In its first report of the 2023-24 session, the House of Lords Economic Affairs Committee published a report yesterday titled “Making an independent Bank of England work better”. Interesting, perhaps, but what has that got to do with Cliscep? If you only read the BBC report headed “Bank boss concerned over UK growth outlook” you might still be wondering.

Of course, the BBC likes nothing better than a bad news story about the UK economy, and so it majors on concerns over economic growth, prospects of (relatively) high interest rates for the near future, and problematic inflation. It’s very diligent of the BBC to report on a report in the Newcastle Chronicle following its interview with Andrew Bailey, Governor of the Bank of England, in which he expressed these concerns. The BBC report went on to refer to the House of Lords Economic Committee report referred to above, in which it said (according to the BBC) that “the framework for the Bank’s independence had been tested by the rise in inflation and “the resulting loss of public confidence in the Bank””.

What else did the House of Lords Committee have to say (according to the BBC)?

The report said that a “democratic deficit” had emerged with “critically important” economic decisions being “delegated to unelected officials”. [I agree].

It suggested the Bank’s remit be “pruned”, in order to “ensure that the Bank is focused on its primary objectives of tackling inflation and ensuring financial stability”.

“The Bank must do more to foster a diversity of views and strengthen a culture that encourages challenge,” the report added.

Yes indeed, the Committee did suggest that the Bank’s remit be “pruned”. But it went on to talk about a specific part of the Bank’s remit that it found to be particularly problematic, and which – funnily enough – the BBC decided to gloss over. Or lying by omission, as I prefer to think of it. Let’s take a look, since the BBC chose not to enlighten us.

The report runs to 73 pages, including frontispiece, contents list, a summary of its main conclusions, and seven appendices. Fortunately, then, the meat of the report is fairly short, and quite a lot of that is devoted to being critical of the Bank’s climate change remit. Its summary deals with four main points, and the second is as follows:

Second, witnesses often expressed concern regarding the Bank’s expanding remit, especially with respect to the matters it is expected to have regard to or consider—climate change being the most cited example—to support the Government’s economic policy. We found that this widening of the Bank’s remit risks jeopardising the Bank’s ability to prioritise its primary objectives; risks drawing the Bank into the Government’s wider policy agenda; and increases the potential for conflict between its objectives. We recommend that the Bank’s remit should be pruned by HM Treasury, with a focus on the number of matters it is expected to have regard to and consider. The Bank’s management structure, which has expanded in line with its growing remit, should also be reviewed with a focus on whether it could be made more streamlined.

Interestingly, then, it isn’t simply the House of Lords Committee that is taking issue with the Bank’s climate change remit – rather, this was the example most cited by the witnesses who appeared before the Committee. No wonder the BBC didn’t want to talk about it.

The Committee’s report performs a useful function in explaining the Bank’s remit, duties, obligations etc, and the statutory background against which it performs its functions. At paragraph 67 we learn that the Financial Services Act 2012 established the Prudential Regulation Authority (PRA). At paragraph 68 we are told that the Financial Services and Markets Act 2023 added a new regulatory principle to the PRA’s remit: “the need to contribute towards achieving compliance with Section 1 of the Climate Change Act 2018 (UK net zero emissions target).” So the drive to embed net zero infiltrates all aspects of public life, and is still ongoing, this change having occurred earlier this year.

And in case the Bank of England Governor should be forgetful about climate change and net zero, the Chancellor of the Exchequer will remind him. As we are told at paragraph 69, the Chancellor sends remit and recommendation letters to the Governor for the Bank’s policy committees, and number of matters outlined in these letters has increased over the years. As an example, the FPC remit and recommendations letter of 2022 sets out that the Committee should act with a view to supporting the Government’s strategy for financial services, with particular focus on a range of matters including “Climate change and energy security”.

Paragraph 70 is very specific about how all this is affecting the Bank of England:

The general expansion of the Bank’s remit has included a particular focus on stipulations to support Government policy on climate change. The Bank of England has implemented a range of measures in this regard: from “greening” the corporate bonds purchase scheme (MPC) to incorporating climate-related risk metrics into credit risk methodologies (PRA) and a host of other measures. In 2021, the Bank unveiled its first ever stress test to scrutinise the resilience of Britain’s biggest banks and insurers against climate change risks over the next thirty years (FPC and PRA).

