Bank needs diverse voices
Gordon Brown’s greatest gift to UK economics is the independent Bank of England. one may disagree with the Bank’s persistence with an unnecessarily harsh interest rate and despair at its wayward forecasting.
no one disputes that those doing the job act in good faith. It is, nonetheless, crying out for reform.
The Treasury, which nominates members, operates a safety first policy, too often choosing its own alumni and creating group think. Labour is nervous about proposing reforms for fear it might unsettle gilts and the pound.
But it is obvious that more diversity of views is needed, and deeper geographical knowledge of the kind provided by regional US Federal reserve banks.
In the current setup, it takes bravery to vote against the majority.
one may disagree with past mavericks such as Professor danny Blanchflower and Adam Posen, but their dissenting voices were valuable.
The current outlier is associate LSE professor Swati dhingra, who voted last week for a quarter-of-a-percentage point cut in the bank rate from 5.25pc. Borrowing costs have moved very quickly from the abnormally low rate of 0.1pc to the current level.
In an interview with the FT, dhingra argues that lags mean that the nation is looking at a ‘pretty restrictive monetary policy’ even if rates came down.
Breaking down the consumer prices index, she notes that 97pc of the items which drove inflation up have turned down.
She disputes the notion that consumption is driving excess demand. In her view the Bank is underplaying the downside risk and the real economy of output and jobs could get ‘negatively hit in a profound way.’ It is a view unlikely to be heard from any of the other nodding heads on the Monetary Policy Committee. That’s why a broader range of views is so necessary.
Buyback gusher
BP needed a strong hand on the tiller following the messy departure of Bernard Looney. Shareholders have been disgruntled by the green commitment at time of geopolitical turmoil, which drove a cash bonanza in 2022 and put a floor under oil prices in 2023.
Murray Auchincloss’s first outing as BP chief executive should help repair confidence. He is taking a leaf out of the Shell playbook by rewarding shareholders while maintaining the commitment to a greener future. restless investors will be calmed by pledges to buy back £2.8bn of shares in the first half of next year and as much as £11bn over the next two years.
The focus on turning BP into a ‘ higher value’ company partly is made possible by stronger than expected final quarter earnings, boosting the outcome for year to £10.98bn around half 2022’s bumper total.
Auchincloss, as former finance overlord, is suited to reshaping balance sheet priorities.
Capital spending plans are being trimmed to £12.7bn this year and next against a previous target of up to £14.2bn. The north Sea remains part of that with the Seagull project expected to come on line in 2025.
BP also remains involved in the Gulf of Mexico where the deepwater Horizon explosion almost destroyed the company in 2010. oil spill payments continue with the company projecting payments of just under £1bn in 2025. Low carbon investment is expanding with the BP buying the 50.03pc interest it doesn’t own in battery storage group Lightsource bp.
BP and Shell are easy targets for climate change activists. However, wealth generated by oil and gas also gives them scope to be among the UK’s biggest investors in carbon reduction projects. The green goals are intact but it is the promise of some big pay days which sent lacklustre BP shares higher.
Tall order
KwASI Kwarteng’s stint as Chancellor may have been short at just 38 days but was filled with incident.
His mini-budget with £45bn of tax cuts triggered a jump in borrowing costs, a sterling crisis and an eruption in the pensions system. Kwarteng turned up in washington for the IMF meetings where the six foot five Chancellor received a dressing down from the diminutive Janet Yellen over his perceived wrong-headed policy. Still convinced he was safe Kwarteng flew back to London overnight to confer with colleagues only to find he had been sacked by his political soul mate Liz Truss while on the red-eye.
now he is to leave the Commons: it was an exhilarating ride.