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Osborne to handover more powers to Mark Carney

The British chancellor of exchequer will present his budget on 20 March.

According to the Financial Times, George Osborne is considering handing over more powers to the incoming Bank of England (BoE) governor Mark Carney, who will take up his position in July.

Business secretary Vince Cable suggested in this week's New Statesman that Osborne ought to ease off on his Plan A, with a new programme of spending on schools, roads and housing. Cable implies that that spending ought to be funded by extra borrowing to improve the economy.

Osborne, who is resisting the Cable's suggestions, will use his budget on 20 March 2013 to support his message of fiscal conservatism and monetary activism by clarifying how the government intends to use monetary policy to get the economy growing again, the FT reports.

Meanwhile, Treasury officials are discussing proposals to change the remit of the bank.

In the budget, the chancellor will review the 2 per cent inflation target and the bank’s operations. Options include providing the MPC more time to bring inflation back to the 2 per cent target, giving the BoE a Federal Reserve-style dual mandate to target both employment and inflation, and even targeting cash spending in the economy rather than inflation.

Carney told MPs to the Treasury select committee that:

The bar for change is high, but there should be that debate, a relatively short debate, because I don’t think prolonged uncertainty about the framework is in anybody’s interests.

In addition, Carney told colleagues that he wants debate on the monetary framework to happen before he takes his new position.

Mervyn and Paul Fisher joined economist David Miles in voting for more quantitative easing at the February MPC meeting.

Alan Clarke of Scotia Bank, told the FT:

Numerous MPC members spoke over the last week and we judge that there is no smoke without fire. The Bank is no stranger to delivering surprises and it would get more bang for its buck in terms of market reaction by delivering a QE expansion while it is still [mildly] non-consensus.

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Labour tensions boil over at fractious MPs' meeting

Corbyn supporters and critics clash over fiscal charter U-turn and new group Momentum. 

"A total fucking shambles". That was the verdict of the usually emollient Ben Bradshaw as he left tonight's Parliamentary Labour Party meeting. His words were echoed by MPs from all wings of the party. "I've never seen anything like it," one shadow minister told me. In commitee room 14 of the House of Commons, tensions within the party - over the U-turn on George Osborne's fiscal charter and new Corbynite group Momentum - erupted. 

After a short speech by Jeremy Corbyn, shadow chancellor John McDonnell sought to explain his decision to oppose Osborne's fiscal charter (having supported it just two weeks ago). He cited the change in global economic conditions and the refusal to allow Labour to table an amendment. McDonnell also vowed to assist colleagues in Scotland in challenging the SNP anti-austerity claims. But MPs were left unimpressed. "I don't think I've ever heard a weaker round of applause at the PLP than the one John McDonnell just got," one told me. MPs believe that McDonnell's U-turn was due to his failure to realise that the fiscal charter mandated an absolute budget surplus (leaving no room to borrow to invest), rather than merely a current budget surplus. "A huge joke" was how a furious John Mann described it. He and others were outraged by the lack of consultation over the move. "At 1:45pm he [McDonnell] said he was considering our position and would consult with the PLP and the shadow cabinet," one MP told me. "Then he announces it before 6pm PLP and tomorow's shadow cabinet." 

When former shadow cabinet minister Mary Creagh asked Corbyn about the new group Momentum, which some fear could be used as a vehicle to deselect critical MPs (receiving what was described as a weak response), Richard Burgon, one of the body's directors, offered a lengthy defence and was, one MP said, "just humiliated". He added: "It looked at one point like they weren't even going to let him finish. As the fractious exchanges were overheard by journalists outside, Emily Thornberry appealed to colleagues to stop texting hacks and keep their voices down (within earshot of all). 

After a calmer conference than most expected, tonight's meeting was evidence of how great the tensions within Labour remain. Veteran MPs described it as the worst PLP gathering for 30 years. The fear for all MPs is that they have the potential to get even worse. 

George Eaton is political editor of the New Statesman.