Lack of accountability seen as bar to Bank's bid for independence

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The Independent Online
THE Bank of England is unlikely to get any more independence from the Government with Kenneth Clarke as Chancellor. He believes that the lack of accountability of the Bank means that it has already been granted enough autonomy from the Treasury.

The Chancellor's beliefs are reflected in the Government's unpublished response to the Treasury and Civil Service Select Committee report calling for full Bank of England independence.

The Government response states that a number of hurdles would need to be overcome before independence was reached, including the lack of Bank accountability to Parliament.

Since becoming Chancellor last May, Mr Clarke has allowed the Bank to decide the timing of interest rate changes, ended the Treasury censorship of the Bank's Inflation Report and agreed to publish the minutes of the monthly monetary meetings between the two men, after a six-week delay.

The Bank believes these changes have significantly boosted its campaign for full-blooded independence, despite the Chancellor's view that the publication of the minutes may represent the completion of moves to open up monetary policy decision-making.

This belief was reflected in a speech by Eddie George, the Bank's Governor, last week in which he warned that any further interests rate cuts would be taking risks with inflation.

But the Chancellor made clear at a Confederation of British Industry dinner last week, that, while open public debate on monetary policy was healthy, the ultimate decisions on interest rate changes were taken by him.

Details of the response to the Treasury committee follow reports in the weekend press that a senior Treasure official had ruled out granting full independence to the Bank of England.

Despite all the public crossfire between Mr Clarke and Mr George, relations between the two men are friendly. They get on well and during the recent International Monetary Fund spring meetings in Washington spent much of one evening 'putting the world to rights' over brandy snifters, according to sources.