Christopher Fildes

All eyes on the Bank’s weather-vane — this one could go to a recount

All eyes on the Bank’s weather-vane — this one could go to a recount

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At last some excitement. The next vote is on Monday, and this one could go to a recount. All eyes will be on the weather-vane in the Bank of England’s Court Room, which shows its directors how the wind is blowing. Next door, in an elegant anteroom, the nine members of the Monetary Policy Committee will have to decide whether interest rates should go up. This week in Washington, the Federal Reserve Board showed the way. Last month in London, the Committee voted 7–2 to wait and see, but the two in the minority were the two Bank directors who by the nature of their work are closest to the markets. Others may have preferred to hold their fire until the election was over — not that so worldly a motive would ever be reflected in the minutes. Since then the wind has been backing and filling. The steam has gone out of the market in houses, but prices are still running 7 per cent above where they were last year. The shops, it is now clear, have had a cold spring, and the great British consumer may be handing over the big spender’s torch to the Great British government. Manufacture is back in decline — but inflation is not. On any measure, including the fancy one wished on the Bank by the Chancellor, it has been gathering speed. The hawks on the Committee will say that its remit is to hold inflation steady, and that rates therefore need to go up. The doves will protest that the economy is not as strong as, for the last few weeks, we have been told. Has it all been a conjuring trick, an election perfectly timed for the top of the cycle? Tricky.

Sorry, wrong number

For a case study of what is going on in the British economy, the Committee might look at Marconi, now going down slowly for the second time. Its first set of injuries were self-inflicted — Arnold Weinstock’s successors had wasted his substance in riotous bidding — but this time it shows what can happen when imports set the pace of growth. British Telecom, Marconi’s biggest customer, is taking its business to China. A cheaper pound might have helped Marconi to stay in the game — but that, of course, would be inflationary. The worst of both worlds would be to combine falling growth with rising inflation. It can happen, and seems to be happening in Europe now. Thirty years ago our own inflation rate was stratospheric and we had no growth to speak of. Now that was a case study, indeed.

The price of advice

Misfeasance in public office is a hard charge to make stick, but the Railtrack shareholders are trying. At least they now know that ministerial advisers wrote them off as grannies who might be pacified with travel vouchers. Their case is, in effect, that Stephen Byers (yes, him again) drove their company to the wall as a matter of policy, and if they can raise enough money to feed all the legal gas meters, they can look forward to their day in court. Already they have secured the disclosure of thousands of documents which show how the Whitehall machine is short-circuited. Hordes of ambitious advisers, publicly paid but answerable only to their ministers, dependent on their favour for their jobs, swap e-mails with each other. (One of them, you may remember, e-mailed her hapless minister to tell him that 9/11 would be a good day to bury bad news.) Decisions are made on the hoof, or in cyberspace, or on the sofa. Six months ago in these pages, Lord Butler warned of the weight that such advisers, politically chosen, carried: ‘If it’s done to the exclusion of advice from civil servants, you tend to get into error, you make mistakes.’ No one understands better how the machine works, or should do. Railtrack’s shareholders should invite him to give evidence.

Kiss and tell

E-mails, as we should know, can come back to haunt us — sexually liberated City types find that their private lives are public property — and even an efficient filing system can have perils of its own. Lawyers can ask for the files to be opened, as with Railtrack. Anyone can now ask for official files to be opened. Papers which were supposed to be tucked away for 30 years come blinking into the daylight, to the annoyance of historians, who thought that time was on their side. Public bodies search for ways of getting round the Freedom of Information Act. One of them has drawn up a list of the two dozen questions that it least wants to be asked. I dare say that, under the Act, I could demand to see the list.

Hong Kong North

Iceland is hot. Mosaic Fashions — yes, of course you’ve heard of them, shops like Coast and Oasis and Whistles — is bringing its shares to the market in Reykjavik. Baugur, which controls Mosaic, is Iceland’s biggest retailer. That is not saying much, since so few people live there — but Baugur owns Hamleys, the Regent Street toy shop, and has a big stake in the Big Food Group, which used to be called Iceland. An Icelandic bank has bought Singer & Friedlander, one of the City’s survivors, which has passed from hand to hand but was, in its day, a merchant bank. How do the Icelanders do it? Can this be the Hong Kong of the north, with access to a frozen hinterland, at least until it melts? Does it attract international capital by its special status, inside the European Economic Area but outside the European Union? If so, are there lessons for London? The alternative view is that Iceland is just the latest hot spot for hot money. ’Ware frostbite.

Pepys’s Law

Public spending, Stuart style: Samuel Pepys is Clerk of the Acts to King Charles II’s Navy Board, and goes down to Woolwich to see a warship dock: ‘But, good God, what a deal of company was there from both yards to help to do it, when half the company would have done it as well; but I see it is impossible for the King to have things done as cheap as other men.’ He had hit on a truth that Her present Majesty’s Treasury, all set to spend £519 billion this year and more the year after, still seems to be learning the hard way. Let it be a lesson to today’s Chancellor, and to the next.