We must fight recession is the increasingly urgent message that John Redwood is sending to the readers of his essential blog.  His warning comes after yesterday’s large increase in unemployment and growing concern at the inadequacy of Gordon Brown’s response to the problems of the real economy.  Mr Brown spoke yesterday of retraining the jobless as home insulators.  In the understatement of the year The Sun Says: "It will take more than that."

Interviewed on this morning’s Today programme Mr Redwood warned that higher taxes may not raise any extra revenues if they serve to flatten the real economy.  He is also worried that the bank bailout package is giving the government inadequate room to help struggling businesses.  In his latest blog post he urges a cut in interest rates from the current 4.5% to 2%:

"[The UK authorities] have kept interest rates far too high for too long. They should cut them to 2% today, which would still leave scope for further cuts if the economy does not respond well. Market rates are well above the indicated rate and will remain so. That’s all the more reason to cut the indicated rate, to relieve some of the pressure. If interest rates remain too high more people and companies will default on their payments, leaving banks in a weaker position and savers worried about the security of their funds."

As ConservativeHome revealed on Tuesday the Conservatives are preparing a "Brown saved the banks but not the real economy" message.  George Osborne should take the opportunity of current events to revisit his hitherto caution on economic policy.  Noone will blame him for reviewing policies given the severity of the new situation.  As John Maynard Keynes famously wrote: "When the facts change, I change my mind. What do you do, sir?"

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