Bank of England could get Birmingham base and productivity targets under Labour

Moving part of the Bank of England to Birmingham and setting it targets for productivity would help connect it to the "real world", an adviser to the Labour Party has said.

Graham Turner said the bank must realise its "pivotal" role and not be "isolated" from what is happening in the country, as he launched a report commissioned by the party with John McDonnell.

Fixing the UK's productivity crisis should be a key goal for the central bank, he recommended.

Mr McDonnell said the UK's transport and telecommunications infrastructure was "creaking under the burden" of a lack of investment at the launch of the review of the UK's financial system.

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He added: "It's a scandal the lack of ambition that has been shown in recent years around that investment. We are falling behind our competitors."

The report recommends giving Threadneedle Street a target of achieving 3% productivity growth alongside its existing mandate.

The Bank should also open an office in Birmingham, alongside a new strategic investment board (SIB) and National Infrastructure Bank (NIB) to help boost areas outside of London.

Mr Turner, from GFC Economics, said all of the Bank's UK functions should be moved, including the monetary Policy Committee, to give it a "domestic focus".

He said the bank's remit should be widened, adding: "We want to connect the Bank of England to the real world."

The bank's international functions would remain in the City of London under the plan.

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The Shadow Chancellor joked that he had told bank chief Mark Carney that he would help him find a flat in Birmingham.

State-backed lender RBS should focus on support for small and medium-sized firms, the review said.

A new applied sciences investment fund should use taxpayers' cash to help finance research and development, the report recommended.

Under the proposals, the Bank of England and Government would sign an accord at the start of the next parliament, detailing how each will work towards achieving the target of 3% annual growth.

The Bank would be required to report after each Budget on the Government's plans, in light of the 3% goal.

The report's proposals will be the subject of consultation as part of Labour's policy review ahead of the next general election but Mr McDonnell said he would be personally recommending the plan.