The Private Bank of England Corporation

Contrary to the stories we are told about the Bank of England (BoE), it is not "owned" by the Government. The BoE is a private corporation managed by its Court of Directors by virtue of the authority invested in the Court by Royal Charter.

The Government has no power to interfere in the BoE's "business”. This can only be done through amendments to its Charter, and the BoE must consent to make the Charter "anew”. BoE-related government legislation, such as the 1946 and 1998 Bank of England Acts, are legal constructs which the BoE permits.

The BoE allows the Government to create legislation that enhances its status as a private corporation, one with the "public" authority to make monetary policy—thus affording the BoE immense financial and economic power.


The BoE's Alleged Purpose

The BoE declares:

Our mission is to maintain monetary and financial stability for the good of the people of the United Kingdom. To do this, we provide safe, confidential and reliable banking and custodial services that underpin our responsibilities as banker to the UK Government.

The BoE provides services to the Government. It "acts" as the Debt Management Office's "agent" for settlement of its debt securities (government bonds). The BoE also "acts" as the UK Treasury's "agent”, holding its gold and other assets.

The current governor of the Bank of England (BoE), Andrew Bailey, has blamed British inflation on many and varied people. He blamed workers and their unions for calling for wage increases. More recently, he blamed businesses for increasing prices, as they try to absorb the rising costs that result from inflation.

The BoE, like the Government, uses the Consumer Prices Index (CPI) to measure inflation. The CPI does not provide a true reflection of the real impact of inflation and only partially records the effect of inflation. Nor does the CPI tell us anything about the cause of inflation.

Inflation is primarily caused by the monetary policy that is firmly under the control of the BoE. In 1951, the economist Ludwig von Mises said:

Inflation, as this term was always used everywhere and especially in this country [the United States], means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term “inflation” to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise.

Bailey is among the many modern “financial experts” who conflate the effect of inflation—rising prices—with its cause, monetary expansion. In his most recent letter to the chancellor of the Exchequer, Andrew Bailey wrote:

The increase in CPI inflation in the aftermath of the pandemic mainly reflected large increases in global energy prices and other tradable goods prices. [. . .] Russia’s invasion of Ukraine [. . .] greatly exacerbated the rise in energy prices as well as wholesale prices of many agricultural commodities. [. . .] These external factors continue to add significantly to inflationary pressures in the United Kingdom[.]

According to Bailey, sterling inflation mainly reflects the impact of “external factors”. The BoE's—and Bailey's—eagerness to blame anyone and anything for current inflation, except the BoE's own monetary policy, is utterly at odds with its own stated purpose.

The BoE's Monetary Policy Committee (MPC) lays out its alleged responsibility:

Monetary policy affects how much prices are rising—called the rate of inflation. We set monetary policy to achieve the Government’s target of keeping inflation at 2%. Low and stable inflation is good for the UK’s economy and it is our main monetary policy aim.

Again, according to the BoE, it controls monetary policy and it is this—not so-called pandemics, wars or wage demands—that "affects how much prices are rising”. Suggesting that it can control inflation, the BoE declares that managing inflation is in fact its "main monetary policy aim”.

While quick to take credit for on-target, stable inflation, the BoE points the finger at everyone else when the situation deteriorates. It both claims that it can control inflation and that inflation is beyond its control.

Currently, the BoE is seemingly failing to "maintain monetary and financial stability”. If it can't perform its primary function, what use is it? On the other hand, if it is capable, then perhaps we should entertain the possibility that it is deliberately trying to destabilise the economy. Either way, it hardly appears trustworthy.


The "Public" Bank of England Contradiction

The narrative we are given, claiming that the BoE is a "public corporation”, is an attempt to obfuscate using a meld of contradictions. When we examine these inconsistencies, the idea that the BoE is a "public" body becomes untenable.

The BoE was incorporated by Royal Charter in 1694. It is registered at Companies House as RC000042

A corporation is a juridical person. The BoE is a legal entity, in its own right, able to act in its own interest.

