Insiders at the Bank and Treasury cautiously welcomed the plans to appoint a Monetary Policy Committee and a new Council of Economic Advisers.
Most City experts think the only way Labour could prove in advance that it is tougher on inflation than the Conservatives is to announce that the Bank of England will become independent. They were not convinced yesterday that the new committee bringing in outsiders would help towards that end.
Paul Mortimer-Lee, chief economist at investment bank Paribas, said: "The proposed committee is bound to end up being more political because a majority of its members will not be central bankers. There is no real move towards independence for the Bank."
Simon Briscoe at Nikko Europe described the proposals as "misguided". "The Bank and the Treasury are full of perfectly able and experienced individuals who are not political appointees," he said.
In the speech Mr Brown said the committee members would be high-calibre experts in monetary policy, and stressed that he would continue to publish the minutes of the monthly monetary meetings. But City analysts were annoyed that they did not get copies of the text until yesterday evening.
One said: "The phone has been ringing all day with people asking about the implications of this and all we've seen are the headlines based on political briefings. If Labour wants to build credibility with the financial markets they are going to have to change."
Mr Brown's commitment yesterday to a target of 2.5 per cent inflation or less was read by the financial markets as a signal that Labour would probably raise interest rates soon after the general election.
This is a more hawkish stance than Kenneth Clarke's. The Chancellor has made it plain that because of the strong pound he sees no need to increase borrowing costs at present, even though the Bank reckons that inflation will otherwise meet its target for only a few months this year.
On the basis of Mr Brown's "reported speech", the Chancellor said: "Low inflation is the product of sound Tory policies. You may be able to clone a sheep, but you can't clone successful Chancellors." As for Mr Brown's decision to order an outside audit of Treasury figures, reported in yesterday's Independent, Mr Clarke said: "This is the oldest trick in the book.
Vow to be tougher, page 4Reuse content