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‘We will not change Bank of England’s inflation target’ Treasury ministers vow

The Government will not change the Bank of England’s inflation target of 2 per cent, a Treasury minister said.

Andrew Griffith told MPs the Treasury would continue to “work closely” with the Bank to “ensure that monetary and fiscal policy are well coordinated”, but has no plans to change the inflation target.

Conservative MPs have been openly critical of the Bank’s ‘failure’ to control inflation, currently running at 10.1 per cent – five times higher than its target and some have openly questioned the Bank’s role to control monetary policy completely independent of government.

The Bank’s rate-setting Monetary Policy committee will meet on Wednesday to decide whether to raise interest rates for a 12th consecutive time.

The Treasury has called for advice on setting benchmarks for regulators, including the Bank of England, to ensure they meet new objectives to support London’s post-Brexit competitiveness as a global financial centre and aid UK growth.

Competition from rival stock exchanges to attract listing companies New York in company listings, Amsterdam’s emergence as Europe’s biggest stock market post-Brexit, the UK’s poor economic performance relative to other G7 nations, as well claims that the EU has become a ‘batter place to do business’ than the UK has increased pressure on UK financial watchdogs to ease rules.

The benchmarks are seen by critics as a way of politically reining in “overly powerful” regulators at the expense of consumer protection.

The Government originally sought to enforce supervision of regulators by adopting a “call in” power to block regulatory decisions however the move was abandoned amid accusations it would undermine the independence of the watchdogs and hurt the UK’s international reputation.

Ministers are also under pressure to back up the Prime Minister Rishi Sunak’s pledge to grow the economy this year, as he prepares for a general election in 2024.

The Treasury said it wanted to ensure the more powerful role for the Financial Conduct Authority and Bank of England’s Prudential Regulation Authority was made accountable to the public by setting “metrics” they must comply with each quarter.

Ministers insisted there would be no divergence from international standards. The call for proposals is to help determine what additional metrics are most appropriate for the regulators to publish, the Treasury said.

Andrew Griffith, in Westminster, London, as has been appointed as Director of the Number 10 Policy Unit, following the resignation of Munira Mirza. Prime Minister Boris Johnson's inner circle has been rocked by a host of resignations after four senior aides quit on Thursday. Picture date: Friday February 4, 2022. See PA story POLITICS Johnson. Photo credit should read: Yui Mok/PA Wire
Andrew Griffith, Treasury Minister (Photo: Yui Mok/PA)

Mr Griffith also denied the Treasury was “dragging its feet” on reforms that would help mutual companies such as John Lewis and Liverpool Victoria stay in business. He insisted the government was considering reforms to help the sector.

News of mutual rules reform comes as retailer John Lewis is considering its future, which could include ending its 100 per cent employee-owned structure in order to raise capital.

Labour MP Gareth Thomas, who made the foot dragging accusation, said it would allow firms new safe routes to access the capital needed to expand and without having to demutualise.

Mr Thomas, who is campaigning for the introduction of permanent mutual shares, said it would allow such firms new safe route to access the capital needed to expand, and without having to demutualise.

“We have supported reform to the mutual sector, we welcome a diversity of provision and that involves a greater expansion and more commercial freedom for the mutual sector,” Mr Griffith said. “We are looking with the Law Commission on taking their work forward to see if we can help.

Treasury minister Victoria Atkins also told MPs that it remains “challenging” to separate the effects of Brexit and other factors, including the war in Ukraine, on the UK economy.

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