The British Government's central ministry and the de-facto repository of many Crown powers, the Cabinet Office, defines public corporations in its Classification of Public Bodies as:

[. . .] market bodies controlled by either Central Government or Local Government.

A public corporation is distinct from other incorporated bodies because it is “controlled by Government”. In the UK, the Office for National Statistics lists the BoE as just such a public-sector financial corporation.

Yet the BoE contradicts this entirely and says of itself:

Although we [the BoE] are owned by HM Treasury, we carry out our responsibilities independently. We're free from day-to-day political influence. 

Which is it?

The BoE can't be both controlled by Government and "free from day-to-day political influence". If we then consider the BoE's incorporation by Royal Charter, the Government appears to lack the necessary authority to direct the BoE in any event. 

The Privy Council, the Sovereign's supreme advisory body through which the Crown wields its fullest sovereignty, explains incorporation by Royal Charter:

A Royal Charter is an instrument of incorporation, granted by The King, which confers independent legal personality on an organisation and defines its objectives, constitution and powers to govern its own affairs. [. . .] Organisations incorporated by Charter are registered at Companies House, who allocate an identification number with the prefix ‘RC’. This is to distinguish them from the other bodies registered at Companies House which are incorporated under the various Companies Acts.

The BoE's power to "govern its own affairs" is defined not by government statute but by its Royal Charter. The Charter decrees that the BoE:

[S]hall be, and be called one Body Politick and Corporate, of themselves, in Deed and in Name, by the Name of The Governor and Company of the Bank of England; and them by that Name, one Body Politick and Corporate, in Deed and in Name, We do, for Us, our Heirs, and Successors, make, create, erect, establish, and confirm for ever [. . .] they and their Successors shall have perpetual Succession, and shall and may have and use a Common Seal, for the Use, Business, or Affairs of the said Body Politick and Corporate, and their Successors, with Power to break, alter, and to make anew their Seal from Time to Time, at their Pleasure, and as they shall see Cause.

The “Company of the Bank of England” is empowered by Royal Charter to carry out its independent legal business “for ever”. The BoE has the power to amend—make anew, in seventeenth-century parlance—its Charter “from Time to Time, at their [its] Pleasure, and as they [the Governor and Company] shall see Cause”.

The Charter continues:

And by the same Name, they and their Successors in all Times coming, shall be able and capable in Law, to have, take, purchase, receive, hold, keep, possess, enjoy, and retain to them and their Successors, any Manors, Messuages, Lands, Rents, Tenements, Liberties, Privileges, Franchises, Hereditaments, and Possessions whatsoever, and of what Kind, Nature, or Quality soever.

The BoE's incorporating Charter of 1694 stipulates that it shall “in all Times” be “able and capable in Law” of retaining any and all of its liberties and privileges. Nowhere in the Charter is it laid down that His Majesty's Government can impinge upon the BoE's liberty to conduct its business as it wishes. It appears that the BoE's consent would be required to restrict any of its liberties or privileges, just as with those of earlier date enjoyed by the Church of England and the City of London which were reaffirmed in Magna Carta, and as with the universities, which also hold Royal Charters.

The Cabinet Office alleges that the BoE's incorporation by Royal Charter “can be revoked by an Act of Parliament or by the Sovereign”. It then adds:

In practice, a chartered body is normally dissolved through voluntary action culminating in a Petition for Surrender. This is done by the body [the BoE] petitioning The [King] in Council [the Privy Council] to accept the surrender of its Charter. The Petition is accompanied by an appropriate Deed of Surrender together with the original Charter bearing the Great Seal (and any Supplemental Charters). [. . .] It follows from this that a chartered body cannot be dissolved by executive action.

Yet another contradiction: the BoE Charter “cannot be dissolved by executive action”. The Government can (note that modal verb) only revoke it if the BoE agrees to such “surrender”.

Nor does the Government's assertion that the Charter "can" be revoked by the Sovereign stand up to scrutiny.

This time, the Privy Council contradicts HM Government, which it constitutionally pre-dates and outranks:

The Sovereign has no power to revoke a Charter at will, without the consent of the original grantees or their successors.

