INTEREST rates may have to be slashed below zero for the first time if there is a chaotic no-deal Brexit, a former Bank of England policymaker has warned.
The drastic measure — with lenders paying customers to borrow — would be one of only a few options available to encourage spending if the economy collapsed, said David Blanchflower.
He said Bank governor Mark Carney (pictured) and his team had been ‘stupid’ to warn that rates could be pushed as high as 5.5 per cent after a no-deal to curb inflation caused by a fall in the value of the pound. ‘That was a big error,’ claimed the economist, a member of the bank’s monetary policy committee from June 2006 to June 2009. ‘It would kill the economy stone dead. The first thing you would have to start thinking about would be negative rates.’
Mr Blanchflower, known as ‘Danny’ after the Spurs football legend, said the Bank had ‘very few arrows in the quiver’ to encourage spending.
He said sending rates into negative territory would ‘have to be on the table because you’d be trying to encourage people to spend not save’. Rates are currently at 0.75 per cent.
Now working as a professor in the US, Mr Blanchflower also predicted the Bank might reintroduce quantitative easing — pumping cash into the system as was done after the 2008 crash.
Warning that the government would also have to act to avert a crisis, he said: ‘The obvious thing would be to cut VAT by five basis points, increase spending like there’s no tomorrow and scrap austerity.’ Brexit has come at a bad time because the global economy is slowing, he added.
Insolvency payouts cost taxpayer £298m
TAXPAYERS shelled out £298million for the highest level of insolvencies in five years.
The sum paid by The Insolvency Service to ex-workers of firms running into trouble in 2018 rose 31 per cent year on year. It included redundancy pay, unpaid wages, overtime and other benefits.
Insolvencies in retail rose 9.5 per cent and 17.9 per cent in the food and drink sector. Robert Hayton, of real estate adviser Altus Group which reported the figures, said: ‘While business rates are rarely the sole driver for insolvencies, they certainly are a contributory factor.’
■ COCOA farmers in West Africa earn as little as 74p a day, a Fairtrade Foundation report found. It is urging the government and chocolate industry — worth £4billion a year — to ensure farmers get a living income by 2030.
■ UNITE is taking a case to the High Court on behalf of around 3,000 workers blacklisted by construction companies, often for being in a union or raising safety issues. Past claims have seen 400 people paid millions.