Carney charms MPs (once they get over his pay)

The next BoE governor reveals his plans for expectation management, but stays firmly conventional.

Against a background of the Bank of England's monetary policy committee deciding to keep interest rates flat at 0.5 per cent for another month — meaning it has now been four full years since the last rate change — the next governor of then Bank of England, Mark Carney, appeared before the Treasury select committee and and gave some of the first hints as to how he plans to run the country's central bank.

Of course, before he could do that, he had to justify his pay to the assembled MPs. Admittedly, Carney will be payed a lot: £480,000 a year base salary, plus a £250,000 "housing allowance", well above his predecessor Mervyn King's £305,000. But he defended his salary by pointing out that "I'm moving from one of the least expensive capital cities in the world – Ottawa – to one of the most expensive capital cities in the world," and by noting that his pay was in line with the outgoing head of the FSA, whose responsibilities are being merged with the Bank of England's.

David Ruffley MP was behind him, at least:

On the question of pay, you will be paid considerably less than recent England football managers and I think you are likely to have more success than them.

Eventually, Carney was allowed to talk about monetary policy, and revealed that, while he isn't going to be the loose-cannon central banker of our dreams — NGDP targeting and helicopter drops are out of the question — he does plan to be somewhat more aggressive than King.

In Canada, where Carney was the head of the central bank before his appointment here, there are formal reviews of the inflation target on a five-yearly timeframe. Here, by contrast, the target is — and has been since it was introduced fifteen years ago — for inflation to be within a one percentage point band of two per cent annually. MPs asked whether that target should be changed or loosened, and, while Carney did not directly offer any alternatives, he did argue that there should be that debate, albeit a "short" one.

The "high bar" that Carney thinks needs to be met before change can happen means that NGDP targeting — the idea of mandating the Bank to aim for a particular level of nominal (un-adjusted for inflation) GDP — is unlikely. He remains "far from convinced" that it could work. Similarly, while the USA has a dual mandate, requiring the Fed to target both inflation and unemployment, Carney isn't necessarily aiming for that as an end-stage for Britain either. He starts "from a position of considerable monetary stimulus to take up the slack", but believes that, for the time being, there is enough flexibility under the normal target to pull that off.

Where Carney marked the most substantial break with King was in his expressed belief that communication could be used more effectively to achieve the aims of the bank.

A huge part of monetary policy is expectations management — ensuring that people believe that the future economy is going to be certain way, and act on that belief. That's because many economic prophecies are self-fulfilling. If you tell everyone the stock market will crash, and have enough credibility that they act on it, then they will pull money out of the market and cause that very crash.

As a result, there's a huge difference between a central bank having a plan to keep interest rates low for a further two years, and a central bank saying it has a plan to keep interest rates low for a further two years. Carney understands that difference, and apparently plans to make the most of it.

No matter what happens, though, he has reiterated that he is only going to stay in charge for one five-year term, due to family commitments and a desire to get out of the high stakes world of central banking while he still can. While MPs expressed disbelief that someone could let something so prosaic as a family affect their job, Carney explained that he hoped to achieve all his goals in that span, and to make an exit "that is less newsworthy than my entrance".

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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An unmatched font of knowledge

Edinburgh’s global reputation as a knowledge economy is rooted in the performance and international outlook of its four universities.

As sociologist-turned US Senator Daniel Patrick Moynihan recognised when asked how to create a world-class city, a strong academic offering is pivotal to any forward-looking, ambitious city. “Build a university,” he said, “and wait 200 years.” He recognised the long-term return such an investment can deliver; how a renowned academic institution can help attract the world. However, in today’s increasingly globalised higher education sector, world-class universities no longer rely on the world coming to come to them – their outlook is increasingly international.

Boasting four world-class universities, Edinburgh not only attracts and retains students from around the world, but also increasingly exports its own distinctively Scottish brand of academic excellence. In fact, 53.9% of the city’s working age population is educated to degree level.

In the most recent QS World University Rankings, the University of Edinburgh was named as the 21st best university in the world, reflecting its reputation for research and teaching. It’s a fact reflected in the latest UK Research Exercise Framework (REF), conducted in 2014, which judged 96% of its academic departments to be producing world-leading research.

Innovation engine

Measured across the UK, annual Gross Value Added (GVA) by University of Edinburgh start-ups contributes more than £164m to the UK economy. In fact, of 262 companies to emerge from the university since the 1960s, 81% remain active today, employing more than 2,700 staff globally. That performance places the University of Edinburgh ahead of institutions such as MIT in terms of the number of start-ups it generates; an innovation hothouse that underlines why one in four graduates remain in Edinburgh and why blue chip brands such as Amazon, IBM and Microsoft all have R&D facilities in the city.

