This piece in a Telegraph newsletter this morning is a classic:
The Bank of England has warned its near 6,000-strong workforce of job cuts as it seeks to fund an overhaul of its flawed economic forecasts.
Andrew Bailey has invited all staff to apply for a voluntary resignation scheme as part of a £45m cost-cutting drive, prompted by the central bank spending millions of pounds on IT upgrades and changes to the way it analyses the economy.
While the Bank's Governor stressed the scheme was “entirely voluntary”, he also warned: “We cannot rule out compulsory redundancies later down the line.”
It comes after an independent review led by Ben Bernanke, the former Federal Reserve chairman, warned that the Bank's ability to control inflation had been undermined by “significant shortcomings” in its economic forecasts.
I am, of course, aware that the Telegraph has put its own spin on this, but let me do the same.
The Bank is worried about things right now:
- Its own economic incompetence, to address which it apparently needs to invest.
- The overvaluation of AI.
- The resulting risk of recession.
So, it has decided to:
- Sack staff, even if they are needed to address issues of its own economic incompetence
- Raise funds for investment by cutting costs, even though credit is (somewhat unsurprisingly) readily available to it and effectively costless, contributing to the paradox of thrift and the risk of recession.
- Presumably, substitute for the sacked staff with AI, about which it has significant reservations.
I have already noted Rachel Reeves' incompetence this morning, and suggested the captain is not in charge, or she would not still be in post. It would seem that the same problem is evident at the Bank of England.
Nine people need to go at the Bank of England: Andrew Bailey, its Governor, and the other members of the Monetary Policy Committee. It is not the Bank's economic forecasts that have done such harm: it is these people's collective lack of knowledge and wisdom that has done that, but others will, of course, carry the can. It was ever thus.
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The MPC members have been different voting records and views. At least 2 of them have been fairly consistent in pushing for lower rates. To say they all need to go is not necessarily fair on the minority there that do have better instincts than the likes of Mann and Pill.
They should look at the notes for those who have diagnosed the saving as being caused by Pele being worried about higher inflation, or who think that the current interest rates are not restrictive, or who clearly put investment returns above households, and drop those. 2 or 3 night qualify to stay
I certainly agree that suitability to serve should be determined on an individual basis, nor would I determine it merely by how they voted on interest rate decisions. However, when the majority of the committee are employees of the BoE who’s livelihood and career progression depends on not “rocking the boat”, then we do, in effect have “BoE insiders” setting the agenda and running the show. In this environment it is very tough for outsiders to achieve anything meaningful.
For a start, there are three Deputy Governors on the MPC; the one responsible for Monetary Policy should be there but the other two (Markets/Banking and Financial Stability) should not – they should deliver reports to the MPC and answer questions.
Also, economists; there should be a non-BoE economist(s), too. Again, they don’t all (or any) have to be voting members.
I would also have the First Secretary to the Treasury there, too. How can monetary policy be discussed without the architects of fiscal policy in the room?
This would free up space for other representatives from Business, Trade Unions, Pensioners etc.
But, whoever is chosen – we must have a non-BoE majority.
Agreed
Spot on.
Sure, the forecasting is poor… but we know it is and, frankly, always will be given the human/political element in the system. “Economic forecasters exist to make Astrologers look good” (JK Galbraith).
But for the Policymakers to blame the forecasters for their own poor decisions is appalling. As you have often observed, a walk down the Mile End Road would tell them more than any forecast. This is classic “let’s throw the little people under the bus”.
We need a change at the top and diversity of MPC members that will challenge the “bankers know best ” attitude that currently prevails.
presumably supposed to be “Nine people need to go at the Bank of England” NOT ” to the Bank of England”
Prof reading not too good this mornings.
Back in bed now….
Hear hear!
Now get back to bed, and get better.
Not the MPC I most worried about . It’s the lack of ability there to model constraints and what can change capacity in the real economy.
Agreed. Perhaps they could also fill these 9 spots with people who have spent more than a few months living in the UK outside of London?
Maybe go so far as people from ordinary backgrounds with a varied but applicable knowledge base?
Get well soon and please do rest.
This is classic management ploy; CEO decides to cut jobs but not own the responsibility. So, bring in a consultant, and offload the decision to a supposedly non-invested person, who is paid handsomely, allegedly, to arrive at the decision required.
Can happen like that but shouldn’t. If the consultant just cuts input as HM Treasury thinks public services should if won’t improve either outputs or productivity, as they don’t know enough about processes. And classic Taylorist time and motion process analysis which ignores what it takes for high output quality doesn’t know enough either, as re-work and customer disenchantment will pile up. What does anyone in the Treasury know about service output quality, including how and where services provide usable inputs? Ever seen re-work assessments for the health service apart from malpractice suits? Sometimes rework is part of the service, of course, as in life long learning. That should be part of the design.