Bank of England strikes deal to end MPC resources row

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EDDIE GEORGE, the Governor of the Bank of England, yesterday revealed the terms of a deal struck with the "outside" members of the Monetary Policy Committee to defuse the damaging row over access to resources.

The Bank will allocate up to two economists to each of the four external members of the committee - Willem Buiter, Charles Goodhart, DeAnne Julius, and Sushil Wadhwani.

Mr George has also set up a formal procedure to decide the priorities for the Bank's overstretched team of economists and analysts.

The Governor described the spat as a "storm in a teacup". He insisted it had not affected monetary policy but admitted it had damaged the MPC. It emerged last month the outside members had complained that requests for resources to carry out research had been rejected.

The MPC will now hold six meetings a year to decide research priorities. This will include one ahead of each quarterly forecasting round and two to discuss work for the year ahead. Each outside member who needs extra resources will be allocated one post-graduate and one graduate economist.

"Provided there is self-discipline on both sides we think this is a constructive way to deal with this," Mr George told the Commons Treasury Committee.

He said he was "disappointed" the row had been leaked to the press. "If you get it in the press, it [is] distorted and over-hyped. I don't think it is particularly helpful to the process."

Professor Charles Goodhart, one of the independents, told the committee there was a "cultural tension" between people who had worked within the Bank and those who were new to it.

Dr Wadhwani, the most recent appointee to the MPC, said the deal was an "important step forward". "We all hope this will work. It is important it does," said Dr Wadhwani, who is believed to have first raised the issue.

Mr George also denied the MPC had "sacrificed" jobs in the manufacturing industry in the Midlands and North by hiking rates to control rising house prices in the South. "It is one factor, but it is certainly not the dominant factor, let alone the only factor," he said. "We can either seek to shelter a particular sector by putting the whole economy at risk of accelerating inflation or we can pursue our mandate to deliver stable inflation across the economy." He said the plight of manufacturing was more closely linked to the level of global demand than monetary policy.

Dr Wadhwani said evidence that house price inflation was no longer concentrated on the South-east was one factor that persuaded him to switch his stance on rates.

The comments came as Land Registry figures showed house prices rose 12.3 per cent in the year to September - the highest so far this year from any survey. Price rises were strong across the country ranging from 6.6 per cent in Yorkshire to 16.8 per cent in London.