So Alistair Darling will be giving the Bank of England more responsibilities in the future. It’s one of those wonderful phrases which at first glance appears to be ’separating the Bank from the Treasury was a great idea, and we’re continuing down that path by ceding further responsibilities to the Bank’. Upon further inspection, of course, it means ’separating the Bank from the Treasury was a great idea that was implemented so poorly that it collapsed liked a flan in a printing press at the first obstacle, and now we’re going to do something about it’.
Of course, the thing they’re going to do about it is to make sure the BoE takes full blame for any future mistakes and the new Financial Stability Committee takes all the credit when things go to plan. We’re seeing the inevitable arms race in the war between No. 10 and the BoE. Mervyn King is right, of course: the economy is headed for recession and there’s not a lot can be done about it except fiddle about at the edges with damage limitation steps. It’s also becoming abundantly clear, though, where the real power lays in this game, and with that in mind, Mervyn King has absolutely no chance. He’ll be gone as soon as there’s an opportunity to get rid of him.
So sad to see that Brown’s best policy is being undermined so rapidly by the man himself. Pretty soon the great Bank of England will be turned into a wet blanket, with no power, no command and no credibility.