GIVING independence to the Bank of England will cost jobs and output, a new report claims.

Mr Robert Chote, of the independent thinktank, Social Market Foundation, argues that independent central banks usually have to induce deeper recessions to meet their inflation targets than do those under direct political control.

In Britain's case, that could mean the equivalent of losing an extra 50,000 jobs to bring inflation down to 2.5 per cent from the 3 per cent predicted by the Bank of England for two years time.

Mr Chote believes the low inflation achieved by independent central banks does not encourage longterm growth in real outputs or incomes.

Instead, price stability is achieved by a shortterm rise in unemployment above its natural rate which leads to a loss in output.

"The reformed Bank of England may have a good chance of delivering low inflation by raising interest rates free of political interference, but if the Chancellor did it himself then fewer people would lose their jobs in the process," he said.