[Politics] Sir Keir Starmer’s route to Number 10

[Jolly Red Giant]

so a tradesman, a fitter or plumber is mddle class, while the banker employing him to fit a new kitchen is working class. cant wait for this work class to rise up

or maybe our modern workforce and socio-economic distinctions dont follow 200 year old models, that probably didnt really even apply then.

Not what I wrote - the vast majority of tradesmen work as waged employees - some are forced to work on bogus self-employed contracts. A small number of tradesmen run small businesses - because of their relationship to the economic forces of production they would be classed as middle-class. This does not mean that they would regard themselves as middle-class - but it is a sociological definition.

You seem to imply that everyone who works in a bank is a 'banker' - the vast majority of bank workers are just that 'workers' - the bankers are the people who operate and control the policy decisions of the bank - a very small percentage of the workforce.

The class definition of people in a capitalist society has not changed in 150 years - and there is no reason for it to change - capitalism still exists and the class relationships within capitalism are fixed based on the individuals relationship with the means of production.

 

[beorhthelm]

Not what I wrote - the vast majority of tradesmen work as waged employees - some are forced to work on bogus self-employed contracts. A small number of tradesmen run small businesses - because of their relationship to the economic forces of production they would be classed as middle-class. This does not mean that they would regard themselves as middle-class - but it is a sociological definition.

You seem to imply that everyone who works in a bank is a 'banker' - the vast majority of bank workers are just that 'workers' - the bankers are the people who operate and control the policy decisions of the bank - a very small percentage of the workforce.

The class definition of people in a capitalist society has not changed in 150 years - and there is no reason for it to change - capitalism still exists and the class relationships within capitalism are fixed based on the individuals relationship with the means of production.

you want to claim trademen are all employees because that suits your arguement. i'd say some are some arent, most i worked with were not. the case i made is for one that is self employed. the trademan that owns the means of production - their skills, knowledge, tools, work their own hours on the jobs they chose. the bankers role in the business is irrelevant unless they own the business, they are waged workers. or are you making an arbitrary distinction between a c-suite manager making high level decisions or senior, middle, junior management that make decisions of different importance? or moving goal posts. the reality is the modern world, where service sector dominates economic output, the old classification breaksdown and become meaningless. it changed because most now have skin in the game, they own assets and capital.

 

[BenGarfield]

1. All the opinion polls on policies indicated that the policies put forward by Corbyn were popular with a majority of the electorate - the election was decided on the issue of completing Brexit (and Starmer purposely scuttled the LP on that issue)

2. Of course things have to be paid for - that is why the government collects tax. Let's look at what has happened to taxation since Thatcher became prime minister - over a 45 year period - the top rate of tax (for the very wealthy) was cut from 75% to 45% (a rate which the Tories now plan to abolish) and the investment income surcharge was abolished. The basic rate was also reduced from 33% to 23% - but was offset by a raft of regressive and indirect taxes such as increased National Insurance contributions, VAT and local taxes (the tax cuts for the rich in Ireland were even greater). On top of that the rich can hire an army of accountants to utilise every tax dodging scheme going. So - yes stuff has to be paid for - the problem is that the burden of taxation globally has shifted in the last 50 years from the rich to the poor. In America someone earning $1million a day has a lower tax burden than someone earning $500 a week. But the capitalist class doesn't give a sh*t about paying for stuff - paying tax is only for poor people.

3. Every economy needs a banking system - the problem wasn't that Brown bailed out the banks - it as how he did it. He socialised the gambling debts of the bankers, spivs and speculators and he dumped the cost of that onto working class people. While the odd speculator went to the wall - the capitalist class as a whole were completely insulated from the impact of their bad gambling debts. In the five years after the crash the richest 1% globally doubled their wealth - while working class people lost their jobs, saw their wages cut (back to the doctor's demands for pay restoration today - 15 years later), saw attacking on their working conditions, and overall saw poverty and deprivation increase significantly. In 2017 Gordon Brown came out and said that the bankers should have been jailed for their fraudulent and dishonest behaviour - how magnanimous of him - he knew about their fraudulent and dishonest behaviour before he every had to consider bailing out the banks. Capitalism thrives on fraudulent and dishonest behaviour - and has done since it was founded 300 years ago.

I agree with almost everything you say but like a lot of people on the left you completely misunderstand how government finance really works. Tax is not there to pay for public expenditure it performs other functions which I have outlined at length on other threads. Realisation of this fact frees us from having to rely on capitalists to fund the projects that those on the left would like to achieve.

