Why I’m the first leader to support a looser Bank of England mandate
13 March 2013 12:34am
WHEN Mark Carney takes over as our new governor of the Bank of England, at this time of “exceptional” economic crisis – his words not mine – he must be fully armed and working to a clear political direction from the start. Carney’s first day on the job should be an economic D-Day for the UK.
That is why I want to be the first UK political leader to commit my party to changing the Bank of England’s mandate. It’s time to put the Bank, with its increasing powers and broadening economic reach, on the side – incontrovertibly – of the struggling people of Britain.
The status quo is not an option. British voters have made it clear in three by-elections, each time with rising force, their feeling of intense anger at the Westminster and Brussels elite. Ukip carries the flag for these voters. I’m proud that I can give voice to their anger, while offering them something positive to do with their vote. But Ukip offers more. We offer a future in which Britain is free to govern itself, to enforce its own laws, to control its borders, and to make its successful way economically – trading at a profit and able to honour promises to its citizens. A first and crucial step is that we take back the commanding height of our economy – the Bank – and put it to work driving employment, growth and confidence.
I expect George Osborne to use this Budget – three years late – to open the debate on the objectives of the Bank, and to lay out the options for change. But I call on him to go further. He must put some red British meat into the dish. He should announce which option he prefers, and set a fixed timetable for the consultation and the decision. He must guarantee that, by Carney’s first day, the new framework is in place.
Why do I put this pressure on him? Because one of the many failures of this government has been its inability to take the decisions needed to put growth and confidence first. The list of its jellied failures to decide is long – on energy, aviation, housing, roads, and infrastructure investment. Neither the public nor businesses know whether to be confident and spend, invest, or hire.
Coalition politics isn’t responsible for these failures. It is David Cameron, George Osborne and the Number 10 machine itself. Cameron won’t take the hard decisions. The weakness is in the man. On growth, on an EU referendum, and on Romanian and Bulgarian immigration, it is Ukip’s job to say what needs to be done, and to force the sclerotic parties to move or die.
Don’t take my word for it. The world’s investors are clear about the problem. Their minds have to be changed. Only then will money flow, machines be made, exports shipped, and workers hired.
The mandate of the Bank has been focused on avoiding a repeat of the last crisis, instead of addressing the root of the problem we face today. Its negative focus on fighting inflation is put to shame by the positive objectives of the US Federal Reserve’s dual mandate that it “shall maintain long-run growth of the monetary and credit aggregates, commensurate with the economy’s long-run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates.” That is the language of Ukip economics – maximum employment, growth, and a positive outlook.
Yet the Bank of England is not the worst by a long way. Where is the worst major league central bank mandate? Europe and the European Central Bank, of course. It makes a god out of fighting inflation, whatever the human cost. In the arid world of central banking, it is time for the UK to turn away from Europe.
I call on Cameron, Nick Clegg, and Ed Miliband to join me, to abandon outdated views on the role of the Bank, and to admit that – like the worst of the First World War generals – they have been trapped in ways of thinking conceived to fight the last economic war. They have held on to these views far too long and at far too great a human cost.
The other leaders should listen harder to Carney. When he said that “economic circumstances here are clearly exceptional”, he meant it. British voters rightly doubt that more of the old Labour medicine is the answer, and feel that coalition austerity, while the total UK debt is still rising, is pain without gain. Voters want action. Altering the mandate of the Bank of England is just the first of those fundamental changes we need to make.
Nigel Farage is leader of Ukip and MEP for South East England.
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