The Bank of England is not independent

Constitutionally the Bank is the creature of Parliament. In recent years Parliament stripped the Bank of major powers in the late 1990s, whilst giving it more independence over settling interest rates. After the 2010 election Parliament gave back important regulatory powers to the Bank. Any so called independent power the Bank enjoys it does so only for as long as it pleases Parliament.

In practice the Bank has to accept the instructions and judgements of the government. All the time the government commands a reliable Parliamentary majority the Bank accepts the guidance and views of the Chancellor. Sometimes these are formal and published. For example Mr Brown changed the role and powers of the Bank by Statute, and he altered the inflation remit which controls the MPC during his tenure. Mr Darling overrode the MPC rightly during the banking crash and forced them to cut interest rates more quickly than they were planning. Sometimes the influence is behind the scenes. There is often a happy conjunction of incorrect forecasts between the Bank and the Treasury. The Bank took a similar line to Mr Osborne over the short term consequences of a Leave vote. It appears that the Treasury,OBR and Bank work closely together and often share the same judgements. Were there to be big divergences it would become a matter of controversy.

The government and therefore Parliament has kept to itself the power to approve Quantitative Easing programmes. This is a crucial power to reserve at a time of near zero interest rates. It means that even the devolved independence of the Bank on interest rate setting is constitutionally very constrained, as QE is clearly the major feature of current monetary policy. The latest burst of QE was formally approved by published letter from the Chancellor. Parliament could at any point debate and vote on these matters, but so far has been happy to approve what successive Chancellors have agreed on QE. I am pleased to see the PM is of the view that we do not need more QE, something I have urged here.

A lot of outside commentators misunderstand the powers of Parliament. Leaving aside current EU obligations which do constrain Parliament, Parliament is free to debate and vote on whatever it likes, and to change the law affecting any institution or policy it wishes. This includes whatever the Bank does. So it must be in a democracy. Ultimately the Chancellor should get the credit for economic policy success, or the blame for failure. The electorate can dismiss him at an election, not the Governor of the Bank. The fact that Parliament has chosen in recent years to allow the Bank to set interest rates, and has on the whole not been critical of what it has done does not mean the Bank is independent. It is accountable directly to Parliament, but more importantly it is mainly accountable through the government to Parliament. On two crucial occasions in the past Chancellors have intervened directly in the interest rate setting process itself, and those are the ones we know about. Maybe now it is time for Parliament to be more critical of its Bank, as its present policy of QE and ultra low rates is driving the pound down too much and undermining savers.


  1. Lifelogic
    October 7, 2016

    Indeed it is not independent it is however largely incompetent.

    Why, for example, is nothing being done about the huge margins bank now have due to the lack of competition in banking. Deposit funds and get you paid perhaps 0.2% borrow and get charged base plus 3% to 30%+. So they buy at between 1/15 to 1/150 of the price they sell at. Loans that are often very well secured indeed and to people who are a lower risk than the bank itself.

    They are being permitted to fill old holes in their balance sheets by ripping off current businesses & personal customers due to a lack of any real competition. Do we not have a competition authority or anyone at the BoE looking at this?

    1. Lifelogic
      October 7, 2016

      From May’s dire speech:-

      “But injustices remain.
      If you are from a black Caribbean background, you are three times more likely to be permanently excluded from school than other children.
      If you are a black woman, you are seven times more likely to be detained under mental health legislation than a white woman.
      People in ethnic minority households are almost twice as likely to live in relative poverty as white people.
      But it is not just those from minority backgrounds who are affected.
      White working class boys are less likely to go to university than any other group in society.”

      So what is she actually trying to say here? Is she accusing the state sector doctors, the medical profession, school teachers, social workers and education professionals of blatant racism, being evil and grossly incompetence?

      Anyway working class white boys are probably right not to do one of the many duff university courses at a cost of £9000 PA plus three years loss of earning. Instead learning how to fix cars, become a plumber, gardener or builder like their parents.

      She just throws this section in without any proposals, solutions or analysis – it is totally pathetic dog whistle from her. What “solutions” is she suggesting? Perhaps mental health problems are indeed more common in certain groups are more disruptive or carry more knives to school has she checked? What is her proposal, she offers nothing but a pathetic dog whistle.

      1. Anonymous
        October 8, 2016

        Well… have an election today and she’ll landslide it and get her mandate, no problem.

        What she said (except for HS2) thoroughly resonated with me to the point that I could have written that speech.

        (I have reservations about her previous on migration and expect all is not as it seems.)

    2. Lifelogic
      October 7, 2016

      Michael Portillo, on This Week last night (who can sometimes be sound) even wants May to build loads of council flats. All that is needed in housing is to relax the planning controls, reduce the greencrap building regulations, reduce stamp duty and other red tape and houses will be built. The state is in the way of it and not the solution.

      The state sector, using tax payers money to undercut the private sector provision would be profoundly misguided and unfair competition. Anyway how will these cheaper houses be rationed once finished?

      Meanwhile BBC favourite & general lefty Wayne Hemingway thinks taxes have gone up for the poor and down for the rich. He clearly has not followed all the changes the pathetic (IHT ratter) Osborne made. Taking about personal allowances and child benefits from the rich, keeping the 45%, cutting the higher tax threshold, mugging pension pots and landlords, putting 10% on insurance. This while increasing the tax free threshold for low earners. Still why let the facts get in the way.

      These actually did quite the reverse, look at the actual record Waine.

      1. Bob
        October 7, 2016


        “Anyway how will these cheaper houses be rationed once finished?”

        On a points based systems, whereby a newly arrived assylum seeker with 8 kids goes straight to the front if the queue, while a soldier returning from active service abroad can sleep on the streets while ambulance chasing lawyers try to prosecute him for violating the rights of the enemy during combat.

