Page last updated at 14:53 GMT, Saturday, 18 April 2009 15:53 UK

Obituary: Lord George

Lord George
Edward George: "Steady Eddie"

As Governor of the Bank of England, Edward George was given unprecedented responsibility when, within days of ascending to power in 1997, Tony Blair's Labour government announced it was handing control of interest rates to the Bank.

But it did not end the tension between economists and politicians that had been a prominent feature of British politics for some years.

George was born in south London, the son of a Post Office clerk. After National Service in the RAF, he took an economics degree at Cambridge.

In 1962, the year he married, he joined the Bank of England as a trainee and started to work his way up the ladder.

Black Wednesday

He was made Deputy Governor in 1990 and emerged as a possible successor to the Governor, Robin Leigh-Pemberton.

Although he later requested he should be addressed as Edward, the chain-smoking George was dubbed "Steady Eddie" by newspaper columnists.

They saw him as a tough character who would argue strongly for economic stability.

George's time as Deputy Governor was a testing one. Having been opposed to the Conservative government's decision to join the European exchange rate mechanism (ERM), he had to deal with "Black Wednesday".

It was the night the pound was forced out of the ERM by its plunging value in the currency markets.

Then there was the world's biggest banking failure, the collapse of the Bank of Credit and Commerce International with debts of £9bn.

The subsequent Bingham report into the crash criticised the Bank of England's supervisory role in the affair.

There were also allegations it had failed to protect customers of BCCI led to long-running damages claims.

He had a cast-iron reputation for understanding the financial markets, but his analysis would sometimes bring him into conflict with chancellors of the exchequer.

Frozen salary

He supported Margaret Thatcher's monetarist stand in the early 1980s, but was deeply critical of her Chancellor, Nigel Lawson, for attempting to shadow the Deutschmark.

His over-riding philosophy was the importance of controlling inflation, allied to the need for an independent central bank which, he believed, would deliver the stability which had eluded politicians in the past.

Before taking over as Governor in July 1993, George asked for his £200,000 salary to be frozen for his five-year term of office to underline his commitment to low inflation. Later in the year, he urged companies to help by limiting profits.

When Labour was elected in 1997, they wasted little time in announcing they were handing control of interest rates to the Bank of England.

He declared he was "delighted" at this "historic moment" and Blair described it as "the biggest step in economic policy-making since World War II".

Ready to resign

But although the Chancellor, Gordon Brown, wanted an independent Bank of England, it was said he did not want George as its governor.

When the chancellor told George he planned to transfer the Bank's supervisory powers over financial institutions to a Securities and Investment Board, the governor began preparing his letter of resignation.

The prime minister's intervention ensured an agreement which left the Bank with enough overall responsiblities of the financial system to satisfy George's honour. The governor was reappointed in February, 1998, for a second five-year term.

George could sometimes seem tactless or out of touch. Once, he appeared to suggest that unemployment in the north was an acceptable price to pay for low inflation in the south.

After many years of marriage, having helped to raise three children, the man who determined how much we paid for our mortgages and overdrafts, revealed he had no idea of the price of a pint of milk.

He also confessed he knew little about the financial management of his own household. "I'm hopeless," he said.

George was knighted in June, 2000, and made a life peer in 2004.

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