Profile: To the Bank's lasting credit: Eddie George, as the new Governor, could restore the Old Lady's reputation, writes Hamish McRae

Click to follow
SO IT is steady Eddie. That the deputy governor of the Bank of England would get the top slot had been widely enough trailed to be of little surprise - it had even been reported in the Sun.

The appointment will be widely seen as the obvious one: that the Prime Minister (for this is his appointment) wanted a career Bank man, someone who was sufficiently steeped in the tradition of the Bank not to rock the boat with grand ideas of taking it independent. All the theoretical arguments in favour of independence - that the countries with the lowest inflation rates in the world have relatively independent central banks - would pale into insignificance beside the cold reality that if the Government did not retain control over interest rates, base rates might go up in the middle of an election campaign.

But if it is a safe choice, and in a way it is for Eddie George is a known quantity, it is also a symbolic one. This is the new Britain. Out goes the Tory grandee, Robin Leigh-Pemberton, the man who looks and sounds like a film director's idea of someone who is big in the City but who actually does not carry any real power. In comes another of the new meritocrats who under John Major really do run the country, and who know it is their intelligence and persuasiveness that give them their authority, not the fact that they make speeches at City dinners.

Eddie George (he is never called Edward) is the man from leafy Dulwich in south London. After public school and Cambridge, he might equally have gone into the civil service or one of the professions. Instead he joined the Bank as a graduate trainee and has stayed there ever since. Spending one's entire working life in one organisation might not seem a background which would breed imagination or breadth, but one of the things the Bank takes seriously is career development. Eddie George has been one of the beneficiaries of this policy: he has done a series of different jobs, from the early days as an East European expert to the job of deputy governor, which is in effect the chief executive.

He has also had two important spells on secondment to international institutions: one at the Bank for International Settlements, in Basle, the central bankers' bank; the other to the International Monetary Fund, in Washington. He knows Europe and knows America.

Personally, his most noticeable (and attractive) quality is his lack of side. He talks very quietly: at a City reception there will often be a little clutch of people around him leaning forward to catch what he is saying. To outsiders he is comfortable, well padded, anxious not to embarrass them, eager to help where possible. He is sufficiently politically incorrect to smoke, which endears him to the less earnest members of the City community. As was shown in the parliamentary hearings over the Bank's role in the BCCI debacle, he is also good at presenting the Bank to the public: no bombast, just calm reason.

The quiet, comfortable image is genuine but there is also an edge, which sometimes worries people inside the Bank or bankers who have dealings with it. They talk of his authoritarian streak - that once he has a particular view, it is very hard to change it.

Of course, central banks should have authority: one of the Bank's problems is that its relative failure at what should be its main task - control of inflation - has robbed it of authority. Within the City itself, people will still usually do what it suggests because they know that it is usually better to have the Bank on their side. But in Britain as a whole, and in other financial capitals, the Bank is not greatly admired. Some foreign central bankers are openly contemptuous.

And that will be Eddie George's real task: rebuilding the reputation of the organisation he loves. He knows there are two levels at which the Bank has to change. The actual operations have to be better run: it ought not to be making mistakes such as BCCI. This requires both a higher degree of competence and more open communications within the Bank. This in turn means building a less deferential culture. That he will do.

The more subtle change will come in building the Bank's role in framing policy. Formally, there is no change in the relationship with the Government. The Treasury forms policy on the advice of the Bank: the Bank can propose, but the Treasury will dispose. In practice, the Bank has been handed a lever and a fulcrum to help increase its power. The lever is its new quarterly report on progress in reducing inflation; the fulcrum, the government's inflation target. If, come the autumn, underlying inflation looks like exceeding the new ceiling of 4 per cent, the Bank must shout. If action is not taken, and that action may have to include a rise in interest rates, the Bank will have to shout again, for it will be a fight that the Bank has to win if it is to have any hope of rebuilding its credibility with the international financial community.

Eddie George knows this. The signal was made very clear when he spoke after the announcement. A lot of store was set by the Government's statement of the Bank's role, stressing the commitment to reducing inflation. Britain will not be getting an independent Bank, but it may get one with more authority. Put harshly, the Bank cannot be made independent because it is not good enough to be made independent. If Eddie George can improve its performance, then gradually it could be given more power.

A gradual move towards an independent Bank may not yet be on the Government's agenda, but you can safely assume it is on steady Eddie's.

(Photograph omitted)