Till Time's Last Sand

by David Kynaston

  The tercentenary in 1994 was not the only anniversary that year; it was also 100 years since the recruitment of the first women to the Bank’s clerical staff. By this time there were some distinct signs of progress – Merlyn Lowther was made deputy chief cashier in 1991; Frances Heaton, director general of the Panel on Takeovers and Mergers, became in 1993 the first woman to be appointed to the Court; Carol Sergeant later that same year was promoted to the rank of senior official, as deputy head of Banking Supervision – but overall the Bank remained a very male-dominated organisation. ‘There is still a glass ceiling,’ Anne Skinner told the Old Lady in 1992 as she prepared to retire, having risen to become head of the Administration Division and also a senior official. ‘Men choose men.’ Her interviewer asked why that should be. ‘They feel more comfortable,’ was her incontrovertible reply.33

  Irrespective of gender, the big domestic picture in the 1980s and 1990s was of the Bank starting seriously to slim down. During 1979 the average number of staff employed (banking staff plus technical and services staff plus Printing Works staff) was 7,700; during tercentenary year, the equivalent figure was 4,440. Two years later, in May 1996, a lengthy paper on severance by Sue Coffey (an analyst in Personnel) provided helpful context:

  As with many organisations operating in dynamic business environments, the Bank has been forced to streamline its practices, upgrade its technology and, consequently, to reduce numbers. Largely, this has been achieved through natural wastage and voluntary severance schemes, although it has been necessary to raise the question of enforced redundancies on a number of occasions – following the relaxation of exchange controls in 1979, closure of note-centres at Newcastle and Glasgow in 1981 and the closure of the Liverpool and Southampton Branches in 1987 and, of course, at present, the rationalisation of the remaining branches.

  The branches indeed seemed during these decades under almost permanent review. ‘Changes by the clearing banks in the way in which they handled notes, involving in particular the increased deployment of used note sorting machines, were beyond the Bank’s control,’ Blunden pointed out in 1986 to a union representative, adding that ‘it was an unfortunate fact of life that the present areas of growth in the Bank’s work were concentrated in the regulatory and supervisory realms and were essentially London-based’; three years later, he observed to senior colleagues that ‘our banking work there was declining, partly because an increasing amount of Government work was put out to tender’, leading in turn to ‘over-staffing’; and in 1996, the year that Newcastle was closed, George explained to the chancellor how the Bank was ‘rationalising’ the role of its branches: ‘They were pulling out of banking business and their role in the note issue would be substantially reduced. However, he wanted to strengthen their role in gathering economic intelligence. The net effect would be to reduce significantly staff and office space in the regions, but the number of agencies might be increased.’ In London itself, an emblematic moment was the complete departure by 1992 of the Accountant’s Department – following years of falling numbers because of computerisation – to a new home in Gloucester, leaving just the odd Bank outpost at New Change. More generally, what had traditionally been an organisation long in tooth – prizing above all else the wisdom of practical experience and institutional memory – became during this period distinctly less so. ‘The Bank has experienced a significant reduction in its older workforce in the last few years,’ noted a senior executive in May 1997, offering a twofold explanation. ‘Firstly, the Bank needed net reductions in staffing to cope with reduced workload in some areas (notably exchange control and gilt registration). But, secondly, the skill mix required in the Bank was changing quickly. Many of those who had been working here for a large number of years were not equipped with the kinds of analytical skills which are in the greatest demand across the institution at the present time.’34

  Little of this was brilliant for staff morale. Back in September 1983, shortly after becoming governor, Leigh-Pemberton had a lengthy encounter with Ray Shuttleworth of the Bank of England Staff Organisation. ‘Although his manner was entirely affable,’ the note for record observed of BESO’s man, ‘he was unable to avoid a slightly didactic approach, with a good deal of finger-wagging.’ As for substance:

  Shuttleworth freely acknowledged the difficult position of the Bank with regard to cash limits [imposed by the Treasury on public bodies since 1980]. Nevertheless, many Bank staff felt that over the last three or four years their pay had fallen noticeably behind that of their traditional analogues. He thought that middle and senior management were particularly affected by this. As a result, considerable resentment was building up. On the other hand, Shuttleworth admitted that the Bank remained an attractive employer in today’s circumstances.

  Tellingly, he added that he ‘regretted the increasing tendency for the Bank to act not as one integrated institution, but as a series of individually-directed components’.

  More broadly, with promotions blocked and pay differentials (especially with the Treasury) eroded, just as the City at large was starting to revel ostentatiously in serious money, the Bank in the mid-1980s found itself the subject of some rather fundamental soul-searching. Admirably the Old Lady published during these years a trio of notably objective assessments.

