Flying in American to set UK rates is costing taxpayer £80,000

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The Independent Online

The Treasury's decision to appoint a United States-based academic to the committee that sets interest rates will come under fresh attack today after the Bank of England revealed it will cost taxpayers almost £80,000 a year to import him into the UK for the monthly meetings.

The cost of flying David Blanchflower from his home in Dartmouth, New Hampshire, and putting him up in a London hotel is almost as much as he draws in salary.

The figures are published today in an answer to a request by The Independent under the Freedom of Information Act.

Professor Blanchflower struck a deal with Gordon Brown to work three days a week as an external member of the Monetary Policy Committee, concertina-ed into a 12-day monthly shift. The Treasury agreed that his costs would be met by the Bank of England.

The FOI documents show it will cost the Bank £3,902 a month for the round-trip airfare. "We have negotiated a special price with British Airways for regular business class travel between Boston and London, together with transport at each," it said.

The hotel that Professor Blanchflower is using costs £149 a night, but the Bank refused to reveal its identity for "security reasons". He also receives a £100 a day living allowance.

The total annual cost of £79,692 is close to his likely salary of £89,588, calculated on a pro-rata basis for a three-day week on the full salary of £149,314.

Senior Bank officials have expressed anger in private at the appointment although it declined to comment last night. Professor Blanchflower was unavailable to speak.

Bank officials were furious they were given only a short amount of notice to sort out the travel and accommodation arrangements, which will come out of the Bank's budget.

Officials at the central bank have always made clear that they have no criticism of the appointment of Professor Blanchflower, who is an expert in labour market economics.

The arrangement will also have a financial cost for the new member, who faces a tax liability over his hotel costs.

It is understood that HM Revenue & Customs have agreed there is no tax liability for the cost of the transatlantic flights.

MPs on the Treasury Select Committee backed the appointment earlier this month but said they would launch an inquiry into the way the Treasury picked MPC members. One called Professor Blanchflower's appointment "bizarre".

City economists have accused the Chancellor of appointing Fogs - "friends of Gordon" - to the committee, warning this could undermine credibility in the monetary policy process.

The MPC has been short of its full complement of nine economists for almost four months after Richard Lambert's decision to take the top job at the employers' group CBI.

The position has been made worse by the unexpected death of David Walton last week, which means it is likely July's rate decision will be taken by a committee of seven.

In 2002 the Bank was left short of a deputy governor after the Treasury failed to make its choice in time.

The Treasury has consistently said Professor Blanchflower is the "best person for the job" and that his country of residence is not an issue.