Bank of England Monetary Policy Reports - Treasury - Select Committee - 24/02/2026

Order. Order. Welcome to the Treasury Select Committee on Tuesday the 24th of February, 2026. Today we have one of our regular meetings with the monetary policy committee or some members of the monetary policy committee. And we've got in front of us as our witnesses of course the governor of the Bank of England, Andrew Bailey, who's in the center. He's joined by his on his left Professor Alan Taylor who's an external member of the monetary policy committee. Dr. Hugh Pill who's the chief economist and the executive director for monetary analysis at the Bank of England to Mr. Bailey's right and to his further right Megan Green who's also an external member of the monetary policy committee. So we obviously've had a series of bank rate decisions and thank you all for your annual reports about your thinking behind it. We're going to go into the detail of some of the thinking behind it in later questions. But Governor, you've been a swing voter quite a number of times now. And I mean what could you just talk through why you took that position? We've discussed this a bit before. And also what you would need to see to vote for a further cut.

Okay. And Professor Taylor, you have voted fairly very persistently to cut do you see what where do you see that going? Because you've also talked about saying three you said 3% should be in our sites now. So if we have slower cuts now, does that mean sharper cuts later or in your view?

Right. So when I'm voting, I always think about the MPC's mandate and our mandate is to return inflation to target. But we also have to think about the trade-off between pushing inflation back to target quickly versus incurring too much output volatility. So that consideration has been especially important after the large shock of well post-covid and then the 22 Russia invasion and energy price shock. So the economy has been quite resilient at first. We were able to combat second round effects by raising rates and that was the right thing to do. And the economy didn't suffer the kind of high sacrifice ratios of the 1980s. So I think we were quite fortunate there and it seemed like a soft landing was possible and I think we were in that fortunate position because we had anchored inflation expectations and that was a definite payoff from the kind of mandate-based inflation targeting regime that we've had with an independent central bank for 30 years in place both in the UK and elsewhere. But I was always concerned that that resilience wouldn't necessarily last forever in the face of restrictive monetary policy. And it struck me about a year ago, probably throughout the last 12 to 18 months, that that resilience was starting to go away. And that's shown up in the recent NPR forecast over the course of the last year. The inflation forecast path has been drifting down cumulatively and the unemployment path has been drifting up cumulatively. So that reflected my outlook in the last 12 months that there were growing downside risks. they seem to have materialized and that's showing up in 2026 and 2027 with a risk now of undershooting in our latest forecast. So I saw that in the hard and soft data and also in my agency visits around the country. So now we're seeing that I think that the current forecast is in a place that I think manifests those risks and makes plain sort of where we are on the normalization path. So that's, why I've been dissenting over the last 12 months and also in the most recent vote. In terms of where we go next, I would agree with the governor very strongly. We need to start seeing the final boxes being checked. We can't wait until all of them have been checked, but we need to see the new wages in 2026 coming in hopefully in line with the agent survey. I think that would be target consistent. that will then feed through into services price inflation and as the governor indicated the mechanism then would be we'd expect that to bring expectations down. So that's what I'm looking for and then I'll think we will be on a course to neutral.

Okay. And Megan Green you talk in your annual report about services price inflation as well and but you also talk about wanting to see that firms and households revise down their inflation expectations because you've voted very consistently for hold all the way through. And you've also done quite a lot of I mean we talk perhaps we can talk a bit about the agency visits later but you've done number of visits I think eight to the regions or something like that. Yeah seven and how well if you can tell us a bit more about why you voted hold but also how useful the agency visits have been in informing your view.

Yeah sure. Thanks. So as the governor has pointed out we're expecting to hit our inflation target of 2% sooner than we had been before. And that's welcome news certainly. Embedded in our central forecast is a sort of nifty handoff where we hit our inflation target sooner. And wage growth and inflation expectations come off just as the impact of fiscal policy on inflation sort of flips. So part of the reason that inflation will hit our target sooner is because of energy prices including measures in the budget. Some of that drops out a year from April, of course. And I think that's a plausible and reasonable forecast, but I'm a little bit worried about that handoff not going as planned. And there are three things I'm looking at in particular to see whether that's happening or not. One, I'm worried that our forward-looking wage indicators, particularly coming through in the agents pay settlement survey and also the DMP figures, suggests that actually wage growth has been coming off, but it might kind of stop from here. So, that's a worry. The agents have pay settlements at 3.4% this year. The DMP has it at 3.6%. That's not far from where it is now. So, that's a concern. and I would want to see indications of wage growth coming off, continuing to come off in line with our forecast. I'm also worried about inflation expectations as you point out and that goes for both businesses and households who are both part of the wage setting process. So for businesses, if you look at the DMP, they're year ahead price expectations suggest that actually the disinflationary process might be stalling for them too. And so

you are looking ahead not not at what?

