By Hosking, Patrick
New Statesman (1996) , Vol. 132, No. 4645
Having put the boot into Eddie George two weeks ago, I must join the hagiographers praising the outgoing Bank of England governor. The overall verdict has to be positive.
There have been hiccups in his career -- the collapse of BCCI and the ill-fated attempt to prop up the pound in the dark days before Black Wednesday to name two -- but "Steady Eddie" is assured a prominent niche in the central bankers' hall of fame. Since Gordon Brown handed over interest rate policy to the Bank in 1997, George has barely put a foot wrong. Contrary to all expectations, the Bank's monetary policy committee (MPC) has consistently hit or come close to the 2.5 per cent inflation target.
He has established confidence in the Bank -- from ordinary mortgage borrowers, from City traders and internationally, where Britain's reputation for prudent economic policy has improved immeasurably. He has been opaque enough to keep City traders guessing, but not so Greenspan-esque that it is impossible to gauge his opinion on anything. And he has been a grown-up. It must have been tempting to throw his toys out of the pram when Brown took responsibility for banking supervision from Threadneedle Street and gave it to the new Financial Services Authority. But George -- after considering resignation and no doubt puffing on a few more Rothmans than usual that day -- stayed put, thank goodness.
A key lever of economic power has been successfully removed from the grasp of short-termist, vote-hungry ministers. George, as much as Brown, should take the credit for that.
In one sense, however, it is too early to judge the George years. The MPC sets interest rates to regulate the economy two years hence, and the impact of its decisions ripples out for years after that. Over the past five years, the Bank has consistently underestimated the strength of the housing market. It repeatedly claimed things were about to cool, only to see property prices rocket ever higher. Maybe there will be a soft landing, in which prices simply stagnate for a few years while incomes catch up.
But if the bubble bursts more painfully -- with sharp house price falls across the country, negative equity and all the shocks that ensue from that -- then George and his colleagues would have to shoulder some of the blame.
I say George barely put a foot wrong. His one gaffe (although he insists he was quoted out of context) was to tell a Tyneside reporter a few years ago that unemployment in the north-east was "a price worth paying" for low inflation nationwide. …