Good morning. The chancellor Rishi Sunak has warned “the next few months will be tough”, after inflation hit 9 per cent, its highest rate in 40 years and more than any other G7 economy. Political rows over the Bank of England’s handling of its inflation target are rumbling on. That, plus Labour-Liberal Democrat relations, are the topic of today’s email. Get in touch via the email below.
Inside Politics is edited by Georgina Quach. Follow Stephen on Twitter @stephenkb and please send gossip, thoughts and feedback to insidepolitics@ft.com.
Our latest stories
-
Deal in cash | The chief UK financial watchdog will gain new powers to ensure that banks and building societies continue to provide access to cash, the government will announce today. Up to 10mn Britons are said to rely on it.
-
Pressure pints | Two of the UK’s largest pub groups have warned that cost pressures are a “major challenge” to the industry and have forced them to axe discounts, reduce energy use and simplify their menus.
-
Grenfell Tower inquiry | The government said it will not implement recommendations of the Grenfell Tower Inquiry which called for legal obligations to plan for the evacuation of high-rise buildings and disabled residents in the event of a serious fire, reports Peter Apps of Inside Housing.
-
Telling all in Tel Aviv | Is Wes Streeting the saviour Labour desperately needs? Or, as his critics suggest, is he just a prospective return to Blairism? My colleague George Parker interviews Labour’s shadow health secretary in Israel on a week-long tour to see how the country’s health services use technology.
So you hate the MPC? Name three of its external members
There’s an interesting story in Kevin Maguire’s gossip column in this week’s New Statesman. Conservative MPs who gained their seats in 2019 are unhappy with Andrew Bailey, governor of the Bank of England:
Andrew Bailey is in the sights of restless Red Wall Tories. I’m reliably informed that a group are discussing a letter to Rishi Sunak demanding the Chancellor sack the central banker only two years into an eight-year term. The governor has been accused of washing his hands of the cost of living crisis after blaming “apocalyptic” food prices and the highest inflation for three decades on Russia’s invasion of Ukraine.
As the Financial Times’ economics editor Chris Giles notes in his handy explainer, what is alarming for central bank officials and politicians alike is that UK inflation shows greater signs of persistence than other European countries.
As I wrote on Tuesday, while scepticism about the BoE’s independence is currently a position confined to the outermost fringes of both major parties, we can’t say with any confidence that it will remain so.
However, there are useful signals which point to the Tory centre of gravity. Several MPs I spoke to felt that the BoE should have tightened monetary policy faster, but all were of the view that central bank independence was a principle to cherish. Even among the 2019 intake, every MP told me that sacking a central bank governor during the middle of his term was the stupidest idea they had ever heard. (Politics being politics, many of them had suggestions about which of their colleagues might actually be stupid enough to sign such a letter.)
However, a much smaller number of MPs were able to correctly identify that, you know, Rishi Sunak can’t sack the BoE governor. The bank’s directors, who are appointed by the crown, can dismiss the governor, with the consent of the chancellor.
But most MPs acknowledged, to put it mildly, that it was not ideal that Bailey’s appearance at the Treasury select committee resulted in headlines with the word “apocalyptic” as a result of his off-the-cuff riffing. Bailey told MPs on Monday that Britain faced “apocalyptic” rises in food prices and that “there isn’t a lot we can do about it” because of the global forces at play.
While the ability to make a media appearance and set out the Bank’s position in lucid and calming tones isn’t the governor’s only job, it is an important bit. As it happens, it is the bit which would be tested in a confirmation hearing. Unlike the Fed chair or the head of many other central banks, the BoE governor doesn’t need to pass a parliamentary vote, and nor do the government’s external appointments to the Monetary Policy Committee. One flaw in the UK’s implementation of central bank independence is that the first time a BoE governor has to reassure fractious MPs and navigate a busy media round is during some kind of difficult real world event.
Inevitably, an era of high inflation means a greater political focus on the BoE’s operations. Some backbenchers will start asking why they don’t have the same powers of appointment that so many of their international peers have.
I don’t know how MPs’ thinking on central bank independence will evolve in the coming weeks and months. But one thing I do feel confident in saying is that the chancellor’s next appointment to the MPC will surely make more of a political splash than the last one, whose public criticisms of Brexit and UK government policy were largely unnoticed outside the pages of the FT.
When all is Ed and done
Over at PoliticsHome, Sienna Rodgers and Alain Tolhurst report that Labour frontbenchers have been told not to campaign in the upcoming by-election in Tiverton and Honiton, where the closest the party has got to winning was a mere 34 points behind the Conservatives. Instead, Labour has instructed frontbenchers to focus on campaigning in Wakefield, a seat the party held until 2019 and where there is a by-election on the same day. Both contests are expected to take place on June 23.
As I’ve written before, one of the most important stories in UK electoral politics is the informal pact between Labour and the Lib Dems (first revealed by George Parker and Jasmine Cameron-Chileshe) and the growing willingness of supporters of both parties to vote tactically for the other.
These two by-elections are, in many ways, the easiest environment for the party’s “no, honestly, this is not a pact” pact to operate in. The test for the Lib Dems in Wakefield and Labour in Tiverton and Honiton is whether they want to waste money. They have literally nothing to gain by getting in one another’s way.
Although the relationship between the Labour leader Sir Keir Starmer and Lib Dem leader Sir Ed Davey is a far cry from the genuine political proximity between Tony Blair and Paddy Ashdown in the 1990s, informal talks between the two men’s offices take place regularly and with high-level officials involved on both sides. One thing to watch for is that while, if Starmer has to stand down, his successor is unlikely to have radically different political positions from him, their willingness to work closely with the Lib Dems may be very different indeed.
Now try this
Thank you for the many messages about Arsenal’s capitulation to Newcastle on Monday. I really enjoyed* reading them. I am telling myself that the silver lining is that, because the chances of us winning the Champions League next season are essentially zero, the Europa League will be more fun.
* Something I actually enjoyed reading was Brooke Masters’ column on the US shortage of baby formula:
Walking into the baby aisle of my local New York pharmacy these days feels like entering a Soviet supermarket in the 1970s. Shelves usually jammed with cans of powdered baby formula are empty save for a notice warning customers they can buy a maximum of three tins each.
As Brooke explains, the shortage of baby formula is a handy guide to some of the pitfalls that governments will face as they seek to “reshore” more manufacturing after the pandemic.