The proposal, to be made in a speech to the London School of Business, is seen as an important element of the Tories’ economic policy in the run-up to the spring elections.
Portillo’s plans would limit the power and control of the chancellor over fiscal policy, and would fly-in-the-face of chancellor Gordon Brown’s strategy of ‘self-imposed’ tax and public spending regulations, the Financial Times reported today.
Brown has followed a policy of strong growth in public spending, a strategy criticised by the Bank of England and independent economists, who believe an increase in public sector spending will mean private spending and investment growth must slow down to keep inflation in check.
According to the FT, Portillo is expected to emphasise ‘more rigorous disciplines’ to meet global economic conditions. To do to this, the independence of the Bank of England from the exchequer’s office will be strengthened, and the selection of members to the Bank’s monetary policy committee is to be more transparent.
The Tories will also announce an enhanced role for the Treasury’s council of economic advisers, similar in responsibility to the Bank of England’s Monetary Policy Committee, which rules on interest rates. However, unlike the MPC, the Treasury’s council would not be a decision-making body, but would only monitor and advise the chancellor on policy.
Some economists criticised the Tory proposal calling it an ‘inappropriate economic policy mix’ – an inflexible monetary policy contrasted against a loose fiscal policy.
Portillo is expected to provide evidence of a growing antagonism to paying tax, and reiterate the Tories’ anti-euro stance.
Last week, the Conservative Party promised to cut public spending and give £8bn back to taxpayers.
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