WHILST most of the North East Shadow Monetary Policy Committee voted to hold the interest rate at 0.5 per cent ahead of the Bank of England’s MPC announcement on Thursday, the debate about negative interest rates made its first appearance at the forum today.
A partnership between the North East Chamber of Commerce (NECC), Tees Valley-based accountancy firm Waltons Clark Whitehill 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.
While seven out of the quorum of nine voted to hold interest rates, Tony Slimmings, Director of Tees Valley-based pensions and investments firm WR Financial, opted to decrease the rates in a bid to inflate the economy, while Recognition PR Lead Partner Graham Robb voted to increase the interest rate to encourage savers and help those on fixed incomes.
There was an almost unanimous consensus there should be no quantative easing, with Ajay Jagota, Chief Executive of South Shields letting firm KIS, the only member of the committee to advocate this policy.
Tony Slimmings said: “There is a sense of optimism; things are stable, but we’re not out of the woods yet. We are seeing clients taking on employees at a fairly steady rate, but not as many people getting pay rises.”
He voted to decrease interest rates to encourage spending, adding: “This obsession with austerity and keeping inflation to a certain level has allowed the economy to sleep-walk through the last five years. Inflation has to go up, otherwise we will spend the next five years waiting for something to happen.”
Graham Robb said he thought the idea of a negative interest rate was “gimmicky”, and was a betrayal of savers, pensioners and young people trying to get onto the career ladder.
“I have deep reservations about moving away from tried and tested economic practice,” he said. “We need to see growth, not bounce.”
Ajay Jagota, who voted for a hold in interest rates, as well as a rise in quantative easing in a bid to help businesses get finance from banks, said he thought a fix at the existing interest rate would give the economy some stability.
“I think that would give people more confidence to invest and spend,” he said. “At the moment, survival is the name of the game; you should have an eye on growth but now’s not the time.”
Heather O’Driscoll, Managing Partner at Hartlepool-based accountants Waltons Clark Whitehill and committee chairwoman advocated a hold on interest rates and no further quantative easing for the time being.
“There is a quiet optimism amongst businesses at the moment,” she said. “Many are not quite ready to invest yet, but I think we are slowly coming out of the other side. My firm has helped a phenomenal amount of one-man limited companies set up over the past year.”
Catriona Lingwood, Chief Executive, Constructing Excellence in the North East, also agreed with this more positive outlook on the economy, saying orders in construction had increased ten per cent in the last quarter.
“One contractor told me they have 20 sites ready to start across the North East, North Yorkshire and Cumbria. This is a very, very positive outlook for construction as a whole - that’s got to be a good thing.”