Economy: Interest Rates

Lord Lawson of Blaby Excerpts

Wednesday 18th June 2014 Lords Chamber

[Lord Newby]

My Lords, the Government have given the MPC the role of ensuring that inflation stays as near as possible to 2%. As the noble Lord knows, subject to that, the Government have given the committee the role of pursuing their policies in terms of employment and growth. Separate to what the Bank is doing, the Government have set in train a whole raft of policies, whether they be apprenticeships, reducing national insurance payable by businesses or increasing tax-free investment allowances, which we believe will lead to growth—non-inflationary growth. It is extremely interesting in terms of those two, as he says, incompatible points, that during the life of this Government we have been able to generate an additional 2 million jobs, and inflation over the period has, if anything, fallen.

[Lord Lawson of Blaby (Con)]

My Lords, is it not simply the case that the 0.5% policy rate was a crisis rate, set because of the economic crisis in which this country was plunged, and the fact that we are now likely gradually to come to more normal rates of interest is a tribute to the fact that we are successfully emerging from that crisis?

[Lord Newby]

The noble Lord is exactly right. One of the benefits of a gradual increase in interest rates will be that savers, who have had a very poor return on their savings, will start to get what they would consider a more normal return in the future.