One such spin out making its mark is PureLiFi, founded by Professor Harald Haas to commercialise his groundbreaking research on data transmission using the visible light spectrum. With data transfer speeds 10,000 times faster than radio waves, LiFi not only enables bandwidths of 1 Gigabit/sec but is also far more secure.

Edinburgh’s universities play a pivotal role in the local economy. Through its core operations, knowledge transfer activities and world-class research the University generated £4.9bn in GVA and 44,500 jobs globally, when accounting for international alumni.

With £1.4bn earmarked for estate development over the next 10 years, the University of Edinburgh remains the city’s largest property developer. Its extensive programme of investment includes the soon-to-open Higgs Centre for Innovation. A partnership with the UK Astronomy Technology Centre, the new centre will open next year and will supply business incubation support for potential big data and space technology applications, enabling start-ups to realise the commercial potential of applied research in subjects such as particle physics.

It’s a story of innovation that is mirrored across Edinburgh’s academic landscape. Each university has carved its own areas of academic excellence and research expertise, such as the University of Edinburgh’s renowned School of Informatics, ranked among the world’s elite institutions for Computer Science. 

The future of energy

Research conducted into the economic impact of Heriot-Watt University demonstrated that it generates £278m in annual GVA for the Scottish economy and directly supports more than 6,000 jobs.

Set in 380-acres of picturesque parkland, Heriot-Watt University incorporates the Edinburgh Research Park, the first science park of its kind in the UK and now home to more than 40 companies.

Consistently ranked in the top 25% of UK universities, Heriot-Watt University enjoys an increasingly international reputation underpinned by a strong track record in research. 82% of the institution’s research is considered world-class (REF) – a fact reflected in a record breaking year for the university, attracting £40.6m in research funding in 2015. With an expanding campus in Dubai and last year’s opening of a £35m campus in Malaysia, Heriot-Watt is now among the UK’s top five universities in terms of international presence and numbers of international students.

"In 2015, Heriot-Watt University was ranked 34th overall in the QS ‘Top 50 under 50’ world rankings." 

Its established strengths in industry-related research will be further boosted with the imminent opening of the £20m Lyell Centre. It will become the Scottish headquarters of the British Geological Survey, and research will focus on global issues such as energy supply, environmental impact and climate change. As well as providing laboratory facilities, the new centre will feature a 50,000 litre climate change research aquarium, the UK Natural Environment Research Council Centre for Doctoral Training (CDT) in Oil and Gas, and the Shell Centre for Exploration Geoscience.

International appeal

An increasingly global outlook, supported by a bold international strategy, is helping to drive Edinburgh Napier University’s growth. The university now has more than 4,500 students studying its overseas programmes, through partnerships with institutions in Hong Kong, Singapore, China, Sri Lanka and India.

Edinburgh Napier has been present in Hong Kong for more than 20 years and its impact grows year-on-year. Already the UK’s largest higher education provider in the territory, more than 1,500 students graduated in 2015 alone.

In terms of world-leading research, Edinburgh Napier continues to make its mark, with the REF judging 54% of its research to be either world-class or internationally excellent in 2014. The assessment singled out particular strengths in Earth Systems and Environmental Sciences, where it was rated the top UK modern university for research impact. Taking into account research, knowledge exchange, as well as student and staff spending, Edinburgh Napier University generates in excess of £201.9m GVA and supports 2,897 jobs in the city economy.

On the south-east side of Edinburgh, Queen Margaret University is Scotland’s first university to have an on-campus Business Gateway, highlighting the emphasis placed on business creation and innovation.

QMU moved up 49 places overall in the 2014 REF, taking it to 80th place in The Times’ rankings for research excellence in the UK. The Framework scored 58% of Queen Margaret’s research as either world-leading or internationally excellent, especially in relation to Speech and Language Sciences, where the University is ranked 2nd in the UK.

In terms of its international appeal, one in five of Queen Margaret’s students now comes from outside the EU, and it is also expanding its overseas programme offer, which already sees courses delivered in Greece, India, Nepal, Saudi Arabia and Singapore.

With 820 years of collective academic excellence to export to the world, Edinburgh enjoys a truly privileged position in the evolving story of academic globalisation and the commercialisation of world-class research and innovation. If he were still around today, Senator Moynihan would no doubt agree – a world-class city indeed.

For further information www.investinedinburgh.com