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Bank of England independence needs reining in, says Ed Balls

Published 17/11/2016

Ed Balls called for the establishment of a 'systemic risk body' to oversee the entire system
Ed Balls called for the establishment of a 'systemic risk body' to oversee the entire system

Former Labour shadow chancellor Ed Balls has called for the Bank of England's independence to be reined in amid growing "popular discontent".

Writing in an academic paper for Harvard Kennedy School, Mr Balls said there was a need for central banks to "sacrifice some political independence" in order to protect their reputation and purpose.

" Absolutist interpretations of complete central bank independence may both undermine the pursuit of new central bank objectives and fray the political support that currently exists for central bank autonomy in their core monetary policy function," he wrote.

Mr Balls said power was "hugely concentrated" in central banks and their independence is "unfinished business".

He called for the establishment of a "systemic risk body" to oversee the entire system, chaired by the Chancellor and setting a mandate for the Bank.

However, in the paper he said "the case for operational independence in both monetary and macro-prudential policy" was strong and to retreat from this position would be a "serious mistake".

"What we need to have is a better dialogue between central banks and government," Mr Balls told BBC Radio 4's Today programme.

"If government had done a bit more work to support the economy through infrastructure spending, that would have made it easier for the Bank of England.

"They've been left to their own devices, it's very unfair for them to take the rap."

The intervention follows criticism by Prime Minister Theresa May, who has claimed the Bank's easing efforts were disproportionately hurting savers while benefiting the asset-rich.

Mr Balls agreed with governor Mark Carney's claim that politicians were engaged in a "massive blame deflection exercise" against the Bank.

"I think it's been very worrying to see Mark Carney being attacked.

"I have to say, I think Philip Hammond, the Chancellor, has also been doing a rather lonely job, he needs more support, the Treasury's got an important voice on Brexit and he needs to be supported rather than knocked down."

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