Bank of England: Interest Rate Policy

Baroness Chapman of Darlington Excerpts

Wednesday 12th July 2023 Lords Chamber

[Baroness Penn (Con)]

While I will not be tempted by my noble friend to comment on the conduct of monetary policy, I agree that, in the context of high inflation, fiscal responsibility and keeping government borrowing under control are absolutely essential. That is why the Government are committed to that.

[Baroness Chapman of Darlington (Lab)]

My Lords, what is it about the Government’s handling of the economy that means that, with near 0% growth, inflation is still high, despite the Prime Minister promising to halve it, and higher for longer in the UK than in many similar economies? How does the Minister think that 1 million households facing a £500 a month increase to their mortgage payments by the end of 2026 will cope? How concerned should we be at the Government’s voluntary agreement with the banks, which means that over 1 million households will miss out on the support that Labour’s mandatory scheme would have brought?

[Baroness Penn (Con)]

My Lords, growth is better this year than predicted and expected by some. The UK is not alone in facing high inflation. Core inflation in the UK is lower than in more than half of Europe, but we face particular underlying factors that interact with the global challenges causing inflation. The energy shock has been felt more keenly in the UK because of our historical dependence on gas, and we have labour market tightness, due in part to a rise in activity during the pandemic. That is why we are focused on measures to tackle these problems. I talked about the energy price guarantee, which brought down inflation by around two points, and our measures to address childcare. I say to the noble Baroness, reflecting the point from my noble friend, that fiscal responsibility and government borrowing have a part to play in this. That is why Labour’s plans to spend £28 billion a year of additional borrowing would be inflationary and make the problem worse.