Minister, Gordon Brown, is said to have fallen out with Mervyn King, Governor
of the Bank of England.
The irony is that Mr Brown was the Chancellor
of the Exchequer – finance minister – who granted “independence” to Britain’s
Indeed, it is widely
regarded as his greatest achievement. Certainly he has enjoyed great credit for
it over the subsequent decade.
Yet, even at the time,
there were a few older heads who muttered that there was a reason that
independence had not been granted before: although the Chancellor of the
Exchequer had given away a key power over the economy, he remained politically
and constitutionally responsible for it.
In practical terms,
that mattered little so long as the Bank’s stable money policy underpinned the
boom that Mr Brown, and the then Prime Minister, Tony Blair, had inherited from
the previous Conservative administration.
However, a conflict of
interest was bound to develop when tougher times returned – as they always do,
much as politicians would like to pretend otherwise. Faced with recession,
politicians tend to pump money into the economy, especially when an election
looms, as it does for Mr Brown.
However, Mr King, like
all good central bankers, is an inflation “hawk”.
It does not help that
Messers Brown and King are both literal-minded, academic types, stubborn about
what they see as points of principle – whereas their respective predecessors,
Mr Blair and Sir Edward “Eddie” George, were famously smooth social operators
who were able to paper over any cracks.
It seems that central
bank independence really makes the economy – and the lives of every
entrepreneur in Britain – dependent on the social skills, or social ineptitude,
of a politician and an unelected official.