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King Vs Brown, The Showdown At Mansion House

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Chancellor is pulling the Bank's strings

By George Trefgarne

(Filed: 23/06/2006)

You could tell there are differences between Gordon Brown and Mervyn King, the Governor of the Bank of England, just by looking at them at the Mansion House on Wednesday night.

The Chancellor, as usual, defied the customs of the City by turning up in a suit. Mr King - a stickler for the rules - was in black-tie. And although the Governor's speech was emollient, it came after a couple of weeks of hints that he is increasingly concerned about inflation. Just that morning, the Bank had warned that the current turmoil on the stock market could be prolonged.


Mr Brown likes to trumpet "the independence" of the Bank, but in reality he still tries to control it through his power of patronage. Four of the nine members of the MPC are appointed directly by him. And another three - the Governor and the two deputy governors - are technically appointed by the Queen, on the advice of the Prime Minister (which, one assumes, means Mr Brown). And now Mr Walton is gone, there are not just one, but two, vacancies. For some reason, Mr Brown has dithered when it comes to finding the replacement for Richard Lambert, the Labour-supporting ex-editor of the Financial Times, who left the MPC three months ago.

The danger is that the Chancellor will choose a couple of cronies
, who will shy away from criticising his public spending boom and his tax rises, parrot his fiction that inflation is the lowest since Nelson's time, and vote to keep interest rates artificially low.
Such candidates might usher in a Brown premiership, but would presage dangerous risks with house prices and the highly indebted economy

If this appears fanciful, consider his two latest appointments. There is Sir John Gieve, the former permanent secretary at the Home Office, who had to be found something useful to do following a disastrous tenure that saw the foreign prisoner release scandal, chaos in the immigration system, and a massive overspend in the department's budget.


The situation is particularly acute in Britain. Three years ago, the Chancellor changed the index which the Bank must use to measure inflation. The new index, known as the Consumer Price Index, puts inflation at 2.2 per cent.

But the CPI is a fudge. It excludes house prices and concentrates on the tumbling cost of cheap goods imported from China.

Brilliant article. Sums up what most Bears believe.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?

      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%

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