Closed Mark Carney faces MPs on Brexit – as it happened

File photo of Bank of England governor Mark Carney during a news conference at the Bank of England in London

Mark Carney is up in front of the Treasury Select Committee. Brexit and the economy are in focus. The appearance by the governor of the Bank of England follows that of Theresa May in Parliament, her first since the summer recess, where she effectively ducked most questions on Brexit

Key points

  • Carney tells MPs he is “absolutely serene” about his comments warning of a post-Brexit downturn

  • Bank of England governor says he was “comfortable” with the rate cut decision taken in August

  • May tells House government will not disclose negotiating position on Brexit

  • PM Repeats assertion that she can trigger Article 50 Brexit divorce clause without consent of parliament.

Good afternoon and welcome to our live coverage of two key sessions today. Firstly, Theresa May is facing MPs in her first PMQs after the summer recess and is due to give an update on the recent G20 summit. The first line of questioning by Jeremy Corbyn, the Labour leader, is focused on affordable housing.

May gets a few digs in at the Labour leader early on, including one about the recent spat between Corbyn and Virgin Trains over the Labour’s leaders insistence he couldn’t get a seat.

Corbyn rather stoically ignores the jibes and keeps pushing the PM on the poor state of the country’s housing stock. “We want to make sure that people living in the private sector are paying the right level of rent,” he says, as he moves on to asking for a commitment from the PM to protect women in refuges who have suffered from domestic violence being protected from the benefit cap.

May quips it’s 50 days since they last met across the dispatch box. “Nice to see you” Mr Corbyn replies.

No questions on Brexit from Jeremy Corbyn on first PMQs of the parliamentary term.

Angus Robertson, leader of the SNP at Westminster, takes up the baton and immediately moves the subject on to Brexit and asks May to clarify the government’s position. He makes the point she has had all summer to make clear the position.

May replies: “I say to the right honourable gentleman, we can approach the vote in two ways, we can try to row back on it and say we don’t believe it . . . actually we are respecting the views of the people of the UK . . . . and are forging a new way of the United Kingdom in the world.”

Further prompted by Robertson she says the government can’t dislose its negotiating position but will ensure any deal ensures growth and prosperity across the United Kingdom, including Scotland. Adding that Scotland’s future is best served “by remaining part of the United Kingdom”.

Theresa May says she can press ahead with triggering Article 50 without the consent of parliament. This is a “prerogative power exercised by the government” she says in reply to a question by Brexiter and Tory MP Bernard Jenkin.

James Gray, a Tory backbencher, has just set up the PM to attack Corbyn on his views on defence and his reluctance to say whether or not he would come to the aid of a Nato ally, as laid out under article 5 which assures collective defence. It also allows May to have another dig at the Labour leader’s anti-nuclear stance as the government gets ready to renew the Trident submarine-based nuclear deterrrent.

Little reassurance from Mrs May given on university funding beyond 2020, a question that is worrying vice chancellors across the land.

PMQs has finished and Theresa May is now due to give the House an update on the recent G20 summit

Theresa May is back up on her feet and is offering some comments on the “process of Brexit”

She says the issues around Brexit should be considered in a “sober and considered way” and repeats her comments from earlier in PMQs: “We will not reveal our hand prematurely . . . it is not the best way to maximise our negotiating position and secure the best deal for the country.”

She then moves on to the G20 summit

The prime minister says she will make the UK a “global leader in free trade” and tells the House of Commons that a number of countries told her at the G20 they would “welcome talks” — they include India, South Korea, Singapore, China and Australia, she says. After meeting Malcolm Turnbull, Australia’s prime minister, in China, who promised his country would strike a “very strong, very open” trade agreement with Britain after Brexit, she said the country’s trade minister had been in London on Monday for exploratory talks

Jeremy Corbyn attacks the “contradictory messages” that do not “add up to a considered position” on Brexit. The referendum, Mr Corbyn adds, “has left the country divided.” He then moves on to question the PM on talks with China over steel dumping in Europe and urges clarity on “which aspects of the contract” for the Hinkley Point nuclear plant she is opposed to.

