THE North East Shadow Monetary Policy Committee (MPC) is split on changes to the Bank of England base rate, ahead of Thursday's official announcement.

A partnership between Hartlepool-based chartered accountants and business advisers Waltons Clark Whitehill, the North East Chamber of Commerce (NECC) and The Northern Echo, the North East Shadow MPC looks at the region’s economy and gives experts from a variety of sectors the opportunity to argue their case for a shift, or hold, in the rate.

The majority of the committee said they believe that interest rates should remain at the current level of 0.5 per cent, but several members offered differing opinions.

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Heather O’Driscoll, managing partner at Waltons Clark Whitehill, called for a freeze on the rate of interest.

She said: “I wouldn’t like to see the base rate go up, as I think it would just allow banks to give businesses even tougher terms when finance renewals come up.”

When quizzed for her thoughts on quantitative easing, she added: “Quantitative easing just has not worked, and I’m not convinced the Government’s Funding for Lending scheme has made much of an impact either. I would like to see banks maybe relax their lending rules to help SMEs thrive and grow in this challenging market.”

But, Ross Smith, director of policy at the North East Chamber of Commerce (NECC), argued in favour of Funding for Lending (FfL), and called for a hold in the rate of interest.

He said: “The key issue is supporting SMEs with access to finance and continuing to strengthen the Funding for Lending scheme will be much more effective than further QE could ever be.”

Tony Slimmings, director at WR Financial Limited, said: “Interest rates should be lowered to 0 per cent due to continued slow growth.

He added: “Further quantitative easing measures would serve no purpose either, apart from putting more cash on bank balance sheets. The funds would be better invested into direct infrastructure projects that would get business moving again.”

Michael O’Connell, managing director of EOS, believes that interest rates should be increased to 1 per cent.

“Business activity in the manufacturing sector is increasing and if we don’t start increasing interest rates and capping quantitative easing we will see inflation start to increase quite steeply in 2013 which will not be good for business or the consumer,” said Mr O’Connell.

“There should be no more quantitative easing; businesses need to stand on their own feet. It would appear that the banks are using the money injected into the economy to further bolster their balance sheets and the consumer is not seeing the benefits by way of increase lending at affordable rates.”

Graham Robb, senior partner at Darlington-based Recognition PR said: “The time is right for a small 0.25 per cent rise in interest rates. It will be a real help to savers, particularly those on fixed incomes. Such a modest rise would do very little to harm housing confidence but might persuade lenders that it is worth their while to advance loans as they will get very real returns. It will also signal that the inflation is not going to be allowed to take root in the economy. Resetting rates now, while the Eurozone is in a short period of stability and stock markets are rising seems like good timing.”

David Bowles, chairman of Inova Power Ltd and Non-Executive Director of NDI Ltd, echoed these statements, saying: “We do not need any more QE, there is no evidence that it is filtering down to assist small businesses and people with mortgages.”

Jim Willens, chief executive of Newcastle Building Society, said: “QE is not the answer at the moment, as there is inconclusive data to support it. The economy may need some other form of stimulus to help boost specific areas, like small businesses.”

Kevin Rowan, regional secretary of the Northern TUC, believes the base rate should stay the same. He said: “The recent GDP estimates confirmed what we all suspected, the last quarter of 2012 was disappointing economically. The economy is stagnating and it is likely that this will be the prevailing conditions for 2013.”

Despite the ‘stagnation’, Mr Rowan does not think there is any need for any more quantitative easing.

He added: “There is a lack of money in circulation in the economy, but I don’t believe the Bank should add money into it, shortage of money is not the main problem. Economic conditions are preventing investment, lack of confidence that there will be positive economic activity is the main reason why businesses and financiers are not willing to invest. Any loosening of public spending should be focused on infrastructure projects and support for employment, especially youth employment.”

Nigel Mills, chairman of the Entrepreneurs Forum in the North East and managing director of property investors Closewalk Ltd, said: “I would keep interest rates as they are because sales are still growing at the expense of lower prices hence lower gross profit margins.”

Mr Mills continued: “There should be no more QE at this stage as the jury is still out on how effective it is. Also there are other funds available to banks and businesses to avoid the need for this stimulus.”

David Coates, managing director of Newsquest North East, commented: “There is not much substantial growth in any areas other than Digital, so I believe we need to hold interest rates where they are.

“Any further QE should be held as we have done quite a lot and we may need more if there is any further faltering in the Eurozone.”

Jane Reynolds, Tees Valley business manager at North East Finance Ltd, said: “Businesses do not want any change as they are cautious that any growth may be effected and need to see strong signs of growth before any changes are made to the base rate.”

Keith Proudfoot, regional director, Institute of Chartered Accountants England and Wales, recommended “interest rates stay as they are as there has been a slight increase in confidence in the previous two quarters and businesses need the stability to continue.

Mr Proudfoot continued: “The is no need for any more quantitative easing measures as there is enough liquidity in the economy at the current time. Right at this time, I would welcome more from the Funding for Lending (FfL) programme to help out smaller businesses."