Paul Tucker attempts to spice up British monetary policy

Negative interest rates are like candy floss to central bankers, it is believed.

In the midst of his testimony to the treasury select committee, Bank of England deputy governor Paul Tucker gave a suggestion that Britain might be considering some unorthodox monetary policy of its own:

I hope we’ll think about whether there are constraints to setting negative interest rates. This would be an extraordinary thing to do and it needs to be thought through very carefully.

Such a move would be unlikely to affect the Bank's base rate. While we still have cash, that rate is pretty firmly stuck at the zero lower bound, because savers will always be able to withdraw savings as cash and horde it that way, safely out of reach of the banks trying to charge interest on their money.

Instead, it would be the rate paid on the Bank's overnight deposits which would be hit. This is the sum the Bank pays to other banks which leave their money with the Bank of England. It's basically the interest rate the Bank charges when it's actually acting like a bank. It can get away with it because, while withdrawing your savings and stuffing them under a pillow may work for you or I, it's less of an option for Halifax or HSBC.

The Financial Times' David Keohane thinks that the statements, which echo suggestions in the minutes of the monetary policy committee released last week, could be an attempt to talk down the value of the pound. Keohane writes:

Throwing around the negative interest rates idea has become very trendy all of a sudden with Draghi, Praet and Constancio weighing in and, we'd argue, using the threat to substitute for policy impotence.

Was Bank of England deputy governor Paul Tucker doing the same thing? Using a jedi-trick to talk down sterling perchance?

Of course, as Keohane points out, if that was the aim, it didn't do a whole lot of good. The effect of Tucker's words is almost lost in the general volatility of the market today:

Maybe the Bank of England is just feeling a little bit jealous of its Japanese counterpart? After all, they're gearing up to do all kinds of cool new things with monetary policy — Foreign bond purchases! Stock exchange targeting! Capital stock nationalisation using the profits of quantitative easing! — while we're stuck with boring old open market policy, where a chart from eight months ago is still accurate.

Continuing the theme of literally illustrating metaphors, this is a picture of some spices. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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The SNP thinks it knows how to kill hard Brexit

The Supreme Court ruled MPs must have a say in triggering Article 50. But the opposition must unite to succeed. 

For a few minutes on Tuesday morning, the crowd in the Supreme Court listened as the verdict was read out. Parliament must have the right to authorise the triggering of Article 50. The devolved nations would not get a veto. 

There was a moment of silence. And then the opponents of hard Brexit hit the phones. 

For the Scottish government, the pro-Remain members of the Welsh Assembly and Sinn Féin in Northern Ireland, the victory was bittersweet. 

The ruling prompted Scotland’s First Minister, Nicola Sturgeon, to ask: “Is it better that we take our future into our own hands?”

Ever the pragmatist, though, Sturgeon has simultaneously released her Westminster attack dogs. 

Within minutes of the ruling, the SNP had vowed to put forward 50 amendments (see what they did there) to UK government legislation before Article 50 is enacted. 

This includes the demand for a Brexit white paper – shared by MPs from all parties – to a clause designed to prevent the UK reverting to World Trade Organisation rules if a deal is not agreed. 

But with Labour planning to approve the triggering of Article 50, can the SNP cause havoc with the government’s plans, or will it simply be a chorus of disapproval in the rest of Parliament’s ear?

The SNP can expect some support. Individual SNP MPs have already successfully worked with Labour MPs on issues such as benefit cuts. Pro-Remain Labour backbenchers opposed to Article 50 will not rule out “holding hands with the devil to cross the bridge”, as one insider put it. The sole Green MP, Caroline Lucas, will consider backing SNP amendments she agrees with as well as tabling her own. 

But meanwhile, other opposition parties are seeking their own amendments. Jeremy Corbyn said Labour will seek amendments to stop the Conservatives turning the UK “into a bargain basement tax haven” and is demanding tariff-free access to the EU. 

Separately, the Liberal Democrats are seeking three main amendments – single market membership, rights for EU nationals and a referendum on the deal, which is a “red line”.

Meanwhile, pro-Remain Tory backbenchers are watching their leadership closely to decide how far to stray from the party line. 

But if the Article 50 ruling has woken Parliament up, the initial reaction has been chaotic rather than collaborative. Despite the Lib Dems’ position as the most UK-wide anti-Brexit voice, neither the SNP nor Labour managed to co-ordinate with them. 

Indeed, the Lib Dems look set to vote against Labour’s tariff-free amendment on the grounds it is not good enough, while expecting Labour to vote against their demand of membership of the single market. 

The question for all opposition parties is whether they can find enough amendments to agree on to force the government onto the defensive. Otherwise, this defeat for the government is hardly a defeat at all. 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.