BoE Strategic Review. The Bank’s regional agencies and the Centre for Central Banking Studies

Looking a little closer at the institution, and what might be ripe for ‘Review’.

The first thing that comes to mind is the Bank’s Centre for Central Banking Studies [CCBS].  This is a Division of 5-10 economists, including management, and some support staff, contracting in help from elsewhere in the institution, that delivers training courses in economics and finance to other central bank staff, predominantly those from developing or transition economies.  The CCBS attracts great people, partly because it offers a quasi-academic life for those working there, removed from the hurly-burly of the policy work, instead teaching, traveling, and offering time for research that is less directed.  Many of the Bank’s most talented and disgruntled researchers have found a home here, and been managed sympathetically, often in the interim few years before these individuals exit into a university.

What’s wrong?  Well, CCBS I would guess, historically derives from the UK’s ex colonial role.  Why is the Bank taking upon itself to spend money delivering courses to foreign central bankers?  Especially when – if you accept my jaundiced view that technical skills of the Bank’s own employees are neglected – there is a training problem at home?  Many CCBS courses are open to BoE staffers, but the vast majority of the effort is directed at this foreign aid function.  As such, this does not strike me as a core part of the central bank business.  Foreign aid decisions should be taken elsewhere, consciously, not opaquely inside the central bank.  At a time when the core policy functions are short of technical resources, it makes no sense to me to fritter them away on teaching others.

A second function that deserves scrutiny is the Bank’s network of regional agencies.  In days gone by, these were fully functioning offices immersed in note distribution and many of the core businesses of a paper-based central bank.  Now, they are slimmed down operations with Agents and deputies visiting scores of contacts in business, and coordinating the regular visits of MPC and Executive Team members.  Sounds good, no?  These visits serve two purposes.  The first is regular PR.  The Bank is shown to have a listening ear to business’ concerns.  The second is intelligence gathering.  The interviews and conversations are ‘scored’ and aggregated and stories taken back to the regular monthly briefing meetings for MPC.

OK, first comment.  The intelligence gathering is done by mid to late-career staff most of whom have never worked as an economist or statistician, and none of whom are professional survey researchers.  If this intelligence is important, then the lack of science applied to the process – compared to other bodies who do the same job, and compared to the care taken in other bits of the Bank’s economics analysis – is inexplicable.  Sampling is haphazard and unscientific.  Those compiling the Labour Force Survey or working in YouGov would wonder that the staple of stratified random sampling is ignored.  Even with such science applied, as, with, say the LFS unemployment numbers, the result is a noisy signal on true unemployment, but where we understand the noise.  The Bank’s Agency material is nowhere near even that, and there is no hope to understand the noise.  Moreover, the quality of the data is impoverished further by the fact that the design of the questions posed themselves is done by amateurs, neglecting another few decades of expertise accumulated by professional survey researchers.

It used to amuse me to hear MPC members regularly asked what they thought the most important information they encountered in the course of their briefing, and to a person they would always point to the information from the Agents.  This was pure politically correct PR, to present themselves as listening kind of people, not vicious rate-hikers indifferent to the plight of business.  And it was incongruous with the way they used to behave with the Bank’s Agents themselves, who, charged with delivering the murky results of their ‘surveys’, and often uncomfortable with formal statistical analysis, would regularly be torn apart by MPC members looking for sport.  I recall one butting in:  ‘Excuse me : do you mean the rate of change, or the rate of change of the rate of change, or the rate of change of the rate of change of the rate of change?’  [with scarcely concealed irony].

The Bank has managed to professionalise this activity somewhat over the years, and the Agencies themselves are in a continual mode of cost cutting, cramming themselves into ever leaner premises.  But.  The basic philosophy of intelligence gathering is still amateur.  My suggestion:  open this function up for Review and consider intelligence gathering by outside, contracted survey professionals.  Mixing intelligence gathering with PR makes for bad intelligence.

What about the PR?  Well, here, personally, it makes me queasy that money is handed out on such a large-scale for an essentially PR function.  Can’t public bodies just do their job at minimum cost, and avoid spending cash on persuading us what a great lot they are?  The modern era seems to suggest not, and most public services have improved at the same time as their providers have got in our faces about their loveliness.  So there is clearly correlation.  Perhaps PR does help.  If we have to have it, though, why skew so much of it to these invisible one-on-one meetings with businesses?  Or private dinners?  What proportion of these visits involve a meeting with the workers?  If PR is the purpose, why not spend time visiting other public bodies?  The impression got is of the Old Bank, cozying up to men in suits who make the money, in private, so that they can quietly reassure them that the Bank is working in their interests.  And if we have to have PR, the Bank should call it that, and then add it to all the other money it spends [on its education program, the website, other media activities] so we can take a look and ask whether that’s a sensible proportion of the seigniorage to spend, or whether more of the money could be remitted back to the Treasury.

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