Letter: Manifesto for recovery: Gatt, housing market, monetary policy

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The Independent Online
Sir: In your manifesto for recovery you place great emphasis on both the independence of the Bank of England and an immediate cut in interest rates to 5 per cent. This must be some definition of independence of which we were not previously aware, or is it just that the cut in interest rates would constitute a last valiant act of discretionary monetary policy before turning to a more sedate and safe world where policy is taken out of the domain of meddling politicians, journalists and academics?

But this muddle raises a serious point in your otherwise sensible proposals. Monetary policy, as your concern demonstrates, involves important strategic questions about growth, employment and so on. The success of any policy will depend on the extent to which it can command consensus within society, and thus on the extent to which its formulation is the outcome of the democratic process. Abdication of monetary policy to independent central bankers is thus a second-best solution in a world where the vagaries of the democratic process are treated with more suspicion than the decisions of wise men in Threadneedle Street.

It is not that the alternative to an independent Bank of England means that monetary policy will fail to impose significant constraints on the economy. It is just that these constraints are more likely to be seen as self-imposed, and thus command greater respect if they result from actions of policy-makers who are democratically accountable to Parliament.

Yours faithfully,






Department of Economics

University of Kent