Lord Mervyn King, former head of the Bank of England, has blamed record-high inflation on central banks, including the Bank of England, for keeping interest rates too low for too long.
Speaking on BBC Radio Four’s Broadcasting House, Lord King acknowledged that while inflation has now been brought under control, central banks were slow to act in the beginning.
He pointed out that although the Bank eventually raised rates, following the actions of other central banks, the delay contributed to the inflationary surge. “That’s why we had inflation,” Lord King said.
He believes interest rates are now at an appropriate level, referencing the current base rate of 5%, which was maintained by the Bank in its most recent meeting in September.
The next rate-setting meeting is scheduled for November.
Ahead of the upcoming Budget, Lord King predicted potential adjustments to the UK’s fiscal rules, given the government’s commitment to public investment and spending limits.
He suggested that the government might need to modify these rules, particularly the ratio of national debt to national income.
He argued that this metric, judged over a rolling five-year forecast, was impractical, proposing that the government should aim to reduce the ratio by the end of the current Parliament.
Lord King also criticized both the previous and current governments for their handling of national insurance contributions.
He described the previous government’s decision to cut national insurance as “irresponsible” and suggested that Labour should reverse it, noting his confusion over why they chose to maintain the cut.
Also read: UK House Prices Surge By 3.2% In September, Driven By Terraced Homes