Paragraph 71 reminds us that all this is taking place against an international backdrop:

Central banks around the world are adopting different approaches with regard to climate change and sustainability generally. As of June 2023, the Network for Greening the Financial System—a network of central banks sharing best practice in the development of climate risk management—had 127 members.

Interestingly, even a leading light of the Labour movement, Ed Balls, takes issue with the Bank of England’s climate remit. In his evidence to the Committee he said the Government should be clear that tackling climate change is a matter for the Government and that to “start expecting the Bank to lead on that does not seem, to me, to make any sense.”

He was not alone in expressing that opinion. Professor Malherbe told the Committee that while he thought climate change is “extremely important”, it was hard to consider it a “natural mandate for a central bank.” Professor Goodhart had “considerable doubts about the value or worth of including other objectives, like green, hitting net zero or … inequality.” While he considered these issues important, he was of the view that they should be dealt with by another body and not the Bank of England. Chris Giles said: “This is a government responsibility primarily, and it would be much better for it to stay as such.”

Perhaps inevitably, given the establishment view with regard to climate change, witnesses to the Committee were keen to line up and stress its importance. However, there seemed to be a strong view (albeit with some witnesses dissenting from it) that this isn’t the Bank’s job, and that dumping all this stuff on the Bank has led it to take its eye off the ball, and to prevent it from doing the day job properly (I paraphrase).

For example (paragraph 76):

Although he was supportive of action on climate change and a limited role for the FPC in that regard, Andreas Dombret, former board member at the Deutsche Bundesbank, said that additional objectives make it more difficult for a central bank to pursue its price stability mandate. Sir Paul Tucker argued that when “senior staffers and senior policymakers are making speeches about other things there is a significant opportunity cost” and Sir John Vickers argued that it “dilutes the sense that they are focused on inflation control.”

Witnesses were also concerned about the implications for the Bank’s independence. Stephen D King told the Committee that “giving the central bank more objectives, when it is supposed to be independent, forces it to make changes or decisions that expose it to understandably greater political and media interest.” When asked whether the Bank of England was being politicised in such a way, Roger Bootle said: “I think the short answer is yes. I would argue that, although the various [secondary objectives] referred to are worthy objectives, most of them are better catered for by government”.

Even the Bank of England Governor conceded that secondary objectives are not without cost, saying:

[The growth in the Bank’s remit] certainly creates more work … To take the … PRC—whether it is 31 going to 25 “have regards”, the staff have to spend time on them and we, as policymakers, have to spend time … It makes policy-making more complicated.

Today I received an email from Net Zero Watch (I subscribe to them, and would encourage interested readers to do the same) telling me that Lord Frost has welcomed the Parliamentary report that called for the Bank of England to lose its remit to fight climate change. From this I also learned (which I hadn’t spotted) that last week Chancellor Jeremy Hunt deprioritised global warming in the Bank’s work programme.

For those who hope that Rishi Sunak might be about to see the light regarding the folly of the Government’s net zero policy, it’s worth bearing in mind that (as Net Zero watch tells me) “the climate-change role was added to the Bank’s remit in 2021 by the then Chancellor, Rishi Sunak.”

I thought I’d report in a little more detail regarding the House of Lord’s Committee’s report, since the BBC hasn’t mentioned the parts it doesn’t like. Perhaps overdosing on the COP28 run-up has left it short-staffed?

19 Comments

  1. It might only have been put formally into the Bank’s remit but Mark Carnage was bloviating on the climate change angle for a long time before that. Remember those lectures he gave to share analysts about so-called stranded assets in the oil and gas industry? Of course, the scribblers and beaters of the Groan and BBC reported dotingly on these absurd statements: they didn’t have the sense to enquire what we would use to make laptops and phones and the type of suits favoured by Carnage and co. I suppose he was just easing his way into his current absurd job at the UN

    Liked by 1 person

  2. Mark,

    I found myself thinking about whether or not it was a good thing for the BoE to be formerly involved in the Net Zero strategy. But then I realised how little it mattered. When the policy is wrong, there is nothing left for anyone to do to avoid fiscal chaos.

