We need Eddie's steady hand at the helm

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The Independent Online
Chancellor Gordon Brown is being hailed as a genius for his breathtaking move to hand control of interest rates to the Bank of England. The praise which has been heaped on him is richly deserved. It is a bold move which has the potential to be rewarded with an economic stability that will outlive the Labour government.

However, all the benefits which now beckon could quite easily be lost if the Chancellor continues to fail to recognise a crucial element of the foundation on which economic stability will be built. For while Mr Brown has been very imaginative on the question of policy, he has ignored completely the question of personality. Here I refer to the absence of any confirmation that Eddie George will be reappointed for another term as Governor of the Bank of England when his period in office expires in a year's time.

It is an unfortunate oversight which I am sure Mr Brown will rectify as a matter of urgency. It represents, unfortunately, a failure to recognise the contribution Mr George has made in getting the economy to a position where greater independence for the Bank could be even contemplated, let alone implemented.

The thing which most struck me about Mr George when I first met him several years ago was his commitment to long-term economic stability. He was intensely disappointed by the way the British people had been let down by those in authority who had failed to recognise the dangers of a boom- bust approach to economic management. It is that disappointment and his determination not to let the people down again which fuels the Governor's distaste for inflation. It is the consequences of inflation, not inflation itself, which drives him to fight to keep it under control.

One of the key elements which needed to be in place before the Bank was granted greater independence was broad acceptance of the benefits of monetary stability. Mr George and his colleagues have been unstinting in their preaching of the stability gospel to an extent where the business community takes it for granted and the wider electorate also appear comfortable with the creed.

Mr Brown has perhaps not appreciated that his own new-found credibility in part comes from the man who has been handed the new responsibility to oversee interest rates. The markets know that Mr George is a man who will take that new responsibility extremely seriously, objectively and professionally.

They also know that he is a man who will not squander the opportunity he has been given because 35 years at the Bank have taught him the bitter consequences of failure to discharge that responsibility.

Given Mr George's understated contribution to the credibility of monetary policy, it is surprising there is so much speculation that the Chancellor is considering not renewing the Governor's appointment. This speculation is unhelpful and will be exacerbated by the appointment of a second deputy governor, who will be judged not as a guardian of monetary or financial stability but as Mr Brown's governor-elect.

The place for poodles is the pet shop, not Threadneedle Street.

The opportunity to set the record straight will come in the next few weeks as the new appointees to the monetary committee which will determine interest rates are made. Any suggestion that those appointees are dictated by their political persuasion rather than economic credentials will be wiped away by confirmation that Mr George will be staying on for another term.

The "Governor must stay" campaign begins.

ICI regains chemistry

ICI's pounds 5bn acquisition last week of Unilever's speciality chemicals business provided more than just a fillip for the share price. It is a deal which will allow ICI to regain the momentum that it appeared to lose in the wake of the Zeneca demerger. It also fills in some important gaps.

In particular the deal replaces some of the chemistry which was lost and reaffirms ICI's commitment to research and technology. That the Unilever business spending in this area is at a rate twice that of ICI's is a reminder of how important this investment is to the group. Meanwhile, demands for new investment in speciality chemicals will be received more sympathetically at ICI than they might have been at Unilever.

At the same time the newly acquired business will bring an expertise in marketing and customer services which will accelerate ICI's own endeavours to develop its own skills in this important arena.

It also brings together two business with shared values and ambitions. They have similar cultures and are both hungry for growth.

Although there has been much talk about restructuring in the chemicals industry it has yielded little of real substance. ICI has been fortunate then to find a deal of such substance.

Labour's wrong move

New Labour giveth and New Labour taketh away. Having spectacularly tempted Sir David Simon away from BP, the Labour Party more discreetly dispensed with the services of his New Islington neighbour, Alastair Ross Goobey, whose voluntary work as chairman of the Private Finance Panel is no longer required.

As a former Conservative candidate and one-time adviser to Tory chancellors, Mr Ross Goobey does not have New Labour credentials even if he does live in the right part of town. However, while not unexpected, the manner of his dismissal still looks shabby and small-minded. It sends out the wrong signals to a business community which has shown great willingness to work with the new government.

New Labour may question Mr Ross Goobey's politics but they cannot question his commitment to making the Private Finance Initiative work. Were it nor for the hiatus of the election there would have been more tangible evidence of the success he has enjoyed in breathing some life into an initiative which is permanently on the critical list. To dispense with a man of Mr Ross Goobey's talent so flippantly is a sign, I fear, more of naivety than confidence about the future.

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