Chancellor selects Bank committee
Thursday 29 May 1997
All three are highly-respected academics, and will do much to reassure doubters in the financial markets who feared Gordon Brown would make politically- motivated appointments. The Government is still looking for a business person for the fourth slot, but is having trouble finding somebody whose other activities would not conflict with giving advice on interest rates.
The three chosen so far are David Currie, a working Labour peer and Professor of Economics at the London Business School, John Flemming, an economist who is Warden of Wadham College, Oxford, and Charles Goodhart, a Professor of Finance at the London School of Economics. All are acknowledged monetary policy experts, who would prove very acceptable to the Bank of England itself.
The appointments could still fall at the last hurdle because it has proved harder than expected to make sure the members of the committee would face no conflict of interest with their other work. Like many well-known academic economists, the three men undertake some private consultancy work.
The potential conflict of interest with private sector work is the reason the fourth post, whom the Chancellor want to be a business person, has also turned out to be difficult to fill. Candidates who were intitially on the list such as Sir Christopher Hogg have had to be ruled out. Nor has the Chancellor been able to find a suitable female candidate for the committee.
The Treasury said yesterday that a formal announcement of the committee's membership would be made "shortly".
The first meeting of the Monetary Policy Committee will be held on 5- 6 June, with an immediate announcement of its decision on interest rates on 6 June. The Government intends to have the four committee appointments at least announced in time.
The four outside posts would be expected to carry a salary equivalent to full-time pay of around pounds 125,000, although they will probably not be full-time jobs. They carry a three-year term.
The other members of the Bank's Monetary Policy Committee are internal: Eddie George, Governor of the Bank of England, Mervyn King, the Bank's chief economist, and Ian Plenderleith, an executive director. Two deputy governors will also belong to it; but the current deputy, Howard Davies, is to move to head the replacement for the Securities and Investments Board, while the second post can not be filled until it is formally brought into being in the new Bank of England Act.
The Bank's latest Inflation Report, published two weeks ago, indicated that the internal members of the Committee will be inclined to raise interest rates again before long. The Report concluded that, despite a favourable short-term inflation outlook, "inflation is more likely than not to be above the target two years or so ahead".
There might, however, be grounds for delaying the next move until after the Budget and the Chancellor's Mansion House speech. Not only might Mr Brown alter the stance of fiscal policy, he will also restate the inflation target. This will be "at least as tough" as the current 2.5 per cent or less, aides promise, but might take a different form.
The date for the Budget will be announced officially on Monday, with 2 July now looking the likeliest date.
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