Former Bank of England governor Mark Carney has criticized the British government’s plan to cut taxes, saying it undermines efforts by his former employer to curb inflation and has created chaos in financial markets.
“Unfortunately having a partial budget, in these circumstances – tough global economy, tough financial market position, working at cross-purposes with the Bank – has led to quite dramatic moves in financial markets as we have all seen,” Carney said in an interview with the BBC.
British finance minister Kwasi Kwarteng had last week announced a number of tax cuts without detailing how the government planned to pay for them, sending the pound plummeting to its lowest level since decimalization.
The sinking pound saw British government bond yields soar, forcing the BoE to revive its bond-buying in an emergency move to shore up pension funds.
Carney said it was the correct approach from the government to focus on growth but that ambition remained for the future and in the short term there was confusion about how the public finances were going to add up.
The lack of an assessment by Britain’s budget watchdog, the Office for Budget Responsibility, had spooked investors, Carney said.
“It’s important to have (the budget) subject to independent and dare I say expert scrutiny,” said the former bank governor.