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Bank of England boss must go if he doesn’t change course, says senior Tory

‘Maybe it’s time to look for someone else who’s got a better plan’, says Jake Berry

Adam Forrest
Political Correspondent
Sunday 25 June 2023 23:43 BST
Sunak says ‘no alternative’ to his inflation plan

The Bank of England governor Andrew Bailey may have to go if he does not come up with an alternative course to putting up interest rates, according to the former Conservative Party chair Sir Jake Berry.

The senior Tory and Boris Johnson ally is the first to publicly question Mr Bailey’s future, amid backbench fury over the Bank being “asleep at the wheel” over inflation and the looming mortgage timebomb.

Sir Jake – who was appointed Tory chair by Liz Truss and was previously a defender of her failed economic plans – said yesterday that “maybe it’s time to look for someone else who’s got a better plan”, as the Bank continues to face accusations that it was too slow to tame inflation.

The ex-cabinet minister suggested that the governor was failing in his job because he is pursuing “blobonomics” – defining the concept as Treasury orthodoxy set by the civil service “blob”.

Mr Berry told GB News that the Bank’s inflation forecasts had been complacent, saying officials were “asleep at the wheel”, adding: “The United Kingdom central bank has acted far too slowly, and mortgage-payers and businesses are paying the price.”

He said: “Andrew Bailey is pursuing what I call blobonomics, which is the sort of flawed economic principles of the Treasury. And I think the problem he has is that every prediction that is being made is wrong.”

Sir Jake then warned: “I think the government should be getting him in and talking about whether he has a plan other than just ... ratcheting up the interest rates and mortgages on households. And if he doesn’t, then maybe it’s time to look for someone else who’s got a better plan.”

Senior Tories continued their war of words with the Bank this week after interest rates were raised to 5 per cent, the 13th consecutive rise, with Jacob Rees-Mogg calling Mr Bailey “chief ostrich” with his head in the sand.

Sir Jake Berry says Bank of England ‘asleep at the wheel’ (PA Wire)

But until Sir Jake’s remarks on Sunday, no one in the party had dared suggest Mr Bailey should be replaced, with some MPs warning that changing the leadership at the Bank would further destablise Britain’s financial reputation in a period of turmoil.

Mr Sunak offered full-throated personal support for Mr Bailey for the first time on Sunday, insisting that there was “no alternative” to the Bank’s approach and the government’s strategy to taming inflation.

The PM told the BBC: “The Bank of England’s track record – including the governor’s track record – over a long period of time is that inflation has been managed appropriately … The Bank of England has my total support.”

Chancellor Jeremy Hunt agreed a plan with banks to offer more flexibility over interest-only mortgage holidays, a 12-month repossession grace period and a guarantee that credit scores will not be impacted by switching to temporary support.

Writing in the Mail on Sunday, Mr Hunt urged cash-strapped Britons to be “patient” with “painful” interest rate rises and stressed that the hikes were “one of the most effective methods” to squash stubborn inflation.

Rishi Sunak offered support to Andrew Bailey during BBC interview (BBC)

Mr Berry is among the senior Tories calling on Mr Sunak and chancellor Jeremy Hunt to bring back mortgage interest relief at source (Miras) – a form of tax relief on interest payments.

He said: “I just don’t think this crisis is going to be over in six months and that’s why I’ve been calling for a reintroduction of Miras … you will have seen that there’s a potential 10 per cent drop in property prices in the next 12 months predicted.

“That puts us on the brink of a financial crisis in terms of the amount of wealth that we have in this country invested in property. We absolutely have to act.”

Sir Jake added: “I don’t think the approach frankly of Andrew Bailey at the bank, or the government, wait-and-see approach, is one that is serving my constituents.”

While the Lib Dems have called for a £3bn mortgage protection fund, one senior Tory MP told The Independent the government could offer “generous” loans to cover mortgage interest payments for Universal Credit recipients.

Liz Truss is said to have revived her reputation among some senior Tories (PA Wire)

Former prime minister Ms Truss is said to have revived her reputation somewhat among some MPs amid the gloom which has followed this week’s bleak inflation figures and dramatic rate rise. She told guests at a summer drinks event last week: “I think I am the only Conservative left in Britain.”

Some senior Tory figures are “revising” their views on Ms Truss, according to the Sunday Times. A Truss ally told the newspaper: “The car was on its way to driving off the cliff and she tried to do a handbrake turn.”

But Truss ally Mr Berry, chairman under her brief premiership, admitted that the implementation of Trussonomics “left a lot to be desired”. He said: “I believe in growth, growth, growth – that’s what Liz Truss went for … it’s a shame, frankly, we made such a mess of implementing the policies.”

Then-chancellor Kwasi Kwarteng, who oversaw Ms Truss’s disastrous mini-Budget fiasco which pushed up borrowing costs, said the Bank of England “was a bit slow” in reacting to inflation. Mr Kwarteng defended the push for growth, and said the idea of seeking a recession in 2023 to tame inflation was “mad”.

Last month Mr Hunt said he was “comfortable” with a recession, and one of his advisers has said Britain should now be willing to “create” a recession. Mr Kwarteng told GB News: “I don’t know what Jeremy [Hunt] meant by his remarks, but to openly will a recession when you’re responsible for an economy is not responsible.”

Tory MPs are increasingly worried the mortgage timebomb will cost them their seats, as new research shows many in the “blue wall” southeast of England face a £5,000-a-year increase in payments.

Research by the Public First consultancy shows those with average mortgages in London and the southeast could see their mortgage costs rise by £5,000 or more a year compared to 2020-21.

The findings, first shared with The Observer, also show that Britons under the age of 45 could see their annual costs increase by more than £4,000, since interest payments make up a larger proportion of their mortgage.

Internal Labour polling, shared with the Sunday Times, shows that 45 per cent of mortgage-holders say the current crisis makes them less likely to vote for the Tories.

And voters in the “blue wall” are more likely to blame the Tory government for rising interest rates (37 per cent) than the central bank (14 per cent). A separate Opinium poll shows Labour now holds a 31-point lead over the Tories among mortgage-holders.

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