A bit of recommended reading for you from the FT’s digital comment editor, Sebastian Payne, wrote this piece on Monday explaining why May is keeping her cards close to her chest on Brexit.

Mrs May has just said a decision on the controversial Hinkley Point nuclear power project will be announced “later this month.” The FT’s Energy Editor, Andrew Ward, wrote this article about what might happen if did not go ahead

Further clarity from Theresa May on the sort of immigration policy she wants to see. She reiterates what seems a final blow for the UK adopting a Australian points-based system because it would not deliver the “control” over numbers that she seeks.

Theresa May is answering questions from various MPs and continues to duck any follow ups seeking more specifics on Brexit – the chamber is emptying out rapidly :

Just a reminder that we are continuing with our live coverage and will switch to the appearance of Mark Carney, the governor of the Bank of England, at 2:15pm BST. Emily Cadman, the FT’s economics reporter, who will be joining the blog shortly has written this preview:

The economic fallout from Brexit will be the only subject on the agenda when MPs on the Treasury select committee quiz Bank of England governor Mark Carney at 14.15 London time.

It is likely to be a stormy session.

After a run of better than expected survey data, Brexit supporting MPs on the committee such as Jacob Rees-Mogg have already accused officials of “scaremongering” and being too early to cut interest rates.

Those accusations are likely be firmly rebutted by Mr Carney, who is likely to point out that the BoE’s action may have actually helped boost confidence.
Mr Carney will also stress that there is very little hard data available yet on the short term impact and it is too early to make a definite call that the UK is out the woods.

The reasons most economists believe Brexit will be bad for the UK economy are not because of short term jitters, but because of the assumption that future trading relationships with Europe will be less favourable.

What the markets will be watching for in in Mr Carney’s testimony are any hints about future interest rate cuts. When the BoE cut rates in August, it signals that another cut would be on its way this year if the data printed as expected.
This led most analysts to pencil in a further cut in November – but the better data has left this in doubt. Expect sterling to rise if there are hints rates could stay on hold this year.

Also key will be the testimony of the three other members of the rate-setting monetary policy committee – Jon Cunliffe, Kristin Forbes and Gertjan Vlieghe. Analysts will be watching to see how much divergence in views there is between the dovish-Vlieghe and more hawkish Forbes.

Alex Salmond offers an interesting take on the prime minister’s slapping down of David Davis (below), the Brexit secretary, over his comments that continued access to the EU single market was not possible if the UK wanted to be able to control EU migrant numbers. The former SNP leader observed the convention that honourable members were normally reprimanded for “misleading the house, not when they’re caught telling the truth”

May takes the opportunity in response to a question from David Rutley, a Tory backbencher, to make clear the government’s support for the Northern Powerhouse project of devolving powers and budgets to Northern cities and regions.

“This government remains absolutely committed to the Northern Powerhouse.”

May says “she fully expects to guarantee the status of other EU citizens” living in the UK after Brexit and says the only basis on which that wouldn’t happen is if the status of Brits living in other EU countries post-Brexit is not guaranteed. Again there is nothing new in this line from the PM as she continues to dodge questions about her slapping down of David Davis, the Brexit secretary, on Monday.

Theresa May is still in the chamber taking questions, the latest one is about ratification of the Paris climate treaty, which China and the US have just ratified. The UK has not so far but the PM insists the government is committed to doing so.

May sounds bullish on the UK post Brexit, dismissing concerns its international standing would be diminished.
The UK is already “at the forefront” of discussions on climate change and tax avoidance and evasion, she says.

“We will be out there as a bold, confident, outward looking nation continuing to play a key global role”.

Our attention is now switching away from the House of Commons chamber and towards the committee rooms, where BoE governor Mark Carney will shortly be facing questions from the Treasury select committee.

The MPs are likely to focus on whether the governor over-cooked his warnings about recessionary dangers of Brexit and then felt obliged to launch a policy response even though hard data was thin on the ground.

