Steve Richards: Politicians may be deeply flawed, but look what happens when they hand over power

Mervyn King is likely to be in his post longer than Brown or Darling. This gives him more freedom

Tuesday 10 June 2008 00:00

For political leaders, one way of guaranteeing a thunderous cheer is to promise that they will give their power away. There is no more endearing move a leader can make in this anti-politics era than to declare humbly that he or she does not know best. Instead, the fashion is for non-elected specialists to decide, none of them swayed by the short-term pressures of electoral politics.

The inspiration and, to some extent, the model for devolving power is the independence of the Bank of England, widely regarded as New Labour's great masterstroke. A supposedly mighty government gave away the power to set interest rates, arguably the most powerful economic tool of them all. Ever since, Labour has looked at ways of handing over power. From the latest budget cuts for railways, announced last week by a non-elected regulator, to the decision over which city should get the doomed "supercasino", specific decisions are taken by largely anonymous individuals. Currently, ministers are considering giving away another range of levers relating to big planning decisions, including the location of nuclear power stations. These are big and highly sensitive powers for elected politicians to cede.

There were none bigger than those handed over to the Bank of England after the 1997 election, although the motives at the time were political rather than economic. Haunted by what had happened to previous Labour administrations, this one sought to secure trust by giving power away and, for much of the decade that followed, the policy served its purpose. While there were early tensions between the elected politicians and non-elected bankers, on the whole they danced together, a harmonious choreography arising from the melodious tunes of a stable economy.

Now the economy is far from stable and the precarious harmony has evaporated, to be replaced by seething tensions, conflicting approaches and a significant change in the dynamics of the relationship, with one side becoming weaker and the other more assertively powerful.

What makes the changed relationship more significant is that the underlying cause highlights a serious flaw in the fashion for giving power away. Ultimately, ministers are accountable for what happens. In this case, Gordon Brown and his Chancellor, Alistair Darling, must answer for the dark economic situation in the media, in Parliament and before the electorate. Voters gave their verdicts in the recent local elections and the Crewe and Nantwich by-election. They continue to do so as Labour record dire ratings in the opinion polls. In contrast, the Governor of the Bank of England, Mervyn King, has recently been given a second term. He is relatively secure compared with the increasingly unpopular Prime Minister and Chancellor. His appearances in the media are rare. Select committees get the chance to question him every now and again, but he does not have to win votes in Parliament and is not standing for election.

Of course there is a pivotal link with elected politicians. In this case, the Chancellor appoints the governor and defines his remit. There are ways in which powerful, popular prime ministers or chancellors can put pressure on a governor. But at the moment King is likely to be in post longer than either Brown or Darling. This gives him more freedom to be assertive and he appears to be making the most of the space the diminished authority of the Government has given him.

The new dynamic partly applies to policy differences. Ministers worry about high interest rates making matters worse. King has his eyes fixed firmly on inflation, hinting that there will be little room for cuts in interest rates. To some extent, these differences are nuanced as two different bodies agonise over the best way forward. But in his new, firmly entrenched position, King has become more expansive. Perhaps inevitably, he lacks a political touch as he speaks out. More than anything else, this has alarmed a government which must face an angry electorate within two years.

The Chancellor got the shock of his political life when he awoke one morning in the late autumn to hear King giving a long interview to the BBC's Robert Peston on the Northern Rock saga. Darling thought he had agreed with King and others not to give detailed interviews at that highly sensitive point. He also considered King's account to be highly selective. Darling was livid, but probably his reaction was mild compared with a second more recent occasion when King delivered what, from the Government's perspective, was a soundbite from hell. Publishing the quarterly inflation report, King announced that the "nice decade is behind us". His detailed analysis was even more funereal, in marked contrast to ministerial statements about Britain being well placed to weather the storm.

Politicians are deeply flawed administrators, but they understand the importance of tone. As elected politicians, ministers have to contemplate how a policy will be viewed, where it will leave them and their opponents as they are held to account. In contrast, King can make a speech and return to his office without a further thought as to the political consequences.

So we have an elected government arguing that things could be a lot worse and loosening a little the fiscal strings and a governor saying things are bleak and taking such a cautious view over interest rates that his own actions could make matters bleaker. If voters cannot get a mortgage and house prices fall even faster because of high interest rates, Brown and Darling will be booted out of office. King will still be there, his tenure renewed because Brown and Darling were in too weak a position to act in any other way.

The Bank's independence is the most vivid example of blurred lines of responsibility and accountability when power is given away to non-elected bodies. Yet the fashion continues. In the current Planning Bill, there is a proposal to establish an Infrastructure Planning Commission, a body that will have major decision-making powers. Like many such moves, the motives are well meaning. In this case, the Government seeks to speed up clumsy, bureaucratic planning procedures.

The model is very similar to the Bank of England. Ministers will set the broad policy and objectives. Individual decisions will be made by the commission. With good cause, MPs from all parties worry about the degree to which the powerful, non-elected body will be accountable to anyone beyond a minister who could be out of a job at any point. Whoever chairs this body would be much more powerful than most cabinet ministers.

In theory, there is a strong case for devolving power, spreading it and devolving it. And yet what happens when the largely anonymous, non-elected figures make the wrong moves or ones that are fundamentally at odds with the elected government? No one has answered that question satisfactorily and until they do I will continue to have doubts about the wisdom of elected figures, accountable to Parliament and the media, doling out power to those of whom we know little.

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