Up the stone steps. Through the heavy doors. Into an ornate lobby to be greeted by a security man wearing a pink frock coat and a top hat. These are a visitor’s first impressions of the Bank of England. The man in the fancy clothes, Reg Shaw, has worked there for 27 years. His coat is cleaned once a month. His top hat is custom-made by Patey of Mayfair, which has been making hats since 1695 – the year after the Bank of England opened its doors for the first time. All this sends a clear message: this place is old, this place is serious, this place has its own way of doing things. Like a medieval monastery, it is walled-off and self-contained. Behind this imposing facade, which occupies a three-acre site on Threadneedle Street, is one of the most powerful institutions in Britain.
Upon entering, it feels a little like a mausoleum. The ceilings are high and there are mosaics on the floor. People speak quietly and walk with a measured tread. The corridors and stairwells form an intricate maze, in which staff sometimes get lost. It is not hard to see why some of the 2,200 people who work here fondly refer to it as Hogwarts.
Take one of the lifts below ground and the atmosphere is different, more like a nuclear bunker: the endless identical corridors, thick security doors, and the rumbling of passing tube trains make it faintly claustrophobic. This is where the gold is kept – all 400,000 bars of it, each weighing 13kg and worth £300,000 apiece. (The Bank is careful about who it lets down to the vaults, so it has its own full-time locksmith, known affectionately as Bob the Lock.)
In the wake of the worst financial and economic crisis to befall the UK in a century, the Bank of England has acquired more power than it has ever had in its 321-year history. Before 2008, it was responsible for setting interest rates, keeping gold in its vaults, and deciding what our physical currency looked like. However, in the past seven years, it has undergone a radical transformation. These days, it can affect the terms on which a household can obtain a mortgage, it is responsible for overseeing individual insurance companies and ensuring that the big banks do not go bust again.
These new responsibilities were granted by the chancellor, George Osborne, who, in July 2013, appointed a new governor, Mark Carney, to sweep the City clean. The Treasury had to pay around £900,000 a year to woo Carney away from the Bank of Canada to take up the most powerful non-elected job that the UK has to offer. The chancellor’s remit for Carney was simple: make sure there is not a repetition of the near-meltdown of 2008 and address the public perception that the financial sector has become a cesspit of venality and corruption.
It is a big task for the Bank, which is now heavily exposed should things go wrong. It could make a hash of setting interest rates. It could let another bubble inflate in the housing market. It could miss the next crisis in the financial markets by looking in the wrong place for the source of the problem.
There are already some warning signs. The Bank has been havering over the timing of its first interest-rate rise in eight years, the Swiss bank UBS has described the London housing market as an accident waiting to happen, and the Bank itself has acknowledged that half the business that goes on in the City is opaque and needs closer monitoring.
While the Bank had long been known for its secrecy, Carney’s tenure has been marked by a more open approach. In the past two and a half years, there have been more on-the-record interviews with the governor than there were with his two predecessors, Eddie George and Mervyn King, in two decades. Carney is keen to show that the modern Bank of England is more than a bunch of economists sitting above a bullion vault. The Bank has even given the public a say in the choice of which visual artist should be the face on the new £20 note, to enter circulation in 2020. Back in 2013, it responded to a public campaign to put Jane Austen on the next £10 note. This time it has run a formal consultation, during which 29,701 nominations were made for 590 eligible artists.
The fact that the Bank is now more powerful has not gone unnoticed or uncriticised. It too has been caught up in the scandals that have ripped apart the City’s reputation – the rigging of the currency markets and interest rates – and it too needs to win the trust of the public. With the scars of one crisis still livid and the outlines of the next dimly visible, the Bank is keen to explain what it does and why it does it. Its reputation – and the fate of the British economy – is on the line if things go wrong.