Rishi’s Economic Fairytales

As the dust settles after last night’s turbulent Tory leadership TV debate, Guido has scrutinised some of the more scrupulous claims of the candidates. Few seem so economical with the truth as Rishi’s interest rates arguments. Early phases of the debate focused on the economic impact of tax pledges, with Rishi heavily relying on the claim that Patrick Minford, who supported Liz’s economic plan, argued for a rates rise to “7%”, with Rishi clarifying “that’s the number that he gave”. The trouble is Minford didn’t say this…

While Minford did argue rates should rise, his actual words specified “a normal level is more like 5-7%” with his personal preference being between 2% – 4%. Minford has explicitly denied the quotes attributed to him by Rishi, which are clearly an exaggeration. Nor did he specify that rates would rise as a direct result of tax cuts. Perhaps Liz was onto something with her project fear claims…

Rising interest rates when inflation is approaching double digits means that savers still face negative interest rates. Savers tend to be older, as do Tory voters. Rishi misunderstands the membership if he thinks higher interest rates fill them all with fear. 

Rishi’s monetary misrepresentations didn’t end there. The former Chancellor went on to claim American “mortgage rates are almost 50% higher than mortgage rates in this country because they’re borrowing so much”. While US mortgage rates are higher, this is because of completely different mortgage markets. In the US mortgages are fixed rate for up to 30 years, though can be refinanced whenever rates decrease. In the UK they are fixed rate for between 2 and 10 years, with a charge for refinancing. UK mortgage loans are generally cheaper and shorter. Guido was surprised to see these claims coming from someone so keen to stress his economic competence…

mdi-tag-outline Tory Leadership 2022
mdi-account-multiple-outline Patrick Minford Rishi Sunak
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