Oh, no. I'm looking Yeah, looking ahead. That's right. And so I would want to see those start to come off. And household inflation expectations as you mentioned have been high and actually in the latest figure ticked up, not down. So I would want to see household inflation expectations coming down. Now that should happen as inflation outturns come down, but we do know that there's an asymmetry in how households and businesses set their expectations. So, they're more reactive to upside surprises in inflation than downside surprises in inflation. So, I'm a bit worried that it might take longer.

Is that what you referring to? I think in your book about people saving more and is that is that what you mean? they're not spending when they when they when when things get better.

That's so that's one of the ways that it plays out, but generally people notice a surprise in inflation when it goes up rather than when it goes down more. And so that feeds through into their inflation expectations. And so it just suggests as inflation comes off it might take a bit longer for that to be incorporated into inflation expectations on the labor market side which is sort of at the center of a downside risk of weaker demand I think there are signs of the labor market stabilizing so even as it has weakened and we've expected it to weaken there are indications that unemployment's ticking up because of falls in inactivity rather than falls in employment growth and I also there's a risk management aspect to my strategy which suggests that actually the cost of a policy error is greater if we end up in a world of higher inflation persistence rather than weaker demand.

I know it came quite strongly through on your report that you're looking at risk in that way.

That's right. And just to answer your question quickly about the agents and what I've picked up on all the visits that I've done. I think the agents the intelligence you gather around agency visits is incredibly useful around inflection points in particular because so much of our data is lagged. So I will say they from what I've heard from firms it's sort of corroborated a story of generally weak growth generally flat employment intentions.

And I noticed you also visited a couple of schools.

That's right.

Is that has that have others have you done that as well? Yeah, that's that's good good to the next generation of economists are being well mentioned in and Dr. Pill, you also have been holding for for a long while. Do you want to explain your rationale and where where you think we're the glide path is going?

So like Professor Taylor, I'm very focused on meeting our mandate of 2% inflation. My assessment kind of has three elements. The first element is the disinflation process towards that 2% target remains intact and like the governor I think that is good news. I mean a part of that disinflation process is just the unwinding of the impacts of the big inflationary shocks we had from COVID and the invasion and energy prices. But there is a monetary policy component and I'll come back to that in a moment. But the second kind of element of my assessment is that disinflation process towards the 2% target is still incomplete. Like Megan described I think we need to maintain a forward-looking and medium-term oriented approach to running monetary policy given the lags in transmission and the uncertainties we face. I think it's important that we are not beguiled by the achievement of 2% headline CPI inflation in the spring on the back of a lot of one-off fiscal measures. I think there's an element of us in the past having perhaps given more weight to that than we perhaps should have done. I would therefore in line with things Andrew has said maintain my focus on underlying developments in inflation. On my reckoning in the middle of this year underlying inflation is somewhere between 2 and a half and 3%. I mean that's mechanically a fact of we forecast inflation in the late spring of 2% but we know half a percentage point or more is coming from these one-off budget related impacts. And for me given our target and given that focus on underlying inflation there is still work to do and that brings me to the third element which is I do think despite the important part played by the unwinding of those inflationary shocks monetary policy has also played a role in bringing inflation back towards the 2% target over the last few years. While that monetary policy stance that we've set is still restrictive, and I still think it is restrictive, it continues to bear down on inflation, and bearing down on those underlying inflationary pressures remains necessary while we still have work to do. In terms of the sort of things I'm looking for, I share quite a lot of the analysis that Megan's described, so I won't repeat all of that, but just to give one example of I think the dynamics which we are dealing with. If we look at the pay settlements survey that is collected by the agents every year we can see in 2024 that was a number of 5.4%. In 2025 that was a number of 3.9%. And in the survey where we got that number of 3.9% the expectation for 2026 was 3.4%. So that is very much consistent with the disinflationary process remaining intact. But if we focus on the end 2025 number and see how that's evolved through time at the time we were making decisions which given the lags in policy we would normally think being relevant for that horizon. So this would have been in the summer of 2024 18 months or so before. In fact just when we were deciding to begin collectively that reduction in interest rates the view given to us by the agents was that pay settlements would be somewhere between 2 and 4%. So let's say 3% as the middle of that. Then as we move towards the autumn they said it would be in the upper half of that range. So let's say 3 and a half%. At the time the survey was conducted after the budget in the early part of 2025 the number came out at 3.7% and then as I've said the outturn at the end of last year was 3.9%. So within that overall disinflationary process remaining intact, I think it's been slower than we anticipated and that's precisely why we're continuing to see underlying inflation above target in the middle and second half of this year. So that's the reason why I think we would need to see more progress on those types of indicators of underlying inflation, services inflation, pay settlements, wage dynamics, the types of things that Megan has discussed in order to proceed. So on balance I see risk still to the upside of achieving the inflation target given where the current forecast is and that points me in the direction of some caution in the further reduction in bank rate.

