Brown versus the Old Lady of Threadneedle Street
James Forsyth 4:41pm
Peter Oborne in The Mail today details the tensions between the government and the Bank of England. Oborne writes that,
The truth is that relations between the Bank and Treasury are close to breaking point. They are easily the worst since the Sixties, when Harold Wilson fought a vicious and prolonged battle with the Bank of England over the level of sterling.Bank governor Mervyn King regards Alistair Darling, the Chancellor, with hostility and contempt. The feeling is reciprocated. Chancellor Darling - as ever, the hapless cipher of the Prime Minister - is working flat out to undermine the integrity and authority of the Bank.
As Britain heads towards its greatest economic crisis since the banking collapse of the early Seventies, communications between our two most important financial institutions have frozen over.
More alarming, they hold utterly opposing views on the economic perils facing Britain.
Gordon Brown and Alistair Darling are terrified about the slowdown in growth, and the potential knock-on effects on taxation receipts, public spending and above all lost jobs.
Looking down the other end of the periscope, Governor Mervyn King's nightmare is inflation. He knows it is rising sharply and is determined to bring it down.
The result is nothing short of extraordinary. For the past few months, Britain has had two flatly contradictory economic policies.
Peter points to the appointment of a successor to Rachel Lomax, deputy governor of the Bank of England, as an example of the current power struggle. King wants inflation hawk Charles Bean appointed as her successor but Brown is refusing to do so.
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A Theologian
June 7th, 2008 6:23pm Report this commentHow low can they go takes on a wholly new meaning. The UK is now the Zimbabwe of Europe.
Michael Hargrave
June 7th, 2008 6:28pm Report this commentKen Clarke (Tory Chancellor) pointed out at the beginning of the NL experiment that this might happen.
Of course the PM and CoE have tied the BoE into controlling inflation rather than the economy, so they are stuck with it until they cut the link.
Arthur
June 7th, 2008 6:41pm Report this commentI thought the agreement was that the Bank looked after inflation with interest rates and the government looked after growth and the balance sheet with prudent economic, taxation and spending policies. Has something changed?
j miller
June 7th, 2008 6:47pm Report this commentAhh, the kudos Brown continues to get for making the Bank "independent". All part of the "greatest Chancellor ever" folklore. And like the other parts a load of bull.
Puncheon
June 7th, 2008 8:57pm Report this commentEvery Labour Government there has ever been sooner or later starts using inflation as a macro-economic instrument. This one is no different, and it has simply been a matter of time. It seems to be a sad fact of life that every generation has to learn this lesson anew. The ensuing chaos will take years to put right. In the meantime many, many economic lives will be ruined. All caused by those who like to describe themselves as "progressives".
TomTom
June 7th, 2008 9:30pm Report this commentThe personnel problem arises because John Gieve who botched his job at The Home Office - and whose wife was the lawyer representing Blunkett in his paternity suit - was moved to the Bank when Home Office accounts were qualified.
At the B of E he is a former Treasury man with no City background and so weakens the B of E links to the institutions leaving the government desperate to use the LOmax vacancy to remedy it instead of firing Gieve
Perry
June 7th, 2008 10:57pm Report this commentFascinating internecine strife here. Were it not that the fate of our land and people is inextricably bound up in it, it would be fascinating to watch the implosion of control freakery in a storm of hopeless ignorance and arrogant posturing.
And as Puncheon noted, it seems every generation has to learn afresh. There are many reasons why this should have happened now.
Perry
June 8th, 2008 9:30am Report this commentAnd inevitably, it all can be tracked back to Mz. Prudence of Noo-Lying-Bores, Bliar’s bungling bodger of botched bullion bargain-basement sales. What a puffed-up little ignoramus.
The pontificating twerp Bliar, together with the populace at large, and the esteemed press corps were well and truly, - how shall we say? – shafted.
Trumpeter Lanfried
June 8th, 2008 11:03am Report this commentWho would you rather trust with the economic future of this country? Alistair Darling or the Bank of England?
Thought so.
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