Oulook: Banking pays

HOW EMBARRASSING. As Gordon Brown exhorts everybody to restrain their pay demands, staff at the Bank of England have been enjoying salary increases of more than 4 per cent on average. This is modest by banking industry standards, but still around twice the headline inflation rate. It just goes to show the perils of preaching as an economic policy.

The deal also high lights the jobs market as the Achilles heel of the British economy. Growth is still weak but there is a shortage of staff, especially skilled staff, and especially in economic hot-spots like Central London. The Old Lady has not been wildly imprudent: Bank of England bonuses are too small to force interest rates higher. But the same can't be said of the rest of the City.