To what extent has control of the economic policy passed from British Governments to non-elected bodies both home and abroad?
Danielle Hill 13KF
To what extent has control of the economic policy passed from British Governments to non-elected bodies both home and abroad?
The Government was traditionally in tight control over the economic policy for the country but over time the governments powers have become eroded and devolved to other non-elected bodies.
The Bank of England’s importance rose after 1975 and has increased steadily over the years. After Labour’s landslide victory in 1997 on the 7th of May they gave the Bank of England operational independence, which empowered them even more. This gave the Bank of England control over interest rates through the Monetary Policy Committee (MPC), which is made up of five members from the Bank of England and four experts appointed by the Chancellor. The advantages of this are that economic experts and not amateur politicians formulate the monetary policy. It also removes political pressures, which enables a greater co-operation between the Bank of England and other central banks. This also means interest rates are depoliticised and increases the bank’s credibility with the market. Although the bank has a degree of control in reality the government still has some constraints over them. The Prime Minister, for example, appoints the Governor (currently Mervyn King) and the Chancellor appoints most members of the MPC. The MPC have to publish details of their interventions with the market so is held to account better than the European Bank. The Governor also has to appear before the Treasury Select Committee (TSC). The TSC and the Parliament also scrutinises the Bank’s report to the House of Commons. One main constraint the Bank of England faces is that the Government sets the inflation target and in national interest the Government for a limited period can take the power the Bank has back. The Government has also devolved some of the Banks power to the Financial Services Authority (FSA). The FSA now regulate the financial institutions.