Is Labour’s Prospective Economic Policy Short-sighted? The Rumoured Relocation of the Bank of England Suggests So

In this third and final post of the day, we will take a brief look at a proposal being advanced today by the Labour Party, which attempts to convey their commitment to redistributing wealth across the U.K. rather than its current concentration in the South-East of the Country. This review will only be brief because, given the political landscape, it is all that it can be at the time of writing; however, whilst the suggested aim to redistribute the economic dynamic across the Country is hardly surprising given the stated aims and objectives of Jeremy Corbyn’s Labour Party, in reality the question this suggestion raises is two-fold: is the Party operating on any solid basis of reality, and then do they recognise the reality of the problems i.e. their root causes, or are they focusing on and subsequently adding to the façade that serves to preserve the current power structure? Surely, as recent and historical evidence suggests, anything other than a ‘root and branch’ redevelopment will have very few lasting positive consequences.

The Shadow Chancellor, John McDonnell, has commissioned consultants to review potential options available to the Party if it wins the next General Election, and one option that is being promoted today is that the Bank of England, located in the City of London since 1694, should be relocated in whole or in part to Birmingham, because the current base is ‘unsatisfactory and leads to the regions being underweighted in policy decisions’. The prospective move would accentuate the development of the ‘National Investment Bank’ and the Strategic Investment Board’ in the city and would represent the development of a new ‘economic policy hub’. Whilst the suggestion so far is that the move would provide for a visible representation of the Party’s determination to ‘promote growth and a rebalancing of the economy’, the real question is ‘is that enough’ to uproot a British Institution for a ‘representation’?

Of course, the answer is ‘no’, because whilst HSBC and potentially Channel 4 may be moving to the city, it is a different prospect entirely moving the Bank of England. The simple reason is that uprooting the Bank of England, so soon after the Country leaves the E.U. and faces the prospect of battling for international trade deals which will be underpinned by the perceived authority of the City of London as a financial centre, means McDonnell’s suggestion will remain on the drawing board irrespective of whether the Party comes to power or not; naturally, it is one thing suggesting policies from the side-lines as opposed to actually governing. Yet, whilst this counteracting point is the obvious one to make, the more obscure point is what effect would moving the bank actually have on ‘rebalancing’ the economy? The divergence between basic economic indicators like wages and employment levels in both the North and the South of the country are clear for all to see, the political battle that is being fought on the basis of the development of the ‘Northern Powerhouse’ suggests that devolving power and authority may fulfil the aim of reducing the divide, but in many instances it may not. Theresa May was earlier this year forced to respond to critics that accused her of paying lip-service to the ideal, and whilst Labour supporters may not like hearing that their Party has similarities to the Conservative Party, McDonnell’s suggestion implies that this is the case; of all the things to be done, is relocating the Bank of England a worthy option? Is it even worth us discussing based upon the fact that diluting the influence of the City of London in the wake of Brexit is a non-starter? Whilst this author does not support either Party, it is worth stating that to rise to power the Labour Party should really seek to be rooted in realism to provide a realistic alternative to the Conservative Party who operate in a rather different way. Ultimately, the more noises we hear from the Labour Party about how they will govern whilst they are on the side-lines, particularly with respect like these calls today, will only serve to undermine their chances – only root-and-branch and consistent change, over a long period, will reduce the divide between the North and the South.

Keywords – Bank of England, Labour Party, Politics, Birmingham, City of London, @finregmatters