Low interest rates '˜a tax increase', claims former minister

Baroness Altmann argued that in some ways, monetary policy is “acting like a tax increase”, reducing people’s spending power.

Savers have seen their returns eroded further by the recent cut in the Bank of England base rate to 0.25%, while some home owners have seen the benefits of low borrowing rates offset by surging house prices.

Lady Altmann said the groups that have been damaged by monetary policy include people trying to get on the property ladder and savers relying on interest on their cash pots for an income.

She suggested it might be possible that monetary policy could have contributed to dissatisfaction among voters who have felt “left behind” in recent years.

She said: “The rise of anti-establishment nationalist movements, epitomised by the Brexit result, may reflect anger at the financial difficulties facing some parts of the population, which policymakers have failed to recognise.

“Politicians might like to consider how this balance of winners and losers fits with a desire to help the many, rather than the privileged few.”

Lady Altmann said the Government “should launch an inquiry into the effects of lower interest rates”.

She said the full impact of the Bank of England’s quantitative easing (QE) “experiment” will not be known or understood for many years, while its negative side-effects may have been underestimated.

“It is worrying that this massive monetary experiment of printing money to artificially distort long-term interest rates may now be considered ‘normal’ - it is certainly not normal at all.”