The Conservative attack on the Bank of England’s independence is delusional

Editorial: The Bank of England is facing a barrage from Liz Truss’s team, which could undermine the British economy at a precarious time

There is reason to be fearful for the economic future of the nation (PA)

When the putative next chancellor of the Exchequer in a Liz Truss-led government, Kwasi Kwarteng, attacks the Bank of England for its record on inflation, there is reason to be fearful for the economic future of the nation.

Mr Kwarteng says that if the Bank’s inflation target is 2 per cent, and the rate is headed towards 13 per cent or more, then “something has clearly gone wrong”. Other allies in the Truss camp argue the Bank should have put interest rates up a year ago or more, and it neglected its responsibilities. It is a ludicrous stance, and if Mr Kwarteng means it – as opposed to just politicking – then he is ill-equipped to be placed in charge of the Treasury.

As the Bank’s governor, Andrew Bailey, has tried to explain, the reason why inflation is so high can be summed up in one word: “Putin.”

Whatever pressures were building up in the economy because of Brexit and post-pandemic disruptions – principally labour shortages – have been massively exacerbated by the collapse in gas, oil, grain and cooking oil supplies from Ukraine and Russia. Inflation is a global phenomenon, and there is no record of Mr Kwarteng or Ms Truss urging higher borrowing costs to business or an increase in interest rates while the nation cowered in fear of the coronavirus.

It is not too great an exaggeration to argue that the Bank helped save the nation during those difficult times, and should be thanked for its hard work and rapid action. No one is going to clap for a bunch of economists, but some sort of understanding of the Bank’s motivations would be appreciated. On the contrary, Mr Kwarteng and Ms Truss have lined them up for blame.

Of course, it would have been theoretically possible for the Bank to get inflation down to 2 per cent as the cost of living began to rise – but only by an absurd tightening of policy, crashing the economy and causing mass bankruptcies, unemployment and a long slump. They would hardly have been thanked for that.

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Ms Truss, who makes Boris Johnson look like the very model of prudence and restraint, has already said she will “review” the Bank of England’s mandate, which can only mean she plans to “take back control” of its independent operation of monetary policy.

Her fresh mandate for the Bank won’t explicitly tell it to engineer a boom so she can win the next general election for the Conservatives, but that’s plainly what she intends to do. At the very least, Mr Bailey will be expected to ensure that the monetary policy committee accommodates a reckless programme of inflationary tax cuts and refrains from raising rates until after polling day.

It is the misfortune of the Bank of England to be charged with the responsibility to maintain stable prices at a time of high and accelerating inflation that is almost beyond their control. It has no oil wells to pump, nor wheat fields to harvest, nor gangs of lorry drivers ready to get the economy back to normal.

It’s not going to be possible to squeeze inflation out of the system if the government of Ms Truss and Mr Kwarteng stop it doing so, scapegoat it and force its governor out of his job. The Bank of England faces not just a battle with inflation but a bare-knuckle fight with some rather delusional politicians.