Is it time to sack Andrew Bailey?

Kwasi Kwarteng’s mini-Budget was botched and the government has lost control of public spending. But this morning Jacob Rees-Mogg was not wrong to deflect at least some of the blame for current market turmoil on the Bank of England. The bank has been hopelessly behind the curve on inflation – in May last year it was still confidently predicting that the Consumer Prices Index would rise no higher than 2 per cent this year. Shortly before Kwarteng’s budget it showed that it was still lagging behind by raising interest rates by 0.5 per cent rather than the 0.75 per cent which markets had been expecting.

But it is the bank’s latest fiasco that has really unsettled markets. Speaking in Washington on Tuesday, the bank’s governor, Andrew Bailey, ruled out extending beyond Friday the emergency gilt purchases which the bank has been undertaking to shore up the pensions industry. Soon afterwards, it emerged that the bank has been saying something completely different in private: telling pension funds that it may very well extend purchases after Friday. It is the kind of mixed messaging that markets hate, and they are showing it, with the pound sinking again this morning. It is bad enough having a government that seems to have lost control, announcing a massively expensive energy price cap and tax cuts one minute, then abandoning one of the tax cuts and hinting at huge public spending cuts the next minute. But to have a central bank which is nodding in two different directions at once compounds the problem.

The trouble is that by virtue of its independence, the Bank of England has been put beyond criticism by government and opposition alike. It has managed to get away with its massive cock-up over the past 12 months because no minister or shadow minister seems to be brave enough to criticise it – to do so, they fear, would be to compromise its independence. That is the problem with putting things beyond politics: public officials become as untouchable as medieval cardinals.

Liz Truss and Kwasi Kwarteng are going to struggle to keep their jobs after the debacle of the past couple of weeks. Like John Major after Black Wednesday they look doomed; there has been a huge, and perhaps permanent shift, in the judgement of the public on the competence of the government. If Truss and Kwarteng are not out by Christmas (which I think is unlikely, for all the plotting of permanently-revolutionary Tory MPs) they will have an extreme challenge in winning the next election. But what about Andrew Bailey? If ever there was a public official who deserved to be relieved of his responsibilities it is surely him. Gordon Brown’s decision to make the Bank of England independent in 1997 was hailed as a triumph for many years afterwards as inflation remained under control. We are now seeing its negative side.