Obituary: Lord George
Had things turned out differently, Lord ("Eddie") George, who has died aged 70 of cancer, could have been remembered as the governor of the Bank of England who quit before completing his first term. In the event, his 10-year occupancy of the governor's office, from 1993 to 2003, was notable because he became, as the present incumbent Mervyn King has pointed out, the governor who led the Bank to independence after the 1997 general election brought in a Labour government.
Independence gave the Bank power to set interest rates and the responsibility for the control of inflation, to which George was absolutely committed. Instead of simply advising the government and managing its debt, the 300-year-old institution could finally function fully as a central bank.
George could meet other central bankers, such as Hans Tietmeyer, who was appointed president of the Deutsche Bundesbank in the same year, 1993, as George became governor of the Bank of England, on equal terms and could discuss monetary policy in the same way as other central bankers.
Although independence did not come until nearly the mid-point in George's two five-year terms as governor, he quickly earned the respect of other central bankers. When he quipped, at his farewell dinner at Mansion House, that he was leaving the realms of Who's Who for the obscurity of "Who's He?" he need not have worried, for he will be remembered as one of the most skilled central bankers ever. Universally known as "Steady Eddie", George was always much more than the safe pair of hands suggested by the label.
Although the timing of independence, a long-held ambition, just days after the Labour victory, was a surprise, George had been in discreet talks with the then opposition in the run-up to the election. This followed four years of increasing frustration with the conduct of monetary policy under Kenneth Clarke's stewardship as Conservative chancellor of the exchequer. George would spend enormous amounts of time preparing papers for his speech, arguing for a rise in interest rates. The Treasury team were also looking for an increase, but Clarke would dismiss the idea almost with a wave of the hand, citing anecdotal evidence that there was "no sign" of inflation.
On the surface, the two appeared to get on to such an extent that the monthly appearances at the committee became known as the "Ken and Eddie" show. Both appeared to be equally avuncular figures, who would enjoy a drink, a smoke and a joke. But insiders knew the show was always more Ken than Eddie. It was not at all what George wanted, but he knew he had to put up with Clarke's populist instincts and his tendency to "wing it".
George would return from the meetings frustrated that the arguments had been swept aside and was more than once heard to say, "I might just as well not have bothered." It was always a superficial interpretation that George got on better with Clarke than with Gordon Brown, his successor, but he knew there were no prizes for a Bank governor who fell out with the chancellor of the exchequer.
Or so it seemed. However, George fell out publicly with Brown over banking supervision. George believed that Brown lied to him. When the Bank was given its independence, it was widely assumed that a quid pro quo would be that it would lose the role in supervision. George sought an assurance that, before this decision was made, he would have a chance to have his contrary views heard.
Brown assured George that a review would be carried out before a decision was made, but only two weeks later he announced that supervision was, in fact, being passed to the Financial Services Authority. What angered George was not the decision itself, which was expected, but that he felt he had been deliberately misled. This was, in George's book, a cardinal sin, and he very publicly considered resigning over the issue, not least because the 700 staff employed on supervision were given one version of the future which, within days, had to be changed.
However, the following year, he was appointed by Brown for a second five-year term, but even that was messily handled. Brown appeared to be dragging his feet over his choice of governor, and when he finally made up his mind, George was in South Africa. George was told that the chancellor wished to speak to him. Not knowing whether he was about to be sacked or reappointed, he then had to sit by the telephone for nearly five hours for Brown to call with the news.
This reappointment did, however, bring about a turning point in relations between the two men. Neither of them could be described as easy characters, and both knew that the right to control monetary policy had to be re-earned constantly. Although they hardly became bosom pals, they did become much closer. In part, this was because George had got what he wanted, a second term. He knew his place in history was secure, and he began to relax. Monetary policy appeared to be an unqualified success. Inflation was under control and the Asian, Russian and 9/11 crises had all been weathered.
Although, externally, George did retain a reputation as the avuncular bon vivant, those close to him knew that behind the clubbable figure with a love of dry martinis and cigarettes lay a man who never spoke without first thinking very carefully about what he was going to say.
Staff were terrified of him, since he expected as much from them as from himself. But it was said you could put your head in his mouth and he wouldn't bite, if you knew what you were talking about. He was a demanding man, but people knew where they were with him.
George had been appointed to his first term at a particularly testing time. Less than a year earlier, Britain had fallen out of the exchange rate mechanism, at which time he was deputy governor. He was widely and correctly credited for playing a leading role in setting sterling on a stable course. Then, two years after he became governor, came the Barings crisis, when a young trader in the Far East ran up losses big enough to bring down one of the City's oldest merchant banks. George correctly judged that the collapse of Barings would not bring down the system.
During his second term, George steered the British economy through a sustained period of growth with inflation averaging just 2.4 per cent. However, George was aware, and later admitted, that consumer spending was being pushed up to levels that could not be sustained in the longer term. He was also starting to be concerned about the sub-prime situation in the United States, though he confessed he never quite grasped the risks involved.
Unlike most of his predecessors, and certainly unlike the governor before him, Robin Leigh-Pemberton, George was from a relatively modest background. Born in Carshalton, Surrey, the son of a Post Office clerk, George won a scholarship to Dulwich college, in south-east London. From there he went on to Emmanuel College, Cambridge, where he read economics.
In 1962, aged 23, he married Vanessa, the woman with whom he would spend the rest of his life, and also joined the Bank, where he would remain, excepting for secondments to the Bank for International Settlements and the International Monetary Fund, until his retirement some 40 years later. At the time of "Big Bang" in 1986, when the markets were deregulated, he could have gone outside the Bank and earned huge financial rewards, but he chose to stay. In those respects, the "steady" hat fits well enough.
When his second term expired, he declared himself "ready for retirement" and looking forward to tending his large garden in Cornwall. He was given a life peerage the following year. In 2003 he became a trustee of the Eden Project, and its chairman in 2007 until he became too ill to continue. He was also a non-executive director of Nestlé, NM Rothschild & Sons, Grosvenor Group Holdings and the Bank for International Settlements, Basel.
Despite knowing everyone who mattered, and having a knack for getting on with people, he was at heart a private man for whom family was vital. He is survived by Vanessa, whom he had known from the age of 14, one son and two daughters.
Howard Davies writes: Montagu Norman used to say the Bank of England was his only mistress. Eddie George was too fastidious to use such racy language, but the same was true of him. He loved everything about the Bank, from the pink-coated parlour stewards to the annual governor's cricket match. Each year, he assembled a team to try to beat the Bank Club's first eleven. In his last year he persuaded Viv Richards to turn out, alongside old lags like me and Ian Plenderleith.
As Viv and I were preparing to do battle, Eddie popped into the changing room to give us a word of encouragement. Sir Viv solemnly asked him how the pitch would play and what tactics he advised. Eddie began to answer, as he would to a journalist quizzing him on the inflation target, then collapsed into giggles as he saw the absurdity of lecturing Richards on his strokeplay. He was a lovely man, and much more fun to be with than his central bankish demeanour in public suggested. The Old Lady has lost a faithful admirer.
• Edward Alan John George, Baron George, banker, born 11 September 1938; died 18 April 2009