Conservative MEP Syed Kamall says the next Bank of England governor should have to bring inflation in line with the Bank’s 2 per cent target within 12 months or resign.
Writing in City A.M, Kamall, who is a member of the European parliament’s economic and monetary affairs committee, says inflation has too often been above target.
He says in the year after the Bank was given its independence in 1997, its then target of 2.5 per cent RPI was missed in every month but one. He adds that in response, then Chancellor Gordon Brown changed the target to 2 per cent CPI, but inflation has only been at that level in 12 of the past 84 months.
Kamall says: “In many ways, King is culpable for our economic woes. His Bank has almost complete operational independence, yet he has failed to control inflation. He acts as if he is King of the City, arbitrarily calling for the heads of top bankers as if they were his courtiers.
“So here is a suggestion. When Mervyn King retires next year, the new governor should be handed a new employment contract by the Chancellor, requiring him or her to hit the inflation target within 12 months of taking office or resign. And the new governor, like all bankers, should be paid in line with performance.”
The Bank has responded to high inflation by pumping £375bn into the economy through quantitative easing. Kamall says: “The Bank of England has reacted to this headache like an alcoholic with a hangover. Printing even more money in the form of a third round of QE, announced just a few weeks ago, will probably lead to more inflation.”
The Treasury declined to comment.