Bank of England governor Andrew Bailey is set to be hauled over the coals by cabinet ministers today over his approach to tackling spiking inflation rates of 7% and the Bank’s alleged failures to keep inflation within the institution’s 2% goal.
Bailey will appear before the Treasury select committee later today. Meanwhile, Cabinet Ministers have reportedly been up in arms over the Bank’s failures in recent times, with one Tory MP commenting to the Telegraph that the government was “questioning its independence.”
Business Secretary Kwasi Kwarteng said on Sunday that he was concerned that inflation had run so far beyond the Bank’s target level.
“When the Bank of England became independent in 1997, they had an inflation target of 2%,” Kwarteng commented to Sky News Sunday programme reporter Sophy Ridge.
“Inflation is running into almost double digits now. That is an issue, clearly.”
Kwarteng caveated that given the heavy situational combination of Brexit, Covid-19 and the war in Ukraine, Bailey was making the best out of a terrible time in his tenure.
“All of these things mean that it is a very difficult time and I think [Bailey] is doing a reasonable job. But it is true to say that 2% is part of their mandate and they have to keep it to 2%.”
The surging cost of living has been a rising concern in the government, as the energy price cap added £700 to household energy bills and food inflation saw consumers abandon higher-end grocery stores for lower prices in discounter chains as analysts warned that cheap food in Britain was in the past.
Labour has been calling on the Tory party to impose a windfall tax on oil giants including BP and Shell, who reported bumper profits on the back of soaring oil prices while consumers around the UK struggled to pay their heating bills.
Shell listed tripled profits of £7.3 billion in Q1 2022 and BP highlighted profits of £4.9 billion year-on-year, prompting renewed calls for the isolated tax.
Shadow Climate Change Secretary Ed Miliband heaped criticism onto the administration for its reluctance to consider a windfall tax, and called its hesitation “frankly obscene.”
Chancellor Rishi Sunak has not yet declined the consideration outright, however Kwarteng has been vocal about his opposition to the suggested measure.
“What you are taxing is investment in jobs, you are taxing investment in wealth creation, you are taxing investment in new technologies,” said Kwarteng.
“And that is what we want to see, we want to see more investment. We don’t want to see taxes that essentially act against any incentive to invest.”
The country will have to wait for Sunak’s Summer Statement to see if the Chancellor provides more breathing room for Britons than his meagre Spring Statement offerings in March, however consumers are currently bracing for a chilling year as the cold snap of double-digit inflation in October is already sending shivers down the UK’s collective spine.