Andrew Hewitt
Sunday 1 March 2026 was the 80th anniversary of the Bank’s coming into public ownership, following the Bank of England Act 1946. It was the first of eight major nationalisations by the post-war Labour government and the only one not to be later reversed, in whole or in part. Some opponents, at the time, were said to consider it a revolutionary ‘measure of first-class importance’; others considered it inconsequential. Although it was a defining point in UK financial history, it did not feature highly in the public consciousness. Yet it laid enduring foundations for the Bank’s operational and financial independence, carefully balancing powers to act in the public interest with limits on political interference.
The Bank’s Governor at the time was (Lord) Thomas Catto – or ‘Catto of Cairncatto’, as he often liked to style himself. He was, according to historian David Kynaston, ‘a canny, obstinate Scot’, who had started his career as a clerk in a shipping company, and worked his way up the merchant banking ladder. He and the great economist John Maynard Keynes worked so closely together during the war as senior government advisors at HM Treasury – Keynes as the great intellectual force, Catto expertly filling in the practical details – that the pair were affectionately known as ‘Catto and Doggo’.
Lord Catto of Cairncatto, Governor of the Bank of England 1944–49 (archive reference: 15A13/13/1/3/18/2).
This familiarity and trust with Treasury officials, and his strong working relationship with Labour’s first post-war Chancellor, Hugh Dalton, enabled Catto to work very effectively behind the scenes to, in his words, ‘secure the adoption of the least possible disturbance to the existing set-up’ in the Bill to be presented to Parliament. The Bank would remain organisationally independent from the civil service, and would gain a broad power to request information from, and make recommendations to, bankers ‘in the public interest’. And HM Treasury would, if necessary in the public interest, be able to give directions to the Bank – but only after consulting its Governor, and not with respect to individual bank customers. The ‘public interest’, however, remained undefined (the Bank did not receive any formal statutory objective until 1998, with monetary policy independence).
Crucially, Catto persuaded the Treasury to omit a provision from the Bill that would have empowered the Bank to regulate the proportion of assets of different descriptions that banks may hold. The Bank’s archive contains Catto’s handwritten note (below) of a meeting with Dalton in August 1945, in which Catto emphasised the dangers to public confidence of such an invasive power – ‘One step at a time’, he urged! This, and other stories about Catto’s influence on the Bill, is told in more detail by Austen Saunders’ Bank Underground post from March 2021, and in John Fforde’s official history of the Bank.
Governor Thomas Catto’s handwritten record of his meeting with Chancellor Hugh Dalton, of 17 August 1945, from the Bank of England archive. ‘… In particular Paragraph 7 is very dangerous at this stage. It is not part of taking the B of E into public ownership and it is only to the latter that the Government is committed. Then why go further at this stage. Clause 7 is really taking powers not only of bringing the B of E under public ownership but bringing all banks under public control. That is something on which public opinion has not been tested and will be very devastating to confidence: moreover it is completely unnecessary. One step at a time. CofC ; [‘Catto of Cairncatto’] 17/8/45.
A ‘streamlined Socialist Statute’
The Eton-educated Hugh Dalton, known for his ‘back-slapping bonhomie and booming voice’, introduced the Bill at its second reading in the House of Commons on 29 October 1945 as a ‘model’ for future nationalisations. Containing just five clauses and three schedules, he described it as a ‘streamlined Socialist Statute’, involving a ‘minimum of legal rigmarole … [so] that it can be understood as readily by layman as by lawyers, which is as it should be’. The Bill would ‘lay the foundations of an economic plan for this country, and a new social order’.
In his memoirs, Dalton revealed that he didn’t see need to mention the events of the interwar years to justify a Bill that stood on its own merits. Some on the Labour benches did, though, refer to the interwar gold standard ‘debacle’ in which, on Governor Montagu Norman’s advice, the government had returned the British Pound to its pre-war gold parity in 1925 but had abandoned it in 1931 amid rising unemployment and economic turmoil. This caused the Labour government to fall, prompting the Labour Party to adopt a policy of public ownership for the Bank. As the influential Socialist intellectual, Harold Laski, put it in 1940, ‘Britain has been conquered only twice in its history. The first time was by William the Norman in 1066 and the second by Montagu the Norman in 1931.’
A revolution or an irrelevance?
