George Osborne got Mark Carney – at the cost of his principles - The Guardian

A man's word is supposed to be his bond. When it comes to George Osborne, a chancellor's word is – well, his word. After presiding over one of the most lamentable economic strategies of any post-war Conservative chancellor – even Black Wednesday had the advantage of leading to an economic recovery – George Osborne has just given us another example of how his word can only be trusted up to a point.

I refer, of course, to the announcement that the next governor of the Bank of England is to be Mark Carney, at present governor of the Bank of Canada.

Just as Osborne's deficit reduction strategy was to have produced a sizeable economic recovery – always a delusion, but we had the chancellor's word for it – now, in desperation, he has gone back on his word about the promised arrangements for appointing a governor of the Bank of England.

In opposition and in government, Osborne made a huge fuss about his brilliant idea that future governors would be appointed for one eight-year term. This would, we were told, be a clever way of avoiding all the inevitable speculation that occurs about whether or not governors serving a five-year term will have their contracts renewed. He also took up the suggestion from his Labour predecessor, Alistair Darling, that, to avoid cronyism, the job should be advertised and those fancying their chances should have to apply.

It was not a great idea to ask people to apply, because at that level there was an obvious danger that some good candidates might not wish to expose themselves to the public humiliation of not getting the job. But the eight-year term always struck me as a bad idea too, because the traditional practice gave ministers the opportunity to rid themselves of turbulent governors, especially if there had been a change of government.

In appointing Carney, Osborne has gone back on both of his commitments. Carney's initial denials of interest in the job were not, as has been reported in some places, what Winston Churchill (a former chancellor) called "terminological inexactitudes", or plain lies. He did not apply. Indeed, he had to be wooed by a star-struck chancellor. In addition, not to put too fine a point upon it, he had to be bribed.

Yes, at a time of a policy of planned penury for the poorest in our society, including shameful cuts in welfare benefits, causing misery for hundreds of thousands of citizens, the salary of the governor of the Bank of England will go up by more than 50% next July, and be accompanied by pension contributions and "relocation and housing expenses".

There seems to be little question of Carney's ability, although, as usual, much of the comment has been well over the top. As Jeremy Paxman said on Newsnight when the editor of the Economist (a friend of Carney's) was lauding the Canadian, "you'll be telling me he walks on water next".

Carney's initial reaction was, according to the Financial Times, negative. He "told UK officials he did not want the strings attached to the job: a central bank with an economy in severe difficulties, a salary much lower than he liked, the need to move his wife and four daughters to Britain, and the prospect of serving an eight-year term".

Well, it has to be said that, if nothing else, Carney, who will serve for five years, is a formidable negotiator. Osborne has proved to be putty in his hands. And we have it on the authority of Mrs Carney in the Canadian press that Carney only accepted the job because an opening in Canadian politics has disappeared for the time being.

At all events, we are back to the old days of appointments not applications, and a lot of distinguished candidates have been the victims of what became a complete charade. The chancellor's mind had already been made up.

In announcing the appointment, Osborne looked like the cat who got the cream. But if he is still at the Treasury when Carney arrives next July – and a Macmillan-style prime minister would by now have given him the sack for his abject failure to "deliver" – Osborne may be in for a nasty shock.

Our chancellor seems to think that Canada is a glowing example of "expansionary fiscal contraction" – that is, of emerging from depression and securing a good rate of economic growth by cutting the budget deficit and imposing austerity on those who are most certainly not "in this together". He cites the experience of Canada in the 1990s – failing to appreciate that it was rapid growth, fuelled by a devaluation and a boom in trade with the US, that induced the Canadian recovery, a recovery which enabled the deficit to be reduced with little pain.

Well, as the autumn statement and the latest report from the Office for Budget Responsibility will demonstrate once again on Wednesday, Osborne's policy is hurting but it isn't working. And how!

Carney, if he is as good as people say he is, must know this. Indeed, as noted above, when first approached he did not wish to have any truck "with an economy in severe difficulties" – namely the UK.

He has contrived to be bribed into changing his mind. He apparently relishes the challenge of restoring supervision to the Bank of England and repairing the banking system. But if he has any sense he will take one look at the policies his chancellor is conducting, and become as difficult as many a governor before him.