Bank of England: Interest Rate Policy

Lord Forsyth of Drumlean Excerpts

Wednesday 12th July 2023 Lords Chamber

Asked by

[Lord Forsyth of Drumlean]

To ask His Majesty’s Treasury what assessment they have made of the impact of the Bank of England’s interest rate policy.

[Lord Forsyth of Drumlean (Con)]

My Lords, I declare my interest, as in the register, as chairman of a bank.

[The Parliamentary Secretary, HM Treasury (Baroness Penn) (Con)]

My Lords, we constantly monitor the UK economy’s performance and outlook, and we acknowledge the pain that rising interest rates are causing for many households. However, setting interest rates is the responsibility of the independent Monetary Policy Committee of the Bank of England. The Government do not comment on the conduct or effectiveness of monetary policy. We will continue to support the MPC as it takes action and focuses on making the tough decisions necessary to tackle inflation.

--- Later in debate ---

[Lord Forsyth of Drumlean (Con)]

My Lords, I fully understand the need to respect the independence of the Bank of England, but that it is not the same as denying it being subject to proper accountability. The Bank of England was responsible for a huge increase in the money supply through quantitative easing—which resulted in part in the inflation that we are now experiencing—despite warnings from Andy Haldane, its chief economist at that time, that that would result in inflation. Andy Haldane is now suggesting that there may be an overreaction and overcorrection in putting interest rates up to the extent that they are being. This will cause misery to millions of people. The Bank of England should surely be accountable for this.

[Baroness Penn (Con)]

My Lords, I agree with my noble friend that the Bank of England should be and, indeed, is accountable for the decisions that it makes, but it is not for government to comment on the conduct or effectiveness of monetary policy. He is right that high levels of inflation and, therefore, high interest rates, are causing pain. That is why the Government are taking action to support people at this difficult time, including the mortgage charter, agreed by my right honourable friend the Chancellor, that covers around 90% of the market and gives people options when they are facing higher mortgage rates to make sure that their payments continue to be affordable.