The intriguing power struggle between Gordon Brown and Mervyn King has just heated up a few notches. Since (finally) securing his second term as Bank of England governor, King has been emboldened and is saying – in code – ‘no more of your funny games, Brown’. I blogged earlier about his assessment of Treasury spin. He has become more frank in his economic assessments, telling it how it is. Ditto his chief economist Charles Bean, who has compared the recent plunge in the pound to Black Wednesday. Now King is pushing for Bean to become his deputy, replacing the recently-departed Rachel Lomax.
This is all bad news for Brown, whose election strategy depends on spinning a fake economic narrative. It won’t do to be contradicted by the Bank of England, with two credible and independently-minded people at its helm. What to do?
Step One is to thwart Bean’s appointment, sending in some pliable City chap instead. There is an ongoing battle about this. Step Two we heard a few hours ago. Darling wants to appoint a new board to “advise” the Bank – “outside expertise to advise the governor or the appropriate deputy governor” he says. This cannot but dilute the power and authority of these two.
King isn’t a vainglorious chap. He’ll realise he has to protect the separate identity for the Bank because right now the words “Brown & Darling” are taken about as seriously in the City as “Laurel & Hardy”. King is also infuriated by Brown using language such as “we have been able to reduce interest rates” when it’s the Bank, not the government, that cuts rates.
Making the Bank of England independent is regarded as Brown’s single best achievement. It went well when the political cycle and the economic cycles were aligned. Now they are out of synch, we see a tension between a PM saying “things are okay really” and a Governor saying “things are dire – adopt the brace position”. It will be hard for Brown to stuff this genie back in the bottle. But we can expect some fireworks as he tries.
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