Okay. I just want to ask you quick it's difficult to give a quick answer on some of these things but how low do you think we can go? I mean, Professor Taylor, you have talked about 3% being the neutral level for interest, the base rate. Do you see any reason to go below that?

Well, I think if I mean the neutral rate has this sort of theoretical or hypothetical definition, which is if all of the shocks real and nominal had vanished or sort of dissipated, that's where we would end up in a world free of shocks, we know that that world is never really observed. So I think subject to that conditioning that is where we would end up. Of course there are upside and downside risks as Hugh Pill just mentioned and so would we have to deviate from that? Well yeah if we had persistent inflation we would have to be above that interest rate. If we had really negative growth inflation undershoot or recession we would have to go into accommodative territory below. So no economic historian can sit before this committee and say recessions will never happen or inflation shocks will never happen again. They will and 3% is just on average where we might expect to be.

We will get on to some of the political and global uncertainties that could have an impact on this. Governor, finally almost finally to you, the minutes of the MPC have not noted that market pricing of long-term interest rates is sloping upwards beyond predictions of what the base bank base rate would be. Do you think markets are pricing in that political uncertainty?

Yes. So the answer is yes.

Okay. And are you confident that we're on the glide path still?

Well, I think we've all said that we expect inflation to be there or thereabouts 2% in the late spring. And that is pretty much baked in given sort of things we know are coming through. It's a mixture of sort of we get these annual base effects which is the sort of things from last year unwinding. We know what the budget measures are and we know what effect they're going to have. I mean Hugh was talking about underlying inflation. If you look at the latest number and the number that came out last week it was pretty much exactly where we thought it were going to be the headline number. If you look under the lid goods prices bit weaker. My view is I think we are seeing some trade effects coming through. I think we're probably seeing some trade effects coming through in goods pricing from China. I come to that. Food prices were off a bit more than we expected. But services prices which I think Hugh and Megan both pointed out didn't come off as much as we thought they would.

Okay. Well and put all those together you ended up pretty much so things before we move on though I noticed that Miss Green is sitting in this awkward sunspot and there is no way we can adjust it. So, Miss Green, I was wondering if maybe we just move you to the other end of the table.

Yeah, it's a pleasure to be blinded by the sun.

I appreciate it. Just just indicate suspend for a moment just to give you modern rooms designed for meetings not always perfectly arranged. We can't we can't block it any other way. Okay. So, thank you very much for that. I'm going to hand to Dame Harriet Baldwin MP. Dame Harriet.

Thank you very much, Chair. And it's good to hear that inflation will be back at 2% which I seem to recall it was back in mid 2024. And I just wanted to ask Dr. Pill actually about the impact because a couple of times you've mentioned the budget at the end of last year but there was also the budget in 2024 and I remember in the sessions after that budget we asked the governor what kind of impact that might have on inflation and we were told that it was obviously too early to tell that it could play out through higher inflation, through lower wage increases, some loss of employment, a squeeze on profit margins, or potentially a much slower increase in productivity. And I wanted to ask Dr. Pill. Now that some time has passed, some time has elapsed since the budget in October 2024, whether the bank has a handle on how the economy has reacted through those four or five different variables to the changes that were announced in that budget.

Yes. So we have been monitoring very closely the impacts of the measures. I mean, in particular, I would flag the changes in national insurance contributions and the changes in the national living wage. Strictly speaking, the latter was announced at the budget. I guess it wasn't part of the budget. I think the margins of adjustment that you listed, we asked at the time how firms through the decision maker panel survey that Megan described, we asked how firms were going to balance across those margins of adjustment. and most firms talked about employing some element of each of those margins of adjustment. I think what we've seen subsequently that has indeed be the case. If you look at the path of headline consumer price inflation, so the kind of key indicator of inflation for which our target is based, we have seen this infamous hump in inflation over the past 12 months or so. in part in large part actually driven by some of these phenomena and I think that reflects the fact that some of the higher costs imposed on firms were passed through into higher prices.