The duty of introducing the Bill in the Lords for its second reading on 22 January 1946 fell to the newly ennobled Frederick Pethick-Lawrence. He was a pacificist, a conscientious objector who, with his wife Emmeline Pethick-Lawrence, had been prominent in the campaign for women’s suffrage, which had led them to be imprisoned and to go on hunger strike. Pethick-Lawrence explained to Parliament that it ‘is the habit of people in these islands to carry out wide, secret and hidden revolutions without changing the outer form, but it is also the custom in this country when that has been done to give statutory form to the change in order that in future it may be recognised, that we cannot go back on it, and also so that the consequences may be fully understood’.
Lord and Lady Pethick-Lawrence outside their Surrey home in 1949 (reproduced with the kind permission of The Master and Fellows of Trinity College, Cambridge; archive reference PETH/9/128).
A few months earlier, Sir Winston Churchill had declared in his response to the 1945 King’s Speech, to gasps of surprise from Conservative MPs, that ‘the national ownership of the Bank of England does not in my opinion raise any matter of principle … what matters is the use to be made of this public ownership’. Yet it was Churchill’s wartime Chancellor, Sir John Anderson who described the Bill as a ‘Measure of first-class importance … an enormity’ that could damage confidence in sterling and even replace a small part of the unwritten British constitution.
In contrast, Colonel Oliver Stanley, summing up for the Conservatives in the Commons, called the Bill ‘a sham; not because it is going to do harm, but because it is going to do nothing at all … a piece of political eyewash’. Breaking ranks, the controversial Conservative, Robert Boothby MP described it, in a wide ranging, memorable speech, as ‘a momentous occasion in the history of this House and the country’. Borrowing the words of Abraham Lincoln, he said that nationalising the Bank would help make money the ‘servant of humanity’ rather than its master. He also cited Vincent Vickers, who had resigned a Directorship of the Bank of England in 1919 to become a thorn in Governor Montagu Norman’s side: ‘We have to remember that … the purchasing power of money, and consequently the price of goods, can be, and has been, varied intentionally and deliberately, not by the will or action of the State, but by those individuals who themselves manage and control the money … no one in authority here dares alter the system because the financiers don’t want it altered.’.
Financial Times, 19 February 1946 (© The Financial Times Limited 2026. All Rights Reserved. Not to be redistributed, copied or modified in any way.)
Press reaction to the Bill was generally muted. The Economist said that ‘It would take a very nervous heart to register a flutter’ although the FT’s leader on the day of nationalisation sounded a note of caution: the government had ‘given formal notice that it means actively to govern the direction as well as the volume of credit in the country … Since the new economic architecture must start somewhere, the basis of the inverted pyramid of credit is an obvious place for the foundation-stone’.
The 1946 Act’s quiet legacy
The Bank of England Act 1946 leaves several quiet but lasting legacies. The Bank remains in public ownership: the Treasury Solicitor continues to hold 100% of stock in the Bank of England on behalf of HM Treasury. After Norman’s marathon tenure of 24 years that concluded in 1944, the 1946 Act introduced strict fixed terms for Governors. Although they have been adjusted over the years, they remain in place and now stand at an eight-year (non-renewable) term for the Governor and five-year (once renewable) terms for the Deputy Governors. The 1946 Act placed statutory responsibility for ‘managing the affairs of the Bank’ on the Bank’s Court of Directors, a duty which, except for policy matters now reserved to statutory policy committees, endures. HM Treasury retains power under section 4 of the Act to direct the Bank ‘in the public interest‘ after consultation with the Governor, and the Bank may, if authorised by HM Treasury, direct ‘bankers’ to comply with requests in the public interest, although carve-outs for monetary policy and micro-prudential regulation and supervision have been introduced. These reserve powers have never been used, though their existence as a formal ‘option of last resort’ may have helped, paradoxically, to secure the Bank’s operational independence.
In conclusion, the 1946 Act struck a careful balance in empowering the Bank to act where necessary without undue interference with banking business, formalising the government’s powers to direct the Bank, while simultaneously securing the Bank’s own operational and financial independence from government. It was neither revolutionary nor inconsequential. Over the years, the Bank has become much more accountable to Parliament, its independence and powers have been strengthened and broadened. The Bank’s objectives, and those of its statutory committees, have been codified and detailed. Nonetheless, the 1946 Act helped to secure the principle that, above all else, the Bank must act independently, in the UK public interest, to maintain the value of money and a safe, efficient, effective, and competitive financial system now and into the future.
Andrew Hewitt works in the Bank’s Resolution Directorate.
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