Tory MPs to grill Bank of England governor on high inflation

Bank of England Governor Andrew Bailey will face Tory MPs angry at inflation on Monday as cabinet sources moved to crack down on inflammatory talk about the Bank’s independence.

The governor’s appearance before MPs – which has been compared to clashes with former Bank boss Lord Mervyn King during the 2008 crash – will be accompanied by intense work by Chancellor Rishi Sunak to find new measures to reduce the cost of living before the summer. break.

Labor will challenge Tory MPs to vote for a windfall tax on oil and gas companies in an amendment to the Queen’s Speech – a move which Sunak failed to rule out but which the Secretary of State strongly opposes. business, Kwasi Kwarteng.

Bailey’s appearance at the Treasury Select Committee will come amid growing criticism of the Bank’s performance, including from some cabinet ministers, one of whom told the Telegraph they were “now questioning his independence “.

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Cabinet sources have moved to quell speculation, with one dismissing the prospect as ‘not even debatable’. Another minister called independence “sacrosanct” and said the Bank’s situation was not unique: “All central banks are fighting inflation.” A Downing Street source said Boris Johnson was not considering the prospect.

Harriett Baldwin, one of the Tory MPs on the committee, said the Bank needed to answer some serious questions about inflation. “I have long flagged the risk that they will misjudge things and put too much monetary stimulus in the economy for too long,” she said.

“When things started to open up again, they didn’t really take their foot off the pedal very quickly. There are things that were unforeseen like the war in Ukraine, but there are things that were predicted that the fiscal and monetary stimulus was there for too long and too prolonged once things started to pick up.

Kwarteng said on Sunday it was a concern that inflation was above the Bank’s target. “It is a fact that when the Bank of England became independent in 1997 it had an inflation target of 2%. Inflation is now near double digits. It’s clearly a problem,’ he told Sky News’ Sophy Ridge on Sunday’s show.

“We had the Covid pandemic, we had a huge spike in economic activity after lockdown restrictions eased, and then of course you have this war in Europe for the first time in 70 years.

“All of these things mean it’s a very difficult time and I think [Bailey] does a reasonable job. But it is true to say that 2% is part of their mandate and they should stick to 2%.

Labor said attacks on the bank’s independence were a distraction. Rachel Reeves, Labour’s shadow chancellor, said: ‘Instead of trying to blame the Bank of England for the Government’s mistakes, the Chancellor should call an emergency budget, scrap the National Insurance hike and support Labour’s costed plan for a windfall tax to help keep people’s energy bills down.

The Treasury has denied emergency budget plans but is expected to announce limited further measures to ease the cost of living once fuel price data is released in the next fortnight, which will inform the rise in the fall price cap.

Tax changes will be impossible before the autumn budget, although Johnson has repeatedly insisted to MPs that he is looking for ways to cut taxes.

Shadow climate change secretary Ed Miliband said it was ‘frankly obscene that the government was refusing’ a windfall tax on oil and gas companies and predicted it was inevitable, calling it ‘an unanswered case’ .

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