Secrets of the war against the Bank

The Treasury is deploying every 21st-century weapon of spin in its public relations battle with the Old Lady of Threadneedle Street, reports economics editor Sean O'Grady

In his first act as Speaker, John Bercow warned the Government to stop leaking: "When ministers have key policy statements to make, the House must be the first to hear them, and they should not be released beforehand" intoned the diminutive champion of Parliament before Prime Minister's Questions. His authority was challenged within hours.

Tellingly, it was that most arrogant of Government departments, the Treasury, that defied him, as it pursued its vendetta against the Bank of England. Mr Bercow issued his injunction on Wednesday: The Treasury handed the Financial Times the details of its forthcoming White Paper on banking regulation in time for Friday's edition. The story? The Bank will have to share powers with the Financial Services Authority. Not Watergate, admittedly, but a useful scoop, and a slap in the face for the Bank. File under "arcane but important for the future of the City and thousands of jobs".

Mr Speaker Bercow ought to be annoyed, but the more annoyed he gets, the smugger the Treasury's spin doctors will be with their own insolence. They've humiliated the Governor of the Bank of England and the Speaker of the House of Commons in one deft move. Clever, eh?

Clever, yes, but not big, and illustrative of the different methods of media management employed by the Treasury and the Bank. Their ways could not be more different, nor their values and ethos, though both are supposed to be sober agencies of state charged with safeguarding the economy. But they are not alike, and seem more like rivals, maybe because they are both charged with that same duty.

The Treasury is mesmerised by media manipulation and how to bend the web to its advantage. The Bank is not. And they are at war. The military analogy that springs to mind is that of the battlefields of Poland in 1939: the gallant, old-fashioned, but profoundly brave Polish cavalry officers riding their horses towards the might of the German's modern panzer divisions. The Treasury has the armour; the Bank is on horseback. The winner of this battle is not so predictable, though.

The Treasury's panzers are the modern ways of manipulation – anonymous smearing, leaks and spin. But advanced weaponry as they may have at their disposal, they don't seem always to deploy it to lethal effect. Or, leastways, lethal effect on their enemies rather than themselves. To take one obvious example, the absurd "chancellor-as-thoughtful-bloke" interview that Alistair Darling offered the Guardian's Decca Aitkenhead at his Highlands hideaway last year, replete with comedy image of him crawling around his little rowing boat, specs askew. That provided an irresistible Private Eye cover, with the headline "Darling in Creek Tragedy" and the bubble "where's my paddle?" Nice work, guys.

The team did better when it came to saving Darling's job in the reshuffle. It was ironic that their efforts were in response to a threat from Schools Secretary Ed Balls, who, as Gordon Brown's special adviser when Brown was Chancellor, spent a decade "modernising" the Treasury's media ops, ie brutalising them. A number of old-style press officers were eased out in New Labour's early days. As a result, the Treasury was well able to get down and dirty, this time at Balls' expense. Don't forget, either, that this is the department of state that once gave Charlie "Bollocks" Whelan a berth, and was also the nursery of one Damian McBride, the man who gave us an "email campaign of hate" against the Tories, as the tabs called it. The boozy, aggressive profanity usually associated with the Treasury is unfair on some of the team, who are far from laddish. But the contrast with the more academic, cerebral atmosphere of the Bank is still striking.

Compared to George Osborne and Nadine Dorries, Mervyn King has got off lightly, the campaign of hate being limited to his conduct of monetary policy and flawed oversight of the financial system. The Treasury let it be known, off the record, naturally, that Mr King wasn't much cop at either. They were also obviously irritated by King, allegedly, briefing the Tories ahead of the recapitalisation of the banks during last autumn's crisis. George Osborne, so the story goes, then used this inside knowledge to ambush Darling in media appearances, passing off the Bank/Treasury plan to save the banks as his own.

If King had wanted to be shown the White Paper on banking regulation, as he publicly complained he was not, perhaps he ought not to have grassed to the Tories. Or maybe the Treasury just didn't have time to show it to him – pressure of deadlines and all that. But Mr Darling would never say in public.

So modern are they at the Treasury, by the way, they even Twitter: Sarah McCarthy-Fry is the Exchequer Secretary to the Treasury. On Friday, for most of us a working day, she tweeted: "going to a carpet picnic – can't do it outside cos it's too wet." Visit twitter.com/smccarthyfry for a unique window on the life of a Treasury minister.

They don't tweet at the Bank of England and King wouldn't be caught dead with Decca Aitkenhead. There is an old motto that reverberates around its dingy corridors: "Keep the Bank out of the press and the press out of the Bank". It was followed religiously by the Bank's last Director of Communications, Peter Rogers, a former business journalist with The Independent, and has been inherited by his successor Jenny Scott, who left the BBC to take up her post last year.

There are technical briefings on the Bank's reports and important policy initiatives, but nothing personal or political. If Mervyn King wants to mix it with the Chancellor, it seems, he doesn't get Jenny to ring up some crony in the press to pour poison in their ear. No: Mr King just says what he thinks, bluntly, at as high a profile event as he can find: the Mansion House dinner is ideal; an appearance at the Treasury Select Committee is fine. It has done him little harm, so far. He has made himself look like a victim of Treasury spite, being excluded from consultations on a White Paper he ought to have been closely engaged with. He has made himself the financial conscience of the nation by criticising the scale of Government borrowing, though that is properly speaking a political matter. By not spinning he has won the spin battle – he has withstood the Treasury's onslaught by not playing by their rules.

But there is a price: The Government will not give King what he wants. More damagingly still, the arguments about the Bank's role have become highly politicised. The Bank, through little fault of its own, has come to be seen as being aligned with the Tories, its sectional interest and the Bank's conception of the national economic interest geared to a Cameron win at the next election. With his outspoken utterances, the Governor seems not too bothered about the Bank being in the press; a few months ago he even dared to issue a press release slapping down Peter Mandelson, so bold has he become. Yet Mr King ought to be very concerned indeed that party politics seems to have slipped past the Bank's doormen.

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