In 1997, when Tony Blair was elected to government, the price of that was the so-called independence of the Bank of England. Of course, the Bank was always independent of government, despite its "nationalised" status, but there was one thing in particular it couldn’t do: set interest rates.
So as soon as Blair became Prime Minister, his great friend and colleague Gordon Brown, who only 10 years later would become known by himself as the Global Chancellor of the Exchequer, announced that the Bank would gain its independence.
This was not an issue which had ever been mentioned prior to the election. Just as with Britain’s 50 year defence pact with the French, foisted on an unwitting nation immediately following the 2010 election by David Cameron, the change to the relationship between the state and the Bank was simply announced.
The change established the Monetary Policy Committee which was given the role of setting interest rates in order to keep inflation within a target band.
While the decisions on interest rates were made by the Chancellor, there was at least some notion of accountability, even though how interest rate decisions were arrived at were never divulged.
Once the responsibility for that was passed to the MPC, the Great Global Chancellor gained slopey shoulder syndrome. “Not my problem, guv.”
Accountability shifted to the Governor of the Bank, and what accountability it was, too. From that time on, the Governor was required to write a letter to the Chancellor in the event that inflation fell outside the target band, explaining why.
As with Chancellors current and past, the Monetary Policy Committee just didn’t feel the need to let anyone know how their interest rate decision were arrived at. There was pressure to change.
Yesterday the Bank published its “independent report by former Federal Reserve Board Governor Kevin Warsh, following his review of the Monetary Policy Committee’s (MPC) transparency practices and procedures.”
It is not clear how the report can be independent, bearing in mind that it was written by a member of the club of Central Bankers. So it is hardly surprising, perhaps, that the publication of this report doesn’t change very much.
The “minutes” of the Monetary Policy Commitee meetings which previously had been no more than a list of bullet points (the transcripts of the meetings which are then used to create the “minutes” are currently shredded and burned”), will continue to be a list of bullet points.
In future (or at least from next August) that list of bullet points will be available at the time the interest rate is announced, rather then two weeks later, and instead of shredding the meeting transcripts, they will be published after eight years have passed.
In other words, nothing changes in practice, other than we find out when it no longer matters if any members of the Monetary Policy Committee said anything different when behind closed doors, than in public.
Mark Carnage, Governor of the Bank of England said
The Bank now has immense responsibilities for monetary stability, financial stability and for microprudential regulation. And with these responsibilities comes the need for effective transparency, genuine accountability and robust governance. Today I am pleased to announce the most significant set of changes to how we present and explain our interest rate decisions since the Monetary Policy Committee was formed in 1997. Alongside those measures, we have also proposed a number of additional changes that will mark a step change in the governance of this institution. These changes will enhance our transparency and make us more accountable to the British people.
“Make us more accountable to the British people”?