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t In an unusual break with Whitehall protocol, the new deputy governor of the Bank of England has attacked the Government's public-sector pay policy, writes Barrie Clement.

Howard Davies, former director general of the CBI who was appointed to the bank in August, told union representatives that the strategy had "worn out" and needed to be more flexible. For the last two years, and for the foreseeable future, ministers are insisting the pay bills of government-funded organisations remain static.

But Mr Davies said the policy had caused problems.