April 22, 2018 / 9:30 AM / 9 months ago

Labour Party likely to seek broader BoE mandate if in power

LONDON (Reuters) - Britain’s opposition Labour Party would likely broaden the Bank of England’s mandate to include factors such as employment but would not seek to remove the central bank’s independence, Labour’s finance policy chief John McDonnell said on Sunday.

Britain's Shadow Finance Minister John McDonnell, speaks as he sets out Labour's demands for the Spring Statement, in London, Britain, March 9, 2018. REUTERS/Simon Dawson/File Photo

“I’m quite attracted by the wider mandate that there is in America but we would retain Bank of England independence,” McDonnell told ITV’s Peston on Sunday show.

Asked whether he thought such a shift was very likely, he said “Yes, it is.”

Britain is not due to hold another national election until 2022, and is currently governed by Theresa May’s Conservatives.

The Bank of England’s interest rate-setting committee has a remit to maintain price stability and keep inflation at 2 percent, as well as supporting the government’s objectives for growth and employment.

The U.S. Federal Reserve has a mandate to promote maximum employment, stable prices, and moderate long-term interest rates.

McDonnell said the party would publish its second report on the future of the Bank of England in late May or early June, and that he wanted as wide a debate as possible about what its aims should be.

Last year, Labour said it would consider moving parts of the BoE to Birmingham, in central England, if it won power, arguing such a change was needed to reduce the economy’s reliance on London’s banking industry.

Although Labour trails the Conservatives in most opinion polls, it is considered a viable future government given that May is undertaking a complex and divisive exit from the European Union without a parliamentary majority.

That prospect has unnerved some in the British financial services sector, who fear for the status quo as a result of the shift towards a socialist agenda undertaken by Labour since left-wing leader Jeremy Corbyn took power in 2015.

On Thursday, McDonnell, an outspoken critic of the banking system, offered London’s financial services industry a new pact, giving banks a seat at the policymaking table if Corbyn replaces May, in return for higher taxes.

Reporting by William James; Editing by Edmund Blair and Dale Hudson

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