The MT diary: Howard Davies

An OFR Gordon can refuse; farewell to the Great Man of the Fed; Meyer spooks GKN.

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Last Updated: 31 Aug 2010

Gordon Brown seemed to catch everyone on the hop with his decision - announced to the multitude at the CBI conference - that he is canning the legal requirement for an Operating and Financial Review (OFR). This was not quite what Digby Jones and the boys had in mind when they heard about the latest 'bonfire of controls' planned by the Government. (The seventh since 1997, by my calculation).

Most listed companies prepare an OFR with a minimum of cost and fuss, and investors like the clarity it brings to corporate reporting. The DTI was trumpeting the advantages until just the other day. The International Accounting Standards Board is planning to introduce global guidance that recommends something rather like an OFR. The Transparency Directive will require very similar disclosures, in any event. And, for good measure, the Government itself has already agreed to use an OFR approach in the reports prepared by its own departments.

Will the Treasury now produce an OFR, or not? Did it think through the implications of the Chancellor's announcement? Perhaps, if Jones' predecessor Adair Turner came out against the OFR, Gordon might be persuaded to reinstate it.

That Colossus of central banking Alan Greenspan departs this month. I've been interviewing central bankers and other financial luminaries for a BBC Home Service programme to mark his retirement. It's hard to find anyone with a bad word to say - though a few US economists feel he contributed to asset-price bubbles.

The exercise caused me to recall my first meeting with the Great Man in August 1992, when I was DG of the CBI (everyone gets a turn at Centre Point eventually). It was a sultry August day. I was on holiday with my wife and two veg, but our Ambassador suggested I should call in to explain why British businesses supported the Government's struggling ERM strategy.

Our Man even lent me a jacket and a tie to add a touch of gravitas to the proceedings.

I made my case. We could hold our position in the ERM if we toughed it out. Greenspan was polite, but clearly unimpressed - as well he might be. On the way out he asked what I was doing in DC in the dog days of August. I explained I was on holiday with the family, and that my wife, astonished by how cheap things were in the States as a result of the over-strong pound, was at a mall buying the children's winter clothes. 'Your wife's economics are better than yours,' he said with a smile. The rest is history.

Ben Bernanke's views on European monetary union are not yet known. But Greenspan's successor is a fan of inflation targets, so it seems likely that the US will soon become the 23rd country to adopt the idea - invented in New Zealand in 1989.

(The inflation target and the spear tackle are the two innovations to emerge from the Land of the Long White Cloud this century.) That will further expose the European Central Bank, which is left by the Treaty to determine its own definition of price stability, and then to meet it.

Unlike here, interest rate policy is highly politically charged in the eurozone - a reversal of past experience.

One reason for the difference is that in Britain, the Chancellor can change the inflation target if he wants. So if he were to rail in public against the Bank's policy, he could reasonably be asked why he didn't simply lift the target rate. In the eurozone, ministers have no statutory purchase on the ECB, which leads them to talk endlessly. If they held the target in their hands, it would be much harder for them to do so and Jean-Claude Trichet's life would be easier.

But this would, sadly, require a change in the Treaty. While our euro-leaders find it hard to agree on an annual budget, it is unlikely that they will launch another constitutional review.

One of the culinary delights of my year is the GKN retired directors' Christmas lunch. It's a great company, and I was proud to spend six years on its board in the early '90s - discharged only because I went to the Bank of England. But I detected some nervous faces this year. Nothing to do with the results - which are fine. No, it's the presence on the board of Christopher Meyer, he of the diplomatic indiscretions and the red socks.

Can his colleagues look forward to boardroom revelations in the next volume of memoirs? Which of them will be dubbed 'corporate pygmies' or 'simply not up to the job'? And no use complaining to the Press Complaints Commission (chair: C Meyer) if they're serialised in MT. Maybe time for a bit of rotation - just to get some fresh blood on the board, you understand.

Some of the press had a problem with Lord Turner's report: lots of numbers and long words. The FT did an excellent job over four pages, but others struggled. The old brain cells hurt just reading the intro.

None struggled more than Neil Collins in the London Evening Standard.

He gave up, ignored the arguments and let prejudice be his guide. He can't stand management consultants (Lord Turner was a McKinsey director), the CBI (another ex-DG) or Europe (Turner has a passport). So the report, without further argument, was just so much 'hot air'.

I think we are starting to see why Collins no longer features on the Telegraph back page. Fortunately for the Standard, Tony Hilton remains on top form.

- Howard Davies is the director of the London School of Economics.

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