Labour promises wholesale reform of Bank of England

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Labour plans for the biggest reorganisation of the Bank of England since the Second World War, including a powerful new monetary policy committee to decide the Bank's policy on interest rates, will be outlined today by Gordon Brown, the shadow Chancellor.

Mr Brown will use a speech in London to propose sweeping reforms of the Bank's relationship with the Treasury to "de-politicise" the process of fixing interest rates while injecting more "professionalism" and "objectivity" into the process.

The shadow Chancellor will explicitly rule out a Bundesbank-style independent central bank and will commit a future Labour government to retain the key role of setting inflation targets. Rather, the shake-up will be seen as advancing the process of giving the Bank a more powerful role in monetary policy begun by Kenneth Clarke, the present Chancellor of the Exchequer.

In an interview with the Independent, Mr Brown confirmed there will be "no going back" on the decision by Mr Clarke to publish regularly the minutes of his meetings with the Bank's Governor, Eddie George, and went on to detail a programme of further reform. The measures will include:

t Creation of a seven- or eight-strong full-time monetary policy committee within the Bank which would decide with the Governor how to advise the Chancellor on interest rates. That would broaden the responsibility for that advice which is now taken solely by the Governor in what Mr Brown yesterday called the "Ken and Eddie show". Majority decisions of the committee would be binding on the Governor. Members of the committee would be appointed by the Chancellor and would be drawn from a pool which would extend beyond the ranks of the senior officials in the Bank.

t A stipulation that the Bank should receive a wider and more transparent range of advice, including from regional business and industry as well as from the City of London.

t The date of every monetary meeting between the Bank and the Chancellor to be published at least a year in advance, to ensure they cannot be changed for the political convenience of the governing party. Labour claimed this month that the Treasury had delayed the monetary meeting until the day after the local council elections.

t An announcement, as a matter of course, of the outcome of the monetary meeting on the day it takes place - whether it has produced an interest rate change or not. At present no announcement is required until the Bank raises or reduces rates, possibly several days later.

The plan for a new monetary policy committee would be in addition to Labour's existing proposal make the Court of the Bank of England - the Bank's board of directors - more "representative" by bringing on to it more senior figures from industry.

Mr Brown said: "We do not de-politicise the process only for it become to become more personalised. Therefore we must move away from what has almost become an attempt at a cult of personality - the Ken and Eddie show. I have no intention of continuing this unprofessional way of conducting affairs."

He disclosed that the role of the "Seven Wise Men" who give advice to the Treasury would be considerably broadened. Experts on labour market trends and the Treasury's public spending performance could be added to the group.

At the same time, Mr Brown intends that the Governor and possibly other officials should make appearances in Parliament to explain their decisions. At present, this is limited to occasional appearances before the Treasury Select Committee.

Mr Brown will also propose tough new controls within Whitehall on borrowing and spending and will lay out plans for a medium-term growth strategy to complement the setting of inflation targets, reasserting the determination of a Labour government to prevent inflation.

He will make clear Labour has replaced plans for a heavily corporatist national economic assessment, jointly reached between the unions, industrial management and the Government, with a "Green Budget" to stimulate public debate on fiscal and expenditure options.

Brown interview, page 19

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