        1. rose
          October 7, 2016

          Yes, we only have Englishmen in tents here. I’ve never seen an immigrant sleeping rough.

        2. Lifelogic
          October 7, 2016

          Or they will classify state sector workers as “essential workers”. The people who issue parking tickets or who maintain bus lane or box junction lane (cash cow mugging) cameras.

        3. Edward2
          October 7, 2016

          I immediately want to say,
          Well said.

      2. APL
        October 7, 2016

        Lifelogic: “All that is needed in housing is to relax the planning controls, reduce the greencrap building regulations, reduce stamp duty and other red tape and houses will be built.”

        Yes, all of that is true. But it’s rather what we call, ‘talking your book’.

        We have a surfit of housing in this country. The problem is it’s in parts of the country that people don’t really want to live, certain areas of Liverpool, for example.

        It’s also not necessary to import hundreds of thousands of the third world population, nor should it be our obligation to house them at our expense when they turn up uninvited.

      3. APL
        October 7, 2016

        Lifelogic: “housing is to relax the planning controls, reduce the greencrap building regulations,”

        This is what you get with a combination of lax planning enforcement ( same as lax planning controls ) and high levels of immigration.

        Basically, ‘THE JUNGLE” in Luton!

      4. Jerry
        October 7, 2016

        @LL; “The state sector, using tax payers money to undercut the private sector provision would be profoundly misguided and unfair competition.”

        Of course Mr Lifelogic you will want to push that argument, but have you forgotten to do something first?

        Perhaps you should preface your comments when talking about housing (especially the rental sector) with a deceleration that you are a landlord within the private sector…

        What unfair competition, after all it is not as if landlords such as yourself are building these new houses or flats that Mr Portillo suggests needs building.

        Your real issue is that the last thing you will want is proper and fair competition that will come from a greater numbers of (most likely higher quality, more modern) properties. The last thing you want is a housing stock expansion, never mind surplus, as the current shortages drive the market rent up even higher for the same basic outlay, thus higher profits – and if the tenant is within the scope of housing benefits it means that tax payers are basically funding the landlords lifestyle – nice work if you can get it!

        1. Lifelogic
          October 9, 2016

          I am certainly building some houses and flats (mainly for sale) but property rental is not my main business just a side line.

          I agree increased supply will bring the value of my investments down. Never the less some relaxation in planning is clearly needed to meet demand, cheaper more available housing will help industry find the right staff too.

    3. Lifelogic
      October 7, 2016

      Banking must currently have even larger margins even than selling posh lingerie or kitten heals.

      1. StevenL
        October 7, 2016

        There’s loads of long term 0% credit cards about again, and I’ve just financed a new car at 2.9% APR via the manufacturer.

        What project can’t you get a loan for, have you tried crowdfunding?

        1. Lifelogic
          October 7, 2016

          I can get the loans OK but the margins fees, terms and general hassle with bank surveyors and the likes is far, far more that it used to be. This despite the fact that I am a very low risk now and have substantial asset. It was almost easier when I started off broke than it is now. It all changed in about 2008 before that is was perhaps a little too easy but not the hassle may you wonder if you can be bothered to do another deal.

          1. Lifelogic
            October 7, 2016

            Most banks only want to give you five year loans on investment now too. Then charge a new fee and valuation at renewal.

          2. Jerry
            October 9, 2016

            @LL; Well yes perhaps government, banks and regulators have over compensated but can you blame them, you might well be ‘honest John’ but sorry to say the housing sector was rife with questionable deals on both side of the counter, and probably still is.

      2. APL
        October 7, 2016

        Lifelogic: “Banking must currently have even larger margins even ..”

        And vide Royal Bank of Scotland, still can’t make a profit!

        £97billion poured into RBS since 2008, it’s overstated market capitalization is something like £25billion.

        Top deal!! All thanks to two Scots; Goodwin & Brown.

        1. Lifelogic
          October 7, 2016

          Indeed filling the holes in their balance sheets by over charging new and existing customers. They sold my loans of to Shawbrook bank (they did not even have the courtesy to offer them to me on the same terms first).

    4. DominicJ
      October 7, 2016

      Bank losses were incalculably huge in 2007
      The solution was to increase their profitability for the next 50 years to allow those losses to be recognised, at a snails pace, but recognised.
      It’s not side effect, its planned

      That said, yesterday I was offered £5k at 0% interest for 34 months with a charge of 0.8%
      If you are paying 30% you are a crfit risk or borrowing very poorly indeed.

      1. Lifelogic
        October 7, 2016

        My most expensive main borrowings currently are at about Libor plus 3.4% but even that is 17 times what they pay to many depositors. They seem to charge more on commercial property loans than residential investment ones (for little rational reason related to risk) just because they can get away with it due to lack of competition in the market).

        The 0% for x months works on the basis that many forget, muck up or cannot repay and thus you end up paying a few months at 20-30 % rates later. Still it is a good deal if you do not forget and can repay, who is offering that rate?

        Cut out the rip off middle man banks if you can seems to be the best thing to do where you can.

      2. Bob
        October 7, 2016


        ” I was offered £5k at 0% interest for 34 months with a charge of 0.8%”

        zero interest rate loans? There must be strings attached.

        1. graham1946
          October 7, 2016

          There are many zero rate loans for 36 months or so, particularly in the furniture business, for instance. However, the loan is not ‘zero’ – the cost is in the product you buy.

  2. Mark B
    October 7, 2016

    Good morning.

    It is important that there is always good parliamentry oversight, especially where matters on the economy are concerned.

    We cannot dismiss the Chancellor, only the MP that holds that office. And even then only if he is in a non-safe seat.

