Rees-Mogg in row over higher interest rates
(Picture: PA Wire)Brexit minister Jacob Rees-Mogg sparked a row on Friday after appearing to urge the Bank of England to hike interest rates as he hailed the 1980s economic policies of Margaret Thatcher.
He warned against the Government throwing open the spending taps to ease the cost-of-living crisis as he advocated a “tighter monetary policy” to tame soaring inflation.
Ministers normally steer away from commenting on interest rates, which as they rise push up mortgage payments for millions of households, given the independence of the Bank of England.
However as inflation spirals, possibly towards double digits, worsening the cost-of-living crisis, Mr Rees-Mogg told Times Radio: “The right responses are tighter monetary policy, which is the responsibility of the Bank of England, and constrained fiscal policy.”
He added: “An emergency budget is not likely to be an answer to this. What is going to be an answer are essentially long-term measures combined with the immediate help that’s been given to people who are particularly affected.”
A source close to the minister insisted he was not calling for higher interest rates which were recently nudged up to one per cent.
“He is not commenting on whether they should go further or not,” he said.
However, Liberal Democrat business spokeswoman Sarah Olney, MP for Richmond Park, said: “Instead of pressuring the Bank of England to increase rates, ministers should focus on helping hard-pressed households by slashing VAT. This is a cost of living emergency, Londoners can’t wait any longer.”
Chancellor Rishi Sunak admitted today that London and the South East have been the slowest regions to recover from the Covid pandemic
Rejecting an analysis by Bloomberg that other regions were increasingly lagging behind, he said: “Those are different to the figures I looked at, where what I saw was a much stronger recovery in jobs and wages outside London and the South East,” he said. “We are very committed to levelling up.”
However, the Government has been warned not to level down the capital as it seeks to boost other regions.
The Standard revealed recently how National Insurance changes this year are far more likely to hit London workers than those elsewhere in the country because of higher average earnings in the capital - offset by much higher living costs.
This year anyone earnings £34,000 will be worse off, rising to £37,000 in the next financial year. Far more Londoners earn above this level than in the rest of the country meaning they will be take home less pay.
Many people in the capital also have bigger mortgages given the sky-high property prices.
Interest rates hit 15 per cent in autumn 1981 during the recession which saw unemployment rise to three million.
They are currently historically low but economists believe they will rise higher.
Business chiefs in London are urging the Government to offer more support to people on middle as well as low incomes to cope with the cost-of-living crisis and to protect the economy.
They issued their plea after Cabinet minister Michael Gove suggested that additional help could be limited to those most vulnerable to soaring prices.
Mr Rees-Mogg warned the Government against adopting “short term expensive measures” to deal with the cost-of-living crisis as he backed Mrs Thatcher’s economic policies of 40 years ago.
“The problem with spending more money is you make the inflationary problem worse rather than better. This is very difficult for politicians because with a cost-of-living problem there aren’t easy popular things to do, and if you do those you make the problem worse,” he told GB News.
“You have to do, as Margaret Thatcher showed in the 1980s, the things that need to be done.
“You can’t take short term expensive measures because they just (make) things worse.”
He also denied that axing 90,000 Civil Service jobs implied a return to austerity.
“I don’t think it is, because what is being done is getting back to the efficiency levels we had in 2016. That’s a perfectly reasonable and sensible ambition,” he told Sky News.
“The administration, the negotiations, most of the work in relation to Brexit has been completed.”
Mr Rees-Mogg said he had seen “duplication” within Government departments, and argued the job cuts could be done at least largely with a recruitment freeze.
But the FDA civil servants’ union warned the “ill-thought-out” proposal would not lead to a more cost-effective Government and could have impacts on passport processing, borders and health.
FDA general secretary Dave Penman accused the Government of “picking a number out of the air” when setting its target for Civil Service staffing, and said the plans to return to 2016 levels were “unrealistic”.
However, the Civil Service has left itself open to accusation over inefficiency after its slow return from working from home to the office compared to many businesses in the private sector, and delays in the Passport Office causing misery for thousands of people seeking to travel abroad.