As part of the BoE’s stimulus programme also included resuming the programme of asset purchases – something that required Treasury approval – expect Mr Carney to also be pushed on his interactions with the government.

Mr Carney is expected to mount a robust defence of the BoE’s action – and point out that by acting early the BoE may well have helped boost confidence.

Appearing alongside him will be three other members of the rate-setting monetary policy committee – Jon Cunliffe, Kristin Forbes and Gertjan Vlieghe.

Of most interest to the markets though, will be any comments from the committee on the outlook for further interest rate cuts.

Expect sterling to rise if there is any sense that policy action is now on hold. Currently city analysts have a further cut pencilled in for November, but this is now looking less likely after a run of better than anticipated survey data.

Mr Carney’s session is due to start at 14.15, but it looks like it may be running a couple of minutes late.

Meanwhile, Theresa May has finally finished and left the chamber of the House of Commons

And we are up… the committee is now in session

Committee chair Andrew Tyrie starts by examining what he terms the “charge sheet” against Mr Carney during the referendum campaign.

First, that the governor “over-egged” the impact of Brexit and then secondly sought to justify these warnings.

He hands the first question to arch critic of Mr Carney, Jacob Rees Morgan, who asks how happy Mr Carney is with his previous comments:

“I am absolutely serene” says Mr Carney.

Quick reminder of the story Emily Cadman wrote about Carney’s warning in early August about a looming post-Brexit downturn – full story here

Asked specifically about what has happened since the vote, Mr Carney says that there is evidence of pressure in the commercial real estate market – where the volume of transactions has been cut.

One of the points of the economic stimulus is to “lean against” these forces, Mr Carney says.

The “quite extraordinary efforts” the BoE put into place in advance of the vote in terms of arrangements and protocols with banks, helped ensure “what was a surprise to financial markets… passed smoothly in terms of the functioning” of the system.

The BoE was then in a position to launch a stimulus package to “help support, cushion and help this economy adjust”, Mr Carney argued.

The chair of the committee Andrew Tyrie has asked Mark Carney to make his answers a bit shorter . . .

Carney so far is not giving an inch to his critics.

He rejects the suggestion from Mr Rees-Mogg that he forecast a “dire” outcome before the vote.

The pre-recession warning of a “material slowdown” in growth would not be considered “dire” by anyone who lived through the financial crisis or big business cycle downturns he suggest.

He rejects concerns that the was too gloomy in the immediate aftermath of the Brexit vote.

“Denying something as obvious as I’ve ever seen in the foreign exchange markets is not a good way to manage ones reputation”, he says.

In a further defence of the BoE’s actions, Mr Carney said that the “this financial system, under the supervision of the Bank of England, sailed through what was a surprise to the vast majority of financial market participants”.

Gesturing to the politicians, Mr Carney says that has put everyone in a better position.

Mr Rees-Mogg and Mr Carney are being icily polite to each other. There is no meeting of minds going on though.

Jacob Rees-Mogg, a Conservative MP, is a former asset manager in the City so he speaks Carney’s language and is not letting up in his attempts to force Carney to accept the Bank of England overdid what he terms “dire” warnings and thereby contributing to “fear in the financial markets” over Brexit. Rees-Mogg is a Eurosceptic and backed the Brexit campaign.

Defending the BoE’s decision to launch a large stimulus package in August before there was hard data available he said: “We are making monetary policy in a forward looking manner”.

The BoE expected the surveys to bounce-back in August, Mr Carney said, and that was included in the forecasts.

Mr Carney says there has been a little bit more bounceback in the data than expected but the broadbrush picture is that “growth is running about half as much as it was before the referendum”

Part of the bounce back was because the Bank took “timely and comprehensive” action, Mr Carney said.

Turning to QE, deputy govenor Jon Cunliffe is asked about the increasingly vocal complaints from the pension industry that renewed asset purchases from central banks are hurting pension schemes and becoming part of the problem.