    The problem with our so called democracy is that it is that the executive is made up from the legilature and, the government has control of that through the Whips. Managed democracy or elected dictatorship, you decide

    1. Lifelogic
      October 7, 2016

      Well the real problem is we only get a choice of the least bad candidate, once every 5 years. We only get EU referendums about every 45 years. Also MPs just say the things they think will get them elected. Then they do the compete opposite if they like. The respond to party not the electorate in the main.

      Just as, “low tax at heart”, “cast iron”, “no if no but to the tens of thousands” ratter Cameron did. Also Osborne even now we still do not even have the £1M IHT thresholds each that he promised the electorate some 8 years ago.

    2. David Murfin
      October 7, 2016

      “The problem with our so called democracy is that it is that the executive is made up from the legislature ”
      Hear, hear. But simple enough to stop. Back to the system of a by-election if an MP is made a minister. Ministers to report regularly to the Commons, and be subject to dismissal by a vote therein (say 2/3 of those voting to be merciful). That would at least encourage members supporting Government policies to attend, especially if entrance was denied once the report had begun. It might also keep down the size of ministries, if junior posts were not available as rewards and rungs on the ladder, especially if the Government majority was small.

  3. Richard1
    October 7, 2016

    The plummeting pound – let’s stop denying that it is plummeting – must surely be bad for confidence. It’s a pity Mrs May used her conference speech to talk about silly interventionist guff rather than about how to make the economy more competitive and dynamic, taking advantage of the opportunities afforded by Brexit. The plummeting pound is a warning sign. Mrs May and Mr Hammond need to focus on the day job and move quickly to restore confidence in the UK economy.

    Reply I agree the Bank needs to do this – it is QE and ultra low rates that are hitting the pound

    1. Gary
      October 7, 2016

      Without QE and the resulting low rates the housing bubble will burst. And that is where most of this country’s wealth is locked into. The bank put us into this corner and now we cannot get out.

      Since we import most of our goods (see the trade deficit) the 25% fall of the pound will feel like a 25% pay cut for each of us.

      1. Sir Joe Soap
        October 7, 2016

        “Without QE and the resulting low rates the housing bubble will burst. And that is where most of this country’s wealth is locked into.”

        Probably what is needed.

      2. Edward2
        October 7, 2016

        It won’t be a 25% pay cut.
        Inflation is under 2%

      3. Frank Salmon
        October 7, 2016

        We trade about 30% of our economy so 30% of what we buy could go up in price by 20% after the fall in the £. This would lead to a 7% increase in prices. However, the new higher prices of imports will make domestic production look cheaper. Hence we will spend more money on UK made items, and of course, our exports will be up to 20% – or 25% cheaper, depending on the imported content of those exports. Hence the economy is stimulated by the fall in the £, the trade balance improves, and our tourist industry does much better. The fall in the value of the £ better reflects our ability to pay for imports – we were spending beyond our means and now there is a better balance.

    2. Dame Rita Webb
      October 7, 2016

      and what are you actually going to do about it? Bring base rate back up to around 4% where it should be and risk bringing down the housing market? Real austerity and bring the mob on to the streets complaining about their benefits?. They have tried everything, loads of QE “forward guidance”, operation twist etc. Its not working and it will not until the Western democracies realise its the neo lib model that is flawed.

      1. Lifelogic
        October 7, 2016

        Rates up but bank margins down is what is needed.

    3. Lifelogic
      October 7, 2016

      Indeed devaluation of the pound through QE and low interest rates is clearly the Treasury & BoE agenda.

      May’s lefty, interventionist, I am clearly not a Tory speech and the absurd go ahead for basket case projects of HS2 and Hinkley Point C cannot help either.

      It shows that the UK is being lead by someone who is clearly totally innumerate, economically illiterate and rather daft.

      1. Lifelogic
        October 7, 2016

        Had Theresa gone for simpler lower taxes, sound money, a smaller more efficient state, cancelled HS2, the greencrap grants and Hinkley C and gone for a bonfire of red tape then confidence in the pound would have been far higher.

        It would have shown we had a rational leader with real a grip on reality and what actually works best. Alas not, we have a lefty, innumerate, interventionist, red tape increasing, borrowing yet more, a bloated state enthusiast. A geography graduate with a dodgy taste in shoes who thinks she should tell people how to run their businesses. This even though she has never run one herself and clearly knows nothing about business.

    4. oldtimer
      October 7, 2016

      It seems to me that they have, through the QE and low interest actions, sought to engineer a drop in the £. If the fall back negotiating position is a hard Brexit (possible given Merkel`s latest comments) then one can understand why.

      PS I read that Mr Hammond has asked Mr Carney to stay on for another three years; he awaits his reply.

    5. The Prangwizard
      October 7, 2016

      Reply to reply:
      I fear it is more than this. We have had the French making threats and the EU is hostile. Speculators and our enemies will stoop to dirty tricks. There needs to be firm action counter this. regret Mr Redwood’s naive and mistaken belief that others will always act reasonably is likely to be illustrated here as it was with EVEL.

    6. Chris
      October 7, 2016
    7. graham1946
      October 7, 2016

      The falling pound is both a boon and a curse. The perverse side of having our own currency. The good side is that you can print money like QE to temporarily cover a shortfall and move the losses from the bankers to the masses by way of low or zero interest on savings and relatively high interest on loans with the profit margin being many, many times their cost. How anyone can make a loss out of banking is beyond me. Practically free of charge ‘stock’ and charge what you like.

      Whilst a lower pound may help exporters, it hurts people who buy imported goods, which is most people..

      The Germans have had a lovely run on a low value currency because it is not theirs. A Deutsch Mark would be much higher in value than the Euro is and they would be less competitive. The losers are the rest of the Currency Union who must carry the can for Germany’s success.

  4. The Active Citizen
    October 7, 2016

    This is a good reminder and shot across the bows for the increasingly self-politicised BoE.

