A University of Threadneedle Street?
Published online by Cambridge University Press: 18 September 2020
The incoming Labour government immediately in 1997 set a new framework for the Bank’s operational independence, while removing debt management and transferring financial supervision to the new Financial Services Authority (FSA). The FSA would operate in a trilateral framework, in regular contact with the Bank, which established its own Financial Stability Committee in parallel to the newly created Monetary Policy Committee. But the Bank’s role was increasingly seen as primarily in setting monetary policy, with an overall inflation goal of 2.5 per cent, and the obligation to write an explanatory letter to the Chancellor of the Exchequer if the target were to be seriously missed. Chancellor Gordon Brown saw the Committee structure, with half the Committee appointed by the government, as a path to cutting down the powerful figure of the Bank Governor as an alternative economic policy-maker. The early years of the MPC were overshadowed by disputes over the resources allocated to the external (government-appointed) members of the Committee, and by increasing press attention to divisions within the MPC between ‘hawks’ and ‘doves’. By the time George stepped down as Governor in 2003, the MPC process looked highly credible.
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