16/01/2014 10:48 GMT | Updated 25/01/2014 16:01 GMT

Labour MP Slams Mark Carney As George Osborne's 'Hand-Picked' Bank Of England Governor

Bank of England Governor Mark Carney speaks during the bank's quarterly inflation report news conference at the Bank of England in London, Wednesday, Nov. 13, 2013. Carney said unemployment in Britain is falling faster than anticipated, raising speculation in the markets that interest rates may start rising sooner than expected. (AP Photo/Toby Melville, Pool)

Mark Carney has been accused of political bias with a senior Labour MP describing him as "hand-picked" by George Osborne, after the Bank of England governor dismissed opposition proposals to restrain bank executive pay and cap the size of big banks.

Speaking to the Huffington Post UK, Teresa Pearce, Labour member of the Treasury select committee, said: "It is not surprising that a governor hand-picked by the chancellor, and rewarded with a £874,000 pay package, is not in favour of tackling exorbitant pay and bonuses in the banking sector."

Pearce's comments come after Carney told the Treasury select committee that he did not support a "crude" bonus cap as agreed by Brussels politicians, which limits banker bonuses to just the same level as their pay, or twice that with shareholder approval, which can easily be seen to clash with Labour's call on Wednesday for bankers at the state-owned RBS to keep their bonuses capped.

She added: "I am aware that some commentators say Dr Carney makes no attempt in private to disguise his contempt for my Party's economic credentials. However, I cannot comment on what Dr Carney does or does not say in private, as I am afraid that neither I nor my constituents, many of whom are on the national minimum wage and live in overcrowded and poor housing, move in the same social circles as Dr Carney with his £5,000 a week housing allowance."

The chancellor announced Mark Carney would take over from Mervyn King at the Bank of England in November 2012, praising him as the "best man" for the job.

Pearce added: "I believe that Dr Carney was persuaded by George Osborne to apply for the job. I recall that he did not just apply when the vacancy arose, but was headhunted after the closing deadline."

Carney was previously accused of being "too close to the chancellor" by another Labour member of the Treasury select committee, John Mann. In response to this jibe, the Bank governor said he was "more than mildly offended" by the insinuation of political bias.

However, Professor Danny Blanchflower, a former member of the Bank's Monetary Policy Committee during Mervyn King's governorship, told HuffPostUK that he agreed with Mann's criticism.

"The governor of the Bank of England has got to remain apolitical and has got to be able to advise both the chancellor and the shadow chancellor.

"Carney has compromised his position as Bank of England governor, Osborne has got his hand up his backside!

"It'll be very hard for him to give advice to the Labour Party. When asked about their proposals, he should have shut his gob."

However, another Labour Treasury select committee member, MP Andy Love, said given Carney's importance, "we'll continue to question whether he's siding with one side or the other [when he makes public statements]".

However, he avoided echoing Pearce's criticism of Carney, saying: "I don't detect political bias and clearly people will try to pose the issue of whether the governor is wholly on the side of the government or against the opposition."

Tory MP David Ruffley, also on the Treasury select committee, dismissed accusations that Carney was biased in favour of the chancellor as "conspiracy theory".

"I absolutely reject it. His reputation depends on making the right judgements."