Till Time's Last Sand

by David Kynaston

  For all these understanding words, King himself remained uncompromising about what he wanted in his own patch. ‘A priority would be to recruit quality from outside,’ he told Pennant-Rea later in 1994, adding that in terms of the initial two-year training period for graduate recruits ‘he would also like people to spend more time in his area when they first joined the Bank in order to properly consolidate what they have learned at University’, while ‘looking ahead to the future, he said that he would like to recruit more PhD students’. Two years later saw another telling moment:

  Mr King noted [at a meeting with the governor and deputy governor] that he was aware that some people in Monetary Analysis were thought to be arrogant and did not communicate adequately with the Bank. Allied to this was a reported feeling in some quarters that Monetary Analysis is a clique. He felt that such arguments were exaggerated …

  Mr King said that he was still worried about any plan to bring substantial numbers of non-economists into FSW [Financial Stability Wing] who would have no Bank-wide utility. He firmly believed that economics was the right qualification for people joining both wings of the Bank.

  Undeniably the economists were buzzing in the mid-1990s. Among those recruited in 1994 was the former Guardian journalist and future government minister Ruth Kelly, who for two years was part of the team compiling the quarterly Inflation Report. ‘Being offered a job at the Bank was an unprecedented opportunity,’ she recalled in 2002. ‘I was hugely impressed with the rigour with which Bank staff approached issues – very different from the way journalists approached them.’38

  Tercentenary celebrations and growing influence notwithstanding, these were not happy times across the Bank as a whole. ‘EDP Talks Break Down’ was the main front-page story in March 1994 in the first issue of a new staff paper, The Bank Fortnight, detailing how BIFU was that week balloting the Electronic Data Processing staff on strike action over the Bank’s proposals for a new pay structure. In the context of management having written to each member of EDP staff, ‘inviting them individually to indicate whether they were willing to accept the Bank’s package and whether they wished this to be reflected in March salaries’, a BIFU press release accused the Bank of ‘living in the 17th Century’. A year later the Court formally endorsed an end to the traditional approach to personnel matters. ‘The shift from a 1950s paternalism (with its implication that there was automatically a job for life) has left a vacuum, with staff expectations that are inconsistent with 1990s economic realities,’ observed Pennant-Rea in the key paper. ‘There is thus some distrust of the Bank as an employer.’ And: ‘Post-Ashridge changes have brought to the surface some sizeable staff mismatches, with more limited senior opportunities; a move away from paternalism; the absence of effective management development programmes; continuing relatively low staff turnover but above-average absence rates caused, in part, through additional stress; and inconsistent messages to staff.’ What was now needed, in order ‘to attract, retain and motivate quality people’ – in a larger context in which ‘the majority of staff cannot have, and should not expect to have, continuous advancement over 30–40 years’ – was ‘a commitment by the Bank instead to help the continuous personal development and re-skilling of staff’.

  Soon afterwards, one of the senior banking supervisors, David Swanney, had a heart-to-heart with his chief, Brian Quinn:

  He [Swanney] said he thought the concept of the reorganisation of the Bank was good, but had not been well handled, particularly the treatment of people; and he mentioned the treatment of some long-serving staff as having been particularly brutal. He said that in his experience people were complaining but still got on with the work. Nevertheless, we could no longer rely upon their commitment …

  There had been too abrupt a change of culture from the old Bank to the new approach, by which he meant that people had been obliged to accept a very rapid switch in their career expectations and outlook. He thought this might have been introduced more gradually …

  He said he was acutely aware he was not an economist, not because he felt that it exposed any great deficiency in his ability to do his job, but really because he thought it might cause an obstacle to moves in other parts of the Bank in the course of his career. He asked whether there might be any short courses available for people like him so that he might do something to fill in the gap.

  At the heart of the new personnel strategy was internal appraisal. ‘We managed,’ the governor was informed in June 1995 after a negotiated settlement with BIFU, ‘to get the union to “accept” that the principle of merit bonuses will be a main element of our remuneration structure from now on’; though the following February the new deputy governor, Howard Davies, was lamenting the lack of frankness in performance appraisals and noting how the recent round of comments on the forms ‘suggested that all was for the best in the best of all possible worlds, and that the performance of HoDs [Heads of Division] was almost entirely even across the Bank’.

