The politicisation of monetary policy-making in postwar Britain

In the context of the move to grant operational independence to the Bank of England in 1997, this article analyses the extent to which a 'depoliticisation' strategy was required to prevent ministers adjusting monetary policy for short-term political gain. It does this by assessing the degree to which monetary policy-making had become politicised in postwar Britain. The article argues that the politicization of monetary policy-making has been widely misunderstood and that a distinction needs to be drawn between Treasury politicization, understood as the Treasury gaining ascendancy over the Bank, and Ministerial politicization, understood in terms of pressure being brought to bear on the Chancellor to alter monetary policy for short-term political gain. Contrary to most existing accounts, it notes that the Bank retained an extraordinary degree of autonomy until the early 1970s when in the face of the Competition and Credit Control fiasco, its authority was weakened, and the Treasury finally took the reins handed to it by the Radcliffe Committee over a decade earlier. By way of conclusion, the article begins an assessment of whether Ministerial politicization has been a feature of British economic management and offers a tentative suggestion that the available evidence does not support the view that politicians have sacrificed the longer term 'national interest' in the pursuit of short-term political gain. © 2007 Palgrave Macmillan Ltd.