    Volatility in the currency markets overnight show the imperative for a clear and consistent positive message to be given globally about the UK’s intentions and its wonderful prospects. Regrettably the current BoE Governor appears incapable of this and must go at the earliest opportunity. Even more regrettably it seems the new Chancellor needs to be told to wake up and smell the lovely aroma of Brexit coffee.

    On a wider point, the Government must get a grip of its international PR. As someone dealing constantly with customers from over 100 countries, it’s tragic to see how the Project Fear campaign has severely damaged the perception of the UK abroad. Foreign media still relays this message and it must be countered by a hefty dose of post-Referendum positivism and reality. This is now urgent.

    1. turboterrier
      October 7, 2016

      @ T A C

      On a wider point, the Government must get a grip of its international PR. As someone dealing constantly with customers from over 100 countries, it’s tragic to see how the Project Fear campaign has severely damaged the perception of the UK abroad. Foreign media still relays this message and it must be countered by a hefty dose of post-Referendum positivism and reality. This is now urgent.

      Spot on the button. Having worked and had my own business abroad, when you are out there you cringe the way the UK comes across the way our politicians and business leaders comments are interpreted. In business perception is all there is.
      The old granny saying is so true “Engage brain before speaking”

    2. Denis Cooper
      October 7, 2016

      If Theresa May wants a strong starting position for the EU negotiations then she needs to put the government propaganda apparatus into reverse gear on Project Fear. That means more than just warm words about the robust health of the UK economy, it means emphasising its size and resilience and its ability to counteract any losses which may be deliberately inflicted by our partners (enemies?) on the continent for purely political, not economic, reasons.

      On Sky News last night Vicky Pryce was being allowed to give the impression that it would be catastrophic for the whole economy if the City lost the present freedom to trade across the EU; after all look at the number of people employed in financial services, and the tax revenues they generate. Eh, yes, but the great majority of those people have nothing to do with any trade with the EU; hence the report:

      concluded that in the worst scenario only about 3% of their jobs would be at risk, in all about 0.2% of the total UK workforce including those employed in indirectly supporting the financial services industry.

      In fact just in terms of numbers of jobs, disregarding their quality, job losses on that scale would be smaller than the number of jobs which are now being taken by new EU immigrants every year, let alone much smaller than the total natural “churn” of UK jobs each year, which may be as high as 4 million a year.

      Obviously we don’t want this, but if that’s what the crazy eurofederalists decided to dish out to us then the UK economy could take it. But I still hope, and largely expect, that common sense and financial self-interest will prevail.

  5. Newmania
    October 7, 2016

    Its policy of of low interest rates and QE is the only thing that has saved us from recession and the pound is going down because we have dumbocrackpotically chosen to cut ourselves off from not only our largest trading partners but from the rest of the world as well . If this cynical business bashing anti immigrant illiberal protectionsist government wishes to up interest rates it is only because their oldster fans have been on at them about their savings ( serves them right in my view ).
    How is the weather in topsy turvy land and by the way you did say you were prepared to lose passporting and your suggestions of equivalnce and subsidiaries as an alternative are a load of nonsense
    Thats why the Chancellor of this glorious sovereign state where you have a choice of Daily May or Communism had to go ands grovel to New York Banks not to dump the pounds and London which , to some extent they have made quite clear they are going to do as we have been trying to explain to you

    and annuvver fing I see you think we can ignore international law on the basis that non binding aspects of the EU have not always been adhered to . The usual inventions . Yes we can ignore treaties but there are consequences . This is divorce and as those of us who have been divorced know it is going to become extremely unpleasnat and will not get forgottten .

    1. Anonymous
      October 8, 2016

      We told you there would be consequences to open borders policy, Newmania.

      You didn’t listen.

      Look in your mirror, buddy.

  6. Dame Rita Webb
    October 7, 2016

    The BoE know nothing else but QE and ZIRP. Despite all the cobblers in the MSM this week there has been no change in HMGs economic policy. All Hammond has done is tell the truth that Osborne would not, in that the prevailing view is that deficits do not matter. Someone mentioned the case of Japan yesterday and its massive debts in support of this. However he/she did not compare the UKs current account versus that of Japan’s and how much the UK is being supported by foreign money and the sale of UK assets. Despite all of this increasing debt you can see the state withering away. Lefties can complain about the state of the NHS, schools etc. Us on the right about 20,000 fewer coppers and an army that has more horses than tanks. In the meantime our borders are wide open to people who are going to be mostly drawing something from the public purse for the rest of their lives. The status quo is unsustainable and you do not need to be a great student of history to see what happens next.

  7. Jerry
    October 7, 2016

    “Any so called independent power the Bank enjoys it does so only for as long as it pleases Parliament.”

    Just as any so called freedoms British citizens or residents have they do so only for as long as it pleases Parliament. Hardly earth shattering news either way!

    “In practice the Bank has to accept […more political waffling…] the ones we know about.”

    If the changes that Mr Brown made were so bad why did so many Tory politicians applaud him at the time, why did Osborne not make stopping QE a 2010 manifesto pledge if it is so problematic, if BoE ‘independence’ is so bad why didn’t the Coalition or the 2015 Tory majority government remove it?

    I suspect your problem is not BoE policy so much as the fact that the BoE can no longer able to be used so easily as a political tool as was the case most notably in modern times during the 1980s and early ’90s, gone are the election tools of interest rates cuts and such like.

    “Maybe now it is time for Parliament to be more critical of its Bank, as its present policy of QE and ultra low rates is driving the pound down too much and undermining savers.”

    It is not QE that is driving the GBP lower but investors doubts and fears over Brexit, even without the over night falls – after comments by the French President regarding Brexit.

    1. Edward2
      October 7, 2016

      Without the recent further reduction in interest rates and further QE by the Bank of England the Pound would be faring much better.

