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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