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Labour could move Bank of England operations away from London

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Labour could move Bank of England operations away from London

Labour could move Bank of England operations away from London
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By Andrew MacAskill and William Schomberg

(Reuters) - Britain's opposition Labour Party is considering moving parts of the Bank of England to Birmingham if it wins power at the next national election, saying the change is needed to reduce the economy's reliance on London's banking industry.

Labour's would-be finance minister John McDonnell said the BoE's base in London had contributed to the neglect of parts of the British economy, which suffers from big regional differences in terms of productivity, investment and incomes.

"This will allow us to address some of the imbalances of decision-making that have taken place in the past," McDonnell said at the launch of a report on boosting investment.

"The issue here is maintaining the independence of the Bank of England but ensuring it can operate effectively within the economy."

The BoE has been based in the heart of the capital's banking district since its foundation in 1694 and its nickname, the Old Lady of Threadneedle Street, is derived from its location.

The central bank has regional agencies in 10 other cities and towns across the United Kingdom and a cash centre located in the northern city of Leeds but only about 200 of its nearly 4,400 staff are located outside the British capital.

As well as the BoE's imposing headquarters, the central bank's Prudential Regulation Authority, which oversees the country's banks, is based nearby in Moorgate, also within the boundaries of the City of London financial district.

The BoE declined to comment on the relocation proposal.

Labour has floated other ideas for changing the way the BoE operates since left-winger Jeremy Corbyn took over as leader. In 2015, it set out plans for "People’s Quantitative Easing," or printing money for government spending.

Corbyn has often criticised banks for what he says is speculation.

Monday's report recommended moving some of the BoE's functions to Birmingham, to be located near a new National Investment Bank and Strategic Investment Board, organisations that Labour plans to create in order to boost spending on infrastructure and new technologies.

McDonnell said he plans to discuss the proposals with BoE Governor Mark Carney and a report will provide more detail in 2018 on what operations might move.

The other recommendations include establishing more regional BoE offices in places such as Newcastle and Plymouth.

McDonnell said a concentration of power in London contributed to the regional imbalances that were seen as a factor behind Britain's decision to leave the European Union in a referendum in 2016.

While voters in London voted to remain in the EU, voters in northern England and Wales backed leaving, adding to strains between different parts of the United Kingdom.

Beyond just economics, an opinion poll last year showed half of Britons support parliament being moved out of London while it goes under a multi-billion-pound renovation project over the next few years.

The Labour Party report also called for a review of the BoE's mandate, which it said was insufficiently focussed on encouraging investment.

Britain has the lowest share of investment as a proportion of economic output among the Group of Seven rich advanced countries and government investment in research and development is well below the EU average, the report says.

(Additional reporting by Sangameswaran S in Bengaluru and Elizabeth Piper in London; Editing by Will Dunham and Catherine Evans)

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