    Like

  4. man in a barrel, and John R,

    I think this is interesting, setting out much more of the background to the BoE’s remit:

    “‘Facilitating the transition to net zero’ and institutional change in the Bank of England: Perceptions of the environmental mandate and its policy implications within the British state”

    https://journals.sagepub.com/doi/full/10.1177/13691481231189382

    Mark Carney’s activism is well-known, and is admirable, or problematic, depending on your point of view. Contrast that with the views of his predecessor, Sir Mervyn (now Lord) King, expressed less than three months ago (I cite the Daily Express article, as it’s not behind a paywall, unlike the Telegraph piece, which is):

    “Net zero to blame for Bank of England’s inflation mistakes, suggests former boss Lord King
    Making achieving ‘net zero’ a responsibility of the Bank of England (BoE) has hindered the institution’s ability to fight inflation effectively, its former boss has suggested.”

    https://www.express.co.uk/news/politics/1811019/Net-zero-blamed-inflation-mistakes

    Lord Mervyn King, who was BoE Governor from 2003 to 2013, suggested that adding climate change to the Bank’s ever-growing list of responsibilities was the straw that broke the camel’s back.

    His interview with a national newspaper said that adding more responsibilities to the BoE’s remit distracted policymakers from their main role – keeping inflation in check. Lord King said that the “great danger” with this is that the is that “the urgent drives out the important”.

    Lord King’s comments come just days after the BoE’s former chief economist, Andy Haldane, suggested that mistakes made by the BoE had fuelled inflation.

    Now, Lord King has suggested that BoE is being asked to do much. And he said it made “absolutely no sense” to make the BoE responsible for achieving net zero because the bank “can do nothing about climate change”.

    Lord King told The Telegraph “The Bank of England can do nothing about climate change. It’s not even obvious that the biggest and most immediate risks to the stability of the banking system are coming from climate change, as opposed to pandemics or cyber security. So to have a special focus on [climate] doesn’t in my view make any sense.”

    He said he thought climate change had turned into a “quasi-religious debate”, with politicians and policymakers chasing arbitrary goals. And he said that the UK’s efforts have “a negligible impact” on global emissions.

    Like

  5. Mark – thanks again for your digging.

    liked what Lord Mervyn King had to say in your comment above – partial quotes

    “Lord King said that the “great danger” with this is that “the urgent drives out the important”

    “The Bank of England can do nothing about climate change. It’s not even obvious that the biggest and most immediate risks to the stability of the banking system are coming from climate change, as opposed to pandemics or cyber security. So to have a special focus on [climate] doesn’t in my view make any sense.”

    Bet he gets some flack for that.

    Like

  6. “Bank of England’s climate change remit is ‘ridiculous’ and ‘needs to be culled’

    ‘As many of our witnesses pointed out, climate change policy is a matter for government and, frankly, it is ridiculous to suggest that central banks can have any major impact on it’ – Former governor of the Bank of England Mervyn King”

    https://www.mirror.co.uk/money/bank-englands-climate-change-remit-32726224

    ...He was critical of the Bank’s involvement in climate policy: “As many of our witnesses pointed out, climate change policy is a matter for government and, frankly, it is ridiculous to suggest that central banks can have any major impact on it. Therefore, there needs to be a cull of the additional secondary objectives, remit letters and ‘have regards to’ obligations imposed on the Bank since independence was granted in 1997. Too many responsibilities make it difficult for senior people in the Bank to think strategically.”

    His sentiments were shared by Lord Lamont of Lerwick, a Conservative former chancellor, who expressed: “Many of these objectives are not really affected by the instruments available to the Bank. This must be true of climate change. The Government ought to be clear that tackling climate change is a matter for the Government. To expect the Bank to lead on that makes no sense.“…

    Liked by 1 person

  7. “World Bank’s climate plan: Pricier red meat and dairy, cheaper chicken and veggies

    “We have to stop destroying the planet as we feed ourselves,” a World Bank official said, as red meat and dairy drive CO2 emissions.”

    https://www.politico.eu/article/world-bank-want-aid-chicken-veggies-not-red-meat-dairy/

    Cows and milk are out, chicken and broccoli are in — if the World Bank has its way, that is.

    In a new paper, the international financial lender suggests repurposing the billions rich countries spend to boost CO2-rich products like red meat and dairy for more climate-friendly options like poultry, fruits and vegetables. It’s one of the most cost-effective ways to save the planet from climate change, the bank argues.

