Ed Balls calls for Bank of England accountability

Ed Balls, the former Labour shadow chancellor who has found fame this year on Strictly Come Dancing, has returned to the world of economics with a surprise call.

In his first paper since joining Harvard University as a reader last year, Balls and co-authors James Howat and Anna Stansbury say that the independence of central banks like the Bank of England and the Federal Reserve "should be curbed", according to the BBC.

The proposal is being widely presented as a U-turn from an economist who, as an adviser to Labour chancellor Gordon Brown in 1997, was "one of the masterminds behind the Bank’s independence in 1997", says The Guardian.

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However, Balls is not suggesting that the government once again assumes responsibility for setting rates – far from it. He insists the "accountability" he outlines would help to protect its operational independence by boosting "political support".

The intervention comes after what was seen as a public spat between the Prime Minister Theresa May and the Bank of England over the distributional effects of its ultra-loose monetary policy.

Balls told the BBC's Today programme that criticism of the policy which has kept interest rates at record lows is misplaced, as it has been "the only thing which stopped our economy sliding back into depression".

He still wants the Bank of England to set interest rates, but identified a "gap" in oversight relating to financial stability concerns that have mostly been left at central banks' doors since the financial crisis.

"The reforms we've seen over the last few years have hugely concentrated power in central banks. I think it's unfinished business," he said.

His paper suggests "a systemic risk body chaired by the chancellor", which would take some of the "burden for maintaining Britain's financial stability" and also have a role in evolving the Bank of England's monetary policy remit.

This would act as a go-between on core functions between the government and the bank, which, he says, would reduce the friction building between politicians on both sides of the Atlantic.

"In Congress, the Fed is being heavily criticised," he said. "We've seen not just MPs attacking [the governor] and the Bank of England, but even our prime minister a few weeks ago slapping Mark Carney down. It's very worrying."