BOE's Haldane Will Be Tasked to Fix U.K.’s Poor Productivity
(Bloomberg) -- The U.K. government is taking a leaf out of the opposition’s playbook and looking to the Bank of England to help solve the nation’s productivity puzzle.
BOE Chief Economist Andy Haldane will chair the government’s new Industrial Strategy Council, the Business Department said on Monday in an emailed statement. The body is charged with overseeing delivery of the U.K.’s flagship economic policy to revive flagging productivity by promoting the country’s industrial strengths.
While Haldane will chair the council in a personal capacity, and receive no salary, the involvement of a senior official from the independent central bank in government policy is a relatively unusual step. The moves comes as opposition Labour Party lawmakers have suggested that the BOE’s remit should be expanded to include a goal of 3 percent productivity growth.
In testimony to Parliament last month, Haldane himself pointed out that improving the measure is largely beyond the reach of the BOE’s current toolkit.
“Central banks do not build roads or railways, or hospitals or schools; they don’t train apprentices and they don’t, by and large, teach school children,” he told the Treasury Committee. “Longer term, those are the things that determine it.”
Productivity is a hot-button issue in the U.K., with sclerotic growth in output per hour having choked the economy for years. While the latest official figures show it picking up in the second quarter, it has expanded just 0.3 percent a year since 2008. Poor productivity means the economy can no longer expand as quickly as it did in the past without fueling inflation.
“Productivity is an important determinant of the Monetary Policy Committee’s forecasts for economic growth and inflation. Understanding the impact of the Government’s policies on the outlook for productivity is therefore of great importance to the bank’s work,” BOE Governor Mark Carney said.
The industrial strategy council will meet three to four times a year beginning next month. The Financial Times reported the appointment on Sunday.
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