The Bank of England’s transatlantic flight bill is a mere drop in the ocean
Eyebrows were raised more than a couple of times during yesterday’s lively grilling of Bank of England officials in Westminster.
At one stage Conservative MP Charlie Elphicke quoted an old article from this publication and, contrasting its expectations with the Monetary Policy Committee’s own guidance on interest rates, observed: “It seems that City A.M. is better at predicting [future monetary policy] than the Bank of England.”
An astute observation from the esteemed member of parliament for Dover.
Later in the session another Tory MP, Simon Clarke, attacked the Bank from a different angle. Clarke expressed incredulity at the travel expenses of two senior figures on the Financial Policy Committee (FPC) – the part of the Bank founded five years after the last financial crisis with the aim of preventing, or at least mitigating, similar economic catastrophes in the years ahead.
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Don Kohn and Anil Kashyap are external members of the FPC, brought in to add global expertise to the committee. Based in Washington DC and Chicago respectively, they regularly fly across the pond to attend “FPC related meetings”, according to Bank documents. Such flights, and other expenses, have come to around £390,000 in little more than two years, the MPs said.
Drilling into the numbers reveals some questionable costs. Kohn, for example, billed the Bank for £469 for taxis taken during the latest December-February period, during which he attended just one FPC meeting. The flight he took to attend that meeting cost over £8,000.
Given that the Bank leans on taxpayer funds, it is quite right for MPs and others to scrutinise its spending and highlight areas of apparent profligacy.
However, while such figures may appal the average passerby on Threadneedle Street, it would be unwise to allow them to distract us from the bigger picture.
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The FPC’s remit is enormous, as are the costs of any failure. The inability of central banks and watchdogs to spot the perils of too-big-to-fail, a problem exacerbated by moral hazard stemming from regulatory failure, landed taxpayers with a multi-billion pound bill that still haunts the public finances a decade on. Kohn and Kashyap’s expenses tabs look minuscule by comparison.
Late notice business class flights across the Atlantic do not come cheap, as many City beancounters appreciate. And in financial circles, top international talent does not come cheap either.
MPs are correct to ask if the Bank is getting enough bang for its buck when it comes to the cost of recruiting top economists, but the emphasis should be more on the bang than the buck. A considerable burden rests on the shoulders of the 13 members of the FPC; history will not treat them well if they turn out to have missed the lessons of the recent past.