Monetary policies have scared away the 'confidence fairy' - Ros Altmann

    Ros is a leading authority on later life issues, including pensions,
    social care and retirement policy. Numerous major awards have recognised
    her work to demystify finance and make pensions work better for people.
    She was the UK Pensions Minister from 2015 – 16 and is a member
    of the House of Lords where she sits as Baroness Altmann of Tottenham.

  • Ros Altmann

    Ros Altmann

    Monetary policies have scared away the 'confidence fairy'

    Monetary policies have scared away the 'confidence fairy'

    Maybe monetary policy, rather than austerity, has damaged growth

    by Dr. Ros Altmann

    (All material on this page is subject to copyright and must not be reproduced without the author’s permission.)

    Letter published in Financial Times, 24th October 2012


    In response Chris Giles’ concerns that austerity cannot explain weak UK growth (Comment October 18) Jonathan and Richard Portes (letters, October 23) suggest that austerity has damaged the economy by scaring away the ‘confidence fairy’. I would like to suggest that both growth and confidence may actually have been hampered by monetary, not fiscal measures. To millions of households, Bank of England policies have felt like a tax increase. Ongoing gilt-buying has reduced current and prospective pension incomes in our aging population, while continued ultra-low interest rates and overshooting inflation have reduced savers’ nominal and real incomes. Thus, monetary policy may have inadvertently operated like a tightening of fiscal policy. How can this be? In unconventional times, normal relationships cannot be relied upon. Heavily over-indebted private and public sector borrowers, who benefit from low rates, cannot increase spending, while those without debts, who could spend, feel forced to retrench as their income prospects worsen. Saga Surveys since 2010 have consistently flagged that precautionary consumption cutbacks are the response of the over 50s to falling real incomes. Over 50s represent nearly half of all consumer spending. In the face of the economic evidence, should we not consider the possibility that the extreme monetary policies put in place to try to generate growth have actually had the opposite effect.

    Yours faithfully

    Dr. Ros Altmann
    Director-General, Saga

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