    The politically touchy recommendation — sure to make certain conservatives and European countries apoplectic — is one of several suggestions the World Bank offers to cut climate-harming pollution from the agricultural and food sectors, which are responsible for nearly a third of global greenhouse gas emissions. 

    “We have to stop destroying the planet as we feed ourselves,” Julian Lampietti, the World Bank’s manager for global engagement in the bank’s agriculture and food global practice, told POLITICO…

    Liked by 1 person

  8. https://www.telegraph.co.uk/business/2024/10/29/reeves-make-bank-england-take-climate-change-seriously/

    Rachel Reeves is planning to make the Bank of England take climate change as seriously as growth, as the Chancellor seeks to use her maiden Budget to overhaul the economy.

    In a letter to Governor Andrew Bailey on Wednesday, Ms Reeves is expected to call on Threadneedle Street to reinstate climate change as one of the Bank’s key priorities.……

    However, Ms Reeves’s move to reintroduce a remit to combat risks from climate change could prove controversial.

    Lord King told The Telegraph last year that it made “absolutely no sense” to make net zero another responsibility for the Bank.

    “The Bank of England can do nothing about climate change,” he said, adding that the institution should focus on interest rates and keeping prices in shops stable.

    There have been other warnings, with Mr Bailey conceding that while there was no excuse for failing to tackle climate change, it was not the Bank’s job to help “the world adjust”…

    Liked by 1 person

  10. “Six big US banks quit net zero alliance before Trump inauguration”

    https://www.theguardian.com/business/2025/jan/08/us-banks-quit-net-zero-alliance-before-trump-inauguration

    Of course, this can’t be because they realise now the stupidity of being members of the net zero alliance. No, the sub-heading insists:

    “Exodus from target-setting group is attempt to head off ‘anti-woke’ attacks from rightwing politicians, say analysts”

    …JP Morgan is the latest to withdraw from the UN-sponsored net zero banking alliance (NZBA), following Citigroup, Bank of America, Morgan Stanley, Wells Fargo and Goldman Sachs. All six have left since the start of December.…

    There can only be one possible reason, of course:

    …Paddy McCully, a senior analyst at the campaign group Reclaim Finance, said: “The sudden exodus of these big US banks out of the NZBA is a lily-livered effort to avoid criticism from Trump and his climate denialist cronies….”

    Liked by 2 people

  11. Say what you want about Trump, but he sure knows how to ruffle feathers in the US & UK media.

    Like

  12. “Bank of England urged to do more to tackle climate crisis

    Environmental groups mark 10 years since Mark Carney’s ‘short-term horizons’ speech with plea to act ‘while there’s still time’”

    https://www.theguardian.com/business/2025/sep/25/bank-of-england-tackle-climate-crisis-mark-carney-greepeace

    A coalition of 10 campaign groups is calling on the Bank of England to do more to tackle the climate crisis, a decade after the then governor Mark Carney warned of the “tragedy of the horizon”.…

    ...Ten years on, the environmental groups Greenpeace and WWF and the thinktanks the New Economics Foundation and Positive Money are among the signatories to a new briefing, calling on the Bank to take more decisive action. They urge Threadneedle Street to commission a review of monetary policy, given the increasing frequency of climate-related shocks that can push up food prices, for example.

    Some economists have argued that central banks should be prepared to tolerate temporarily higher inflation, and even that governments should consider building up buffer stocks of staple foods to cushion the impact of price spikes caused by droughts or floods, which are becoming more common.

    The briefing warns that by raising interest rates to respond to such price rises, the Bank increases the cost of the huge public investment needed to transition away from fossil fuels.…

    Liked by 1 person

  13. We’re already tolerating high inflation. The bank cut rates while inflation was well above target – under political pressure to stimulate growth.

    There is no such thing as a climate-related shock pushing up food prices. What there is, is weather.

    Liked by 1 person

  14. “Some economists have argued that central banks should be prepared to tolerate temporarily higher inflation, and even that governments should consider building up buffer stocks of staple foods to cushion the impact of price spikes caused by droughts or floods, which are becoming more common.“

    So it’s “central banks” & “governments” that “some” economists (unnamed as per) think should “consider building up buffer stocks of staple foods“. Not sure what staple foods the UK farmers could stock up, maybe mccain frozen chips?

