30th May 2026
The Bank of England's primary job is to control inflation, and one of the main tools it uses is interest rates. Higher interest rates tend to reduce spending, slow economic activity and weaken demand for labour. That can lead to fewer job vacancies and, in some cases, higher unemployment.
All too often politicians lean on the fact that the Bank of England has the responsibility and not them. That is too easy away to let them off the hook after all a previous government gave them the job and they could easily take it back as ultimately the government is in control.
The UK government used to control interest rates directly. Until 1997, interest rates were set by the Chancellor of the Exchequer. In 1997, the newly elected Labour government under Tony Blair and Chancellor Gordon Brown gave operational independence to the Bank of England. Since then, the Bank's Monetary Policy Committee has set rates with the aim of meeting the government's inflation target.
Most advanced economies have independent central banks, including:
United States through the Federal Reserve.
Canada through the Bank of Canada.
Australia through the Reserve Bank of Australia.
Eurozone countries through the European Central Bank.
However, the degree of independence varies. Some countries give their central banks multiple objectives rather than focusing mainly on inflation.
The US Federal Reserve, for example, has a "dual mandate" of both price stability and maximum employment.
Fewer job vacancies and, in some cases, higher unemployment are what economists sometimes refer to as creating "slack" in the labour market. The idea is not that policymakers deliberately want people unemployed, but that a labour market that is extremely tight, with too many vacancies and too few workers, can contribute to wage-driven inflation. The Bank has openly discussed the need to bring labour demand and labour supply back into balance during recent inflationary periods.
Critics argue that, in practice, this means some people bear a disproportionate burden of inflation control. Young people, recent graduates and lower-skilled workers are often the first to struggle when economic growth slows. Historically, youth unemployment tends to rise much faster than overall unemployment during downturns.
The UK's NEET problem—young people not in employment, education or training—is more complicated than monetary policy alone. The number of NEETs has risen in recent years, but this reflects several factors:
Weak productivity growth since the 2008 financial crisis.
A shortage of affordable housing in areas with jobs.
Skills mismatches between education and employer needs.
Regional economic inequalities.
Reduced availability of entry-level jobs in some sectors.
The long-term effects of the pandemic.
Growing numbers of young people facing mental health challenges.
Critics of current policy argue that governments and central banks are too quick to focus on the behaviour of workers rather than structural weaknesses in the economy. They point out that inflation in recent years was driven largely by energy prices, supply-chain disruptions and global shocks rather than excessive wage growth. From this perspective, raising interest rates may have treated the symptoms rather than the causes.
There is also a wider debate about whether policymakers rely too heavily on unemployment as an inflation-control mechanism. Some economists argue that governments should focus more on increasing the economy's productive capacity rather than suppressing demand. That could include investing in infrastructure, housing, skills training, research and development, and regional growth.
Supporters of the Bank of England would respond that inflation itself is highly damaging to young people. High inflation erodes wages, makes saving difficult, pushes up rents and house prices, and creates economic uncertainty. They would argue that failing to control inflation would ultimately hurt younger generations even more.
The criticism often made by commentators is not that inflation should be ignored, but that governments have spent decades underinvesting in the factors that increase economic capacity. If housing, transport, energy infrastructure and skills systems had been stronger, the UK might have been able to grow faster without generating inflationary pressures.
If policymakers wanted to address the NEET problem more effectively, alternatives or complements to current policies might include:
Large-scale vocational and apprenticeship programmes.
More affordable housing in areas with strong labour demand.
Greater support for first-job and first-career opportunities.
Stronger links between employers and education providers.
Regional investment outside London and the South East.
More support for young entrepreneurs and small business creation.
Earlier intervention for young people at risk of disengagement from education or work.
A criticism increasingly heard across the political spectrum is that policymakers sometimes describe young people as lacking aspiration, skills or resilience while paying insufficient attention to the economic environment they have created. Many young adults face high housing costs, stagnant real wages, student debt and intense competition for secure employment.
In that context, some argue that the focus should shift from blaming individuals toward examining whether economic and social policies are providing realistic pathways into work and independence.