      1. Jerry
        October 8, 2016

        @Edward2; That’s just more wishful crystal ball gazing and not a fact, you are entitled to your opinion though.

        1. Edward2
          October 8, 2016

          Thanks Jerry thats very decent of you.
          Its not “wishful crystal ball gazing” though.

          It is a fact what the Bank of England has recently done.
          And there are economic experts who felt that doing those two things would help drive the pound lower.

          1. Jerry
            October 9, 2016

            @Edward2; Of course it’s crystal ball gazing, no one can be sure that something would have happened had something else not happened, there are just to many variables – as Thursday night/Friday morning on the Asia FX markets proved, who amongst your ‘experts’ saw that coming!

          2. Edward2
            October 9, 2016

            Wrong again
            If the action by the Bank has happened it’s in the past.

            Just after the Bank took action, comments by economists argued this could havr a reactive problem for the Pound

            They were proved right

            Al this is in the past.

  8. alan jutson
    October 7, 2016

    Thanks for your very clear posting today JR.

    Shame we do not have more MP’s (on all sides) with some of your detailed financial knowledge, shame it is not being used to the full by your government.

    1. Lifelogic
      October 7, 2016

      Indeed we main have MPs (without even much common sense) who largely think they have a magic money tree and think they are playing Father Christmas to buy votes!

    2. turboterrier
      October 7, 2016

      @ alan jutson

      shame it is not being used to the full by your government.

      Its not a shame it is disgraceful, but it is the British way. Politicians that are elevated to a higher position with no experience of their department are easier to be controlled by their civil servants who will still be there long after they are gone.

      Troll around the department heads and see the number of round pegs in square holes typical of the definition of achievement in industry. “Getting promoted to the limit of your incompetence” Sadly it will never change.

  9. oldtimer
    October 7, 2016

    Should we conclude, based on your comment about the Treasury, the Bank and the OBR working closely together, that the OBR may not be quite so independent as we have been asked to believe? Or at the very least share the same groupthink?

  10. Iain Gill
    October 7, 2016

    Well said John.

    Very well said.

    I don’t have a lot of faith in parliament either though, mainly because of the way selection of all the main parties works, and I know people like me would never be selected.

    Parliament is itself massively out of tune with the British people, an easy example being the views on Brexit amongst parliamentarians being obviously different to the vote of the people. Its like this on many issues, our immigration situation being the most glaring as the whole of the real world want radical cutbacks on immigration despite our political and journalistic masters pumping us full of propaganda to the contrary, and continuing to keep the floodgates open.

    So myself I would like to see ways the bank could be made more directly accountable to the people. Since the majority will soon be connected online I don’t see why we shouldn’t have lots of mini referendums.

    If parliament wants to remain long term it needs to do a lot better than the people simply voting on policies like they vote on X factor.

  11. Antisthenes
    October 7, 2016

    Theresa May was right that government has a role to play and can do so that is good for the people of the UK. However generally that is not true as it depends on what government does as very often it becomes the problem. Rule of thumb is usually it does what is perceived the individual or the private sector cannot do. Unfortunately that perception is often wrong arrived at by ill informed and biased assumptions.

    The BoE is an example of government or in this case a government agency doing what it should not as it is making decisions on our behalf based on narrow interests. That is open to manipulation, abuse and error. A perfect means exists to correct this failing. The market place where the demands of all regulate the supply at the optimal quality and quantity. That is where interest rates and the money supply should be decided.

  12. Gerry Dorrian
    October 7, 2016

    Well said! Karl Popper said it better than Churchill: “We are democrats, not because the majority is always right, but because democratic institutions are the least evil ones of which we know”.

  13. JimS
    October 7, 2016

    Ditto the BBC.

    While I don’t expect the BBC to follow the government line on all issues it cannot be right that it takes tax payers’ money yet is free to promote an anti-British, pro-EU, pro-mass immigration, pro-expensive food, pro-‘big government’ agenda without being held to account by anyone.

    The current DG doesn’t even think he should appear before HoC select committees. High time parliament clipped the BBC’s wings.

  14. Roy Grainger
    October 7, 2016

    Does Parliament have any role in appointing or approving the appointment of the Governor of the BoE ? That would be the most useful way of influencing policy. As far as I can see Carney promised to stay only for 5 years instead of the usual 8 and that takes him to November 2017, but I see repeated newspaper reports he is “considering” or “deciding” whether to stay on for three more years as if somehow he can decide that himself. It would be odd for Mrs May to have dramatically fired Osborne and cleared out most of his cronies only to leave this arch Project Fear Osborne-ite in place up to the next General Election.

  15. alan jutson
    October 7, 2016

    Off topic

    I see it is reported today that Mr Hammond is once again speaking out that we must accept some free movement of people, if we want access to the single market.

    Afraid this man has not yet got it, has he.

    We do not want access to the single market, we simply want free trade, and if we cannot get that then we walk away.

    Why on earth would we still want to keep some element of free movement of people, is he deaf to the wishes of the people and to Mrs May’s speeches.

    I am getting more and more frustrated by this Chancellors comments, and he has only been in poison for 3 months.

    Time for our new Prime Minister to shut him up or get a new Chancellor, as he is undermining our exit negotiations.
    Unless of course that is the Prime Ministers real hidden plan !

    1. alan jutson
      October 7, 2016

      oops, predictive text strikes again.

      Should have been position, but come to think of it poison does fit as well given he seems to be talking down the UK at almost every opportunity.

    2. Anonymous
      October 7, 2016

      A couple of months of economic turbulence then the offer of a second referendum, I reckon.

  16. Bert Young
    October 7, 2016

    The Bank of England does not appoint its Governor – this is the key indicator of where the influence is . We all know that during the run up to the referendum the telephone and contact between Osborne and Carney existed ; the result was a co-ordinated attack on the economic dangers of leaving . The Bank has since changed its message .

