Increases and that wage increases are coming through

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increases and that wage increases are coming through because that helps to reduce the burden of that indebtedness. What I was concentrating on in the speech is the dynamic as this extra workforce finds employment, in economists’ speak, as the slack is used up – I appreciate that that is a terrible way to talk about it – in the labour market and then we start to see those prospects. We are very alert to this issue and it influences all of our policies. That is the first point. Reference was made to pay-day lenders but then there was the reference to bank lending and, particularly, I think, to the creative industries, which is an important point. There is that a radical restructuring going on, which is not finished but it is in train, of the banking sector in this country. We have, fundamentally, changed the cost of banking to the banks of various activities. It is much, much more expensive for banks to engage in trading in the City, investing in financial markets, as opposed to lending to the real economy. These are big and somewhat lumbering institutions and it takes them a while to adjust, but they need to be successful and to build the skills to lend to businesses. As you know, much of the future of this country is in the creative industries and in industries where the basic assets are human capital, ideas and imagination, so those banks need to be able to make the credit decisions around lending into those industries. It will take them a while but the incentives are there and they are much more resilient in order to be able to do that. Viz-a-viz pay-day lenders and others, what is important is that there are new banks that can come in and compete against these very high rates of interest and very ineffective rates of interest for households, so we have streamlined the ability of new banks to come in and we have had a fourfold increase in the amount of applications 89
and the number of new challenger banks that are coming through again. We have to do more but that is the focus part. Just on interest rates and politics, which is the way I would term it, the first thing to say is that we are absolutely indifferent to the political cycle, to who is in government, who might be in government and who was in government. We are given a specific mandate. It is, basically, unchanged since 1997 to achieve that 2% inflation target, and we manage monetary policy in order to achieve that. If we need to raise interests rates before, or lower them for that matter, a vote, an election or referendum, we will do what is necessary in order to achieve that target. We are technocrats and we do what is necessary. If you don’t mind, I just want to clarify one thing. I think most people are clear on this, but our commitment was not to raise interest rates at least until unemployment got to 7%, because we wanted to secure that recovery. What we said that once the unemployment rate got to 7% we would then look around, take stock and decide where monetary policy needed to go. When we looked around and took stock, we

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