The Privy Council adds:

In the absence of the consent of the grantee, it may be that the only way to revoke a Charter granted under the [Royal] prerogative would be by primary legislation [an Act of Parliament].

The Privy Council’s uncertainty about the dubious authority of possible legislation—which doesn't currently exist—reveals another contradiction. All legislation requires Royal Assent before it can become "law" (setting aside questions of whether Royal Assent is currently given through lawful means). But, as the Privy Council itself notes, the Sovereign has no authority to revoke, in this instance, the BoE's Charter without its consent.

In 1670, Charles II was only able to revoke the Royal Charter of the Hudson's Bay Company because the Company submitted its Deed of Surrender.

From a constitutional perspective, it would be interesting to see the British Government try to enforce legislation to revoke the BoE's Charter without its consent. As noted by the Privy Council, no government has ever revoked a Royal Charter without the express consent of the Charter holder:

[. . .] The Privy Council Office is not aware of any Charter being revoked since the time of Charles II.

In relation to a "Body Politick" incorporated by Royal Charter, the Privy Council adds:

[. . .] amendments to the body’s Bye-laws or Statutes require the approval of the Privy Council [. . .]. This effectively means a degree of Government regulation of the affairs of the body.

Beyond any Statutes or Bye-laws it might make, it seems that the BoE is not “controlled by the Government” in any way whatsoever. The BoE itself plainly states that it is “free” from government influence. 

It cannot be described as a "public corporation”, so why does the Office for National Statistics list it as such? Are we being deceived?


The BoE's “Ownership” Deception

When it comes to BoE claims about it being "owned" by the Treasury, the deception is clear.

The BoE asserts:

We are wholly-owned by the UK government. The capital of the Bank is held by the Treasury Solicitor on behalf of HM Treasury.

In 1946, following its so-called "nationalisation”, BoE stock was transferred to its sole shareholder, the Treasury. Hence the BoE's claim that it is "owned" by the Government. 

In law, this simply isn't true. Shareholders do not "own" corporations.

In the 1948 case of Short v Treasury Commisioners, the ruling was that “shareholders are not, in the eye of the law, part owners of the undertaking [company]”. This was later confirmed in the 2003 ruling, Inland Revenue v Laird Group.

The British Government does not "own" the Bank of England.

Neither, it seems, does the Government have any influence over the business of the BoE. The "ownership" canard is an apparent diversion from the germane question: who directs the business of the Bank of England?

The BoE is managed by its Court of Directors:

The Court of Directors manages the affairs of the Bank as a corporation. [. . .] They include determining the Bank’s objectives and strategy, and ensuring the effective discharge of the Bank’s functions and the most efficient use of its resources. [. . .] The members of Court are appointed by the Crown.

The BoE Court of Directors have no duty to disclose any information about their decisions. In fact, by virtue of agreeing to take up their Court positions at the BoE, they give their oath to:

[K]eep secret during my service with the Bank of England, and after the termination thereof, all matters with which I may become acquainted relating to the affairs and concerns of the Bank[.]

While the Government claims some sort of oversight over the Court, the Directors' oath, once again, contradicts this. The BoE Court doesn't appear to have any notable relationship with the Government, but it has quite close ties to multinational corporations. 

The current Directors have variously held senior positions with:

  • Goldman Sachs
  • Grovepoint Capital
  • McKinsey & Co
  • Amadeus Capital
  • the British Private Equity and Venture Capital Association
  • TalkTalk Telecom Group
  • Sainsbury’s
  • Worldpay
  • Natwest
  • Permira
  • Reed Elsevier Ventures
  • Drax Group
  • Shell
  • Bechtel
  • Powergen

The BoE is a private corporation which is controlled by its Court of Directors. The Court is overwhelmingly drawn from the private corporate world, and the Directors are appointed by the Crown—which is not the Government, much less Parliament. The Court runs the Bank of England as a private concern under a strict veil of secrecy.

