LONDON (MNI) – Effective interest rates in the UK are low due to
the credibility of the government’s deficit reduction plans, and the
question of whether further quantitative easing should be conducted is
solely a matter for the Bank of England, Chancellor of the Exchequer
George Osborne said Tuesday.

Osborne has been conducting a series of media appearances in the
wake of the publication of the Q2 UK GDP numbers. These showed growth of
just 0.2% on the quarter, and Osborne’s message has been that the
government remains committed to deficit reduction, with the figures
showing the economy is continuing to grow.

In a BBC interview Osborne was asked about the call from Business
Secretary Vince Cable for the BOE to try and boost the economy by
relaunching quantitive easing in a “more creative” way – rather than
just concentrating on buying gilts as it did before.

Osborne declined to endorse Cable’s comments.

“The Bank of England is independent, and it is certainly not the
job of the Chancellor to countermand that independence,” he said.

He claimed that the low borrowing rates enjoyed by individuals and
business were a result of the government’s fiscal policies.

“Interest rates in this country, today, the kind of interest rates
that businesses and families can get, are much lower than they are in
Spain or Italy. They are much lower than in many other countries in the
world precisely because we have got credible plans to deal with our
debt,” he said.

Asked about the possibility of the government providing further
stimulus, possibly through tax cuts, Osborne said the key for the UK was
economic stability and taking on more debt would be absurd.

Osborne said the UK had to wean off its ‘addiction to debt’, adding
that without economic stability “you have nothing.”

While the government wanted a “competitive” tax regime he would not
risk economic stability.

“Would we really take the risk of yet more debt, would we risk the
sky high interest rates, the economic stability, and I think most people
would think that was an absolutely mad course for us to head down and,
certainly, this government is not going to do that,” he said.

–London newsroom: 44 20 7862 7491; email: drobinson@marketnews.com

[TOPICS: MABDS$,M$B$$$,MFBBU$]