    The present value of the £ aginst the $ may have relevance but , the exchange rate with the Euro is laughable . Euroland is in an economic mess falsely maintained by the ECB . Germany will not allow the ECB to put its surplus in jeopardy , so , how can the value of the Euro be valid ? . The IMF is equally at fault in this charade and was equally involved in supporting the case to “remain”.

    The £ as it presently stands is too low creating an unnecessary cost the consumer ; this is of importance to the Government who should now take action . Between now and March confidence to industry , commerce and the consumer is the key ; if the Government do not take action we will be in a terrible mess .

  17. brian
    October 7, 2016

    Surely, the BoE has operational frameworks set by government but executes those policies “independently”, reporting publicly on its decisions. It seems that Brexiteers want government to have more power to intervene when the consequences of the Brexit vote are perceived to be negative.

  18. acorn
    October 7, 2016

    In a fiat currency economy, the Treasury and its own Bank (BoE) are one and the same. You can see this in the Whole of Government Accounts; both are consolidated. For instance the Treasury Gilts bought by the BoE under QE are cancelled out of the Treasury stock of Gilts. If we were still on the Gold Standard, or in the Eurozone, it would be different. Like wise, the interest paid by the Treasury on the QE Gilts the BoE is holding, is netted off the gross interest payments on the Gilt stock.

  19. Alan
    October 7, 2016

    Maybe the Bank of England got it right, or maybe it got it wrong. I don’t know, but the reason it did anything at all was because of the vote to leave the EU. This is only the first of many occasions to come where those who voted to Leave will be blaming someone else for the consequences of their action.

    1. Denis Cooper
      October 7, 2016

      Actually I blame those who took us into the EEC in the first place on a treaty which committed us to free movement of persons as a precondition for easier trade, and then those who supported the successive treaties turning it into the EU, and then those who supported the treaties for eastwards enlargement of the EU so that free movement of persons ceased to be a matter of random diffusion of a relatively small number of individuals around the EU and instead became unlimited and uncontrolled bulk flows from the countries in the east left impoverished by six decades of Communism to wealthier countries in the west.

      One could pin especial blame on the Labour government for not taking advantage of the period allowed for transitional controls, an idiotic decision which helped to swing the referendum vote to Leave; but in reality I doubt that has actually made that much difference to the volume of unwanted immigration, as seven years has proved to be far too short a period for those countries with backward economies and low standards of living to catch up with the more advanced countries.

      You may sympathise with Juncker when he tells us that unless we continue to grant every one of half a billion people the automatic right to come and live in our country then they won’t want to trade with us, and that this on that point they need to be “intransigent”, but I see it differently. And so no doubt would most of the people of other countries around the world, let us say for example Japan, if he told them that the EU only wanted to trade with them if they flung open their doors for unlimited and uncontrolled immigration from the EU, a frankly crazy idea.

    2. Anonymous
      October 7, 2016

      Alan – This is why it would be better if people who believed in Leave were in charge. Peter Hitchens is right when he says the plebiscite was a short circuit and that we should have elected a majority of Eurosceptic politicians first, who would have placed Eurosceptics in our major institutions.

      It is a mess. The people are torn from their governing class.

      Surely you did not expect that uncontrolled immigration would go down well with the general public and that there would not be dire consequences because of it ?

  20. Denis Cooper
    October 7, 2016

    I would agree with almost everything that you have written here, JR, but as on the many previous occasions that this has come up I still think that our MPs have fallen down very badly on their job. You have replied in the past, for example here last year:

    “If the Opposition had opposed then it would have been debated and voted.”

    but the fact is that it has never been debated and voted over the past eight years, but for four months, since January 2009 when Darling embarked upon QE to save the Labour government from impending bankruptcy.

    It’s understandable that at a time of crisis, such as that was, MPs should decide to hold back from rocking the boat and let the government do what it needs to do without raising noisy objections and possibly making matters worse by showing a lack of united resolve, but they have just carried on since then in the same, completely passive, way.

    There is surely no doubt that QE may do more harm than good – Osborne himself said that, before he decided to say nothing more about it, and in the process protected Labour from the annihilation in the 2010 general election that it richly deserved – and it is not good enough that the Chancellor sends a letter to the Governor authorising another tranche of QE and merely copies the letter to the Treasury Committee; a draft should be laid before MPs for debate and a vote before the letter is sent.

    I would also reiterate that as far as I know only one piece of legislation has ever been passed in connection with QE; that was a statutory instrument to exempt the Bank and its Asset Purchase Facility from normal regulatory scrutiny by the FSA, which was quietly rushed through at the end of January 2009:

    “The Financial Services and Markets Act 2000 (Exemption) (Amendment) Order 2009”

    Without that SI there would have been a risk that the FSA would have objected to the blatant rigging of the gilts market by the Bank at the behest of the issuer of the gilts, the Treasury; but MPs didn’t even get the opportunity to vote on that, as through a quirk of the 2000 Act it could go through by the negative procedure:

    and it was laid before Parliament as part of a bundle of papers on the Thursday to come into force on the following Monday, ignoring the normal 21 day rule and with Parliament not sitting on the intervening days, not on the Friday nor at the weekend.

    To finish I will just say that having engaged in many lengthy, time consuming, exchanges around this subject over the years I do not intend to do that again this time.

    1. Anonymous
      October 7, 2016

      Denis Cooper – You are utterly brilliant. I am compelled to look for your postings every day.

      This is not to comment on you being right or wrong but you are very thorough and sincere.

      1. Denis Cooper
        October 8, 2016

        Thank you very much for that (qualified) approval!

  21. SM
    October 7, 2016

    I know virtually nothing about finance, and when I try to read the serious stuff in the broadsheets, my eyes glaze over with the complexities. However, even I can see that the global financial markets play merry hell with the ‘best’ intentions of politicians (see Fanny Mae and Fanny Mac subprimes), and that weirdly, the same cures are tried time and again (see Japan) despite their abject lack of success.

