Who is Andrew Bailey and did he breach his remit by predicting food price apocalypse?
In his evidence to the Commons Treasury Committee on Monday, the Governor stressed that the war in Ukraine has resulted in an unpredictable jump in inflation, highlighting that there is still a “major worry” over further rises in food prices due to the conflict.
“It is a major worry for this country and a major worry for the developing world,” Mr Bailey said.
“Sorry for being apocalyptic but that is a major concern.”
The move has drawn questions from the Cabinet and heightened concerns from consumers about the rising cost of living.
It marks the first time that Mr Bailey and the central Bank he leads has encountered tension with Government.
When New Labour came to power in the late 1990s it acted to make the Bank of England independent for the first time in its history, and since then it has remained this way.
Mr Bailey took over as Governor in March 2020, just days before lockdown was imposed to counter the Covid 19 pandemic, sending the country spiralling into recession.
It was a baptism of fire for the economist and financial leader, one he discussed with The Yorkshire Post in an interview last October.
Mr Bailey, born in Leicester in 1959 and educated at a grammar school, studied history at Queens' College, Cambridge, going on to achieve a PhD, writing his thesis on The impact of the Napoleonic Wars on the development of the cotton industry in Lancashire.
Upon concluding his studies, he became a research officer at the London School of Economics, before joining the Bank of England in 1985 where he would hold a number of roles, including that of executive director for banking services and as Chief Cashier, as well as head of the bank's Special Resolution Unit (SRU).
He was praised for his work in the aftermath of the financial crisis, working to run the Bank's special operations to resolve problems in the banking sector.
From 2009 he acted as both chairman and chief executive of Dunfermline Building Society Bridge Bank.
In 2013 he was appointed chief executive of the newly-created Prudential Regulation Authority and, as such became the first deputy governor of the Bank of England for Prudential Regulation.
In 2016 Mr Bailey was elevated to CEO of the UK Financial Conduct Authority after the then acting CEO, Martin Wheatley, resigned following a vote of no confidence by Chancellor George Osborne.
Controversy around Mr Bailey erupted in September 2019 when it was alleged the CEO has fallen asleep during a meeting between campaigners acting on behalf of the British Steel Pension Scheme and the FCA.
The meeting had been called by campaigners seeking faster action to help and protect those affected by what would become one of the UK's biggest pension miss-selling scandals.
A subsequent National Audit Office probe into the case concluded that members of the pension scheme suffered significant financial losses because FCA registered firms tailed to protect them.
This led to parliamentarians commenting that the FCA was "asleep at the wheel" and, in March 2020, the Treasury select committee criticised the performance of the authority, as did watchdogs for both industry and consumer groups.
With then Governor Mark Carney coming to the end of his tenure, Mr Bailey emerged as an early favourite to replace him.
The Economist at the time said: "He is widely seen within the bank as a safe pair of hands, an experienced technocrat who knows how to manage an organisation."
Mr Bailey faced criticism from union leaders in February of this year after he asked workers not to demand pay rises, to combat the cost-of-living crisis.
He also, when pressed by parliamentarians to confirm his salary in a bid to contrast it to the average earnings of care workers, he was only able to give an approximate figure of £500,000, also stating "I can't tell you exactly what it was, I don't carry that around in my head".
In his YP interview last year, Mr Bailey confirmed he was concerned about inflation.
The Bank is charged with keeping inflation to below two per cent but at the time this was rising and is continuing to rise.
The Office for National statistics recorded inflation at 7% in March and on Wednesday it is expected to unveil a figure of 8% for April.
The Bank of England has said inflation is likely to peak at 10.25% during the final quarter of 2022.
His latest comments on the cost of living crisis have heightened tension with Government, with Northern Ireland secretary Brandon Lewis appearing top criticise his choice of words.
Mr Bailey had delivered a series of bombshell warnings about the impact of rising inflation and admitted he felt “helpless” in the face of global pressures during an appearance before MPs.
And while the Government has insisted it supports the Bank of England’s independence, but behind the scenes, ministers have been critical of the failure to curb spiralling inflation.
Mr Lewis’s public comments a day after the Governor’s appearance before MPs are a signal of the private concerns being expressed within the Cabinet about his effectiveness.
Asked about Mr Bailey’s comments, Northern Ireland Secretary Mr Lewis told the BBC on Tuesday: ““I was surprised to see that particular turn of phrase, I have to say.
“But the Bank of England is independent, they will have their view of their assessment, their economic view of where things are and where things are going.
“We do recognise … and as a constituency MP I see the challenges that some of my constituents face, that we all face.
“In my part of the world, we are all – the majority of people – on oil fire heating and you see that change in the price which has a big impact on people.
“That’s why I think it is important as a Government we put in the packages of support we’ve put in and, as the Chancellor said, this is something we will keep under review because of the global pressures, as the Bank of England Governor said yesterday, that we’re seeing on economies around the world.”
Mr Lewis’ public comments follow a Sunday Telegraph article which quoted unnamed Cabinet ministers criticising the Bank and suggesting its independence was being questioned within Government.
One said the Bank had been failing to “get things right” and another suggested that it had failed a “big test”.
The Prime Minister’s official spokesman said: “The Bank of England has independence over monetary policy, it’s not for the Government to comment on the conduct or effectiveness of its monetary policy.
“We are fully committed to the its independence and to the 2% inflation target.”
In his evidence to the Commons Treasury Committee on Monday, Mr Bailey said the main driver of inflation is “the very big, real income shock which is coming from outside forces and, particularly, energy prices and global goods prices”.
He warned “that will have an impact on domestic demand and it will dampen activity, and I’m afraid it looks like it will increase unemployment”.
But can the Bank be blamed for inflation soaring to double digit levels for the first time in 40 years?
Economists are fairly unanimous in stating that the Bank of England could not have done very much to have prevented inflation. It has acted to raise interest rates but, even had it done so earlier, it would not have made much difference.
An estimated 80 per cent of the current rise in costs concern commodities like energy. The Bank has no means of controlling this, nor could it have foreseen a Russian invasion of Ukraine.
The pandemic, along with Brexit and the conflict in Ukraine, have disrupted supply chains, resulting in economic damage to the UK.
While prices are rising, they had fallen during the pandemic in many areas, making the current curve of inflation look more dramatic.
And the Bank's own forecasts predict that, while inflation will rise steeply, it will fall in an equally sharp manner. It will be hoping that rise in interest rates, more of which are likely in the ensuing months, along with depressed consumer spending owing to higher prices, will facilitate this. The question is whether it will hit the two per cent target that Whitehall demands of it.
But was he right to issue the dramatic warning about food prices?
He was asked a direct question on the matter by members of the Treasury select committee and gave a frank answer.
Questions will doubtless remain over his choice of language. "Apocalyptic" is, of course, a very strong word. But it is clear from his remarks that he was referring largely to the developing world, which is much more exposed to shocks in supply chain and has more limited scope to grow its own food and establish trade links.
Rising prices, be it for food or any other commodity, fall under the banner of inflation and Mr Bailey's job is to monitor and control it. As such, his decision to remark the way he did was entirely within his remit.
Mr Bailey's term as Bank of England Governor will expire on March 15, 2028.