Bid for Independence for Bank of England

Article excerpt

STANDING at the epicenter of London's financial district, the Bank of England looks like the embodiment of British self-assurance. But within its windowless granite walls high officials of the United Kingdom's central bank are beginning to think thoughts that would have been unthinkable a few years ago.

They are wondering whether, in 1992, when the European Community removes its internal frontiers, the "Old Lady of Threadneedle Street" ought to be made free of the government. And they are looking to Germany's Bundesbank as their model.

When it was nationalized in 1946, the Bank of England (established in 1694) came under heavy government influence. The idea that its autonomy should be restored has surfaced amid the moves toward greater European unity.

When inflation began to rise again two years ago, Nigel Lawson, Margaret Thatcher's Chancellor of the Exchequer, advocated independence for the Bank, pointing to Germany's booming low-inflation economy. He noted the autonomous roles of the Bundesbank and of the United States Federal Reserve Board. But Mr. Lawson's ideas about the Old Lady were squashed by the Iron Lady. At the time, Cabinet sources said Mrs. Thatcher feared Robin Leigh-Pemberton, governor of the Bank of England, would grow too big for his boots.

No longer chancellor but still a member of Parliament, Lawson remains a strong advocate of the Bank's independence. Others with their eyes on Britain's European future are coming around to the same view.

Tim Congdon, an influential monetarist economist, has urged Mr. Leigh-Pemberton and Prime Minister John Major to look to the Bundesbank for inspiration.

"If Britain wants an inflation rate as low as Germany's, it should put its own central bank on the same footing as the Bundesbank and make it independent," he says. …