The Economy

The reason they think that is because it is true. This, again, is the absolutely hopeless position that Labour under the shadow Chancellor have put themselves in, but frankly, that is for them to work out. If I may declare an interest, we very much want him to stay in his post for the next three and a half years: he is the best recruiting sergeant we have. The Governor of the Bank of England—appointed by the right hon. Gentleman, no doubt, when he was the chief economic adviser—said this last week:"““This is exactly the right macro-economic response to the position in which we find ourselves””." And who is left opposing this credible action, this macro-economic response? The Labour party, which is now advancing this new theory that Britain's low interest rates in this debt crisis are a sign of policy failure, not policy success. That was the argument we heard last week. The shadow Chancellor talked in his response to my statement of"““the illiterate fantasy that low long-term interest rates in Britain are a sign of enhanced credibility””—[Official Report, 29 November 2011; Vol. 536, c. 812.]" I pointed out that, on that basis, Italy's rates of 7% were a policy triumph and Greece's 30% rates were an economic miracle. In the intervening week, I looked for evidence to support the argument that the shadow Chancellor has been advancing. I have not found it, but I did come across the very interesting ““Ken Dixon lecture”” to the department of economics at the university of York. It was given in 2004 by the chief economic adviser to the Treasury—Mr Edward Balls. He told a no doubt gripped audience of students about the importance of lower debt, of running surpluses in good times, of keeping deficits under control. He then cited the market interest rates that Britain was paying on its debt, versus neighbouring countries', as the fruits of economic success. He boasted that the UK was borrowing money more cheaply than Germany and he hailed low interest rates as"““the simplest measure of monetary and fiscal policy credibility””." Does he still believe that?