The Chancellor should change the remit of the Bank of England’s Monetary Policy Committee to make it consider the effect of interest rates on the exchange rate, as well as inflation, the House of Commons Trade and Industry select committee said this week.
In its report, Business, Enterprise and the Budget, published on Tuesday, the committee, chaired by Labour MP for Ochil Martin O’Neill, examined general economic issues facing industry, fiscal proposals outlined in the Chancellor’s pre-Budget report last autumn, and the climate change levy.
The report says that though the Governor of the Bank of England had been reported as accepting that sterling is unsustainably strong, the MPC had done little more than `analyse its own impotence’.
The remedy is the responsibility of ministers, it continues. `We consider that the time has come to reconsider the primacy in the MPC’s remit given to inflation targets and to give it responsibility for examining the influence of interest rates on a wider range of indicators.’
Its investigations emphasise the pervasive sense within UK manufacturing industry that its significance to the economy and potential for growth is insufficiently recognised. `We would welcome a clear sign in the Budget of the validity of some of the complaints made by manufacturers,’ the report adds.
It concludes that consultation on the climate change levy has produced `the outline of a workable regime’, but that there is still the problem of defining what should be regarded as `energy intensive’ for the purpose of qualification.