Blair says George must stay

Prime Minister overrules Chancellor to insist that Bank of England governor is reappointed

The Prime Minister, Tony Blair, has intervened to end speculation that Eddie George will be replaced as Bank of England Governor. He has insisted that Mr George is reappointed when his term expires next June.

Treasury insiders say the Prime Minister has accepted City and business advice that Mr George's continued role as Governor is an essential prerequisite for financial stability and economic policy credibility.

The decision by Mr Blair to take such an active interest in the appointment is being interpreted in some quarters as a sign of growing tension between Numbers 10 and 11 Downing Street.

Mr Blair's intervention put an end to the private campaign to insert Gavyn Davies, economist at Goldman Sachs, as Governor. Last week, Mr Davies' removal from the running was confirmed when David Clementi, chief executive of Dresdner Kleinwort Benson, and Mervyn King, the Bank of England's chief economist, were appointed as deputy governors.

The campaign to secure a Governor who is perceived to be more Treasury- friendly has not fizzled out altogether.

There is mounting speculation that Mr George will be reappointed for two years rather than the full five. The prospect of appointment to Governor in the year 2000 is thought to be sufficiently tantalising to retain the interest of potential candidates. While Mr Davies was thought to be Chancellor Gordon Brown's preferred candidate, Howard Davies, who has just left the Bank as Deputy Governor to run the Securities and Investments Board, and Martin Taylor, Barclays Bank chief executive, have also been touted as potential replacements for Mr George.

A two-year appointment would be illegal under current legislation. The law dictates that the Governor must be appointed by the Queen on the Prime Minister's recommendation for a five-year term. A two-year appointment could only be secured by a side deal involving a promise from the Governor that he would retire less than half way through his second term.

The Governor was not available yesterday to comment on whether he had made such a deal.

Before the general election Mr George, who will be 60 next year, hinted that he may not want to serve a second full term. Recently, however, he has made it clear he is determined to serve a full five years.

Ironically it is the freedom granted to the Bank by the Chancellor to take responsibility for the fight against inflation through its independence to set interest rates that has stiffened Mr George's resolve to stay on.

He has long harboured an ambition to deliver low inflation and sustainable growth to the nation. When the Bank was granted operational independence by Mr Brown as one of the first moves by the new government, Mr George saw it as an unmissable opportunity to fulfil what he regards as the Bank's reponsibility.

Confirmation that Mr George is to be reappointed as Governor will bring relief to the City and financial markets, which had become uneasy at the whispering campaign apparently designed to undermine his position.

The Governor has received public and private backing from the international banking community. It is this pressure that has forced Mr Blair to intervene.

Mr George's influence as Governor is regarded as key to the success of the Government's ambition to keep inflation under control. His presence on the international stage was also demanded in the run-up to the introduction of a single European currency, scheduled for 1999.

It is still unclear whether Monetary Union will go ahead on time and when, or if, Britain might join. The Bank will have a pivotal role to play. Mr George's continued presence as Governor is regarded as critical whether Britain is in or out of EMU.

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Books should be for everyone, says Els, 8. Publisher Scholastic now agrees
booksAn eight-year-old saw a pirate book was ‘for boys’ and took on the publishers
Life and Style
Mary Beard received abuse after speaking positively on 'Question Time' about immigrant workers: 'When people say ridiculous, untrue and hurtful things, then I think you should call them out'
tech
Life and Style
Most mail-order brides are thought to come from Thailand, the Philippines and Romania
life
News
i100
Life and Style
tech
Voices
Margaret Thatcher, with her director of publicity Sir Gordon Reece, who helped her and the Tory Party to victory in 1979
voicesThe subject is being celebrated by the V&A museum, triggering some happy memories for former PR man DJ Taylor
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Business Analyst - Financial Services - City, London

£50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

SThree: Trainee Recruitment Consultant

£18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

Recruitment Genius: Administrator - IFA Based

£22000 - £24000 per annum: Recruitment Genius: This is an opportunity to join ...

Day In a Page

General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence
Public relations as 'art'? Surely not

Confessions of a former PR man

The 'art' of public relations is being celebrated by the V&A museum, triggering some happy memories for DJ Taylor
Bill Granger recipes: Our chef succumbs to his sugar cravings with super-luxurious sweet treats

Bill Granger's luxurious sweet treats

Our chef loves to stop for 30 minutes to catch up on the day's gossip, while nibbling on something sweet
London Marathon 2015: Paula Radcliffe and the mother of all goodbyes

The mother of all goodbyes

Paula Radcliffe's farewell to the London Marathon will be a family affair
Everton vs Manchester United: Steven Naismith demands 'better' if Toffees are to upset the odds against United

Steven Naismith: 'We know we must do better'

The Everton forward explains the reasons behind club's decline this season
Arsenal vs Chelsea: Praise to Arsene Wenger for having the courage of his convictions

Michael Calvin's Last Word

Praise to Wenger for having the courage of his convictions