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6.30pm WATCH: George Osborne’s reaction to interest rate cut

2.15pm George Osborne has issued the following further remarks:

“This is a shot in the arm for the economy, but it shows how sick the patient is. As we have argued, reducing interest rates is the best way to fight the recession and so we welcome the Bank of England’s decision. But the size of the cut means that the Bank recognises the UK economy is in serious trouble.

“Now we need the cut to be passed on to homeowners and small businesses. I would hope that banks that see themselves in strong and stable positions can pass on the cut in full. The recapitalisation plan was not just to rescue the banks but to rescue the economy and the millions of families who depend on it.”

1.10pm Shadow Chancellor George Osborne reacted by saying that the cut was "an indication of how serious an economic situation we are in" and that it was confirmation that we are in a "deep an economic hole" and "ill-prepared for the events which are about to unfold".

Mr Osborne added, like Michael Fallon, that it was essential the cuts were passed on to customers.

1pm: Michael Fallon MP (via PoliticsHome): Mr Fallon said the interest rate cut of 1.5 % shows how bad the Bank of England thinks things are, and added that there’s no excuse for banks not to pass on the cut to customers.

“It’s the news behind it that’s grim. Clearly the Bank now knows how bad things are, and that we’re now entering a bad recession. It really is time now banks rewarded loyalty by cutting. There is no excuse now for banks not to pass on these cuts in full.”

Asked whether banks have a moral responsibility to pass on rate cuts to customers he said, “They certainly do. We’re in a battle now against recession, and everyone has to play their part. “If these two cuts in succession don’t work, it’s hard to see what will.”"

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