 

[BenGarfield]

And where has this printed money being going - oh yea - into the banks who wrecked the economy 15 years ago.

And what are they doing with this money? - they are using it to gamble on the stock market in shorts futures and derivatives - creating financial bubbles and causing more problems (like inflation).

If your talking about QE - that mostly went into bank reserves and actually achieved very little. Banks dont use reserves for investing in the stock market.

 

[BenGarfield]

Modern Monetarism, print as much as you like when you like. I might try that at home!!

Then youd go to prison for fraud - but as i said government finance is not like a household or an individaul or firm who are users of a currency. The currency issuer is like the scorer in a cricket match who can never run out of points to award.

 

[Harry Wilson's tackle]

Then youd go to prison for fraud - but as i said government finance is not like a household or an individaul or firm who are users of a currency. The currency issuer is like the scorer in a cricket match who can never run out of points to award.

You have some interesting ideas. My PhD supervisor (whose wife became a multi millionaire, after fleeing Mao's madhouse with nothing in the 50s) always told me the trouble with me (a far lefty at the time) was that I foolishly imagined we have a zero sum economy. He tended to underestimate the flexibility of my position. Making things creates value, Shirley?

But if any solution to the shit show were simple....why don't we implement it? Is it that important to keep the proles in their place?

Anyway.

And guess what? He just emailed me:

"We are doomed!! Living things are always doomed; some sooner, some later.
I get financial warnings every day (known to financial types, so it’s a conspiracy).
Every now and then there is a realization that we all live on fiat money that is worth intrinsically nothing. History is replete with failure of fiat money so crashes are almost bound to happen. Fiat money = inflation and crashes as with Britain and the US coming-off the gold standard, Germany 1920s. Chinese history is replete with examples of trying fiat money and crashing. The ancients all recognized the danger of money that inherently has no value, but it works most of the time-rather like religion ‘works’ for the religious, those with faith."

 

[Jolly Red Giant]

I agree with almost everything you say but like a lot of people on the left you completely misunderstand how government finance really works. Tax is not there to pay for public expenditure it performs other functions which I have outlined at length on other threads. Realisation of this fact frees us from having to rely on capitalists to fund the projects that those on the left would like to achieve.

If your talking about QE - that mostly went into bank reserves and actually achieved very little. Banks dont use reserves for investing in the stock market.

1. With all due respect - I have been doing this politics stuff for more than 40 years - and while economics is not my forte, I do understand how government finance works. I was making a very basic point about the nature of capitalist society and the function of government and parliamentary democracy. It was a basic response to the repeated mantra that 'someone has to pay for it' - I was demonstrating the fact the world is awash with money, most of it is just in the hands of a tiny percentage of the population.
2. Not accurate - the purpose of the QE programme was to increase private sector spending in the economy because of the threat at the time of deflation. Specifically it was designed to get the banks to increase lending to try and pump-prime economic activity that was in depression since the 2008 crash. Mario Draghi described its purpose as follows “…you basically substitute bonds with cash, and therefore banks, at that point, will have more incentive to lend to the private sector, households and companies.” The problem is that lending is not determined by the amount of cash reserves the banks have - but by demand in the economy and in a depressed economy borrowing does not happen. The banks were awash with money with no profit being made from it. QE led to asset price bubbles as investors (including banks) jockeyed for position on the financial markets. The programme also shifted wealth from poor to rich because the money was not used for useful activity in the economy that could have created jobs and increased wages - but for speculation that had zero impact on economic activity.

 

[Jolly Red Giant]

you want to claim trademen are all employees because that suits your arguement. i'd say some are some arent, most i worked with were not. the case i made is for one that is self employed. the trademan that owns the means of production - their skills, knowledge, tools, work their own hours on the jobs they chose. the bankers role in the business is irrelevant unless they own the business, they are waged workers. or are you making an arbitrary distinction between a c-suite manager making high level decisions or senior, middle, junior management that make decisions of different importance? or moving goal posts. the reality is the modern world, where service sector dominates economic output, the old classification breaksdown and become meaningless. it changed because most now have skin in the game, they own assets and capital.

Again - read what I wrote - I didn't 'claim tradesmen are all employees' - I said the 'vast majority work as employees'.

