Governor was wrong to interfere on wage rises, says Lord O’Neill
ONE of the UK’s leading economists has criticised the Governor of the Bank of England for his handling of the cost of living crisis.
Lord O’Neill believes Andrew Bailey should never have waded into the pay debate, saying it is a decision between employers and their workers.
O’Neill told the Daily Mail: ‘Andrew made an error. He shouldn’t have been so specific about having a view on individual wage rises, that is the role of the employer and their employees or their union to fight that out.’
Bailey has repeatedly called for workers to ‘think and reflect’ before asking for pay rises.
In May he told the Treasury select committee: ‘I do think people, particularly people who are on higher earnings, should think and reflect on asking for high wage increases.’
O’Neill made his name at Goldman Sachs where he was best known for coining BRICs, the acronym for Brazil, Russia, India, and China. He became a Conservative government minister in 2015 under then prime minister David Cameron, a position he held until his resignation in 2016 when Theresa May came to power.
He also said the Bank should have raised rates faster to challenge rising inflation, and ended quantitative easing sooner. He added: ‘They have made mistakes. We should have had rates rising earlier and the last few years of quantitative easing should never have happened. If it had have happened some of the sensitivity wouldn’t have been as strong as it is.’
He continued: ‘It is important inflation expectations do not become embedded and we get into this 1960s mess again.’ Inflation has reached a 40-year high of 9.1pc in May and the Bank of England believes it will increase further, to above 11pc by October.
As a result, the Bank has raised interest rates five consecutive times, to 1.25pc. Earlier this week Bailey vowed to bring down inflation to the Bank’s target of 2pc, adding that the central bank could raise interest rates more sharply than previously in response to surging price rises.
O’Neill expressed some sympathy for the Governor: ‘I feel sorry for him. This is a huge problem the Bank of England finds itself in the middle of.’
He also described taking away the Bank’s independence as ‘crazy’, after Tory leadership hopefuls – including Tom Tugendhat – took aim at the Old Lady.