“The pension industry and those that depend on it depend on the health of the economy,” Mr Cunliffe says – arguing that everyone benefits from a strong economy.

“If people don’t have jobs, then the future economy does not have prospects, and pension claims will not be satisfied,” he adds.

Chairman Andrew Tyrie is now quizzing the governor on when the BoE’s policy response was formulated – in particular the term funding scheme.

The Chancellor was made aware of the prospect in early July, Mr Carney said.

The term lending scheme as a reminder allows banks to borrow at close to the BoE’s base rate from official reserves, provided they lend to consumers and businesses.

The FT’s full explainer on how it works is here

Gertjan Vlieghe, a member of the Monetary Policy Committee, has been reminded by Steve Baker, a Tory member of the Treasury select committee, that he said monetary policy has re-distributive effects and is then asked how he squares that with comments by the prime minister that ultra-low interest rates are hurting first time buyers. Mr Vlieghe replies by pointing out that monetary policy “doesn’t aim to redistribute, it is a side-effect” it is always the case that people in the economy are affected differently, there are always people who want lower rates and those who want higher rates.”

Roger Blitz, the FT’s currency correspondent, reports that 15 minutes into Carney’s testimony, sterling was two-thirds of a per cent down in Wednesday trading, knocked back by data showing declines in manufacturing production.
The pound has now retraced some of that loss to stand one-third lower on the day. It has been enjoying a rally in recent days thanks to a series of buoyant business surveys that suggest worries about the impact of Brexit on the UK economy were overdone.
Sterling could move further, depending on what Carney says about those surveys and how he sees the economy faring for the remainder of the year.

Mr Tyrie suggests that Mr Carney put a “gun to the head” of the new chancellor when the BoE asked for a government indemnity on the term lending scheme.

The governor looked faintly shocked – and firmly rejects the suggestion.

Mr Tyrie though argues the BoE is operating in a grey area between fiscal and monetary policy in the term funding scheme, and it is time to think “very carefully” about issues of accountability.

Mr Carney though stresses that the risks to the tax payer are very low of the government backstop.

We are now moving on from the origins of the term funding scheme to a question about whether the banks are fully passing on the interest rate cut to borrowers.

Mr Carney says he is “highly confident” that all the big six banks will pass the cut onto variable rate borrowers.

Carney added that he expects the smaller lenders to pass on the full cut “in the next few months” after being pressed further by Labour’s Rachel Reeves, the former shadow chief secretary to the Treasury.

Under questioning from Rachel Reeves, Mr Carney says he accepts it is an “anomaly” that a number of banks need to have board meetings before deciding to pass on interest rate cuts to mortgage rates – but not for savers.

“I’ve had a number of letters” he adds.

We are in the middle of an extended discussions about the terms on which the commercial banks are able to access cheap funds from the BoE.

The key argument from Carney is that the scheme is designed to ensure that the interest rate cut is transmitted through the system, not to increase the availability of credit. Hence why there aren’t any precise targets on raising lending attached. MPs though are concerned that it might just provide a means for banks to boost their profits.

Carney has just been asked if there is any risk of an asset price bubble risk. His immediate response is: “Time will tell it is still early days” and goes on to say much will depend on what course the UK’s Brexit negotiations take.

He is asked about the availability of credit and says there should be no problem with creditworthy business being able to borrow but acknowledges some SMEs, particularly smaller and younger companies have been struggling.

Asked whether he still believe there is a risk of a “technical recession” post Brexit vote – that is two consecutive quarters of contraction

It is “less likely” Mr Carney says – but says this is partly due to the actions taken by the MPC

Carney has been pushed again on his warnings in the run-up to the EU referendum about a risk of recession in the event of Brexit and asked where he stands now. He says that seems like “ancient history” adding: “there is less of a risk now of a recession . . .”

Sir Jon Cunliffe is asked by Labour’s John Mann how good the Bank is at forecasting and he replies that the hardest things to predict are “political events,” adding “I don’t think the bank has any specialist machinery to forecast what will happen in politics.”

