Economy: Bank of England Forecasts

Lord Lamont of Lerwick Excerpts

Wednesday 13th May 2020 Lords Chamber

Asked by

[Lord Lamont of Lerwick]

To ask Her Majesty’s Government what assessment they have made of the forecasts for the economy included in the Bank of England’s Monetary Policy Report and Interim Financial Stability Report, published on 7 May.

The Question was considered in a Virtual Proceeding via video call.

--- Later in debate ---

[Baroness Penn (Con)]

My Lords, the Bank of England has specific statutory responsibilities for monetary policy and financial stability, as well as operational independence from the Government to carry out those responsibilities. The Monetary Policy Committee has constructed an illustrative economic scenario based on a set of stylised assumptions to inform its policy decisions. Given the committee’s operational independence, the Government seek to avoid commenting on its assessments and monetary policy decisions.

[Lord Lamont of Lerwick (Con)]

My Lords, I thank the noble Baroness for that reply. The Governor of the Bank of England, commenting on the MPC report, said that it would not be until the end of next summer that the economy would fully come back. Given that that sombre assessment was based on the assumption in the report that social distancing would be phased out between June and September, do the Government recognise that there are whole sectors of the economy—hospitality, accounting for 10% of the labour force; airlines and transport—that simply cannot operate profitably with social distancing? While we all understand why social distancing is necessary now, do the Government also recognise the awkward truth that we will not get back to where we were with a full recovery unless, as the MPC report assumes, we find at the appropriate time a way for social distancing to be phased out so that it does not become part of the so-called new normal?

[Baroness Penn]

In setting out this week their road map for the easing of the lockdown, the Government have stated that step 3 would not take place any earlier than 4 July. We will seek to reopen some of the remaining businesses, particularly those in hospitality and leisure, by finding ways for them to do so safely. However, we acknowledge that this will be difficult for some businesses. We will continue to be guided by the science and we will target economic support based on how we progress with the phased reopening.