ONE of the better-known former external members of the Monetary Policy Committee has, during a visit to Scotland this week, been expressing in no uncertain terms his views on recent decision-making on interest rates.

Danny Blanchflower, Bruce V. Rauner ’78 professor of economics at Dartmouth College in New Hampshire in the US and a visiting professor at the University of Glasgow, appears truly exasperated by the Bank of England committee’s decisions to keep raising interest rates at a time when he believes the Old Lady of Threadneedle Street’s own forecasts indicate it should be cutting them.

He is more than familiar, of course, with the Bank’s fan charts of growth and inflation projections, having served on the MPC between 2006 and 2009.

Mr Blanchflower told an event in Glasgow on Wednesday, hosted by Glasgow Chamber of Commerce, that there was a very considerable probability on the basis of the Bank of England’s own forecasts out to 2026 that there would be deflation, and asked: “How can you raise rates with a forecast that says you should be cutting rates? They are out of their minds.”

The labour market economist had written in The Herald on Wednesday morning: “Two dissenting members of the MPC Swati Dhingra and Silvana Tenreyro, who care about ordinary people, know what is going on. At the last meeting they voted against a rate rise arguing that they expected inflation to plummet soon plus all the rate rises hadn’t actually had time to work yet. This is what they sensibly said (the rest are in Gagaland): ‘The lags in the effects of monetary policy meant that sizeable impacts from past rate increases were still to come through. That implied the current setting of Bank Rate would be likely to reduce inflation to well below target in the medium term. As the policy setting had become increasingly restrictive, this would bring forward the point at which recent rate increases would need to be reversed.’ Exactly.”

It has to be said that Mr Blanchflower made a compelling case, as he often did on the many occasions he found himself in the minority or completely alone in the voting during his time on the MPC.

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He highlighted both in his column in The Herald and at Wednesday's Glasgow Talks event the much greater sadness and pain caused by rises in unemployment, which could be triggered by policies which bore down on growth or sent the economy into recession, than by higher inflation.

And it is crucial in the context of economics that these human factors are not ignored.

In this regard, Mr Blanchflower, who was in conversation with professor of economics at the University of Glasgow’s Adam Smith Business School Graeme Roy at Wednesday's event, was quite right to make no bones about the impact of austerity on the poor.

He told his audience: “What has it done ultimately? It has killed poor people. To be frank – ultimately it is that.”

And Mr Blanchflower noted austerity served “no economic purpose at all”.

He was in town to take part in the University of Glasgow’s tercentenary celebrations of the birth of former student and professor Adam Smith.

Mr Blanchflower, summarising from his perspective what Adam Smith had written in his Theory of Moral Sentiments work, said: “We care about the wealth of nations but we care about the wellbeing of others. We care about poverty. We care about the human condition.”

On monetary policy, Mr Blanchflower astutely highlighted the fact that the UK’s particular inflation woe arising from Brexit would not be solved by increases in interest rates.

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He wrote in The Herald: “Sadly, these [Bank of England] rate rises have hardly had any impact at all on inflation - which was caused by supply chain issues after the pandemic, the Ukraine war and Brexit. Brexit and its devastating impact on supply chains, especially for food, is what sets the UK apart from every other country. This can't be fixed by rate rises.”

UK base rates have been hiked from 0.1% in December 2021 to 4.5%, and are expected by economists and financial markets to rise further.

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The dampening effects of this surge in borrowing costs should not be underestimated, particularly given the weak UK economic backdrop. And the view of the current MPC minority that “the lags in the effects of monetary policy meant that sizeable impacts from past rate increases were still to come through” seems eminently sensible.

This might be especially pertinent at the current juncture in relation to those households which were lucky enough to be able to save more money than usual during the coronavirus pandemic and now might be running down this cash amid the UK’s cost of living crisis.

Mr Blanchflower is also surely quite right to be perplexed that policymakers seem to view the notion of a protracted period of essentially no growth, with all that means for unemployment and living standards, as somehow acceptable, as reducing inflation is prioritised by those calling the shots.

He showed the chart of the Bank of England’s latest forecast for UK gross domestic product growth published last month, when it raised interest rates by a further quarter-point to 4.5%.

Mr Blanchflower declared this chart, based on market interest rate expectations, showed on the central projection that the UK economy would “not grow at all” between now and 2026.

And, in a somewhat incredulous tone, he declared: “Zero growth. That is your job – to get the economy growing.”

It is high time senior members of the Conservative Government and Bank of England policymakers started listening to Mr Blanchflower and other voices challenging their approach.

Chancellor Jeremy Hunt, of course, was part of that David Cameron-George Osborne administration which in 2010 launched the failed austerity programme that has sadly been with us ever since.

He has produced nothing of any significance that might stimulate growth since he came back into the Cabinet last autumn, which is no surprise given he was part of that administration that fastened the austerity ball and chain to the UK economy.

And Mr Hunt appears to have no particular interest in stimulating the UK economy for the benefit of the population at large. He seems to be one of those Conservative politicians who thinks ordinary people should just get on with things, and that some kind of greater good is served by bearing down on growth and living standards.

Prime Minister Rishi Sunak does not look like a leader who prioritises growth either, as shown by his support for the Tory hard Brexit.

It is a sorry state of affairs but it is heartening that people such as Mr Blanchflower are willing to challenge policymakers in no uncertain terms.

That said, it would be even more encouraging if those who seem intent on repeating the mistakes of the past would just listen.