---
title: "Could the Bank of England lose its independence over inflation failures?"
url: https://www.nsfw.info/bank-of-england-independence-inflation-jersey-mortgages/
published: 2026-10-07T07:31:12+00:00
modified: 2026-10-07T07:31:12+00:00
author: "Chief Editor"
categories: ["Money"]
image: https://www.nsfw.info/wp-content/uploads/2026/10/bank-of-england-independence-inflation-jersey-mortgages-1024x572.webp
summary: "Parliament is scrutinising the Bank of England's independence as UK rates sit at 3.75%. Three economists argue for reform, with direct consequences for Jersey m"
publisher: NSFW (https://www.nsfw.info)
---

# Could the Bank of England lose its independence over inflation failures?

**In brief:** The Bank of England’s operational independence, granted in 1997, is under fresh scrutiny as UK interest rates sit at 3.75% and are predicted to rise further. Parliament’s Treasury Committee has launched a formal inquiry into the Bank’s relationship with government. Three prominent economists have set out the case for curtailing or ending that independence, with significant implications for mortgage holders and borrowers across the Channel Islands.

## How the Bank of England’s independence works

The Bank of England has operated independently of government since 1997, when Gordon Brown, believing that political short-termism was distorting monetary policy, handed control of interest rates to the Bank’s Monetary Policy Committee. That nine-member committee, all unelected and unaccountable to parliament, reviews rates eight times per year. The government sets a target inflation rate, currently 2%, and the Bank sets interest rates in pursuit of that target. Since 2009, the Bank has also managed quantitative easing and quantitative tightening.

The Guardian reports that rates are currently stuck at 3.75% and are predicted to climb again, with a further rise expected in November. For many of the Bank’s early independent years, UK inflation averaged 2.5%, compared with 7.3% between 1967 and 1997. However, the source notes that inflation was similarly restrained in France, Germany and the Netherlands over the same period, raising questions about how much credit the Bank can actually take. During the 2022 economic crisis, the UK faced the highest inflation levels in the G7, and inflation has remained above target for most of the past five years.

## The case for change: what the economists argue

The Guardian asked three economists to set out their arguments for reform. Their positions differ in emphasis but share a common thread: that the current framework is not fit for purpose.

Professor Costas Lapavitsas of SOAS argues that between 2009 and 2021, the Bank’s quantitative easing programme, which involved purchasing £895 billion of bonds, inflated house and share prices while productive investment stagnated. He points out that in 2024 to 2025, the Treasury picked up a bill of more than £36 billion to cover losses from the QE programme, while the government simultaneously imposed tight budgets. His proposed remedy is to scrap independence and redirect the Bank toward financing industrial rebuilding, working alongside a new public investment bank.

Dr James Meadway, director of the Verdant thinktank and a former economic adviser to Shadow Chancellor John McDonnell, argues that low post-1997 inflation had more to do with China’s industrialisation keeping goods prices low than with central bank wisdom. He contends that the Bank should leave interest rates alone when inflation stems from sources beyond monetary policy’s reach, such as energy shocks or broken supply chains, and that governments should instead use tools including strategic price controls.

Economist Ann Pettifor notes that the Bank’s own governor, Andrew Bailey, has admitted the Bank cannot do anything about price stability when inflation is imported. She argues that Britain’s fiscal and monetary institutions are effectively “at war with each other”, and calls for the Bank’s 2% inflation target to be replaced with a mandate prioritising full employment and climate considerations. She also proposes an Inflation Control Office, modelled partly on French approaches, using tariff shields and windfall taxes on energy companies.

## What this means for Jersey

For Jersey residents, the Bank of England’s decisions are not abstract. Mortgage rates on the island track closely with Bank of England base rate movements, meaning the 3.75% rate, and any further increases, feed directly into repayments for homeowners and would-be buyers. Those on variable or tracker mortgages will already be feeling the squeeze, and a further rise in November would tighten household budgets further.

Beyond mortgages, higher rates affect the cost of borrowing for local businesses, the returns available on savings, and the broader economic conditions in which Jersey’s finance industry operates. Jersey’s economy is closely tied to the City of London and to UK financial conditions, so any structural reform of the Bank of England, whether a narrowing of its mandate, a change to its inflation target, or a more fundamental curtailment of its independence, would ripple through to the island’s financial sector.

The Treasury Committee inquiry is at an early stage, and no changes have been proposed by government. But the fact that parliament’s most influential financial oversight body has chosen to examine this question at all signals that the debate has moved well beyond the fringes.

## The NSFW Perspective

There is something quietly remarkable about watching three left-wing economists argue, with apparent sincerity, that the solution to a government institution making poor decisions is to give politicians more control over it. The Bank of England has had a mixed record, certainly, and a £36 billion bill landing on taxpayers while the City collected interest on its reserves is not a comfortable read. But the cure being prescribed, handing rate-setting back to the same class of people who brought us the 1970s, deserves rather more scepticism than the Guardian’s framing suggests.

For Jersey readers, the more immediate concern is simpler: rates are high, they may go higher, and the people deciding that are nine individuals in Threadneedle Street who answer to nobody you voted for. Whether that is a feature or a bug rather depends on how much you trust politicians with your mortgage.

*Source: [theguardian.com](https://www.theguardian.com/world/2026/oct/07/wednesday-briefing-is-it-time-to-end-the-bank-of-englands-independence)*