MPC's new boy is an academic and proud of it

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The Independent Online
THE APPOINTMENT earlier this year of John Vickers to the Monetary Policy Committee responsible for determining UK interest rates raised a few eyebrows. An Oxford academic with little expertise in monetary policy, he joined a committee some thought was already too light on practical experience and too overburdened with pointy heads.

However, speaking to The Independent in his first interview since taking up the post, Mr Vickers, the Bank of England's new chief economist, vigorously defended his academic background, his track record and the MPC's remit.

As part of his defence against critics who charge the MPC with failing to understand what's going on in business, he points to his successful experience in managing the finances of his Oxford college. He can boast of making money even when the stock market crashed in 1987.

According to Mr Vickers, who will concede that sitting on the MPC is a "heavy responsibility", he is comfortable with the rate decisions he has taken. And that includes the controversial decision to raise interest rates in June on the back of subsequently discredited figures on average earnings.

He said: "The appraisal of decisions has to be on the information that was available. I'm personally comfortable with the vote I expressed."

Mr Vickers, an Oxford-based father of three, says he has "absolutely no regrets" about his decision to leave academia, a decision triggered by an unexpected phone call from Mervyn King, now deputy governor of the Bank.

According to Mr Vickers, his relative lack of private sector experience - he was briefly an oil analyst at Shell and has also undertaken a number of private consulting projects - has not disadvantaged him in any way.

For the job of Bank chief economist, said Mr Vickers, "you need a generalist applied economics approach and Mervyn [King, former chief economist] and John Fleming before him were in that mould."

Also important, according to the MPC new boy, is the ability to understand what is happening in the financial markets, as that 1987 post-crash performance demonstrates.

The 40-year-old former professor refuted the suggestion that Bank staff felt obliged to vote the same way as Eddie George, the Bank of England Governor. He said it was pure coincidence he had voted the same way on interest rates as Mr George since joining theMPC in the summer.

"The conclusion I have reached has turned out to be the same as the conclusion the Governor has reached. But it is quite clear we're all individually on the line. If there are disagreements, there are disagreements, and that's that."

Mr Vickers, who attended the April and May MPC meeting as an observer before voting to raise rates in his first full meeting in June, said the committee did not "hold back" in its discussions.

"We're all charged with exactly the same thing. Our remit is very clear. The discussions are very free-ranging. People will happily ventilate points of view that are not their own. I think there is a very frank atmosphere."

He is upbeat about recent developments in the financial markets. "It's been very encouraging how things stabilised since the period of the IMF meetings on all sorts of measures."

The outlook, though, for both the global economy and the UK, remains uncertain, he said. Among the uncertainties is the new European Central Bank, which will set interest rates in the euro-area from January.

The ECB's decisions certainly have the ability to affect the UK, according to Mr Vickers, "in the same way that decisions in the US can affect us", via the stock market, exchange rates and the direct impact on trade.

Like the European bank, the MPC faces numerous challenges, not least improving its public image, which has taken a hammering lately .

According Mr Vickers, "There's inevitably a long way to go. The misperception that there might be a trade-off where we say OK, let's have a bit more inflation and then we can sustainably have more jobs is just downright false.

"Explaining clearly why there is no trade-off of that kind is an important thing to do."