The new Bank of England Governor, Mark Carney, has announced that the Bank of England will not increase interest rates until the jobless rate goes below 7%.
It is worth recalling the background to the Bank of England’s “independence”.
The Bank of England was given the independent right to set monetary policy in 1998. This was done by Act of Parliament, removing the Chancellor of the Exchequer’s previous right to set interest rates.
In that Act of Parliament, the Bank was mandated to set monetary policy in accordance with an inflation objective of 2.5% (based on the Retail Prices Index). Subject to that (and note: only subject to that) it was mandated to try and sure financial stability. The 2.5% target was later amended to a target of 2% based on CPI inflation, but the primary objective was not changed.
The control of inflation is the primary objective and not anything else. That is the law, passed by our Parliament.
Furthermore, the right and duty to set monetary policy was given to the Monetary Policy Committee of the Bank, and not to the Governor alone. There were several occasions when Mr Carney’s predecessor, Mervyn King, was outvoted on interest rates.
What all this means is that Mr Carney is way exceeding his powers in making the assurances that he has made about interest rates. He is not entitled to commit the whole Committee to a particular route on interest rates. More seriously, neither he nor the Monetary Policy Committee are entitled to change their statutory duty to treat maintenance of inflation stability as their primary objective.
If Mr Carney wants that duty changed, he is perfectly entitled to argue that it should be changed, including in public if he wants to. What he is not entitled to do is unilaterally make that change himself.
It seems to me that this has been a growing trend in recent years – unelected public officials ignoring the fact that our elected parliament is sovereign.
We may well hold most of the members of that Parliament to be not very impressive. We may even despise some of them. But the fact remains that they are elected by the people as their representatives. If their power to set the law is overridden by public officials, then ultimately that counts as a coup d’etat, and means the end of our democracy.
Lord Mandelson famously stated that we are living in a “post-democratic age”. He was wrong. But if we allow our civil servants to usurp the powers of parliament then we soon will be losing our democracy – and for good.
Perhaps our Government should have appointed one of the perfectly good British candidates as Bank of England Governor instead of choosing one of their mates from the Global Elite who increasingly seem to hold us “plebs” in such contempt.
Let me say it again: Mr Carney does not have the power to set interest rates, and he does not have the power to change the Bank of England’s legal mandate.