Darling won’t rule out printing money
Chancellor Alistair Darling has refused to rule out printing more money to inflate the economy if interest rates fall to zero per cent.
“Interest rates haven’t fallen to zero per cent and have a long way to go,” he said.
“The situation is full of uncertainties. there is an awful lot of uncertainty. We will react as we need to.”
Speaking during a question and answer session in front of the Treasury select committee, Mr Darling warned the government’s plans to increase lending will not mean everyone will get the loan they want.
When the chancellor announced the recapitalisation scheme in October, part of the conditions were lending should return to 2007 levels.
But today Mr Darling said: “Not everyone will get the loan they want.”
However, he stated the amount of lending available should stay the same for the banks taking state help – Lloyds TSB, HBOS and RBS.
The chancellor also said lenders should start to offer credit after the recapitalisation plans – without which the UK would have faced “complete calamity”.
“The general public are entitled to something in return,” Mr Darling told the committee.
“If you ask me is there more to be down. There is much more to be done.”
He also said the mortgage market needs to be ready when the property market turns round and demand for mortgages grows.
“There are a number of areas where they must go further in both lending to businesses and individuals.”
Mr Darling also recognised the strain banks are feeling between cutting interest rates for borrowers, as the Bank of England cuts rates, and holding rates up for savers.
But he claimed the “tension” faced by banks between increasing their capital base and dropping interest rates on lending “can be reconciled”.
The chancellor moved to dodge questions over whether the government would support the falling value of sterling.
He maintained the Bank of England held the target for inflation not sterling, but the government would take actions necessary to support the economy
“I will do whatever to support the economy,” Mr Darling said
“It is important fundamentals are right.”
The chancellor also maintained the UK economy was “in better condition than 1980s or 90s” ahead of the recession.
He claimed the UK now faced the recession with low interest rates and low inflation, unlike previous recessions and high government investment.
“In current circumstances, it is right to take the approach to support the economy [through borrowing].
“Standing back and letting the recession take its toll would be irresponsible.”
Mr Darling also announced David Blanchflower was stepping down from Bank of England’s interest rate-setting monetary policy committee (MPC).
MPC member Paul Tucker will also take on the role of deputy governor of the Bank of England, as Sir John Gieve is stepping down.