It is difficult to get accurate statistics on this because of the nature of the work of tradesmen. However estimates of the number of tradesmen who are waged employees range from 65% to 80% depending on the sector of trade. In the construction sector in Ireland it is estimated that 65% of tradesmen are 'employees' and the remainder are self employed - however, the reality is that 30% of the remaining 35% are what is known here as 'bogus self-employed' - they are forced to signed self-employed contracts so that the contractors are not liable of things like social insurance, holiday pay etc. The remaining 5% are largely small companies with a tradesman employing a handful of employees. The vast majority of tradesmen have a working class outlook - but again - outlook does not determine social class.

Most workers in the banking sector are employees who carry out instructions from someone up the managerial chain. Those in the bank who make decisions and benefit financially from those decisions are not working class - but this comprises a small percentage of the banking workforce. The question is - what is the relationship to the productive forces in society? Those who make banking decisions directly impact on the wider economy and financially benefit from those decisions can be classed as middle-class or upper-class - those who do not are working class.

Take a case in point from a different sector - and this relates to your argument about the services sector - I work in a school - the school has a principal who is responsible for the management of the school. Our principal earns in excess of €140,000 a year - is responsible for advertising jobs, interviewing candidates and (with the rest of the interview panel - and the sanction of the Board of Management) the hiring of staff - is responsible for allocating classes and timetables to teachers etc. The principal also has very much a middle-class outlook - wants to proceed up the promotional ladder and is virulently anti-trade union. However, the principal does not directly play a role in the economic relations in society - case in point - the principal cannot sack a teacher, the principal cannot discipline a teacher, the principal cannot force a teacher (or other staff members) to do any work that they are not qualified to do and cannot engage someone to carry out work that they are not qualified to do (i.e. cannot hire an non-qualified teacher to do the work of a teacher) - the principal cannot even force a teacher to teach a subject that the teacher does not hold specific qualifications in (despite the fact that, particularly in smaller schools, teacher will oblige to get the school out of a bind because they cannot find staff in a specific subject). So - despite the power the principal has, despite the salary of the principal, despite their own class outlook and ambition - this principal is a member of the working class because they do not have any specific role in making economic decisions that impact on the social relations within society (if the principal had the authority to sack workers that would change their relationship to the social and economic forces in society).

It does not make any difference whether a worker is working in the industrial or services sector in the economy it is the social relations to the means of production that determines social class.

 

[Sid and the Sharknados]

Again - read what I wrote - I didn't 'claim tradesmen are all employees' - I said the 'vast majority work as employees'.

It is difficult to get accurate statistics on this because of the nature of the work of tradesmen. However estimates of the number of tradesmen who are waged employees range from 65% to 80% depending on the sector of trade. In the construction sector in Ireland it is estimated that 65% of tradesmen are 'employees' and the remainder are self employed - however, the reality is that 30% of the remaining 35% are what is known here as 'bogus self-employed' - they are forced to signed self-employed contracts so that the contractors are not liable of things like social insurance, holiday pay etc. The remaining 5% are largely small companies with a tradesman employing a handful of employees. The vast majority of tradesmen have a working class outlook - but again - outlook does not determine social class.

Most workers in the banking sector are employees who carry out instructions from someone up the managerial chain. Those in the bank who make decisions and benefit financially from those decisions are not working class - but this comprises a small percentage of the banking workforce. The question is - what is the relationship to the productive forces in society? Those who make banking decisions directly impact on the wider economy and financially benefit from those decisions can be classed as middle-class or upper-class - those who do not are working class.

Take a case in point from a different sector - and this relates to your argument about the services sector - I work in a school - the school has a principal who is responsible for the management of the school. Our principal earns in excess of €140,000 a year - is responsible for advertising jobs, interviewing candidates and (with the rest of the interview panel - and the sanction of the Board of Management) the hiring of staff - is responsible for allocating classes and timetables to teachers etc. The principal also has very much a middle-class outlook - wants to proceed up the promotional ladder and is virulently anti-trade union. However, the principal does not directly play a role in the economic relations in society - case in point - the principal cannot sack a teacher, the principal cannot discipline a teacher, the principal cannot force a teacher (or other staff members) to do any work that they are not qualified to do and cannot engage someone to carry out work that they are not qualified to do (i.e. cannot hire an non-qualified teacher to do the work of a teacher) - the principal cannot even force a teacher to teach a subject that the teacher does not hold specific qualifications in (despite the fact that, particularly in smaller schools, teacher will oblige to get the school out of a bind because they cannot find staff in a specific subject). So - despite the power the principal has, despite the salary of the principal, despite their own class outlook and ambition - this principal is a member of the working class because they do not have any specific role in making economic decisions that impact on the social relations within society (if the principal had the authority to sack workers that would change their relationship to the social and economic forces in society).

