Gordon Brown's second greatest triumph as Chancellor was to make the Bank of England the independent arbiter of interest rates. (The greatest was to keep us out of the euro, but he doesn't boast about that.)

The greatest damage he can do to Britain's economy at this present delicate juncture is to compromise that independence.

He came close to it early last week with remarks about how things will get better when the Bank cuts interest rates again.

The Bank's monetary policy committee very properly did nothing of the sort - no doubt after its customary examination of the finely balanced risks, not to snub a Prime Minister who deserved a snubbing.

The issue is the reappointment of Mervyn King for a second five-year term as governor this summer. Gordon has shilly-shallied so long that it has, deplorably become a political issue.

After weeks of tactful silence, George Osborne, Conservative shadow Chancellor, has yielded to the temptation of calling publicly for governor King to be re-appointed. That means Gordon cannot now re-appoint him without giving in to Tory teasing.

The governor may or may not have been right to hesitate to join the US Fed and the European Central Bank in flooding the world with "liquidity" as the credit crunch took hold. Time will tell.

The Bank's role in the Northern Rock fiasco is controversial, too. Governor King's account of it is plausible, but it differs from the Treasury's - and he has not minced his words about the difference.

All that makes his re-appointment sensitive.

What it does not alter is the Bank's astonishing credibility as the tried and tested guardian of stable prices, person-ified by its governor.

That is not an asset to squander to even up a political score.


The dreaded "N" word is injecting yet another political dimension into the Northern Rock affair. Nationalisation, we are told, would be a terrible failure because it would take the "New" out of New Labour and go back to the days before Tony Blair persuaded a Labour conference to abandon Clause Four of its constitution and drop its committment to state ownership of the means of "manufacture, distribution and exchange".

You don't hear Gordon Brown talking about "new" Labour much, but he has not been an ideological nationaliser for years. Nowadays he takes the proceeds of privatisation where he can find them.

In real life, nationalisation has not been an ideological issue for all of 30 years. Conservative Ted Heath nation-alised Rolls-Royce - arguably the most successful stroke of 20th century British industrial policy - while Labour-left Tony Benn, as Minister for Energy, privatised the first slice of the Govern-ment's stake in BP.

As to Northern Rock, you can hardly get a more abject failure than the serial misjudgments that leaves £50 billion of taxpayers' money tied into a struggling mortgage bank. The proper objection to nationalisation is that competition from a state-owned bank is by its nature going to be unfair to the rest.