  Another difficult area in this changing environment was the delicate and emotional issue of voluntary severance. ‘Many staff (particularly those approaching mid-career) have factored the expected severance windfall into their long-term planning,’ observed Sue Coffey in May 1996; she also highlighted ‘the reactions of those satisfactory and good performers who have been refused severance’, even leading to ‘protracted depressive illnesses brought on by the refusal’; and finally, there was what she called the ‘morbid fear of redundancy’, or in other words ‘the cultural difficulties for some staff who, even with the support of the Transition Centre, an exit secondment and the severance package, are unwilling or unable to accept leaving the Bank’. A Darwinian might have argued that the underlying problem for those unfortunates was that they had existed too long in an unnaturally sheltered, monocultural environment. ‘What I found disappointing,’ recorded Davies later in 1996 after a visit to the soon-to-close Birmingham branch, ‘was that most of the staff, even long-service career staff, had done no external training whatsoever’ to improve their subsequent job prospects. And he reflected: ‘I imagine that this is a side-effect of the “cradle to grave” proposition which the Bank has made to staff in the past.’39

  It was an indication of how seriously the Bank took all these related matters that in 1995 it commissioned its first comprehensive (though excluding the Printing Works) staff attitude survey. The process, undertaken by International Survey Research Ltd, began in May with fifty-nine diagnostic interviews with a cross-section of staff. Some of the reactions were positive:

  The re-structuring has given people a much clearer focus on their own and the Bank’s roles.

  The Bank has a very collegiate culture. The atmosphere is a supportive, co-operative one, with very little backbiting or politicking.

  The Bank is still the most amazingly generous employer, and in that respect I’m very pleased to work here.

  Staff are still delivering the goods to a very high standard. If something needs to be done everybody will rally round.

  This is an exciting time for the Bank. We have a prominent role in influencing policy, and we seem to be getting it right for a change.

  The great majority of quoted reactions, however, were at the more negative end of the spectrum:

  The Bank’s real structure is a number of fiefdoms. The reorganisation hasn’t changed that.

  What we do in the Bank is conceptualise, analyse and criticise. What we don’t do is do. We’re reactive, not proactive. We can’t institute change and we can’t manage it.

  Staff are now very cynical. The traditional Bank culture is being eroded but nothing positive is being put in its place.

  The problem isn’t the ‘reactionary old guard’. Many of them genuinely care about their staff. The problem is the ‘uncaring new guard’. Most of them don’t give a damn.

  The Bank is very hierarchical. People are sometimes inhibited from responding to senior management by a feeling that to do so would be disrespectful.

  The
smallest possible minutiae are passed right up the line. Responsibility rests entirely at the top.

  If you want to retain capable people in a Mateus Rosé structure you have to delegate authority.

  Everything the Bank does is geared to the Officials. The Officers are an after thought. [The officials/officers terminology was a short-lived replacement for the previous distinction between principals and clerks.]

  Staff aren’t recognised for good work. They’re not penalised for bad work either. It doesn’t matter what you do really.

  The pyramid has narrowed, but we still have too many people in senior positions who are past their sell-by date.

  The Bank is seen to have acted in bad faith by abandoning the 40 year career.

  We’ve managed to keep people so far by a mixture of job interest, career mobility and camaraderie. But we’re now dealing with Thatcher’s children. We must find some more money from somewhere.

  We give people generous appraisals, and then fail to meet their expectations due to budgetary constraints. We therefore have a morale problem which is entirely of our own making.

  Nobody is ever praised. We never say ‘thank you’. It’s alien to the ethos of the Bank.

  We’ve had 15 years of death by 1,000 cuts. It’s bitten deep into the psyche of the Bank. Morale is shot to pieces.

  A final comment was, in its way, perhaps as damning as any: ‘I don’t boast about working for the Bank as much as I did.’

  Then later that summer, between late July and early September, came the full-scale survey, with 3,010 questionnaires sent out and 1,911 returned. What emerged, as summarised in October 1995 by ISR’s managing director, Roger Maitland, was a mixed and even contradictory picture. Seven areas coming out broadly on the plus side of the ledger were followed by nine that clearly raised troubling issues:

  Employees are proud to be associated with the Bank.

  They understand the Core Purposes of the Bank and believe that it is highly regarded by its customers.

  Downward communications are rated relatively favourably.

  Divisional management are viewed in a relatively positive light.

  Employees are involved in their work and their contributions are recognised.

  Employees understand how their job performance is assessed and believe that it is assessed fairly.

  Pay and benefits are responded to favourably.

  The Bank is seen as being poorly managed and as lacking leadership and direction.

  Teamwork across the Bank is seen as being poor, and employees are not well informed about the work of other Divisions.

  The culture of the Bank is seen as being ‘closed’ and as resistant to challenge and innovation.

  Bureaucracy is felt to be rife and decision-making to be too slow.

  There is a lack of delegation and employees feel that they are not respected.

  Technical skills are valued at the expense of people management skills.

  Performance management is felt to be poor. Neither superior performance nor expertise are adequately recognised.

  Opportunities for either personal or career development are seen as being very limited.

  Confidence in the future is low, and senior management are felt to be doing a poor job of managing change.

  Tellingly, only one in six believed that action would be taken to address the issues raised by the survey; as for those replying in the affirmative to the question of whether they thought that morale could be said to be good across the Bank as a whole, the figure was a devastating 4 per cent.

