Independence is a must

Jul 2 2009 by Bill Midgley, The Journal

GOVERNORS of the Bank of England and the North East have a somewhat estranged relationship, particularly given the comments made a decade or so ago when it was claimed that loss of jobs in this region were ‘a price worth paying’ to ensure the success of the national economy.

However, the current governor needs support in his attempt to retain the independence of the bank and prevent the Government watering down it’s powers.

Moving the powers of the bank to the Financial Services Authority is a retrograde step, particularly given the somewhat questionable record of the latter organisation in it’s regulation of some of our major financial institutions in recent years. The bank’s role in setting interest rates will be a key factor in holding down inflation in two or three years time as governments may well be tempted to see a return to an inflationary economy. Whilst inflation remains low, and is likely to do so certainly over the next 12 months, there is a real danger of a 1970s-type economy if there are not strict financial controls and it is imperative we have an independent bank.

The individual banks themselves still have a major part to pay as the engine of economic recovery in making credit available and giving support to business start-ups. It remains a mystery therefore as to why many enthusiastic young people find it difficult to be able to set up credit card facilities at the outset of their new ventures, but are being asked to provide a six-month trading record. In a society that is ever more reliant on the use of plastic, and a system which encourages payment by this method, the intransigence of the banks needs to be challenged. Without such facilities many potential new businesses will never get off the ground. This may seem a small issue but nevertheless is an example of where an independent bank can wield its influence.

Bill Midgley is a North East business executive and former chairman of the British Chambers of Commerce