Labour proposes Scotland seat at Bank of England
The idea will be part of a major consultation on the Bank of England’s future being launched by Mr McDonnell which will be carried out by former former MPC member Professor David Blanchflower.
New Labour leader Jeremy Corbyn has already said that in government the party would ensure the Treasury retakes control of the Bank which was made independent in 1997 by the then Labour Chancellor Gordon Brown.
The McDonnell/ Corbyn plan is to force the Bank to print money to pay for infrastructure building in what is known as “people’s quantative easing.”
Today Mr McDonnell uses an article in a national paper to lay out the possible changes he would make to the Bank of England if Labour win power in 2020.
Among these is the plan to give the nations and regions seats on the MPC which controls the level of interest rates in the UK and sets the economic weather for the nation.
The idea was first mooted by SNP former First Minister Alex Salmond during the referendum when he was trying to make the case for Scotland remaining part of a sterling zone.
However, a source close to Mr McDonnell has told The Scotsman that the proposal is to “bind Scotland more closely in the Union” and the seat would be withdrawn from Scotland if became independent.
He said: “We’re not planning on giving France a seat on the MPC and likewise we wouldn’t allow an independent Scotland to have one either.”
The proposal which could also see Welsh, Northern Irish and English Regional seats is to make the Bank of England more like the Federal Reserve in the United States which has regional representation.
It is also aimed at forcing the Bank to look beyond the City of London and into the effects on different constituent parts of the UK and reflecting the new political landscape made by greater devolution across the country..
In the article, Mr McDonnell wrote: “Looking at other aspects of the MPC, both the Fed and the European Central Bank include representatives from far and wide.
“There could be a case, with the recent trend towards devolution, for regional or national representatives from Scotland and other parts of the United Kingdom.
“Looking beyond Lombard Street to the real economies in some of the big cities and regions, and nations of our country.”
The proposals come as Mr McDonnell tries to set a clear direction on his party’s economic policy after chaos last week when he decided to U-turn on his original pledge to support Chancellor George Osborne’s Charter of Budget Responsibility.
The last minute decision to oppose it led former Labour cabinet minister Ben Bradshaw to call it “a f***ing shambles” as he stormed out of the meeting it was announced at.
However, the new leftwing leadership of the Labour Party was privately relieved that a threatened mass rebellion saw just 21 of Labour MPs decide to abstain and not back the party line.