    So just why do these actions keep being repeated? Does anyone in power ever try getting advice from the successful players of the system like George Soros, or even some of the best Forex traders in the City? Or am I being foolishly naive?

  22. Bob
    October 7, 2016

    Heard an old french banker on the R4 Toady program this morning.
    If my translation is correct, he was saying that the french govt are very worried about how they will subsidise inefficient farming practices if the UK contributions cease and Germany can’t make the shortfall.

  23. Yosarion
    October 7, 2016

    Is this not what happens when you set interest rates to fulfill your proficy, and not what the Country needs at the time. In or out we can’t keep relying on perpetual house price increases to borrow against, we still did not build anymore land last year.
    This is not Canada or the US where its over three thousand miles coast to coast, Sir Bradley Wiggins could ride his push bike coast to coast from the Wash to the Irish sea in a day, and without an Inhaler.

  24. Chris
    October 7, 2016

    Slightly O/T, but I was concerned by these remarks apparently made by Philip Hammond.
    If we had a points system, we could have the skilled workers we require from anywhere in the world, not just the EU, and on our terms. This apparent single market worship seems extremely worrying: the EU operates an outdated customs union, which I believe is not fit for the 21st century, and we would be holding our country back by remaining part of it. Also, this customs union denies easy access to the EU for the poorer countries of the world, who we are apparently so keen to help. what better way to help them, instead of the dubious percentage foreign aid commitment, than to open up our markets to them and strike new trade deals with them?

  25. fedupsoutherner
    October 7, 2016

    I just hope the government can hold their nerve in light of what Hollande has said regarding a hard Brexit and the effect it is had on the pound. The quicker we know what we are doing and the quicker we actually get on with it, the better. Why Carney had to muck about with interest rates etc I don’t know. Perhaps they think the public will demand a 2nd referendum if things get worse? That would suit them nicely.

  26. Chris
    October 7, 2016

    Again slightly O/T, but related in that it is connected with independent thought versus bias. Apparent anti Brexit bias in the BBC may be curbed according to Conservative Woman, which notes that Bill Emmott is now leaving his post as chair of content at Ofcom. This apparently is significant, and the article suggests it is to do with conflict of interest. There is guarded praise for Karen Bradley, who it also suggests might have woken up to the fact of the bias and how damaging it is.

    “Hallelujah! Quietly, a significant positive development in the broadcasting establishment may have occurred.

    Might it be that the Government is at last waking up to the fact that the liberal figures who occupy the key regulatory posts are a menace to Brexit?

    The current deluge of anti-Brexit propaganda emanating primarily from the BBC, but also from Ofcom-regulated services such as Channel 4, is the consequence of their current stranglehold over the regulation of broadcast services.

    Back in January, the Department of Culture – as the referendum debate snapped into gear – incredibly appointed arch-Europhile and former editor ofThe Economist, Bill Emmott as chairman of Ofcom’s content board.

    It meant he was in charge of investigations into allegations of bias in commercial radio and television’s coverage of EU affairs.

    (words left out ed) Emmott, with funding from the EU – and in close collaboration with the BBC – had made The Great European Disaster Movie, which envisaged right-wing Armageddon if the supremacy of the EU was challenged or changed….”

  27. Kevin
    October 7, 2016

    This is an encouraging post. Theresa May opened her premiership with a declared intention to “fight against burning injustice”. As a matter of justice, surely savers have as much right to expect a fair market rate of return for their money as, say, employers have to expect diligent labour from their paid employees?

  28. Jack
    October 7, 2016

    Raising rates would make inflation worse. Higher rates imply higher storage costs which is directly reflected in prices, negating a lot of the benefit for savers.

    Instead, keep the base interest rate at 0% forever and compensate savers via fiscal policy, if you want to help them.

    Also on the collapsing pound point, you could argue GBP has been over-valued for years. Our large current account deficits should have slowly devalued GBP to the point where it is naturally corrected, but thanks to reserve currency status we’e been able to sustain these trade deficits for longer than “normal”.

  29. BOF
    October 7, 2016

    OT Is Mrs May not supposed to be setting us free? Free from the EU, free from government control and free from burdensome regulation?

    And why is the Chancellor allowed to sound off about accepting freedom of movement. He was obviously not listening to the PM’s speach.

  30. Dunedin
    October 7, 2016

    QE is creating problems for pension funds, but no worries for employees of the Bank of England. No wonder they’re feeling “serene” in Threadneedle Street.

  31. Go on then
    October 7, 2016

    Certainly it must be hard. Hard for journalists especially those on TV, to keep a straight face confronted personally with politicians. We have “altercations”, well, one “altercation”. UKIP MEP’s , many of whom turned up late to their own meeting therefore not seeing or hearing anything at all or, the rest of them as if they were dressed in a hermetically sealed thick rubber deep-sea diving suits with misted-over goggles.
    Of course when we actually leave the EU these UKIP MEPs will never be elected MP of anyone’s Party. Ordinary UKIP members will try to crawl back into their former parties but are likely to remain unelected and unelectable to whatever role.
    They stabbed Mr Farage in the back and front and cut the legs from under him. Their egos did not allow them to know that without Farage, however bad, they stood no chance. A Party of true ignorance. Good they are finished bar a coatless “altercation” that appears not to have happened at all.

  32. Margaret
    October 7, 2016

    Thank you for highlighting this . Whilst we do not want interest rates to soar , there has to be an incentive to save and capitalise banks. We were hearing stupid projections not long ago about a possibility of negative interest rates. Spend , spend spend eh? boom and bust . I am again Mrs May talks about moderation to counter extremes.