  ‘Few of us in the Bank, if we are really honest with ourselves, have much to complain about with regard to the dissatisfiers, such as salary and working conditions,’ reflected Mark Stephenson in December 1984. ‘The Bank, even in these days of public sector wage restraint, have always been a good employer, endeavouring to pay us fairly for what we do and to take a keen interest in our welfare.’ Even so, he accepted that ‘the log-jam in promotions’ was having detrimental consequences for ‘ambitious people’ at the Bank: ‘They see no prospect for self-realisation because there is little recognition of achievement nor evidence of advancement. This has a counter-productive affect because these people no longer approach their work in a creative manner. They begin to tick over, doing just enough to stay out of trouble but never injecting any new ideas into the job. Confronted with the prospect of waiting many years until the next promotion, there remains little incentive to work harder because, no matter how good your reports, promotion will not come until you reach the median age for someone of your potential.’ A year later the magazine’s editor, David Pollard, declared that, in comparison with the 1960s, ‘there can be little doubt that the bulk of the staff are less satisfied with their lot now than they were then’; and the final paragraph of his editorial had a particular personal resonance:

  Perhaps the greatest change that I think I can see is the loss of the pride, if that is the word, on the part of the staff that my father felt in working for the Bank. His Bank was more than adequately resourced, its image in the outside world was impeccable, its staff were molly-coddled and therefore its greatest ambassador. The leaner, meaner Bank we know today seems somehow to have jettisoned the staff’s goodwill and pride in the establishment, the sense of humour of old has been replaced by cynicism. But lean, mean commercial companies, driven by the profit motive, do increasingly imbue their workforce with a corporate loyalty (and not just in Japan); it can be done, it is imbued professionally and presumably it is cost-effective, so when will we see it again?

  The third of the trio was Michael Pickering, whose letter to the Old Lady in March 1986 was sent from the Register Office. Not only did he deny that ‘the gravy train’ had ‘hit the buffers at 50 mph’, as opposed to having ‘undoubtedly slowed down’, but he called on fellow-staff to stand back a little as they contemplated their situation:

  Unlike a large proportion of the working population we don’t have to pay the full market rate for our housing loans; unlike teachers we don’t have to suffer abuse from a hostile press and an uncomprehending public for demanding a reasonable salary for a thankless task; unlike transport workers and nurses in casualty wards we don’t spend much of our working time in fear of being beaten up; unlike miners (and others
) we aren’t at risk of industrial disease; unlike workers in private enterprise we don’t live in fear of being eased out of our jobs through takeovers or through a simple failure to deliver a maximum performance at all times.

  ‘Yes – we sometimes think about the outside world,’ he concluded in Eliotic mode, ‘but not all that often, because “human kind cannot bear very much reality” and if we thought about it all the time we should probably cease to function.’35

  Over the next seven or so years, neither Leigh-Pemberton as governor nor Blunden and George as successive deputy governors were inclined to pursue a major internal shake-up. But in 1993, with the arrival of Pennant-Rea as a deputy governor eager to exercise an outsider’s dispassionate perspective, that changed. In August, barely a month after starting, he shared his early impressions at an Executive Committee (EXCO) meeting. He ‘wanted to avoid giving the impression to the Bank’s staff that the Executive was only interested in shrinking the Bank’; but, he went on, ‘the ratio of support staff to total staff in the Bank seemed very high’, given that he would have expected a figure like 15 per cent though it was in fact 30 per cent; and he noted that he ‘found the Bank’s approach to surplus support staff hard to understand’, in that ‘we were honest in identifying staff who were not needed, but did not then ask them to leave’.

  That autumn saw two significant papers, in the context of an ‘away weekend’ having been arranged by Pennant-Rea for later in the year to discuss the Bank’s organisation. One, co-written by Pennant-Rea himself, began with some striking assertions:

  The Bank has long seen itself as a centre of excellence, whose comparative advantage is partly in market expertise but also in intellect. That requires staff who are bright and versatile. Such people are in short supply and the subject of fierce competition. Moreover, in our recruitment of graduates we have narrowed the field by concentrating mainly on economists rather than on the full range of university disciplines.

  Apart from the narrowing of our catchment area, three things have changed recently. First, our salaries are increasingly uncompetitive, certainly with the best firms in the City. Second, new graduates have a new attitude: fewer now look for long-term careers. The increase in job-hopping means that the Bank’s offer of job security is no longer the pull that it used to be. Third, significant over-staffing in the past enabled the Bank to cope with relatively few people of high ability and a large number of moderate performers. Today, the Bank is leaner: the fewer the people, the better they must be.

