Bank of England (Economic Affairs Committee Report)

Baroness Lane-Fox of Soho Excerpts

Thursday 2nd May 2024 Lords Chamber

[Baroness Lane-Fox of Soho (CB)]

My Lords, I too thank the committee for this extremely effective and wide-ranging report. I shall make a short intervention with three different hats on.

The first of those hats is as president of the British Chambers of Commerce. We work closely with the Bank on our quarterly economic survey, and our customer and policy insights team works closely with it to swap and use data between the two organisations. It will perhaps be no surprise to this Chamber that, as I travel about as president of the BCC from Poole to Coventry to Doncaster to Glasgow, I hear anxieties about two AIs: artificial intelligence and alarming inflation. Our recent quarterly economic survey shows that business confidence is still very flat. Businesses do not invest at the minute and, although there has been some easing in their hiring constrictions and they are beginning to find more of the talent they need, confidence levels are still low.

I know from conversations with businesses as I travel about, whether to a cheese-wrapping factory or a racehorse training college in Doncaster—one of my favourite days out—that part of the reason for that is people’s opaque view of what is happening in the economy, at the heart of which we must put the Bank of England. More can be done to explain the role of the Bank and—this goes to my noble friend Lord Macpherson’s point—how it is affecting people further down the chain in the economy, who often bear the brunt of the inflationary aspects that we see: a small supplier having a horrible time with their supply chain, or a business struggling to pay the wages it needs to hire people in its bars. While we have a close and productive working relationship with the Bank of England, we also see the direct consequences of the policies that it enables. I personally believe that more could be done to keep the transparency and the levels of trust high in what the Bank of England is doing for the economy, especially among the 85% of our economy that are small businesses, as noble Lords will know.

The second hat that I wear is as a director of Peers for the Planet, an organising group in your Lordships’ House, as many noble Lords know. While I hate ever to disagree with my far more learned friend the noble Lord, Lord Lamont, I believe it is a risk that the Bank of England is not putting resources into climate change analysis. Of course the Bank is not responsible for the policies that will help us to combat the climate crisis but, even as recently as 2022, we saw a German drought directly impact small businesses because of issues related to our supply chains here into the UK, and that created a small inflationary peak. It is essential that we do not reduce the Bank’s capacity to analyse the effects of the climate crisis as they hit us. We know that the Bank has substantially fewer climate-based resources than other central banks of similar size and scale, and 54 experts wrote to the governor in March this year to say so.

For my third point—because I can never resist an opportunity in your Lordships’ House to talk about digital transformation—I am wearing the hat of an ex-digital champion for the UK and creator of the Government Digital Service and GOV.UK. I realise it was not in the remit of this committee’s work, but I am much struck by the extremely harsh assessment in the Bernanke report of the Bank’s IT and digital systems. There is plenty of talk about collaboration with the fintech sector and I have seen the governor talking about the impact of AI in the world, but that is different from the investment needed in hardware and software to have an effective Bank. We know that across the institutions in this country there is a substantial deficit of understanding of what the digital world is now enabling, and the tools that we have in the modern age which will enable us to do a better job.

I am clearly not an expert in the Bank of England but I appreciate the scale and challenge that this would present to any institution. I urge the Government to keep up the pressure, advice and help in supporting the Bank to make those necessary transformations. Catching up with digital investment is very hard. It can be very expensive and can go very wrong, but it is also essential.

The committee’s report starts by saying that the Bank of England was established in 1694 for the “public Good and Benefit” of all people. I urge the Bank of England to make sure that it is still using the tools of and looking at the risks of the modern age, while thinking about the make-up of the economy for the modern age to fulfil that remit.