It does not make any difference whether a worker is working in the industrial or services sector in the economy it is the social relations to the means of production that determines social class.

I'm not going to get into an argument about the nature of class, because I fundamentally don't care (which is the main reason why any analysis of politics that depends primarily on class falls down - most people just don't care).
I will observe that any revolution, left wing or right, that depends on anybody being prepared to read arguments that long is doomed to long, boring failure.

Edit: more importantly, Solly scored while I was writing this, so my involvement in this thread had clearly been entirely successful.

 

[Rdodge30]

I don't make the distinction - sociologists did that many years ago

Yes - someone earning £200K can be working class and a shopkeeper earning £40 can be middle class - it is not the amount you earn -it is the ownership of the means of production. But - importantly - there are very few workers who earn £200K a year (in fact I cannot think of any job that would have that type of a salary scale) - and there are very few shops left where the profit would be £40k - they would have been wiped out by the multiples.

You can call my definition of working class dumb - except its not mine - as I said - it is the definition arrived at by many many sociologists, many many years ago.

The traditional Tory and liberal definition of working class was the blue collar worker - and it is a definition based in class bias. But here is your problem with those working for a salary in a bank or finance house - the vast majority are working class. Those salaried workers who aren't working class are the individuals who benefit from things like company performance bonuses, share options etc (effectively those climbing the corporate ladder) - they have a vested interest in increasing profits irrespective of the consequences to their fellow workers or wider society.

If that is the case then the terms working class and middle class are no longer relevant terms to discuss the financial status of different sections of the population.

You may well be right but to all intents and purposes, we generally use those terms to determine people by wealth.

No point talking about working class people at all if your definition is correct, probably lower income families is what most people would consider working class

 

[Jolly Red Giant]

If that is the case then the terms working class and middle class are no longer relevant terms to discuss the financial status of different sections of the population.

You may well be right but to all intents and purposes, we generally use those terms to determine people by wealth.

No point talking about working class people at all if your definition is correct, probably lower income families is what most people would consider working class

Again - financial status does not determine social class - relationship to the means of production does.

Yes - most people tend to view social class based on the wealth of the individual. The point is that social class is not based on the individual, but on the collective nature of that class. Individually, the rich elites can have a minor impact on social, political and economic policy - collectively the 1% exert controlling interest in society. Similarly, individually, working class people have zero impact on society - but collectively the working class is the most powerful social force in society and when the working class act together with a class consciousness then nothing can stop it. The middle-class vacillate between the two, generally gravitating towards the rich elites, but at time of severe economic crisis can swing behind working class action. The middle-class is not a coherent class - because middle-class people adopt an individualised outlook towards society (as do the rich elites) but they do not have the economic power or the social weight to act on their own. The situation was different 100 years ago - in the inter-war period the middle-class comprised a significantly larger section of society and therefore carried significantly more economic, political and social weight - and that weight was manipulated by the rich elites and swung behind fascism in the 1920s and 1930s.

Political consciousness is constantly changing - sometimes slowly - sometimes very rapidly - and the same applies to revolutionary upheavals. Lenin summed it up "There are decades where nothing happens; and there are weeks where decades happen"

 

[Rdodge30]

Again - financial status does not determine social class - relationship to the means of production does.

Yes - most people tend to view social class based on the wealth of the individual. The point is that social class is not based on the individual, but on the collective nature of that class. Individually, the rich elites can have a minor impact on social, political and economic policy - collectively the 1% exert controlling interest in society. Similarly, individually, working class people have zero impact on society - but collectively the working class is the most powerful social force in society and when the working class act together with a class consciousness then nothing can stop it. The middle-class vacillate between the two, generally gravitating towards the rich elites, but at time of severe economic crisis can swing behind working class action. The middle-class is not a coherent class - because middle-class people adopt an individualised outlook towards society (as do the rich elites) but they do not have the economic power or the social weight to act on their own. The situation was different 100 years ago - in the inter-war period the middle-class comprised a significantly larger section of society and therefore carried significantly more economic, political and social weight - and that weight was manipulated by the rich elites and swung behind fascism in the 1920s and 1930s.