The BoE chooses what to disclose to the Government. The Government has no power to force the BoE to divulge anything. All it has are legislative agreements with the BoE regarding the information the Bank wishes to volunteer.


Made Anew Through Legislation

Like any legal “person”, the BoE is subject to law. The BoE has to abide by legislation or run the risk of prosecution. It does not possess diplomatic immunity, unlike certain supranational banks.

Simultaneously, however, the BoE's Royal Charter ensures that the Government cannot intervene in BoE “business”. Any legislation which changes the “business” of the BoE can only take effect if the BoE agrees to “make anew” its Royal Charter.  

The UK Government can make legislation within which the BoE has to operate, just as any other private bank does. But that is the full extent of government control of the BoE, which conducts its “business” in secret, under its Royal Charter. 

In its 2018 publication, The Bank of England Act 1998, the Charters of the Bank and Related Documents, the BoE admits as much:

The 1694 Charter incorporates the Bank. [. . .] As a chartered corporation, incorporated pursuant to statute, the powers of the Bank have to be determined by reference to the 1694 Charter and statute and subsequent Charter and legislative amendments.

The BoE acknowledges that it must abide by statute—but insists that, where legislation affects the powers of the BoE, changes can only be "determined" by reference to the BoE's original 1694 Charter. It is the 1694 Charter which enshrines the BoE's powers and independence, liberties and privileges, as seen above.

So—seeing as legislation that amends, revokes or alters the BoE’s powers, liberties or privileges must be agreed by the BoE—we shouldn't be surprised that successive legislative changes have all increased the BoE's powers and strengthened its position. This includes its so-called "nationalisation" in 1946.

The 1946 Act allegedly gave the Sovereign the power to revoke any and all aspects of the BoE Charter “except in so far as they incorporate the Bank”. In other words, the 1694 Charter of BoE incorporation was left immutably intact.

The legislature conceded that it had no power to alter the Charter without the BoE’s full consent. The drafters of this post-war parliamentary bill even acknowledged the original wording of the 1694 Charter (emphasis added): 

[T]he Bank of England should be constituted and regulated in accordance with so much of the said Charters as remained unrevoked and such other Charters as might from time to time be granted and accepted on behalf of the Bank of England by the court of directors [. . .]

Comically, the 1946 Act then decreed that the BoE “shall be constituted” and regulated in accordance with whatever the BoE decided not to allow the Government to “revoke”; i.e., the whole—unrevoked—1694 Charter of its incorporation which guaranteed that it could continue its business as it liked.

The transfer of stock from the BoE to the Treasury did not represent a transfer of "ownership", as most believe. Furthermore, during "nationalisation", the power of the Court of Directors was protected under the 1946 Act:

[. . .] every member of the court of directors of the Bank shall be a member of the said body corporate, notwithstanding that he holds no Bank stock [. . .]

The Treasury gave the BoE's private shareholders, who had previously held the BoE's stock, "government stock" in return. For every £100 in BoE stock—held by the BoE's private shareholders—the Treasury issued £400 in government stock, thereby quadrupling the BoE shareholders investment. 

The 1946 Act states: 

The Government stock issued in substitution for any Bank stock shall be held in the same rights and on the same trusts and subject to the same powers [and] privileges [. . .] as those in, on or subject to which the Bank stock was held immediately before the appointed day [. . .] so as to give effect to and not revoke any deed[.]

The former BoE shareholders then received 3% annual interest on the government stock, representing a 12% annual dividend on their original BoE holdings. In addition, the Treasury committed to pay full market price for the government stock to the former BoE shareholders no sooner than twenty years later, thus significantly increasing the value of their assets. The BoE Court of Directors was then "authorised" to be the money manager for the government stock.

Not only was "nationalisation" an incredibly sweet deal for the BoE private shareholders—and a terrible one for British taxpayers; in addition, the BoE's management structure was protected and free to manage the government stock as it wished. “Nationalisation” was win-win for the private BoE.