Mr Carney is now being asked about his judgement on political risks in the rest of Europe – particularly the upcoming elections in Germany and France – and how much contingency planning the bank is doing.

In summary, Carney says they are watching events on the continent, but it is not obvious that there is one binary-event on the horizon which poses a material risk to the UK.

We’ve just had a very long – slightly rambling – discussion about the distributional impacts of the central banks asset buying programmes. The conclusion? There are winners and losers but the BoE believes that supporting the economy is ultimately good for everyone

We are now back on what the BoE might do if the economy weakens.

Mr Carney stresses again that the BoE thinks it could cut interest rates further, and it could also increase both corporate bonds and gilt purchases.

A very strong hint here that there will be no more action until November – when the next forecasting round is due – at the absolute earliest.

“We have time to make another forecast,” Mr Carney says when asked about what the next steps might be

Ms Forbes – who voted against the BoE beginning corporate bond purchases – says that she wanted to wait to get more evidence before delivering a larger monetary policy stimulus.

However she added: “The data still does suggest…there will be a slowing in the economy. Some monetary easing does make sense and I stand by that decision”.

Ms Forbes, an American economist who is a former US Treasury officials and White House advisor, explained that her desire for further evidence extends to the recent survey data from August which suggests there has been a post-Brexit bounce. She adds further stimulus also risks causing inflationary pressures

Mr Forbes also said that part of her decision to vote against additional asset purchases was that the UK is about to go through a very complication transition to new trading relationships.

“This is going to be a long adjustment process,” she says, adding that she would have preferred to wait to ensure there was still tools the BoE could use if there were further shocks.

“There could be some other major negative shocks that emerge.”

“We are not out of ammunition but neither are we trigger happy,” Mr Carney adds

Turning to the economic outlook for the UK post-Brexit, Mr Carney says that the assumption the BoE is working on is that “the UK economy will be somewhat less open than it is today”.

However he is very careful to stress that the BoE has made no assumptions about what specific model the UK will adopt. The BoE’s forecasts will be adjusted as the situation becomes clearer he adds.

With the hearing now two-hours in, reaction to Mr Carney’s comments is starting to pour in.

Costas Milas, economics professor at Liverpool University, says he doesn’t believe that the criticism of the MPC for acting too early is fair.

“The MPC takes policy decisions in a forward looking 2-year horizon. Therefore, one cannot blame the MPC for acting on the reasonable assumption that the government, by honouring rather promptly its promise to the British people, would have completed a large part of BREXIT negotiations within the next 2 years.”

Joshua Mahony, analyst at online trading firm IG, says that the fall in sterling has

“arguably been the biggest post-referendum stimulant, today’s hearings at least provided the markets with confidence that the MPC are unlikely to pull back despite improvements.”

The last exchange on the views of the Bank of England witnesses on so-called helicopter money lasted some time. Both Kristin Forbes and Sir Jon Cunliffe refused to rule out ever resorting to it but both were very sceptical about the idea. Mark Carney was more categoric saying said he “would never support” the use of gifts of newly printed/minted money from the central bank to the public or private sector.

Roger Blitz, the FT’s currency correspondent, reports that the Carney’s mention a bit earlier of possible further rate cuts knocked sterling back again. The pound was down two-thirds of a per cent, which is where it stood when the testimony began. Over the week, it’s up 0.4pc

So that’s it for the hearing. The main points to take away are:

- Mr Carney rejected suggestions from MPs that the BoE had been too quick to act to cut rates, saying he was “comfortable” with the August decision.

- The govenor rejected accusations he had over-egged the pre-vote warnings, saying he was “absolutely serene” about this comments.

- He argued that the BoE’s contingency planning had helped ensure the financial system remained stable despite the shock of Brexit

- While recent survey data suggested some of the immediate shock of Brexit had dissipated the BoE is still expecting growth to be slower than it was before the referendum.

That’s it from us today. Thanks for joining us.