Call to make full employment a key goal of BoE

THE Bank of England’s remit should be changed as the UK heads into the season of Brexit negotiations, Plaid Cymru has urged.

Treasury spokesman Jonathan Edwards argues that when setting interest rates it should have the goal of seeing full employment – not just keeping to the UK Government’s inflation targets.

The Carmarthen East and Dinefwr MP said: “Brexit will undoubtedly throw the sterling zone economy into uncharted territory, with unpredictable effects on people’s jobs, wages and livelihoods.

“It is important, particularly given the recent plunge in the value of the pound, that inflation is kept under control, but it is no longer sustainable that the sterling zone’s central bank – the Bank of England – makes this their only target.

“Many reforms will need to take place in preparation for Brexit but this is a crucial change that is already overdue.”

He continued: “In 1977, the US Congress amended the Federal Reserve Act 1913 and mandated the Federal Reserve to target longterm moderate interest rates and, critically, maximum employment. It’s time the UK Government made the same changes to the Bank of England’s remit.

“We know that some 200,000 jobs in Wales alone are dependent on our trade with the single market so suggestions by Westminster that we will be dragged out of the single market as well as the European Union naturally gives us cause for concern over the state of the Welsh jobs market.

“Other countries in the UK will be similarly affected, so it is crucial that the body charged with setting the official interest rate for these countries ensures its decisions will not have negative consequences for the employment market.

“I would argue that the Bank of England should follow the lead set by the United States’ Federal Reserve and make the target of reaching full employment an equal consideration with the 2% inflation target when determining the official interest rate.”

Swansea University economist John Ball did not support making full employment a key goal of the Bank of England.

He said: “It is not the role of the Bank to seek full employment. The Bank of England is one of many agencies whose role is to create the right environment.”

Dr Ball added: “There is a problem that the Bank’s only real weapon is interest rates but the real bogeyman facing the UK economy is not inflation but deflation.

“[With] interest rates at a record 0.25% maybe the reality of it is the Bank of England’s role is diminished almost to nothing.”

Plaid’s Mr Edwards argues major reforms will be required to ensure the UK does can tackle the challenges that await as the country negotiates its exit out of the EU.

He said: “Brexit will change everything for Wales and for all of the UK countries.

“Uncertainty over our place in the single market and in the customs union is already beginning to translate into job losses but this is nothing compared to the chaos that will unfold if the UK Government confirms that leaving the EU is only the starting point of our increasing isolation on the global stage.

“This will be the first of many reforms necessary to prepare for Brexit.

“We must get all the economic apparatus ready for the post-Brexit environment.”