The aim of Bank of England independence was to take away responsibility for running the Bank from elected politicians. Plain, straightforwardly, Labour did not believe that elected politicians could be trusted with running the Bank of England because the public, they thought, didn’t trust politicians with money. Therefore, they wanted to pass over the running of the Bank of England to ‘wise people’ who they claimed would do it better than any politician could.
The fact that this revealed that the Labour government had no confidence in itself seems to not have been noticed at the time, and every politician since then has said that this is a very good thing that they should not be trusted and that these ‘wise people’ should run banking policy and monetary policy for the UK economy.
It’s that the people out here thought that politiians – not just Labour – could not be trusted with all the policy levers. Therefore monetary policy should be a policy lever which the politicians did not have.
The general finding is that governments which do this pay a lower interest rate on their borrowings than governments which – ceteris paribus – do not.
And here I thought it was so the King couldn’t come in and take all the depositors’ gold without a public fuss being made.
How naïve of me.
It was not that Labour did not believe that politicians couldn’t be trusted – it was because they knew that *Labour* was not trusted after the previous Labour government had worse than halved the value of the currency in five years and had to pay 15% p.a. on some of its borrowings. Brown wanted to be able to borrow money cheaply – and wanted to avoid a run on the currency after the next bad set of trade figures.
Murphy’s little universe may or may not include Thomas the Tank Engine but it does not include genuine observed facts.
I remember them putting BOE in control but didn’t realize that it was done to gain better interest rates. At the time I assumed it was a way of shifting blame for future interest rate rises.
You can see the result in the inflation swaps market. The “best guess” for inflation one year ahead can be compared to the actual outcome. Before 2000 the market guess was that inflation would be higher than it turned out to be (monetarism worked?). After 2000 the market guess is 2% ish. And it’s higher for some time.
So? The market is undercharging for inflation from the government. Gilts rates reflect not just the probs you being paid but of it being worth something. [caveat – inflation linked gilts do this best. They are the gold standard reference but that assumes the base gilt rate has no inflation worry]
It may have had a positive outcome, but it was a bad decision nonetheless.
The principle should always be that you can get rid of people who take decisions that affect you, through the political process.
“The principle should always be that you can get rid of people who take decisions that affect you, through the political process.”
You wanted the Tories out. You got the Labour instead.
Yes, you dumped the ones that weren’t doing what you wanted. How’s that working out?
>Therefore, they wanted to pass over the running of the Bank of England to ‘wise people’ who they claimed would do it better than any politician could.
Isn’t that the point of retaining the monarchy;) That someone can pull the leash of the politicians if they get too froggy?
Maybe Murphy is a republican;)
>snag
August 10, 2024 at 9:35 pm
It may have had a positive outcome, but it was a bad decision nonetheless.
>The principle should always be that you can get rid of people who take decisions that affect you, through the political process.
This hasn’t been the case in either of our countries for the lifetime of everyone commenting here. The ‘administrative state’ is real.
The Bank of England should change it’s name to the Bank of the United Kingdom.
The independent central bank of the UK decides rates and other issues for the entire UK, so it’s name should reflect that. It is deeply insulting to Scotland, Wales, and Northern Ireland that the central Bank has only England in it’s name. It adds to the stupidity of people confusing England with the UK.
How woukd the Engliish like it if the Central Bank was called the Bank of Pictland?
“The principle should always be that you can get rid of people who take decisions that affect you, through the political process.”
Exactly. The BoE did for Liz Truss in exactly the same manner it didn’t do for Boris when he needed a few hundred billion printed to pay for covid idiocy. Both were nominally economic decisions that were in effect pure politics. But we don’t get to decide who is the person making those political decisions. Its high time we did.
It’s just a name. No-one is deeply insulted by it, objectors are just having a bit of performance about a name which reflects the organisation’s origin. I don’t think Scottish bank notes mention England OR the UK by name.
Bank of Pictland would be a silly name, a silly idea from a silly person, as it doesn’t connect you to the past. Bank of the Sterlings might work, but people are busy, got better things to do like worry about immigrants coming here for the purpose of crime, housing benefit eligibility or to marry their cousins.
I am offended by it being called the Bank of England. I have just written a post saying I am offended and then you say nobody is offended.. How does your argument make any sense at all?
I do not why I need to educate you on this. THE BANK OF SCOTLAND AND ROYAL BANK OF SCOTLAND ARE NOT CENTRAL BANKS. Good grief.
Then you go off on some far right.rant about immigrants.
Lots of things can be done by government, changing the name of the Bank of England would be a simple and quick.change..As I said the English nationalists would be going on and on about it if the Central Bank of the UK explicitly rejected England as part of its name. Imagine if it was called the Bank of Scotland, Wales and Northern Ireland, but not England.
