Testing months ahead for super-SIB's chief
Friday 01 August 1997
Yesterday's interim report to the Chancellor on the proposed creation of the City's new mega-regulator - NewRO in the supervisor's charmless official-speak - gave little away that had not already dribbled out. It was predictably long on good intentions and short on specifics.
What was apparent, however, was the speed with which super-SIB will come into being next spring, de facto if not by then de jure. Mr Davies is plainly a man in a hurry, and with good reason. The greatest danger to the new unified regulator is that another Barings will show it to have taken its eye off the ball while it is still being inflated. That is even more the case for a single supervisor, which runs a serious risk of having its overall reputation muddied by a foul-up in one of its divisions.
The other potential headache for the new chairman lies in the scale of the unprecedented task of putting together nine diverse regulators that have grown up over the past 10 years or so with wholly different and possibly incompatible goals, remits and cultures. It is no coincidence that Mr Davies's first job will be to put in place a transitionary management team - a successful super-SIB will be as much about the right people as the right structures.
Bank appointments should ease doubts
The announcement of the names of two new deputy governors at the Bank of England leaves one last thing for idle minds to speculate about. That is whether the Government will replace Eddie George when his term comes to an end next spring, and if so, who will step into his shoes.
Many people in the City would like to see Steady Eddie carry on. He is very much a banker's central banker, and would also ensure continuity at the Bank at a time of very radical change in its functions and organisation. However, the Government has an eye on a wider audience than the banking community. It wants to make sure the Bank of England is broadly accountable and answers to the national economic interest, so City preferences as such cut little ice with Gordon Brown.
In addition, it sees Mr George's record as mixed, with a great improvement in the credibility of interest rate policy offset by doubts about the Bank's handling of the Barings crisis. Bank-Treasury relations are also unusually tense at the moment as a result of all the upheaval being inflicted on the one by the other.
The two names bandied about as possible replacements for Mr George are Mervyn King, the Bank's chief economist who was yesterday elevated to deputy governorship, and Gavyn Davies, chief economist at Goldman Sachs and a columnist for The Independent. Both are known to want the job. Mr Davies is a friend of Gordon Brown, which some commentators think gives him the edge and others reckon puts him at a disadvantage.
The markets would undoubtedly prefer the inside candidate, especially one with such purist views on the need for price stability. The Chancellor, on his past record, would probably like to spring a surprise.
However, yesterday's announcement should reassure anybody who doubted Mr Brown's intentions towards the Bank. The delight of those who welcomed his move to make the Bank independent was tempered by a suspicion that he would water down that independence through the appointments he needed to make. The two deputy governors named yesterday, like the outside experts on the Monetary Policy Committee, should set such suspicions to rest.
Shades of a Whitehall farce in PFI decision
The last day of Parliament is the traditional occasion on which to sneak out awkward government announcements and few fit the bill more exquisitely than the Chancellor's decision to abandon the refurbishment of Treasury HQ as part of the Private Finance Initiative.
Since this was one of the flagships of the PFI, the decision looks odd. It looks doubly strange since Geoffrey Robinson, the Paymaster General, has invested a good deal of his political capital promising to put the PFI back on track.
How the decision will play with the private sector partners Labour is so keen to cuddle up with as a means of saving on public expenditure remains to be seen. But taking nearly two years to select a preferred bidder, and then signing a heads of agreement only to terminate negotiations on the spot is hardly a ringing endorsement for Labour's attempt to portray itself as the natural party of business.
The fact that the heads of agreement was signed by the previous incumbent at Number 11 and the fact that no contract had actually been signed by his successor is unlikely to cut much ice.
The official line is that there were other more worthy PFI projects than tarting up the Treasury at this time of tight spending controls, etc etc, even though there is no shortage of money for PFI projects and, in any case, the financing is off-balance sheet for the Governnment - that being the whole point of the exercise.
The unauthorised version is that the Treasury has been caught with its pants down in a classic Whitehall farce. The refurbishment would have obliged the Treasury mandarins to move out for at least two years, possibly to an ageing office block south of the Thames in Vauxhall. When it moved back in it would have had to share its new accommodation with the Foreign Office, to make the project cost effective.
That in turn would have entailed the FCO finding tenants for its vacated property by Admiralty Arch, not to mention forcing Robin Cook to give up his grace and favour flat and move in with Gordon Brown. While we can only speculate on the personality clashes, we can be be sure that the FCO would have been left with a financial headache.
Still it is one less project that the Treasury's new PFI supremo, Adrian Montague, will have to worry about when he arrives later this month from Kleinwort Benson. Welcome to Whitehall, Mr Montague.
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