No deal ‘may lead to negative rates’
INTEREST rates could be slashed into negative territory for the first time in history to combat the fallout from a chaotic no-deal Brexit, a former Bank of England policymaker has warned.
David Blanchflower – who sat on the Bank’s Monetary Policy Committee from June 2006 to June 2009 – said policymakers may be left with little option but to take rates below zero if a no-deal Brexit sends shockwaves through the economy.
It comes after the Bank’s ‘doomsday scenario’ report warned that interest rates could rise as high as 5.5 per cent if a plunging pound sent inflation soaring.
Mr Blanchflower said: “It was stupid what they said.
“That was a big error. It would kill the British economy stone dead. The first thing you would have to start thinking about would be negative rates.”
Meanwhile, Prime Minister Theresa May ruled out putting a “meaningful vote” on Brexit to the Commons this week, but insisted one would be held by March 12.
Mrs May also denied that Cabinet collective responsibility had broken down after three ministers signalled they could sup- port backbench moves to delay withdrawal in order to prevent a no-deal Brexit.
The PM, in Egypt for the EU-League of Arab States summit said because ‘positive’ talks were ongoing with the EU, a meaningful vote would not be held this week.
She said: “I was in Brussels last week. Ministers were in Brussels last week.
“My team will be back in Brussels again this coming week. They will be returning to Brussels (tomorrow). As a result of that, we won’t bring a meaningful vote to Parliament this week. But we will ensure that that happens by March 12.”
Asked how the Government would treat non-binding motions expected this week which call for the ruling out of a no-deal exit, and which demand an extension of Article 50, Mrs May said: “We don’t know what amendments are going to be tabled.
“We don’t know what amendments are going to be selected.
“I will be making a statement to Parliament (tomorrow). And then, obviously, we’ll be having the debate the next day.”
The PM said the Government was still in talks with the EU about the Northern Ireland backstop.
She insisted collective Cabinet responsibility had not broken down after the intervention by Amber Rudd, Greg Clark and David Gauke indicating that they could back moves to stop a no deal.
“We have around the Cabinet table a collective, not just responsibility, but desire, to actually ensure we leave the EU with a deal. That’s what we’re working for.”
Mrs May said extending Article 50 would not deal with the issues. She said: “It defers the point of decision. There comes a point where we need to make that decision.”
Shadow Brexit secretary Sir Keir Starmer called Mrs May’s decision over the timing of the meaningful vote “an admission of failure”.