CITY AND SUBURBAN
Never mind the Declaration of Independence the Old Lady is still in danger
CHRISTOPHER FILDES
Royal Commissions, Harold Wilson said, take minutes and waste years, so Fran- cis Maude's new commission will have to do better. It is meant to be writing a new blueprint for the Bank of England, but its immediate purpose is to get his party off the hook. That needed doing. When Gordon Brown, in his first days of office, gave the Bank its independence — or at least the power to set interest rates — he wrong-foot- ed everybody from the Treasury to the Tories, still struggling to adjust to their dis- aster at the polls. Their first response was that this idea was a loser. Hadn't their man, Kenneth Clarke, like a good Tory chancel- lor, held interest rates down in front of the election? Hadn't the Bank been urging him to raise them? Put that chap with the cruel glasses in charge and our mortgages would cost us more. The finest brute vote in Cre- ation, or what remained of it, might not know much about monetary economics but it knew how dearer mortgages went down in middle-class constituencies. So the Tories opposed the Bank's independence, and felt vindicated when the man in glasses and his monetary policy committee hoisted interest rates from 6 per cent to 71;2 per cent. The feeling did not last, though. Rates are back at 5 per cent and cheap mortgages are pour- ing off the lenders' production lines. Time for a rethink, Mr Maude decided. By the time this commission has taken its minutes, I dare say that rates will be on their way up again. All that mortgage money is finding its way into house prices, and I detect the early signs of mania, or property rage, as the Hali- fax calls it. Unless checked, it will end in inflation and tears. Mr Maude's commis- sioners should not try to second-guess all these decisions. Instead they should decide on what they expect of the Bank of England.
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