Political consciousness is constantly changing - sometimes slowly - sometimes very rapidly - and the same applies to revolutionary upheavals. Lenin summed it up "There are decades where nothing happens; and there are weeks where decades happen"

Even more so then ‘social class’ is far less relevant to these political discussions than financial status. Your version of working class is all encompassing and it is a massive generalisation to group so many different people together.

 

[clapham_gull]

The middle-class is not a coherent class - because middle-class people adopt an individualised outlook towards society.

The sort of cock womble pseudo social science nonsense I was fed on a cultural studies degree in the 90s. I left.

If working class people are unable to take an individualist outlook why did they vote in their millions for Thatcher and Johnson ?

..and why did my middle class parents at their very core spend all their adult lives helping and caring for other people ?

Put the donkey jacket in the loft comrade it isn't the 1970s or pre revolutionary Russia.

We've got big problems in this country that aren't helped by the likes of yourself creating class division.

 

[abc]

So what 'alternative policy' whilst in opposition would avoid them inheriting asylum seekers on barges if and when this cabal lose the next election

Obviously I mean what is their policy going to be after the election

 

[BenGarfield]

1. With all due respect - I have been doing this politics stuff for more than 40 years - and while economics is not my forte, I do understand how government finance works. I was making a very basic point about the nature of capitalist society and the function of government and parliamentary democracy. It was a basic response to the repeated mantra that 'someone has to pay for it' - I was demonstrating the fact the world is awash with money, most of it is just in the hands of a tiny percentage of the population.
2. Not accurate - the purpose of the QE programme was to increase private sector spending in the economy because of the threat at the time of deflation. Specifically it was designed to get the banks to increase lending to try and pump-prime economic activity that was in depression since the 2008 crash. Mario Draghi described its purpose as follows “…you basically substitute bonds with cash, and therefore banks, at that point, will have more incentive to lend to the private sector, households and companies.” The problem is that lending is not determined by the amount of cash reserves the banks have - but by demand in the economy and in a depressed economy borrowing does not happen. The banks were awash with money with no profit being made from it. QE led to asset price bubbles as investors (including banks) jockeyed for position on the financial markets. The programme also shifted wealth from poor to rich because the money was not used for useful activity in the economy that could have created jobs and increased wages - but for speculation that had zero impact on economic activity.

Re your points:-
1. Do you then accept then that tax doesnt "fund" government spending and that we dont need the wealthy`s money to perform this function?

2. Draghi was wrong. For some reason he was assuming that banks would be more likely to lend because QE increased their reserves. He seems not to understand how banks actually work. There is no mechanism for this link. As I pointed out previously, banks dont lend from their reserves. The more likely explanation for QE was that it was as a tool of monetary policy to keep infation/interest rates low.

2.5 "The programme also shifted wealth from poor to rich" Not true - no new money was created. QE was just a swap between accounts at the Fed/Bank of England from interest bearing gilts to low interest bearing reserves - if anything this would have had a deflationary effect. The government should have increased the welfare of the poor by fiscal stimulus.

 

[beorhthelm]

Re your points:-
1. Do you then accept then that tax doesnt "fund" government spending and that we dont need the wealthy`s money to perform this function?

2. Draghi was wrong. For some reason he was assuming that banks would be more likely to lend because QE increased their reserves. He seems not to understand how banks actually work. There is no mechanism for this link. As I pointed out previously, banks dont lend from their reserves. The more likely explanation for QE was that it was as a tool of monetary policy to keep infation/interest rates low.

2.5 "The programme also shifted wealth from poor to rich" Not true - no new money was created. QE was just a swap between accounts at the Fed/Bank of England from interest bearing gilts to low interest bearing reserves - if anything this would have had a deflationary effect. The government should have increased the welfare of the poor by fiscal stimulus.

silly old Draghi, one time head of ECB and economics career across acedemia, business and politcs, what does he know about how banks work?

 

[BenGarfield]

silly old Draghi, one time head of ECB and economics career across acedemia, business and politcs, what does he know about how banks work?

Seemingly he doesnt, or as some have suggested, he had an alterior motive. As you obviously know more about this than I do, can you explain why the purpose of quantative easing, in Draghis words is to "you basically substituted bonds with cash, and therefore banks, at that point, will have more incentive to lend to the private sector, households and companies.? Why would they have more incentive when the amount of cash in their reserves is neither here not there?

 

[Jolly Red Giant]

If working class people are unable to take an individualist outlook why did they vote in their millions for Thatcher and Johnson ?

