BoE's MPC should be abolished, think-tank claims

The Bank of England’s Monetary Policy Committee has done a “very poor job of managing our money", a think-thank has claimed.

The Adam Smith Institute (ASI), a free market think-tank, said in a report that the MPC’s policies have made the UK more vulnerable to banking crises.

The ASI called on the BoE to abolish the MPC and its inflation target as it believed it was responsible for creating a century of booms and busts that only harmed the economy. The BoE is targeting inflation of 2%.

“They have created artificial booms, followed by genuinely painful busts, through decades of following their unreliable discretion,” said Eamonn Butler, ASI’s director.

Anthony J Evans, the report’s author and an associate professor at the ESCP Europe business school, said the BoE should let go of control of money and allow for a system of free banking.

The report claimed that a system of free banking would deliver fewer crises and more stability in the wider economy.

Under such a system, private banks would be responsible for the supply of money, as they were in the 18th and 19th century in Scotland, which ASI claimed led to a period of greater financial stability.

The MPC meets on Thursday to decide on its latest policy measures. Analysts expect it will keep interest rates unchanged at 0.5% and the asset purchase programme at £375bn.