Hammond must seek answers from Bank of England hopefuls | Larry Elliott | Business

Picture the scene. It is high summer at the UK Treasury. Outside in St James’s Park, the tourists are feeding the ducks but inside a selection panel is interviewing a shortlist of candidates to be the next governor of the Bank of England.

Attracting suitable candidates has not been a problem. The headhunters have found plenty of people to fit the job description: a person of the highest calibre respected in the highest echelons of central banking. A shortlist of three names has been drawn up.

Rather than speculate on who might make the cut, it is worth thinking about what the three hopefuls ought to be asked, because much could happen before the successor to Mark Carney is announced in the autumn.

Question number one: how would they feel about working for a different chancellor? Philip Hammond fired the starting gun for the Threadneedle Street job but the turmoil in the Conservative party means there is no guarantee he will still be in post by the time the process is completed. If Theresa May goes as prime minister, Hammond will go with her. The next chancellor might only be a stopgap before a general election that could result in a Labour government with John McDonnell as second lord of the Treasury.

Question number two: how do you plan to navigate the Brexit process? Despite the six-month extension to article 50, Britain’s relationship with the European Union will remain a vexed issue long after Carney leaves the Bank come January. That is the case no matter what happens over the coming months. Even if May finally gets her deal through parliament, the next stage of the saga – thrashing out the future relationship – will be just as tricky. If she doesn’t, the economy will be stuck in limbo with politics a potential minefield for an incoming governor.

Question number three: how would you respond to a monster financial crisis of the sort witnessed a decade ago? This time last year, central banks were thinking about how to withdraw at least some of the policy stimulus provided during the crash. But the mood has darkened since then and there are fears the next “big one” is coming. If it does, central banks have far less scope to cut interest rates than they had in 2008-09. The next Bank governor’s views on quantitative easing, negative interest rates, helicopter money and all other unconventional central banking tools need to be established.

Question number four: how can the Bank assist in the decarbonisation of the economy? This is not a question that would have been asked of gubernatorial candidates in the past, but is actually the most important of the lot.

Boeing needs hands-on approach

Boeing has a serious problem that goes well beyond its poor financial performance in the first three months of the year. Falling sales and earnings were only to be expected after two of its 737 Max planes crashed and work is under way to fix the technical problem that led to the loss of life.

But this is one of those occasions when technical fixes are not enough. Boeing might be able to use an intensive programme of test flights to convince airlines to go through with the orders placed for the 737 Max. Convincing passengers is another matter entirely, because Boeing has suffered an extremely serious case of reputation damage. A recent poll showed more than half of Americans never want to travel on the plane, even when it has been deemed airworthy by the US Federal Aviation Administration (FAA).

The traditional approach of a manufacturer to falling sales – cutting prices – is unlikely to work in this case because the way to reassure nervous passengers is to demonstrate – and demonstrate transparently – that no expense is being spared to ensure the planes are safe.

But the company also needs the FAA to show some regulatory teeth. There is some irony in this, because in the past the US airline industry successfully lobbied for its own engineers and pilots to do the bulk of testing of new planes. With the US in a cut-throat race with Europe’s Airbus for commercial airline business, the American manufacturers said it was vital to get new models to the market more quickly.

The two 737 Max crashes have led to calls for the FAA to adopt a more hands-on approach. That’s inevitable and, in the long run, will help Boeing.

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