The Bank of England is taking risks on inflation because of the “reckless” speed of Prime Minister David Cameron’s spending cuts, former Treasury Minister Paul Myners said.
The opposition Labour Party lawmaker who sits in the upper House of Lords and was minister for London’s financial district under the last government, said the economy’s contraction in the fourth quarter shows “the thickening of a trend back towards recession -- a trend the U.K. alone is experiencing.”
“Real incomes are being squeezed,” Myners told lawmakers in Parliament in London today. “The Governor of the Bank of England’s forecast is that they will be back to the level of 2005. House prices are falling and unemployment is rising.”
“The Bank of England is having to take risks on inflation because of the severe cuts in economic activity consequent upon the government’s reckless fiscal policy,” he said.
Gross domestic product shrank by 0.5 percent in the fourth quarter, the most since the second quarter of 2009, the Office for National Statistics said last week. The economy’s growth would have been “flattish” without heavy snowfall in December, the agency said.
Responding to Myner’s claim, the government’s treasury minister in the House of Lords, James Sassoon, said it was the central bank’s opinion that “inflation is likely to fall back to target during 2012 as the impact of temporary factors wanes, but the timing and extent of that decline in inflation are uncertain due to the margin of spare capacity in the economy.”
“It is precisely because the government took resolute and early action to restore the fiscal position to one that gets us back from the brink of disaster which the last government left us with that the Bank of England is able to conduct monetary policy on a prudent basis,” Sassoon said.