The 1998 Bank of England Act officially afforded the BoE “operational independence”, a phrase apparently intended to suggest that its independence was somehow qualified, although it is hard to imagine how it could have possibly been more independent. 

The pretence of government “powers” to—in any way—“control” the business of the Bank of England was exposed thoroughly in the 1998 Act. Once again, the “preservation” of all BoE powers, liberties and privileges was reiterated: 

As from the fifteenth day of June One thousand nine hundred and ninety-eight, and without prejudice to the preservation of the provisions of the Charter of the Bank of England dated the twenty-seventh day of July One thousand six hundred and ninety-four which incorporate the Bank of England [. . .] the Charter of the Bank of England dated the first day of March One thousand nine hundred and forty-six shall be and the same is hereby revoked.

In other words, the BoE decided that it didn’t want to be “nationalised” anymore and unilaterally revoked the 1946 Charter amendments. The whole “nationalisation” exercise was a complete farce: a simple transfer of wealth from the taxpayer to the BoE’s original “shareholders”. 

The 1998 Act supposedly gave the Monetary Policy Committee (MPC) of the Bank of England the "responsibility” to formulate and implement monetary policy. That is, the BoE resolved that it would formulate UK monetary policy. 

While the Chancellor of the Exchequer (the British Government's finance minister) would henceforth appoint four of the eleven members of the MPC, upon their appointment these appointees would become employees of the BoE and swear their allegiance to it. These are not ex officio posts. The full “agreed” extent of Treasury oversight was deemed in the 1998 Act to amount to a sole MPC “observer” with no voting rights.

The 1998 Act changed the composition of the BoE Court of Directors firmly in favour of the BoE's enhanced privacy, secrecy and independence from the Government. The Act meant that the Crown would appoint the Governor, two Deputy Governors and sixteen Non-Executive Directors to the Court. Like all Court Directors before them, they had to swear their oath of secrecy.

The Governor was also required to swear his allegiance to the private BoE corporation and give his oath to uphold scrupulously the Bank’s powers, liberties and privileges under the 1694 Charter:

[I] solemnly and sincerely declare that I will to the utmost of my power, by all lawful ways and means, endeavour to support and maintain the said Corporation and the liberties and privileges thereof.

The Court's power to manage the entirely independent business of the private BoE was reaffirmed:

The Court will manage the Bank’s affairs, other than the formulation of monetary policy. This will include determining the Bank’s objectives and strategy, and ensuring the effective discharge of the Bank’s functions.

As a supposed financial regulator and the “lender of last resort”, the members of the BoE Court were wary of being prosecuted for their part in enabling the profligate speculation that led to the 2008 financial crash. Therefore, the BoE Court decreed—despite the lack of any treaty or statutory provision to this end—that its MPC, and the BoE as a whole, would be immune from prosecution in relation to the matter. 

The 2009 Bank of England Act reads: 

The Bank of England has immunity in its capacity as a monetary authority [. . .] "immunity" means immunity from liability in damages in respect of action or inaction.

To return to the 1998 Act, while it "reserved" Treasury powers to instruct the MPC, these could only be used in "extreme economic circumstances”. Despite subsequent tectonic financial shocks, such as the 2008 financial crisis and the pseudopandemic, the BoE tells us:

To date, the Government’s power to issue directions has not been used.

To be fair to the UK Government, there would be no purpose in its issuing directions to the BoE anyway. The Court and the MPC have allegiance to nothing beyond the BoE and its incorporating Charter. Government directions may be politely received, but the BoE is not compelled to follow them.

UK Column recently reported the Chancellor, Jeremy Hunt's, parliamentary statement reporting his discussions with the BoE Governor:

I only ever say to him, please do what you think is necessary, as indeed you are legally bound to do under the Bank of England Act.

Andrew Bailey's "obligations" under the Bank of England Act(s) are to provide whatever limited information the BoE has deigned to share with the Government.

The Government neither owns nor directs the BoE. The private Bank of England corporation is, and always has been, entirely and irrevocably beyond government control.


Image: Andrew Milligan sumo on Flickr, licence CC BY 2.0