Labour's 'desperate' plan: Print more money

SPECULATION was mounting today that the Government was preparing to print billions of pounds of money to help boost the economy.

The Government could keep printing money The Government could keep printing money

Chancellor Alistair Darling indicated during an interview yesterday that he was considering a policy of “quantitative easing” - or printing money - to ease the impact of a recession.

Shadow chancellor George Osborne accused Mr Darling of floating the idea “carelessly” in a move that risked losing confidence of international markets.

The prospect of printing money came ahead of an expected cut in interest rates by the Bank of England today, which would take the current 2 per cent base rate to its lowest point for 300 years.

Treasury and Bank officials are considering other financial measures if the cheaper official borrowing costs fail to have the desired effect of boosting economic activity.

Mr Darling said yesterday: “Frankly, if you were to do anything further (than set interest rates close to zero) this is something that could only be done with the Treasury and the Bank of England working hand in hand, because the two responsibilities just become so close you have to operate together.”

Extra government cash could be used to buy assets such as government or commercial debt, or private equities.

The policy was used by Japan several years ago to stave off deflation - a general trend of falling prices which can lead to economic paralysis.

Treasury sources confirmed today that the Chancellor was “looking at all options” to help stimulate the economy.

Mr Osborne said printing money was the “last resort of desperate governments”.

He said: “The very fact that the Treasury is speculating about printing money shows that Gordon Brown has led Britain to the brink of bankruptcy.

“Printing money is the last resort of desperate governments when all other policies have failed.

“It can’t be ruled out as a last resort in the fight against deflation, but in the end printing money risks losing control of inflation and all the economic problems that high inflation brings.

“And to float the idea carelessly is irresponsible in the extreme as it risks losing the confidence of international markets.”

In the interview, Mr Darling also said the country was “far from through” the current economic problems.

In his Pre-Budget Report (PBR) in November, he predicted that output would fall in the UK for the first two quarters of 2009, then start to recover.

Mr Darling said that this projection was “based on the evidence we had at the time”.

Noting that the economic outlook remained “difficult”, he said: “In the current climate, no responsible finance minister could say that’s the job done, far from it. We are far from through this.

“This year is going to be difficult. There are going to be some tough calls.”

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