Who should you vote for in the UK if you want control of interest rates to revert to the Treasury?

In 1997 New Labour immediately gave the Bank of England independent control over interest rates. All three major parties now seem to agree on this

I cannot see how it makes sense to separate one mechanism of economic regulation from others, e.g. taxation and government regulation. I think that Government should only regulate lightly, but it should control all the mechanisms to do so.

Giving control of interest rates to the bankers and economists leads to its use for the interests of the financial and commercial sectors, which benefit from high rates, as opposed to manufacturing which needs low rates for investment. Also, high interest rates and low inflation benefit the rich compared to the poor.

The bank is using high interest to largely to prevent house price inflation despite other negative effects of this policy. It would be better to hit house prices selectively by taxation.

Do you agree that these are reasons to give control of interest rates back to Government?

Who should you vote for in the UK if you want control of interest rates to revert to the Treasury?consolidation loans

I have been trying to follow the logic in the subtext of your question.

Indirectly, the Government still controls interest rates, because it sets what it considers to be an acceptable inflation level, which the Bank Of England then uses as a basis for setting the interest rate level. Currently, the inflation level is running above the Governments target level, so the Bank will raise interest rates in order to dampen demand. Most economists agree that the real level of inflation is higher than the measure chosen by the government to measure inflation. It misses out key items of expenditure, such as, petrol, council taxes, mortgage payments. So, by setting the inflation level, and also by using a %26#039;fiddled%26#039; inflation measure, the Government is indirectly controlling interest rates.

In setting interest rate levels, the BOE is charged with the sole objective of meeting the Governments inflation target. It can%26#039;t at the same time, set rates to benefit any one sector of the economy. The Government has, however, been running with a low interest rate policy for a number of years. As stated above, it has achieved this by deliberately underestimating the reported level of inflation, which in turn allows the BOE to keep interest rates lower than would otherwise have been the case.

Now, the above policy was pure politics. By following a low interest rate policy, the Government has encouraged massive borrowing, fuelling unprecedented house price inflation. These days, mortgage lenders are not restricted in the amounts that they can lend by the funds that they have at their disposal from their own depositers, because they themselves borrow on the money market.

The above has a further knock on effect regarding the economy. Because house owners now feel wealthy, they borrow money against their inflated house prices, also on credit cards, which provides a massive boost to the economy because of their spending binge. The sums involved are absolutely enormous. The result: a booming economy which makes the Government look good, for quite a while. However, we have now reached a tipping point, because house price inflation cannot go on forever. Once the spending stops, the weakness in the underlying economy starts to show through, interest rate policy has to change (increase) in order to stop people continuing to borrow recklessly, and also to stem the inflation which results from too much money sloshing round in the economy. This is where we are at now. The Governments irresponsible policy has come home to roost.

I don%26#039;t understand why you think that high interest rates benefits the corporate and financial sectors. Quite the opposite, the price of capital goes up, so the demand for borrowed funds, and hence banking activity, goes down. Also, takeover activity, on the back of borrowed money, goes down. Generally speaking, everyone benefits from low interest rates, because it normally means that inflation is low, assuming the Government hasn%26#039;t been playing with the measure.

Bearing in mind that we have had unprecedented low interest rate levels for a long time, the BOE now sees the need to raise rates to stop any further, GROSSLY IRRESPOSSIBLE borrowing, further fuelling house prices, and more inflationary spending. You have to remember that we now have a huge house price bubble, their prices having trebled over the last ten years.

You state that the BOE is now raising rates to prevent further borrowing, which, in turn, is having a negative effect on other parts of the economy. However, the bank should have raised rates a long time ago in order to prevent this huge house price bubble ever developing. The other thing that it could have done, was to set strict statutory lending limits that the mortgage lenders would have to follow for each borrower. This has been done in the past, and would have prevented a house price bubble. They would then have been free to pursue interest policy in the interests of the rest of the economy, without having at the same time, to try to use it to control irresponsible borrowing.

If Governments had direct control over interest rate setting policy, (although I have tried to argue that indirectly they still do), they would find it even easier to manipulate interest rates for cynical political purposes, rather than what is in the interest of the wider economy.

Who should you vote for in the UK if you want control of interest rates to revert to the Treasury?

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I answered at length because I couldn%26#039;t accept some of your reasoning which took you to the question you asked. I thought it more important to explain why, rather than give you a direct answer to an irrelevant question. Sorry, but do you see my point? Report It

|||vote tory|||No, absolutely not. What, you want POLITICIANS to decide on a whim when and by how much to raise/lower interest rates?

Gordon Brown%26#039;s decision in 1997 was long overdue. Note that the Tories hadn%26#039;t done it when they could have done and they wrecked the economy as a result.

With the current system we have a stable and healthy economy, growing not too fast and not too slowly either.|||Giving control of the interest rates to the Bank of England was the best thing that Gordon Brown ever did. Before this, yes interest rates were controlled by Government. When I bought my first property about 18 years ago - interest rates rose from about 6% to 15% in a very short period of time - result, house market crash and negative equity - if you were around in the eighties you will remember the repossessions. Since the Bank of England have controlled interest rates we have at last had some stability. If you think things are bad now - you should have been around 15 years ago.|||i am no fan of labour new or otherwise but getting the B of E rates away from the politicans was a very good move. so good i wonder how often brown regrets doing it