Can you put a number on that in part?

I would say it wasn't the whole story because as has been discussed we also had higher food prices. So I mean as you know inflation peaked at 3.8%. food prices made quite a significant contribution to that. But I think probably about half would be coming through these types of effects. But I think it is important to emphasize that these are in somewhat loaded language was seen as transitory effects in the sense that they were one-offs. So as I've described a moment ago, personally I have focused on the underlying dynamics in inflation precisely because I think these one-off transitory effects should especially in a context where there is less tightness in the labor market than say we saw in 2022. they're less likely to feed through to the more malign second round effects disturbing inflation expectations and so forth which I think would be much more of concern from a monetary policy point of view. I think it's also fair to say that we have seen the other margins of adjustment being influenced. So we have seen attempts to lower wage dynamics a little bit influenced by this to sort of have overall labor costs reduced and we've seen in that context also some downward pressure on employment. So the whole combination of those things is playing out into the macroeconomic effect.

So if I hear you correctly through trying to express this in a way my constituents might find less sort of economist speak that there was an impact on inflation. You're saying inflation did go up but you think about half of the increase was from the impact from the budget and you also think that wage increases have been less high than they would have been is did I hear that correctly and there's also been some loss of employment has the bank put a number on the loss of employment

I think it's quite difficult to do that I mean the so I would personally not want to be giving

it's not been zero.

It's not been zero.

Office for budget responsibility at the time forecast 50,000 jobs would be lost. Has it been higher or lower than 50,000?

I wouldn't want to make a judgment either way. I think the difficulty is well I'm not sure it's my job to make a judgment on employment. It's my job to get inflation to 2%. That's what we're here to do. I do think there's a lot of other things going on and separating this specific element from those other things is quite difficult. I think we will talk later if I understand the agenda correctly around structural changes in the labor market and I think I am of the opinion that those structural changes in the labor market have been quite profound but they are a bit lower frequency.

Let me ask the question slightly differently then. There are 150,000 fewer people on payrolls than there were at the time of the October 2024 budget. How much of that impact was a reaction by employers to the measures in the budget?

Again, I don't think I can give a precise answer that for the same reason I just said. I think there are many factors going on. I think as has been discussed by others over the last 18 months or so, we have seen an easing in the labor market, a cyclical downturn in the labor market. I think that accounts for part of that change. I think we've seen some changes in the structure of the labor market which are more long-lasting which I think have also resulted in a decline in employment. and separating out the impact of these one or two measures I think is very difficult.

And what about the squeeze on profit margins and the potential improvement in productivity? Are you perceiving any of that in your data?

Yeah. So I think we have and certainly the information we get as Megan described from the decision maker panel which is a survey conducted by the bank on which we put quite a lot of emphasis and focus. I think all of those dimensions are ones that are mentioned by firms. again, separating these things out is very difficult especially in real time. but I would say that profit margins have seen in some sectors a squeeze. and the question forward-looking is is that going to be recovered which would tend to boost inflationary pressures or is it going to be resolved in terms of squeezing costs in the future. So this is still something that has to play out. and I think also there are clearly efforts and these are discussed to some extent in I think box C of the monetary policy report to try and raise productivity. we have seen quite high levels at least of an attempt to adopt AI in the UK corporate sector. and we've published some work on that even this week. but also I think there has been an element of shedding labor that perhaps had been hoarded in the period following the end of the furlough where the labor market was very tight and the difficulties in recruitment were intense and the return to trying to retain labor was seen as high and that mechanically leads to a little bit of a recovery in productivity on a cyclical basis. So I think on all those margins firms are trying to adjust as you would expect.

Does any other member of the panel want to try and disentangle the way in which the economy reacted to the measures in the October 2024 budget?

And no I just I don't come in on this if you come carry on carry on Dr. Pill, you mentioned cyclical rise in unemployment and you alluded to some work you've done on the structural change in unemployment due to potentially artificial intelligence and companies trying to use that. and I just wondered if you wanted to tell the committee where you think we are in the cycle and given that unemployment has breached 5% for the first time in a long time. is there a significant risk in your opinion that in order to meet your monetary policy objectives that unemployment is going to continue to rise?

