Lib Dems slam rate rises

Following the interest rate rise to 4.25 per cent fears remain over spiralling household debt and the house price boom.

08:12 07 May 2004

Following the interest rate rise by a quarter of a per cent to 4.25 per cent fears remain over spiralling household debt and the house price boom.

The rate hike, the third in the past seven months, was in a bid to calm the soaring property prices and personal consumer debt.

Prior to the rise Dr Vince Cable, shadow chancellor of the Liberal Democrat, wrote to Gordon Brown urging him to act more decisively over the potential threat of the UK's economic stability.

In his letter Dr Cable called the Chancellor's moves as "one club economics" which were simply "not working."

He wrote: "The Bank of England is in danger of being compromised by heavy pressure from the Chancellor, who is using interest rates to deal with the consumer debt and the housing bubble."

Dr Cable wrote he was "concerned" that the Bank of England was being urged to take on a role their mandate did not cover, namely "the management of asset markets."

He pointed out: "To control the economy solely through the use of interest rates is creating imbalances."

His opinion was that "Driving up the exchange rate will further damage manufacturing," and stated "Measures are needed to curb the massive uncontrolled expansion of secured and unsecured debt.

"The government needs to signal to the Bank of England that lending needs to be reined in."