  The paper also offered a cultural analysis. ‘Many decisions’ were ‘routinely taken at a higher level than is actually necessary’; it was ‘still far too common’ for individuals ‘to produce pieces of work without having much idea of the underlying purpose or, indeed, ever getting a clear feel for how that information is used’; and ‘the balance between praise and blame is wrong’, attributable partly to ‘the Bank’s traditional concept of excellence, in which mistakes are not easily tolerated and perfection is taken as the common currency’. The other paper was by someone, Pen Kent, who was wholly an insider, albeit a notably cerebral insider:

  The Bank must be as near a perfect example of a classical bureaucracy in the jargon of management theory as it is possible to create. Bureaucracy has become a term of abuse, but it need not be. It embodies values and behaviours which have a reason peculiarly apt for the Bank because of its role. These include a hierarchical structure calculated to produce consistency of product and accountability. It does not do for a public body for example to seem arbitrary in its application of regulation. This concern, taken to an extreme, can lead to upwards delegation so that only the seniors have the power to communicate with the outside world. Do you recall the ban on anyone below the rank of Zone 1 (b) signing a letter leaving the Bank, which only ended within our own career span? Another value is that of perceived equity of treatment for all Staff – to protect individuals from favouritism or victimisation – hence the elaborate rituals of appraisal, now called assessment. This combination of hierarchy and equity makes our staffing arrangements relatively inelastic, as we are now finding out to our cost. It is possible that a culture change could deliver more efficiency gains than any reorganisation.

  ‘However,’ concluded Kent, ‘our international stature as a central bank far exceeds the UK’s global weight. We must be doing something right!’36

  The brainstorming weekend took place in December at Ashridge Management College in Hertfordshire; over the next few months, three working groups, reporting to Pennant-Rea, thrashed out details; in April came the announcement to staff; and from 4 July 1994 – just over three weeks before the tercentenary – the Bank had a new structure, amounting to the most significant internal shake-up since 1980. In essence, its activities were now divided into two broad wings, supported by a central services area. One wing was concerned with monetary stability; the other wing was concerned with financial stability, including the supervisory aspect; and the casualty was the International Divisions, with some of their members allocated to the two new wings, but also involving a degree of ‘letting people go’ hitherto not seen at the Bank. Undoubtedly it was Pennant-Rea who particularly pushed through the restructuring, but it is likely that he had the wholehearted support of the governor. ‘There has for many years,’ George had observed in 1992, ‘been something of a struggle to persuade the people in International Divisions of the relevance of much of their work to the work of the rest of the Bank. This is, in my view, partly because historically the work has been to study overseas economies etc almost for their own sake.’ Pennant-Rea himself told an interviewer, shortly before the restructuring took effect, that there was a threefold rationale:

  One of the things that struck me when I arrived – and has struck other people as well – is that quite a few people here do not see the connection between what they do and the Bank’s ultimate purposes. I think the Bank’s employees would like to know where they fit into its ultimate goals. So that’s one important focus.

  Secondly, we will bring the operational work and the analytical work closer together. Very often you have had people doing things – say in monetary policy or banking supervision – and some distance away you have a bunch of people of shouting ‘Watch out for this!’, ‘Watch out for that!’ These are the analysts looking at, say, the economic background; and the distance between them and the operational people means there is a risk that their words get lost in the wind. As far as one can, one needs to get them working close together so that the operational person can turn to the analytic person sitting at the next desk for his views. Those links are there in the reality of our work and we needed to find ways of making them as close as possible in the structure of the organisation.

  Thirdly, we will make sure that we have the staff – numbers and quality – in the right places to match the demands made on them. One of the features of a well-established, multi-winged bureaucracy is that you tend to get an imbalance between resources and needs. This is difficult to change within an existing framework, but once you shift that framework, you have a once-in-a-decade opportunity to get the balance right.

  Sadly or otherwise, an in-house foreign office no longer had a place in the trimmer, more focused Bank of its fourth century. ‘It will be some time before the effects of the Ashridge restructuring become clear,’ noted the Financial Times’s Peter Norman on tercentenary day. ‘But it would be unwise to assume it marks the end of change at the Bank.’37

  Would there be parity of esteem between the two wings? Pennant-Rea’s interviewer put it to him that ‘all the glamour goes to people involved in monetary policy and all the brickbats to people in supervision’; but the deputy governor was adamant that ‘the two sides will be seen as of equal importance in terms of numbers, intellectual content and public profile’, adding that ‘there is no sense in which one is the Cinderella’. Within weeks of the new structure becoming operational, EXCO had a revealing discussion. Expressing concern about the possible creation of ‘tw
o banks with little mobility between them’, George was worried about a situation in which graduates recruited as economists would tend not to move from monetary analysis to financial stability, while non-economist graduates (by this time usually less than half the annual graduate intake) would likewise tend not to move in the reverse direction. ‘Mr Sweeney [Tim Sweeney, management development manager] said this was the reality already. Many economists, especially MSc economists, already wish to work only in areas involving primarily economic analysis.’ On which Mervyn King, the executive director in charge of the monetary analysis division of the Monetary Stability Wing, commented: ‘The challenge was for the Bank to motivate them [the graduate economists] to be interested in central banking through the work that they were given. At present the prospect of making what was perceived to be a big switch from economics to other work was terrifying for many junior staff.’