I’m glad that my friend Stephen Jackson (Bexhill Observer, August 28) has recognised some significant achievements of the Labour government led by Tony Blair.
What he and his fellow Corbyn supporters regrettably appear to conveniently dismiss is the reality of global financial movements. One of the crowning financial achievements of Tony Blair’s Labour government was the transfer of responsibility for monetary policy from politicians to professional specialists at the Bank of England.
The impact, within days of Labour being elected to office in 1997, was an immediate drop in longer-term interest rates as the financial markets sensed that a sounder approach to monetary policy had begun.
A government led by Jeremy Corbyn would reverse this immense gain to Britain by giving direct instructions to the Bank of England over its policy on quantitative easing.
I believe that the return to direct political control of monetary policy would increase the perceived risk by international financial investors of investing in British debt.
To avoid the flight of trillions of dollars, euros, yuan and yen from the City of London, interest rates would need to rise. This would increase the interest paid on residential mortgages subject to variable interest rates, causing hardship to many families.
It would also massively increase the size of Britain’s interest rate bill, making it harder to control the public finances.
In prime minister Corbyn’s Britain, the Bank of England would buy bonds issued by the National Investment Bank.
The money would be handed to housing associations and local councils.
This ‘off-balance-sheet financing’ (source: The Economist, August 13) would, in my view, cause sterling to depreciate against a basket of other major currencies. Imports would become more expensive.
Inflation would take off again, causing the Bank of England to trigger further interest rate rises.
Unfortunately, were Jeremy Corbyn to be elected leader of her majesty’s loyal opposition, the tabloids would be likely to repeatedly explain this economic scenario more simply than me. This could result in fear across the nation at the prospect of a Corbyn-led government. So the Conservatives would be able to continue ruling for many years to come, progressively hitting the most disadvantaged further and further, dismantling tax credits for low paid workers and progressively rolling back the beneficial state.
To quote former Labour deputy prime minister John Prescott: “We need a leader who won’t just lead protests ON Downing Street” but “march us back INTO Downing Street.” That’s why I’m supporting the economically literate Yvette Cooper for Labour leader and Labour’s candidate for prime minister.
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