Labour eyes fresh productivity target for Bank of England to stop UK 'falling behind'
The Bank of England should stay independent but be given an explicit target to turn around Britain's flagging productivity, a review launched by Labour's John McDonnell has concluded.
Since the onset of the 2008 financial crisis, UK productivity - a measure of how much workers generate for the economy for every hour they put in - has been relatively weak compared to other major economies.
The latest official figures show that Britain is now more than 15% below the productivity average of other G7 countries, prompting the Shadow Chancellor to order a review by economist Graham Turner.
The report, published on Wednesday, recommends that the central bank should have its remit "expanded to include a 3% productivity growth target", and calls for an "accord" between the Bank and ministers at the start of the next government setting out how they will work together to boost productivity.
The bank will have to update ministers at every Budget on its work to meet the target.
However it was left unclear whether the 3% target would be for each year or over the course of a parliament.
Mr McDonnell said the plan would help Labour "build the economy of the future" by overhauling a financial system that "isn't fit for this purpose".
The Shadow Chancellor added: "We need one that helps to deliver enough investment in the high-technology industries and firms so that we can reboot and rebuild Britain. This report is a vital part in making this happen.
"Under the Tories, we’ve seen more and more investment flowing into property speculation whilst high-tech firms have been starved of the money they need, and research spending has lagged far behind.
"The next Labour government will work in partnership with our financial institutions to help deliver the investment that is needed to ensure the UK doesn’t fall behind in the global innovation race of the fourth industrial revolution, as part of our ambitious plans to help build a high-tech, high-wage economy that works for the many, not the few."
As well calling for the continued independence of the Bank of England, which was granted under the last Labour government in a bid to reduce ministers' meddling in the economy, the report urges the creation of a new "Strategic Investment Board" to steer the Government's industrial strategy.
It also says the Royal Bank of Scotland - bailed out by taxpayers during the financial crisis and still part-owned by the public sector - should be used to lend money to small and medium-sized businesses.
Report author Graham Turner said the UK economy was suffering from "deep-seated structural problems" in the face of its impending exit from the European Union.
"Recent poor economic data underlines the scale of the difficulties," he added.
"The UK is ill-prepared to face the challenges of life outside the European Union.
"Without major changes to economic policy, the UK will be marginalised, left behind by countries with higher levels of investment in technology."
Mr McDonnell will officially launch the report at an event in London on Wednesday.