@ Mary Scotland
The Bank of England was formed in 1694 before the Act of Union. The Bank of Scotland was founded in 1695. Each was formed under the laws of their native country.
The BofE became England’s Central Bank through a tortuous process starting with it helping to finance the Napoleonic Wars and then being granted a monopoly on issuing bank notes within a certain radius of London, ending with its being nationalised by the Attlee government, Attlee allowed the Bank of Scotland to continue as a major private sector bank.
If you are offended that Attlee did not nationalise the Bank of Scotland, then I suggest your complaint is 57 years too late because he died in 1967.
MS
What about the Bank of UKland?
Or would you prefer the Bank of Mary??
John77 ; The history you state does not alter in any way the fact that the central bank of the UK should be called the Bank of the United Kingdom, not the Bank of England.
A simple act of Parliament could do this.
How would you have liked it if Attlee had made the Bank of Scotland the Central Bank?
It is unacceptable and deeply offensive to the Scots, Welsh, and Northern Irish and could be changed by a simple Act of Parlaiment. The government could retire the name Bank of England, and use a UK name. There are countless possibilities.
How would you like it if the Central Bank of the UK, was called the Scottish Bank. The name Bank of England encourages the deeply ignorant and offensive mistake when people think England and the UK are the same thing.
Then educate such people who you encounter in life that England and the UK are different.
And put your performative offence taking in a ball sack and strap it tight.
@ Mary Scotland
To change the name of the BoE would NOT require an Act of Parliament. The process for changing the name of a company should be specified in the articles of that company and normally requires an Extraordinary General Meeting of the shareholders. I have not read the Articles of Association of the Bank of England so I do not know whether there provisions for an Extraordinary General Meeting, let alone a change of name.
I merely know that you are wrong on this point.
I don’t actually care whether it is called the BoE or the Commonwealth Reserve Bank
Washington ; You seem like an offensive person. Then you think everyone you offend is easily offended. Wow!
John77 So you are sure about something that you do not know what you are talking about? Wow!
I emailed the Bank Of England, and THEY told me the reality of what it would take. An act of Parliament.
@ Mary Scotland
Any company – including the BoE – is subject to Company Law.
I don’t care what their PR department told you – that is a simple fact
Yes, no, just you.
Emailing the BoE is hardly ‘Disgusted of Tunbridge Wells’ writing a letter and sticking a stamp on the envelope. You’re not offended by the name at all son, you just think it could be changed for the better.
John77 ; The name Bank Of England is incorporated under a Royal Charter and Act of Parliament. Only an act of Parlaiment can change that. And the name change should happen.
Washington; I have tried to explain to you I am offended. GET THIS INTO YOUR HEAD. YOU DO NOT DECIDE THAT SOMEBODY ELSE IS NOT OFFENED EVEN IF THEY SAY THEY ARE OFFENDED.
You have been brainwashed by warped comedians who tell you that nobody is offended EVER.
@ Mary Scotland
An Act of Parliament *is not enough* to change its name.
You have just said “A Royal Charter and an Act of Parliament” (even ignoring the impact of the succession of Companies Acts that have been passed since the introduction of Limited Liability that should tell you that an Act of Parliament is not enough).
I am led to suppose that the PR department told you that it would need an Act of Parliament to dissuade you from campaigning assuming that you would think an Act of Parliament would be beyond your reach. They did not think that you would say “a simple Act of Parliament” because *there is no such thing as a simple Act of Parliament* . Any Act of Parliament is introduced as a “Bill” then has three “Readings” in the House of Commons during which amendments are debated and votes are taken before – if, and only if, the amended Bill is passed at each of the three “Readings” – it is passed to the House of Lords for consideration. Any amendments by the House of Lords mean that the Bill has to be sent back to the House of Commons for further debate; if all the HoL amendments are accepted by the HoC, fine, if not the Bill goes back to the HoL for further debate and so on [there is a limit in that if the HoC rejects a certain HoL amendment three times running the HoL has to give up on it].
Your “simple Act of Parliament” lives in Cloud Cuckoo Land.
You may not have noticed that the BoE is also the de-facto Central Bank of the British Overseas Territories (until fairly recently it was the de-facto Central Bank of the Empire and Commonwealth) and even if renaming it the Bank of the UK was possible it would face the same objection that you have made to retaining the Bank’s original name
A good name for a UK central bank could be The Bank of UK and British Territories.
acronym. BUKT.
There have been simple acts of parlaiment in the past.
Easier still to abolish it entirely.