    It’s the usual poorly written climate crisis article, with this throwaway dig at the end –

    “Since taking office in Ottawa, Carney has cancelled Canada’s carbon tax, and signalled that he wants the country to ramp up gas production, despite his previous anti-fossil fuel credentials.”

    You can almost hear the splat when the real world hits Carney in the face.

    Liked by 1 person

  15. dfhunter, is not Mr Carney one of the many rich people in public life who successfully rode the green wave? Now that the wave is ebbing we should, perhaps, not be surprised that he (and fellow travellers) are tacking to safer waters.

    I do hope his (and fellow travellers’) green investments have/have not* turned into stranded assets.

    *Delete as you see fit.

    Regards, John C.

    Liked by 1 person

  16. “Banking industry’s net zero alliance shuts down amid faltering climate commitments

    NZBA had nearly 150 members but banks began leaving when Trump was re-elected on promise to ‘drill, baby, drill’”

    https://www.theguardian.com/business/2025/oct/03/banking-industry-net-zero-alliance-shuts-down-climate-nzba

    The global banking industry’s net zero target-setting group has announced it will shut down immediately, amid faltering climate commitments around the world.

    The Net Zero Banking Alliance (NZBA), which was rocked by a wave of departures after Donald Trump’s re-election, said its remaining members had “voted to transition from a member-based alliance and to establish its guidance as a framework”.

    “As a result of this decision, NZBA will cease operations immediately,” a spokesperson said....

    Is net zero in free-fall?

    Liked by 1 person

  18. Mark – missed your 3 Oct comment above. Found this related article from 7 Oct interesting reading –

    Mark Carney’s Net-Zero Banking Alliance is done. Now what?

    Partial quote –

    “Last month, sustainable investment advocate Finance Watch issued a report showing that the 60 largest banks in the world carry more than US$1.6 trillion in credit exposure to coal, oil and gas. Finance Watch argues that as the world electrifies and decarbonizes, this large fossil-industry exposure poses a major risk to the banks as the value of fossil assets supporting loans could decline sharply and suddenly. “Banks have more than a trillion dollars of exposure to mispriced fossil fuel assets,” Julia Symon, head of research and advocacy at Finance Watch, said in a statement. “This is a carbon bubble that could burst, like subprimes in 2008. This risk is not properly recognized and banks are not prepared.””

    A few other quotes I could have given, but from the “about us” page –

    “Corporate Knights Inc. is a leading sustainable-economy media and research organization. Founded in 2002 by Toby A. Heaps, Paul Fengler and Peter Diplaros, Corporate Knights is committed to advancing an economic system in which both people and the planet can thrive.  

    Our award-winning magazine, Corporate Knights, is a magazine of choice among business leaders, policy-makers and investment decision-makers. Published quarterly, Corporate Knights maintains an editorial focus on climate change, responsible investing, and the ideas, actions and innovations that shape a sustainable economy. With a circulation of 126,000+, our magazine is distributed in The Globe and Mail, The Washington Post and The Wall Street Journal.  

    Corporate Knights’ research division produces global sustainability rankings, research reports and financial product ratings based on corporate sustainability performance. Our flagship ranking is the Global 100 Most Sustainable Corporations in the World, released each year during the World Economic Forum. 

    In 2012, Corporate Knights spearheaded the Council for Clean Capitalism, a multi-industry group of leading Canadian companies dedicated to advocating for economic and social-policy changes that reward responsible corporate behaviour. “

    So no agenda then.

    Liked by 1 person

  19. Anyone who thinks “This is a carbon bubble that could burst, like subprimes in 2008. This risk is not properly recognized and banks are not prepared,” is not someone that a banker should be listening to. It’s an absurd proposition, since fossil fuels have intrinsic merits.

    Replace it with “This is a renewables bubble that could burst, like subprimes in 2008. This risk is not properly recognized and banks are not prepared,” and you’re a lot closer to the reality: renewables will not persist unless they are actively supported. If policy was completely neutral, fossil fuels would dominate.

    That is not a climate sceptic talking: it’s reality talking. The difference is between the way they want it to be, and the way it is.

    Liked by 3 people

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