Debt commissioners are the Pitts - it's time they woke up

11 April 2012

This is a wake-up call for the Speaker of the House of Commons. Also for the Chancellor of the Exchequer, the Master of the Rolls, the Paymaster-General and the Governor of the Bank of England and his deputies. You are the Commissioners for the Reduction of the National Debt, which has now reached £775 billion and increases by £2 billion every week. Isn't it time you got going?

William Pitt the Younger thought so when he gave you your orders. An expensive war with France and some American rebels had left the public finances in chaos. The National Debt had reached £239 million and the interest bill was the biggest charge on the Exchequer.

First, Pitt brought the budget back into surplus, by cutting some taxes -they then yielded more - and abolishing others and starting again. He could then set up a sinking fund, with an independent commission in charge, to keep it safe from the grasping hands of ministers or Parliament. Over time, the fund would accumulate and would pay back the debt.

The Commissioners met for the first time 223 years ago - on 11 July 1786 - and took two wise decisions. They appointed the Bank of England's chief cashier to be their agent, and they chose a broker to act for them on the Stock Exchange.

Between them, they created a broad and deep market in which it was almost too easy for successive governments to borrow. Three more expensive wars (Napoleon, the Kaiser, Hitler) swelled the debt, and so did peacetime inflation. The Commissioners could not keep up.

All the same, these arrangements worked well for two centuries, and it was left for Gordon Brown in his reforming mode to do away with them. He saw no need for a Government Broker, and he took the agency back from the Bank.

Their work would be done by a newly created Debt Management Office, which would be an offshoot of the Treasury - a consolation prize for ceding control over interest rates.

For the newcomers, the Government's debt cannot have been too hard to manage, until now. There were buyers for stock, led blindly on by the pension funds.

There were wars, but they were not too expensive. There was public profligacy, but the bill has been slow to come in.

Now it has. The Treasury finds itself having to borrow one pound for every four that it spends. Every pundit from the IMF sideways has warned of the dangers.

The hapless DMO has been left to churn out paper on an industrial scale and to find takers. That will be the test of its competence and of its mettle. At the very least, it will need help.

Pitt understood that. Now as then, any open-eyed buyer will want assurances that the public finances will be brought back into order and the National Debt's growth checked and reversed. An independent commission, given just this remit, and so stoutly manned as to be able to resist the pressures of the moment would be as good an assurance as any.

As it happens, Pitt's Commission is still with us. Brown must have forgotten to abolish it. Once a year, the Commissioners get a formal letter to remind them of their duties, but they have not met since 1986, and that was over dinner for their 200th birthday party. Wakey, wakey!

We need a successor to Pitt who will revive or re-found the Commission -and might indeed, while he is at it, bring back the Bank and the Government Broker, the partnership that worked so well for so long. No doubt he could dispense with the Speaker.

We're all on casualty list until battle of the Bank is resolved

There is a first time for everything, so we can now look forward to a general election with the Bank of England as its battleground.

George Osborne for the Conservatives would give the Bank a whole new empire, now occupied by the Financial Services Authority. Labour would put the Bank back in its box. The wait will be the worst of it.

The FSA may find itself becoming an authority only in name. Picture the scene at its waterside office, when Bigfours Bank is told to cut back on its bonuses.

"Oh, yes?" says the man from Bigfours. "George says he will push you all into the West India Dock. So forget it."

Life on the battleground will be no easier for the Bank. The Westminster snipers are out already, and their bullets come spinning through the air towards Mervyn King, the Governor. It is true that the Bank and the Treasury have always been the best of enemies, but he has enough battles to fight on his own turf, without being caught up in a skirmishers' war which looks set to last until May, and will then become general.

Both sides in this political battle conjure up an imaginary world, where all-wise supervisors would never allow banks to fail and we should all be safe and happy. There is no such world, but when a bank does fail, that would have to be shown up as somebody's fault.

The Bank found that out last time round, when it carried the can for such failures as Johnson Matthey, Barings and the Bank of Cocaine and Columbia. No wonder that King seems in no particular hurry to have it back.

All the same, until this battle is out of the way, we shall all be the losers.

Tip from Sir Alan: Pass Go and collect your peerage

Lord Sugar of Clapton - yes, that's right, Sir Alan - knows the ropes. As Gordon Brown's enterprise champion, he has been enterprising enough to pick his peerage up on the way in.

So many businessmen have missed their chances. They get summoned to Downing Street and flattered: "Only you could do this for us - in the public interest - we won't forget you." By saying Yes, they have solved the prime minister's problem and can be forgotten.

Nowadays they know better. Lord Carter came in from City public relations, served as an adviser and then as a minister and is now on the headhunters' lists. Lord Jones of Birmingham - yes, that's right, Digby - has found a new life as a speaker and charges £10,000 a time. In his old CBI days it came with the job.

Lord Myners (money management, and sometime Questor for the Daily Telegraph), has one eye on his next life, which will be closer to God than to Mammon. He may yet become the first financial journalist to receive a peerage and take Holy Orders.

The only name missing is Sir Victor Blank's. As chairman of Lloyds, he obliged the Prime Minister by coming to HBOS's rescue but HBOS dragged the would-be rescuer down, and now he will never be Lord Blank of Cheque. This week's new peer may have noticed.

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Debt commissioners are the Pitts - it's time they woke up

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