Former shadow chancellor Ed Balls has called for the Bank of England’s independence to be curbed in response to growing “popular discontent”. In an academic paper, he said central banks could “sacrifice some political independence” without undermining their ability to do their job. “We need a more nuanced approach to central bank independence in this brave new world,” he added. A former top Bank official said Mr Balls had raised “an important issue”. Andrew Sentance, who used to be on the Bank’s Monetary Policy Committee, told the BBC’s Today programme: “In the UK we have a model where the government sets a remit for the Bank of England, and the government could change that remit, and I think there is a case for looking again at that remit to say whether it’s the right one in the circumstances we now face after the financial crisis. “Mr Balls’ views came in a paper for Harvard University’s Kennedy School, co-written with James Howat and Anna Stansbury.
For his part, Mr Balls told the Today programme that in order to protect its operational independence, the Bank needed “more political support and accountability”. To that end, he said, there should be a “systemic risk body”, chaired by the chancellor, to oversee policy. There needed to be “a better dialogue” between central banks and the government, while the government needed to support the economy better with more spending on infrastructure. Mr Balls added that he disagreed with Prime Minister Theresa May’s recent criticisms of low interest rates, which she said had benefited the rich and made savers poorer. He said the low-rate policy had been “the only thing which stopped our economy sliding back into depression”. He added that the case for operational independence for central banks remained “as strong as it’s ever been” and that it was “very worrying” to see Bank of England governor Mark Carney being attacked for his policies.