Former chancellor George Osborne has labelled the Liz Truss government “political vandals” who caused a “self-induced financial crisis”.
Osborne, chancellor from 2010 until 2016, was speaking to a House of Lords committee investigating the independence of the Bank of England.
He referenced last autumn’s chaotic mini-budget from former prime minister Truss and ex-chancellor Kwasi Kwarteng – and the resultant plunge in the value of the pound – to justify the Bank’s status.
Truss, who resigned as prime minister in October, said she would review the independence of the central bank and question its decision-making on interest rates during her leadership campaign.
Her government’s mini-budget on September 23 then led to a loss of confidence in the currency and bond markets, leading to the pound dropping to an all-time low against the dollar and a crisis in the pensions market.
As a result, the Bank of England intervened with a plan to buy £65 billion of government bonds five days later in a short-term intervention.
The former chancellor said the short-lived government “heavily” depended on the Bank after its spending and cost-cutting plan shook the markets.
“There is a real responsibility for the governor of the Bank, the chancellor of the Exchequer, the prime minister, in particular, to make these arrangements work,” Osborne said.
“You can prescribe in legislation all sorts of frameworks but if the individuals concerned don’t want to make it work then you are going to start grinding through the gears of the British constitution.
“I think you saw that last autumn in Britain when you had a Conservative government which did not particularly value the then governor of the Bank of England and made no secret of it, and then ended up heavily depending on the Bank of England in a crisis they had created.”
He hailed how the Bank and governor Andrew Bailey dealt with the “exceptionally difficult situation” last autumn.
Osborne added: “You had an elected government in this country challenging essentially the legitimacy of the Bank governor and the Bank of England.
“You had a self-induced financial crisis within this country alone at the time. And the Bank managed to navigate through that and it was the Bank’s credibility that managed to restore confidence to the market which was followed by the change of government.”
The former Chancellor also called for increased independence at the Office for Budget Responsibility (OBR), the official forecaster his previous government set up in 2010, adding last autumn’s events bolstered the argument to give it a similar standing to that of the Bank.
He said: “I would learn from that experience and learn from the Bank of England’s independence and find ways to make the OBR more independent and more robust in the face of, you know, political vandals.”
The former chancellor and ex-former Labour shadow chancellor Ed Balls were facing questions from the House of Lords’ economic affairs committee.