Brown Sugar and Sweet Words Not Enough To Tackle Debt

3.58.52pm BST (GMT +0100) Wed 28th Apr 2004

Commenting ahead of Chancellor Gordon Brown's speech at the Institute of Directors Annual Convention in London today, Liberal Democrat Shadow Chancellor Dr Vince Cable said: "While Mr Brown may well use his speech to indicate that he favours an MPC decision to raise Bank of England (BoE) interest rates, he cannot have it both ways."

"Having made the BoE independent, which we supported as a wise decision, he cannot now tell them what to do. The BoE has a genuine problem - their mandate does not include asset bubbles and household debt. If they do use interest rates this will simply exacerbate imbalances in the economy that have led to a stagnation in manufacturing and other industries on the one hand with a runaway consumer boom on the other."

"The Chancellor and the BoE should urgently consider how to control the volume of bank lending by requiring higher reserve levels to influence balance sheets and dampen lending ability."

"The Treasury, BoE and financial services industry need to look at regulatory issues, such as the bias of regulation in favour of easy borrowing contrasted by tight rules on savings and investment. There are also distortions that arise from commission-driven selling of loans and credit cards and the monopoly and excessive pricing in payments insurance."

"Brown sugar and sweet words to the Institute of Directors are all very well, but the Chancellor would do well to acknowledge his responsibilities and act to resolve these issues."