Former prime minister Gordon Brown has attacked the Bank of England for failing to place enough emphasis on jobs, as he called for a rethink of the model of independence he created for Threadneedle Street in the late 1990s.
Brown, who as chancellor in Tony Blair’s government was responsible for granting the Bank operational freedom to set interest rates, said the UK’s central bank should be more like the US Federal Reserve, which has to take employment as well as inflation into account when making policy decisions.
“All UK institutions have to make high levels of employment a greater priority,” Brown said. “Having been the chancellor responsible for the Bank of England Act 22 years ago, I am disappointed that while obligations for employment are included in its statutory objectives, the Bank of England does not place greater emphasis on maximising employment.”
Since Brown’s reforms, the Bank has had the statutory duty to hit the government’s 2% inflation target, but in recent years – after the Brexit referendum vote – has adopted a flexible approach to achieving that goal. Since the start of the Covid-19 crisis, the Bank’s monetary policy committee has cut interest rates to 0.1% and pumped an additional £200bn into the economy through the bond-buying programme known as quantitative easing.
Brown said a more radical approach was needed. “The Bank should announce an operational target, that interest rates will not rise or stimulus end until employment returns to its pre-crisis levels. And we should agree a new constitution for the Bank imposing a dual mandate: to take unemployment as seriously as inflation.”
The former prime minister made his comments to mark the launch of the Alliance for Full Employment, which has brought together the Welsh first minister, Mark Drakeford, and a number of metropolitan mayors to press for action on jobs.
Brown said the government had spent billions on rescuing the economy in the early months of the crisis but was failing to put together a comprehensive plan for recovery. He said measures to help the under-25s were inadequate and compared badly with the more generous scheme Labour had introduced in 2009 when he was prime minister.
“Young people are now facing the worst of times yet the government’s Kickstart youth employment programme will assist only 250,000 of 3.5 million under-25s not in full-time education, and only for six months.”
Brown said the chancellor, Rishi Sunak, should maintain furlough payments to key sectors of the economy, if necessary supporting part-time work.
Austerity, introduced by the Conservative-Liberal Democrat coalition after Labour lost the 2010 election, had always been the wrong policy, Brown said, but made even less sense in the present climate because ultra-low interest rates made it cheap to borrow for long-term investment.