I don't think there's a mechanical link between higher unemployment and lower inflation. I think it depends very much on what are the drivers of the movements in those two variables. so we've talked quite a lot in the past I think on a previous occasion here is if you have positive developments in the supply side of the economy then you can have stronger growth and maybe stronger employment at a time when inflationary pressures are diminishing whereas if you have more driven by demand negative developments on the demand side that would tend to push up in employment and at the same time diminish inflation. So the interaction between unemployment or the correlation between unemployment and inflation I think can go in opposite directions depending on what the underlying drivers are. The point I was trying to make earlier is obviously the tax changes and changes in the national living wage you mentioned are one element here but they're really I think not the most important element in an environment where there are very many fundamental changes in the economy going on and I think those go on over quite a long period. So I mean of course we can go back to the onset of the financial crisis. This is now approaching 20 years ago but behind that we saw quite a big change at least on the measured data in the productivity dynamics in the UK economy and that has a big effect on the cost effectiveness and the demand for labor through time and that's really quite an important driver of what the potential of the economy is. We've also gone through the experience of Brexit and Brexit has had quite significant structural impacts in my view on the behavior of the UK economy. we had a period prior to Brexit or prior to exit from the European Union a free movement which allowed people from continental Europe to come and work in the UK that not only created more flexibility in the UK labor market, it sort of imposed a discipline on behavior in the UK labor market because of the potential for people to arrive. they didn't actually have to arrive to impose that discipline. We've seen quite big changes in migration from non-EU member states both post-Brexit and subsequently different regimes that's gone up a lot and come down a lot and as Andrew himself described a moment ago through covid through lockdown and with the implications of those two things for different parts of the labor force we've also seen quite sharp changes in participation rates in the UK economy generally on the negative side but of late a little bit more positive.

So cyclically you think we're in a sort of unhoarding as you would put it of labor. I mean how far into that cycle are we?

Yeah. So cyclically I think we are seeing weakness. so for example a good indicator and our thinking of the cyclical state of the labor market is the ratio between the vacancy rate which is a measure of how many firms are looking for workers and the unemployment rate which is a measure of how many workers are available for work. that was very very high by historical standards in the sort of immediate aftermath of the lockdown. That was the period where as I said earlier the labor market was tight I think probably surprisingly tight relative to what was expected as we came out of lockdown and that was a moment where high rates of inflation were threatening to create these second round dynamics which could lead to and I think did lead to some extent more persistent high rates of inflation. What we've seen over the last year and a half, two years has been a significant fall in that ratio of vacancies to unemployment, I mean a fall which takes it below what we would probably see as the equilibrium level based on historical behavior.

Does the cycle have to go?

Well on the latest data and this is the more optimistic aspect is that that fall in the vacancy to unemployment ratio which has been quite sharp has now tended to stabilize and I think of late we've seen some rise in vacancies. We've seen unemployment rise but more modestly. I think that the problems that we've discussed on previous occasions with the labor force survey from which the unemployment rate is derived maybe mean that the data we've seen over the last few years is less reliable than otherwise might have been and that might mean that we see better estimates of what the level of unemployment is now. But the changes from what we saw a few years ago to where we are now may not be very reliable. And if you look at indicators like the workforce job survey or you look at indicators like the payroll survey, they are beginning to sort of flatten off. So I think from my perspective that we are getting to a point where the labor market is showing signs of stabilization.

So 5% now what's your forecast as to where it will peak?

Well, the forecast that was published in the monetary policy report, so that's sort of endorsed somehow by the committee as a whole, that is that we will see five and a quarter percent in the second half of this year. So, not much rise.

One final question, if I may, is obviously one of the standout concerns has been unemployment for young people. And is again that consistent with what you would expect the labor market to be doing in this unhoarding phase that you've described it as or this part of the cycle? How much worse is employment going to become for young people? Also you mentioned the AI.

So I do think I very much share your concern about unemployment particularly for the younger people. I have a daughter looking for a job. So this is very immediate experience personally for me as well. I would say that some of the changes that we discussed earlier around tax national living wage they have been particularly had an effect at the 16 to 18 and 18 to 21 and that's because some of the changes as you know have been to move some of the special lower rates of the national living wage up to the normal rates on that margin and similarly the changes in the national insurance contributions were affected more to employ a young person had the impact of the thresholds etc. So both of those things have had a particular effect on young people. I think that also has to be seen in the context of some of the changes. Sorry I'm now getting the light on me.

We're all going to get it eventually and I wait.

