

The first point is simple: Bailey should stick to speaking about policy matters and decisions delegated to him. That means avoiding topics reserved for the government. When officials break that norm, it increases the likelihood of political appointments—people chosen not for expertise but for their loyalty to the government’s messaging. For an independent central bank, this is a massive challenge to its independence.

This norm exists for a reason. If future governors are picked for loyalty over skill, the quality of decisions will decline, and the central bank’s independence could crumble entirely. It’s not just central bank governors—look at the USA right now. You’ve got people with no experience or expertise holding office because of loyalty. It’s a total mess. And if you want a closer-to-home example, think of UK magistrates. They often have no legal experience but still help run the legal system. That already causes massive miscarriages of justice. Now imagine amateurs running the state itself.

Such comments also risk fuelling resentment, which already exists in some political quarters. Remember Liz Truss? She called out Bailey for simply doing his job during the fallout of her mini-budget.

Bailey is, of course, right in what he’s saying, but urging the Chancellor to act isn’t his job. His role is to set monetary and financial policy as effectively as possible within the framework of government decisions. That’s already difficult enough. Just look at how the central bank had to step in to stabilise the financial system after Liz Truss’s mini-budget. That fiasco caused bond market turmoil, massive losses, and a serious hit to pension values.

The temptation to comment must be enormous, given the job and the platform it provides. Journalists are relentless in trying to get a juicy quote to spark drama. But, just like the King or Queen stays silent on politics, or a deputy coach avoids publicly criticising the head coach, central bank officials need to adhere to the principle of collective responsibility. For Americans, think of it like the Hatch Act. These norms exist for a reason: they prevent the government’s reputation and decision-making from being publicly undermined. Would you invest in a company where employees openly disagreed with the CEO? People can have different opinions, but sometimes, your role demands silence.

Bailey raises valid points, but he could’ve expressed them more diplomatically. Given how quickly journalists pounced on his remarks, it’s clear he should’ve said less—or nothing at all. Let’s be honest, most people don’t have the reading comprehension to fully understand his nuanced message. The Chancellor might do well to send Bailey a strongly worded letter reminding him where the line is.

As much as Bailey’s comments reflect valid concerns, the bigger issue here isn’t Brexit or even growth—it’s how we protect the independence of our institutions. Norms exist to safeguard against political interference, and when they’re ignored, trust erodes. We’re already seeing attacks on institutions and the resulting collapse of trust. The last few years have given us enough warning signs to know better. It’s worth reflecting: would you feel the same if it were someone with different views at the helm? Institutions thrive on neutrality, and we lose that at our peril.