Theresa May has restated her determination to be tough on public spending despite political pressure to ease up on austerity. “Continuing to deal with our debts,” is the way to strengthen the economy, the prime minister said.Her speech at the Bank of England is timed to mark 20 years of political independence for the central bank. It came a day after Labour leader Jeremy Corbyn pledged to “repair the damage done by austerity”.At the Labour party’s annual conference, Mr Corbyn – who has consistently criticised the Conservative party’s austerity programme – insisted Labour’s policies were “what most people in our country actually want”.However, Mrs May said that such an approach could ultimately result in less money for public services.”To abandon that balanced approach with unfunded borrowing and significantly higher levels of taxation would damage our economy, threaten jobs, and hurt working people,” she said.
Mrs May also defended the UK’s free market economy, and insisted that “strict new rules” on banking and finance were working. Britain’s flexible labour market had brought prosperity, Mrs May said, although she accepted that it did not necessarily work for everyone. This was why her government was introducing new safeguards.The prime minister’s first job after graduating in 1977 was at the Bank of England, and she is to talk about how the nature of central banking generally has changed over the past 40 years.The Bank of England was given political independence on 6 May 1997 by then Chancellor Gordon Brown just days after the new Labour government took office. Prior to that, interest rate decisions were taken by the chancellor, rather than by independent economists. That meant changes were often driven by politics, for example lowering interest rates after a budget to boost the economy, or raising them immediately after a general election. The Bank has since gained further powers including financial stability and the regulation of financial firms, such as banks and insurers.Current Bank governor Mark Carney will host a two-day conference on Thursday and Friday to mark the 20-year anniversary of its independence. Speakers will include Mr Brown and his then adviser Ed Balls.Other central bankers including European Central Bank president Mario Draghi, Federal Reserve vice chairman Stanley Fischer, as well as International Monetary Fund managing director Christine Lagarde are also due to attend.