  Later in October, an early high-level reaction to the survey came from King, who had seen a disaggregation of its results:

  There are significant differences between Officials and Officers … What is striking is that in both wings [monetary stability and financial stability] those primarily involved in analytical jobs respond much more favourably, especially towards ‘change in the Bank’. The least favourable responses come from EDP staff, Property Services staff, and Bank Officers generally. This is not surprising. Since Ashridge we have done nothing on pay and career structure for Officers. And the Bank has been contracting steadily since exchange controls were abolished in 1979. There are management problems in the Bank … But I feel the impression given to Court that the morale position is uniform across the Bank is in fact misleading.

  The final sentence of King’s memo drew short shrift from Sue Betts, a senior manager in HR. ‘This is pure rubbish,’ she scribbled on her copy. ‘Only 76 people commented favourably on morale – even if all were Officials (the only group M. is interested in) the result would still be very bad indeed.’ Her broad thrust was surely correct: the following month, at a meeting with Davies to discuss the survey, the heads of division ‘described the reactions they are encountering from staff – fatigue, resistance, distrust etc’. What was to be done? ‘There are no easy, pat answers,’ Davies confessed in the Old Lady the following spring. And though he took comfort in the fact that ‘we are not alone’, given the ‘mounting evidence that employee satisfaction across the UK has declined markedly in recent years’, and also pointed to the irrefutable truth that ‘by most external standards the Bank of England is still a very stable culture, with a great number of long-serving staff, and relatively low turnover’, he did not seek to deny that ‘a dangerous gap has opened up between the managers and the managed in the Bank, a gap which urgently needs to be closed’.

  That would be the challenge ahead – a challenge in an environment in which, as Davies succinctly put it, ‘the number of essentially administrative and executional jobs is on the decline, while the number of analytical occupations is rising’. Yet, however that challenge played out, the Bank would still be the Bank. A small but emblematic issue arose in February 1997: what was the Old Lady’s attitude to be towards Red Nose Day? ‘The Governor and Deputy Governor agreed that the Bank could not be involved in an official capacity.’40

  Back in the early 1990s, the collapse of BCCI in July 1991, followed in October 1992 by the Bingham Report, inevitably had regulatory-cum-supervisory implications. ‘Alertness is something which the Bank has had cause to address,’ acknowledged Leigh-Pemberton immediately after Bingham. ‘The criticisms of lack of vigour in pursuing signals of possible fraud have been well publicised,’ he went on to note in his Mansion House speech, ‘as I trust has our response involving establishing a Special Investigations Unit and a Legal Unit under seasoned experts recruited from the professions; strengthening our capacity for on-site examination; enhancing the training of our supervisors; increasing the use we make of the Board of Banking Supervision; and participating in the new machinery which the Chancellor has set up to co-ordinate responses to fraud amongst supervisors, and other prosecuting authorities.’

  Would it be enough? ‘Supervision: recognise need for open financial centre with sensible regulation, but does not want crooks or scandal,’ was the crisp summary in September 1993 of Kenneth Clarke’s views to the governor, while three months later George and Quinn were at the Treasury to discuss a recent study it had undertaken on banking supervision. George moved quickly on to the front foot. He was ‘surprised that the Bank was characterised as being entirely reactive’; he observed that the study failed to emphasise ‘the dogs that did not bark, such as the LDC debt crisis’; he argued not only that ‘not every bank failure should be seen as a scandal’, but that ‘expectations were too high, the question was how to anchor them’; while as for the Bank’s style of supervision he pointed to how, inescapably, ‘there was a conflict between the need for confidentiality and the need for accountability’. There ensued some dialogue with the Treasury’s Rachel Lomax. She ‘said that there remained a perception, stemming from the Bank’s history, that the Bank was the head of the City club’; George ‘denied that the Bank was protective of banks’, adding that ‘the Bank’s relationship with the commercial banks was quite different from a decade ago’; with which she ‘agreed’, noting that ‘there was now very limited sc
ope for suasion’. Discussion then turned to the balance between the formal and informal approaches to supervision, starting with George:

  The Bank favoured the supervisory approach, rather than the regulatory approach, and this had been endorsed by Bingham. What the Bank had learned from the BCCI episode was that the informal system worked well where a basis of trust existed, but that the Bank had to be very sensitive to when that relationship had broken down, and to maintain an ability to change gear. But the trend was towards regulation.

  Mr Quinn said that the Bank was now more systematic in distinguishing between whether or not its powers were exercisable and whether they should be exercised. This meant that the Bank thought very carefully about whether it was deliberately pursuing a voluntary remedial path, rather than a path involving using its powers.

  Mrs Lomax agreed that she had seen a pronounced change in the Bank’s attitude. She thought that there had been a distaste for using powers in the mid-80s.