    1. Margaret
      October 7, 2016

      correction:I am again glad that Mrs May etc. (I am a bit of a Polyanna) but there again we could all live our lives thinking and seeing disaster in everything There are enough natural disasters in Haiti and perpetuation of war in Syria. We should count our blessings.

  33. Denis Cooper
    October 7, 2016

    Off-topic, in amongst all the crazed quasi-religious preaching from Merkel and Hollande and others about the inviolability and inseparability of the EU’s “four freedoms” there is this rather sensible comment from an Italian (opposition) politician:

    “A country that wants to limit the entry of migrants can do so, otherwise it is no longer a state.”

    Well, yes, but the driving idea of the EU is that the EU should become the state, a federal state, a new country called “Europe”, in which the member states are no longer sovereign states but are legally subordinated to the sovereign federation; and then it will be the European federation which decides whether or not to limit immigration.

    1. Anonymous
      October 7, 2016

      In which case let’s be the first to scrap our own government if there is a second referendum and we vote to Remain. If we have anything like Soft Brexit then that will be more difficult to counter.

  34. Sir Joe Soap
    October 7, 2016

    Well it is quite clear that Carney has now achieved his ambition of getting the £ down to $1.20 so perhaps he will leave quietly with this little success (in his view) in his CV.
    At the same time Hammond for the government is talking down the economy, and May is acting as though some awful plague is about to descend. For goodness sake!
    In any other situation, with strong growth and a weak Pound, they would be worrying about over-heating, and that could easily happen here. Interest rate rises should be on the cards, the government should be talking up the economy or at least be talking on an even keel about it.

    This air of drift, not really knowing where you’re going or what you’re doing in government and currency weakness has a distinctly Major-ish feel to it. I see Blair is talking of making a come back. At least he’s positive and certain about his path!!

  35. Mick
    October 7, 2016

    Off topic
    Why not put them back in a bus and transported out of our country, but no the government will let them stay because the government know that the public will be kept in the dark about the fate of these illegals, then they wonder why the British voted to get out of the dreaded eu,
    This sort of headline makes my blood boil, just get rid of them and stop pussyfooting around, enough is enough

  36. William Long
    October 7, 2016

    It sounds from his comments as relayed in the Daily Telegraph this morning, as if Mr Carney is a bit confused about the relationship. He is quoted as saying: ‘It is not for the central bank to address those distributional consequences [of monetary actions by the central bank]. It is for broader government to offset them if they so choose’. This sounds like a recipe for chaos and is very different to the scenarios that you give, where the Government, in the person of the Chancellor, has overridden either covertly or overtly the wishes of the bank. In these cases we would have one action; in the situation suggested by Mr Carney it sounds as if he expects to have himself pushing one way and the Government taking coincidental steps in the opposite direction.
    It could be time he went back to Canada.

  37. Prigger
    October 7, 2016

    Chancellor Hammond should instil his verve and cheerful demeanour about our economy on BoE Governor Carney who, looks happy and serene enough but his words do not marry up . Mr Carney could drive even the Leader of the Scottish Tories Ruth Davidson down into the dumps never mind the Pound. If he were a stock speculator he would earn the term “bottom-feeder.”

  38. acorn
    October 7, 2016

    The “flash crash” of the Sterling (GBP), just before midnight last, is serious. Those that follow the foreign exchange (FX) market, will have spotted the small rise in the Sterling/Dollar exchange rate, that occurred just before the crash.

    This is likely to have triggered some robot high speed computers, to sell Sterling on that blip up. FX markets will have been aware that robot currency trading machines, will have had there deviation limits set tight, because of the previous half a dozen hours of little movement.

    It is time politicians put an end to this casino gambling with currencies and reintroduced capital movement controls between currency areas. The Currency Casino takes about $5,300 billion worth of bets a day, just like any high street Bookmaker; far far bigger than any other “market”. These are punters, who are betting on the equivalent of two flies walking up a window pane, which one gets to the top first.

    The foreign exchange requirements for a whole years worth of internation trade in goods and services, in the real economy, would be covered by a mere four days of global foreign exchange casino gambling.

  39. Jeffery
    October 7, 2016

    Brexiteers should be in no doubt that the pound is in serious trouble unless it can get comfortably above $1.25. This is well known to be a key support level and the plot of the last day shows this quite clearly. After wobbling along $1.25 for a couple of hours, a small tic below this value brought on the much described flash crash. Claims that this possibly involved some (fat finger) mistake are unlikely. This kind of technical trading ‘witchcraft’ may be anathema to finance professors, but it is the way traders find guidance for their wider beliefs. At least some buying set in after the crash, unlike June.

  40. Caterpillar
    October 7, 2016

    I think as well as the PM giving a message to the BoE about the obvious damage of low rates, the bank will actually have to do something, even the small step,of reversing its previous 25 point cut. The Governor and members of the PPC also need to be more positive.

    Following the pounds plunge on Friday I am concerned that the Chancellor responds to expect volatility, he should focus focus focus on the economic fundamentals when he makes comments, trading algorithm or politically caused volatility does not need to be raised in profile.

    Finally as commentators warn that EU politicians might focus on politics rather than economics, the Government and civil service need to work up the ‘no agreement’ case, and strategy for implementation and response, if the EU plays political hardball the Government needs to know at what point it will stop negotiations and move to trade under WTO rules. This should be event driven not time frame driven.

    1. Caterpillar
      October 7, 2016

      MPC not PPC (typo)

    October 7, 2016

    Yet there could be a logical reason why The Right Honourable John Alan Redwood did not serve in Cameron’s Cabinet nor in May’s, so far. He seems silently disliked somehow.
    What hasn’t he stolen that he should have?

    Reply I could not have served in Cameron’s Cabinet because I could not have voted for all those EU measures I disagreed with that he had to keep on putting through.

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