So some of the changes coming from that have been particularly acute for that part of the labor market and I think we do see that in the data. I also would agree that some of the deeper structural changes the fact that many sort of entry-level jobs are being affected by AI. I think that is something that perhaps is difficult to manage. The surveys that we see thus far talk about a lot of UK companies taking up AI as a way of trying to improve productivity. As yet they don't report that's resulted in a large reduction in their willingness or ability to employ labor. But of course on a forward basis I think that remains an open question. I also think in that space I mean there are these issues about the echo or long-lasting effects coming out of covid. so particularly as I know many of you know and have discussed in the past having your first job is an important part of being able to enter the labor market and be productive. the more difficult that is or can have very long-lasting effects and they do cross with things like health issues, mental health issues and so forth. So these are things that I do think post pandemic with those issues having been to the fore that they're so I think it is that margin that I would have most concern about.

Can I just we skied a bit around the relationship between the national insurance contributions you mentioned it in a bit more detail there Dr. Pill and the impact of that on unemployment which is you know there's a political discussion obviously going on about that and a neutral and technocratic assessment because it's possible too can I just you've been out to talk to your visits around the country so perhaps starting with Professor Taylor just your quick take on what impact that has had on unemployment has it have you picked that up from agencies it's had a big big how big the impact from the next raise has that had a bigger impact on people not recruiting therefore and how that flows through to unemployment yeah quick quick answers on And and Dr. Pill, did you want to move to the end? Would that be I think if if Megan continue right it's now a matter of honor. We'll make sure we don't use this room in the afternoon in the future. So apologies for that. Sorry, Dr. Professor Taylor.

Yeah. So I think that has been a recurring theme in conversations I've had with businesses around the country in the last 12 months. So but it's not the only theme. So I think that came through very early on after the budget and I think they were taking measures to adjust. but I think it's important to emphasize in the context of the discussion there were many other things that were on their minds global uncertainty for example and the restrictiveness of our monetary policy which is part of the story and I think going back to the evolution of our forecast that I spoke about earlier. It's interesting that in February and May, I think our staff forecasts had tried to incorporate as best as they could the effect of that 24 budget and those forecasts had unemployment peaking in maybe the high fours. But it's the revisions in November and particularly now in February 2026 where we see the unemployment path moving up much more dramatically. So I think that's in line with what I said earlier. Those moves to me are more a manifestation of the continued global uncertainty and the continued level of restrictiveness and also the impact of our restrictiveness on the economy.

We are also talking globally about these figures where you I mean you as a question about what do we observe sort of going around the country and I would just add the statistics to this. I mean I think the youth unemployment rate or the young person's unemployment rate is around 16% now which is actually it's high. Let's be honest it's high. It's gone up more rapidly than the overall level.

Yeah sure. So if you look at the

When we ask companies how they have already responded, it seems like the biggest margin has actually been margin compression. So there is a question, as Hugh mentioned, about whether firms try to recoup that, given that it's been eating into their margins. Headcount does come up. I think it's the second biggest. When our agents go around and talk to firms, they have been telling us since at least September that firms are saying to them that the adjustment has largely occurred now.

That's right. And then just one really quick point on AI. I think there is a challenge with surveys. Almost every firm I talk to on my agency visit says emphatically that they're incorporating AI into their work, but when you ask them details about what kind of AI, it turns out a lot of it isn't AI at all. It's actually just automation. So, I do think that some of this survey data just needs to be taken with a grain of salt because we all have different definitions of what AI is.

Okay. Thank you very much. I think I'll turn to John Benf and go to him.

Yes. A few weeks ago, Lord Jim O'Neill was suggesting that the changes in national insurance and national living wage were perhaps causing employers to think about the value of additional labor capacity and there was potentially some signs that it was addressing the productivity challenge we faced. I wonder if any of you had reflected on his reflections and have anything to endorse or not that observation, and when would we see data on that because it's quite material.

Okay. Thank you. Katherine West.

Thank you chair. If I could pick up the point on regional levels of unemployment, both the general rate but also for young people. What assessment have the experts here made in relation to what works in terms of government interventions? It's still early days for this government but there is an effort around apprenticeships and those sorts of more dirigiste approaches to youth unemployment. And I'm wondering is there any evidence from going around the country which of these approaches is effective, or does the data not really give us much to go on?

And the second question I had was in terms of the other regional elements of unemployment. Obviously, you've mentioned London, but other regions where there may be older industries which are now no longer providing jobs, that sort of thing. Are there any reflections which have come out of the surveys and the visits about where there might be other pockets of deep unemployment around either young people specifically or the general population?