Budget Statement

Lord King of Lothbury Excerpts

Friday 12th March 2021 Lords Chamber

[Lord King of Lothbury (CB) [V]]

My Lords, none of us envies the Chancellor, who faces bigger challenges than those confronted by many of his predecessors. However, Budgets should be judged by their contribution to economic stability, not their political gimmicks.

I am concerned about the change to the remit of the Bank of England. Independence of the Bank was accompanied by a clear mandate expressed by the inflation target. When asset purchases commenced in 2009, the framework was established to ensure that the Bank did not become the arbiter of credit allocation among different sectors and different companies. But the new remit requires the bank to do just that, and to

“reflect the importance of environmental sustainability and the transition to net zero”—[Official Report, Commons, 3/3/21; col. 259.]

in its purchases of corporate bonds.

Some may argue that this is a harmless gesture; after all, given the inflation outlook, it is far from obvious that there will be new asset purchases by the Bank. But what seems a harmless gesture today may prove damaging tomorrow. I know that climate change arouses passions, but that is no reason to embroil the Bank of England in what should be the responsibility of government. Climate change and declining biodiversity are serious issues that merit proper debate. Fiddling with the Bank of England’s remit, while at the same time taking no action on a carbon tax and freezing fuel duty again, are gestures, not a coherent policy. More importantly, they are the first steps on a slippery slope to undermining the independence of the Bank, and we cannot afford to lose that.