..and why did my middle class parents at their very core spend all their adult lives helping and caring for other people ?

Put the donkey jacket in the loft comrade it isn't the 1970s or pre revolutionary Russia.

We've got big problems in this country that aren't helped by the likes of yourself creating class division.

1. Who ever claimed that all working class people are class conscious?
2. Who ever claimed that there are no decent middle-class people or that middle-class people cannot have a socialist outlook
3. No - its the 2020s and we are entering an Age of Disorder where the ruling elites are embarking on dangerous economic, social and political adventures (cost of living crisis, rise of fascism, war, etc). It is the most serious phase of history since the inter-war period.
4. Those who talk about not creating class divisions are the very people who benefit from class divisions and they want to maintain the status quo.

 

[Jolly Red Giant]

Even more so then ‘social class’ is far less relevant to these political discussions than financial status. Your version of working class is all encompassing and it is a massive generalisation to group so many different people together.

I will repeat again - the working class encompasses anyone who works by hand or by brain for a wage - this by its nature, in a 21st century society, creates a situation where the working class comprise the vast majority of the population - go back 50 years and the proportions were different - go back 100 years and the working class comprised half the population and the middle-class almost 40% - go back 200 years and the working class was in a minority, and a major section of the population were peasantry. Globalisation over the past 50 years has had the impact of decimating the middle-class and dramatically increasing the percentage of the population in the working class.

You can disagree with this - but the facts speak for themselves - the current stats in the UK -

28.5million employees (86.65% of the workforce)
4.39million self-employed (13.35%)

Not all of the 'employees' are working class (but the percentage that aren't is quite small) - and many of these 'self-employed' are bogus self-employed because employers want to avoid their social insurance responsibilities, etc (many delivery drivers, construction workers etc.)

 

[Jolly Red Giant]

Re your points:-
1. Do you then accept then that tax doesnt "fund" government spending and that we dont need the wealthy`s money to perform this function?

2. Draghi was wrong. For some reason he was assuming that banks would be more likely to lend because QE increased their reserves. He seems not to understand how banks actually work. There is no mechanism for this link. As I pointed out previously, banks dont lend from their reserves. The more likely explanation for QE was that it was as a tool of monetary policy to keep infation/interest rates low.

2.5 "The programme also shifted wealth from poor to rich" Not true - no new money was created. QE was just a swap between accounts at the Fed/Bank of England from interest bearing gilts to low interest bearing reserves - if anything this would have had a deflationary effect. The government should have increased the welfare of the poor by fiscal stimulus.

1. I accept that you do not need tax to fund government spending - and we don't need the wealthy's money to perform the function - we can create a democratically planned socialised economy that eliminates the need for taxation and eliminates the wealthy (and by the way - I know where you are trying to go with this argument).
2. QE does not keep interest rates and inflation low - in fact it has the opposite effect. The danger when QE was introduced was a deflationary depression in the global economy - something which capitalism has serious difficulties getting out of. And Draghi was doing exactly what his private sector backers wanted him to do. The gut does not and never has operated in the interests of the general economy, he operated in the interests of the finance houses. And I say this as someone who has met the guy and spend a couple of hours debating these issues with him.
2.5 QE generated inflation (as demonstrated by the current inflationary cost of living crisis) and that is its purpose. and inflation transfers economic wealth from the mass of the population to the richest 1%. You really have your understanding of the capitalist system backwards if you think that QE has/had a deflationary effect.

This is from the Bank of England -

Quantitative easing is a tool central banks can use to meet an inflation target. We are the UK’s central bank and our job is to get the rate of inflation to our 2% target. We do that by changing interest rates to influence what happens in the economy. When we need to reduce the rate of inflation, we raise interest rates. Higher interest rates mean borrowing costs more and saving gets a higher return. That leads to less spending in the economy, which brings down the rate of inflation. When we need to support the economy by boosting spending, we lower interest rates. That also causes inflation to go up. QE is one of two tools we can use to change interest rates. The other is Bank Rate, which historically has been our most important tool. We first began using QE in March 2009 in response to the Global Financial Crisis. At that time Bank Rate was already very low. In fact, it couldn’t be lowered any further at that point. So we needed another way to lower interest rates, encourage spending in the economy, and meet our inflation target. QE involves us buying bonds to push up their prices and bring down long-term interest rates. In turn, that increases how much people spend overall which puts upward pressure on the prices of goods and services.

And for clarification - the inflation rate in 2009 was negative 0.59%