Fresh breeze at the Bank

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The Independent Online
Fresh breeze at the Bank

Howard Davies has wasted little time in introducing his experience of modern management techniques to traditionalists at the Bank of England. Mr ''Call me Howard'' Davies has spent a large part of his early weeks as Deputy Governor dropping in unannounced on staff to have a chat about their concerns.

Nothing like this ever did any harm but the Bank's well-known morale problem runs too deep for the classic techniques of hired-in management consultants. The series of presentations to Bank staff which started on Monday, and the working parties they have created, are no kind of solution.

The root of the problem is the tougher demands now being put on the Bank and its staff. These stem both from the Bank's more important role in monetary policy - which has been more difficult than anticipated since the Chancellor disagreed with the Governor in May - and the need to meet any post-Barings and BCCI concerns about the Bank's supervisory abilities. It is a big task - more so because it coincides with fundamental reorganisation and big job cuts.

The restructuring, launched by Mr Davies's predecessor, Rupert Pennant- Rea, 18 months ago, has divided the Bank into sheep and goats - monetary policy-makers and supervisors. The supervisory goats do not feel good about the herding of high-fliers into the monetary arm.

In addition, layers of hierarchy have been removed so that promotion prospects have vanished. Treasury restrictions mean the Bank cannot use big pay rises to improve effort and morale. Luring outside recruits on higher salaries is allowed, but it is obviously divisive. In the past the Bank has been able to count on the public service ethos of its generally loyal staff to overcome some of these problems. But as the enthusiastic amateur gives way to the thrusting young professional, loyalty becomes harder to rely on. Such are the penalties of modernisation.

Sense of public service will diminish with the increase of the harsh facts of modern business life. This is the conundrum Mr Davies needs to tackle. It is in the Bank's interest if he can take its modernisation close to completion before a new Labour government decides it has better ideas about how to reform the Bank of England.