National Savings and Investments

Lord Barnett Excerpts

Tuesday 14th January 2014 Lords Chamber

[Lord Newby]

My Lords, the Government are not doing quantitative easing, the Bank of England is. On the rate payable on National Savings, as the noble Lord will know, the role of National Savings is to contribute to the Government’s funding requirements. In doing that it has to operate in line with market rates because otherwise the Government are paying more for their money via National Savings than through the gilts market.

[Lord Barnett (Lab)]

My Lords, does the noble Lord’s answer to the noble Lord, Lord Lamont, mean that the Chancellor is advising the Governor of the Bank of England that if he has early plans to increase interest rates the Chancellor will use the reserve powers given to him under the Bank of England Act to stop it?

[Lord Newby]

My Lords, the reserve powers in the Bank of England Act are to be used principally when inflation is outside the target level. That is not the case at the moment. The question of interest rates is very much a matter for the Bank of England. It has adopted a new policy that incorporates forward guidance, which was agreed with the Chancellor in the middle of last year, and that is the basis on which it is operating.