As economic shocks abound, the Bank of England’s political fortunes are shifting

Good morning. I’m not the only one who is waiting for Boris Johnson to prove that his government’s position on the Northern Ireland protocol is all bluff. In today’s newsletter, we discuss why unionists are waiting for Johnson to show them the money, and what Conservative backbenchers think about independent central banks.

Inside Politics is edited by Georgina Quach. Follow Stephen on Twitter @stephenkb and please send gossip, thoughts and feedback to [email protected].

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Stop me if EU’ve heard this one before

“What is the Northern Ireland protocol row even about, anyway?” It’s a question I ask myself a lot in the small hours of the morning when I sit down to write this email. Fortunately for everyone involved, Peter Foster has written a handy primer about what the specific areas of disagreement are. The short answer is that the protocol, agreed as part of the Brexit deal, avoids a hard border on the island of Ireland by deepening the regulatory border between Northern Ireland and Great Britain. This has roiled the Democratic Unionist party and unionists because checks are now required on certain goods entering NI from GB and vice versa. Unionists also believe the deal diminishes the region’s place in the UK.

Here’s what Boris Johnson told reporters during his trip to Belfast yesterday about the government’s planned legislation, which would allow it to unilaterally amend the operation of the protocol. His preferred ‘Plan A’ is to secure changes to the protocol via negotiation.

But to get that done, to have the insurance, we need to proceed with a legislative solution at the same time.

I’m aware there have been an awful lot of times in this newsletter when I’ve said the form book suggests that the UK government will not, when push comes to shove, ever make good on its threats — subscribe to Alan Beattie’s Trade Secrets briefing for much more. So instead, today I will say: the form book suggests that the UK government will not, when push comes to shove, ever make good on its threats — subscribe to Peter Foster’s Britain After Brexit newsletter for more.

One political leader who is worried about just that is Sir Jeffrey Donaldson, the leader of the DUP, who said yesterday:

Tabling legislation is words. What I need is decisive action and that means I want to see the government enacting legislation that will bring the solution that we need.

As I wrote yesterday, my read is that the subtext of everything Boris Johnson is saying is that the DUP shouldn’t wait for him to actually do anything to resume devolved government in Northern Ireland. Now, of course, that may be wrong. With ministers divided on the way forward, noises coming out of the government are so contradictory. But one problem the prime minister has is that none of the groups he needs to convince (not the DUP, nor the European Commission and nor EU member states) think that the UK government will really ever activate its ‘insurance policy’.

Andy, you’re a star (in nobody’s eyes but mine)

Yesterday, Bank of England governor Andrew Bailey and his colleagues were probed by MPs on the failure by the central bank to foresee the inflation rises on the horizon, and adjust monetary policy in time.

How seriously should we take Conservative grumbling about the BoE’s missing its inflation target? That’s the question several of you are asking. This weekend, over at my old stamping ground of the Telegraph, Edward Malnick and Tom Rees reported not one but two cabinet ministers turning on the BoE, saying that it had “failed a big test”. Another minister said that others are “now questioning its independence”.

Although it is not hard to find Conservative MPs who are critical of the BoE’s handling of the economy shocks, no one in a position of power and influence within the party or the government currently believes that independence should be wound back.

But, of course, as several of you have pointed out, it’s no so long ago in the grand scheme of things that no one in a position of power and influence within the Tory party was questioning the UK’s membership of the European single market.

The only honest answer is that we don’t know. It would require an awful lot of change within the Conservative party for BoE independence to be seriously in doubt. But this is the first period of double-digit inflation in the UK since the BoE gained independence and we can’t say for sure how that will change the politics around the BoE’s status and remit. Who knows if ideas that are currently way out on the fringe will become mainstream?

A good indicator, either way, will be how appointments to the Monetary Policy Committee are talked about — or rather not talked about — at Westminster.

As one Tory MP pointed out to me, most of their colleagues couldn’t reliably tell you how many people are even on the MPC, let alone name them. I think we can safely expect that to change — and the first big sign of how the BoE’s political fortunes are changing will be how the next vacancy on the MPC is talked about at Westminster, if it is talked about at all.

Now try this

I’ve just finished Money In One Lesson by Gavin Jackson, formerly economics reporter of this parish and now at the Economist. It’s a lucid and at times very funny history of money. I enjoyed it so much on the train home I ended up in Cheshunt, which I enjoyed rather less.

And if economics is your thing, the Financial Times is hosting a number of events live from Davos on the sidelines of the 2022 World Economic Forum meeting this month. Join us on 22-25 May here.