Brown urges interest rate rise

GORDON BROWN was accused last night of leaning on the Bank of England to push up interest rates and the cost of home loans.

The Chancellor yesterday hinted that rate rises are necessary to cool the spending boom which threatens to drive up inflation.

The next increase is expected to come as early as next Thursday, with the base rate rising from 4% to 4.25% or even 4.5%.

The Government is concerned that house prices and High Street spending are rocketing with the result that personal debt levels are soaring towards £1 trillion.

Brown has left control of interest rates to the Bank of England's monetary policy committee which he set up to be independent.

However, it now appears that the Chancellor is keen to send members of the MPC a signal that he favours higher rates. This follows his speech yesterday at the Institute of Directors annual conference in London.

He said: 'At this time in the economic and political cycle, Britain has had its own special problems when past Governments, of whatever political colour, have allowed either inflation to get out of control or spending to get out of control - or both, as happened most recently in the early Nineties with 10% inflation, 15% interest rates, an 8% deficit and a doubling of the national debt.'

This was seen as coded language for the need to increase interest rates sooner rather than later.

He boasted that giving the Bank control over interest rates had been instrumental in the UK not suffering the recessions recently seen in other major economies.

The MPC was established by Labour when it came to power in 1997 to reassure the markets that interest rate decisions would be taken for economic rather than political reasons.

But it seems that Brown and his cronies have increasingly felt that they are able to lean on the MPC.

In February, the Chancellor's senior adviser, Ed Balls, advocated a rate rise at a local government conference. The MPC subsequently increased the base rate by 0.25% in the same week.

Liberal Democrat Treasury spokesman Dr Vince Cable said: 'Mr Brown cannot have it both ways. Having made the Bank of England independent, which we supported as a wise decision, he cannot now tell them what to do.'