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Theresa May says the UK must deal with its debts Theresa May defends free market economy
(about 1 hour later)
Theresa May has restated her determination to be tough on public spending despite political pressure to ease up on austerity. Theresa May has defended free market capitalism in a speech marking 20 years since the Bank of England was given the right to set interest rates.
"Continuing to deal with our debts," is the way to strengthen the economy, the prime minister said. Mrs May said the British people should never forget the value of a free market economy.
Her speech at the Bank of England is timed to mark 20 years of political independence for the central bank. She also restated her determination to be tough on public spending despite political pressure to ease austerity.
It came a day after Labour leader Jeremy Corbyn pledged to "repair the damage done by austerity". "Continuing to deal with our debts," is the way to strengthen the economy, she said.
At the Labour party's annual conference, Mr Corbyn - who has consistently criticised the Conservative party's austerity programme - insisted Labour's policies were "what most people in our country actually want". Her comments follow Labour leader Jeremy Corbyn's speech on Wednesday at his party's conference, in which he said capitalism was facing a "crisis of legitimacy".
However, Mrs May said that such an approach could ultimately result in less money for public services. Mr Corbyn - who has consistently criticised the Conservative party's austerity programme - also insisted Labour's policies were "what most people in our country actually want".
"To abandon that balanced approach with unfunded borrowing and significantly higher levels of taxation would damage our economy, threaten jobs, and hurt working people," she said. However, the prime minister said her Conservative government would not change course and would continue to be tough on public spending.
Mrs May also defended the UK's free market economy, and insisted that "strict new rules" on banking and finance were working. "To abandon that balanced approach with unfunded borrowing and significantly higher levels of taxation would damage our economy, threaten jobs, and hurt working people," she added.
Britain's flexible labour market had brought prosperity, Mrs May said, although she accepted that it did not necessarily work for everyone. This was why her government was introducing new safeguards. Mrs May argued that Britain's flexible labour market had brought prosperity, and when countries adopted free market economics "life expectancy increases and absolute poverty falls", she said.
The prime minister's first job after graduating in 1977 was at the Bank of England, and she is to talk about how the nature of central banking generally has changed over the past 40 years. It was the "only sustainable means of raising the living standards of everyone in a country", she added.
The Bank of England was given political independence on 6 May 1997 by then Chancellor Gordon Brown just days after the new Labour government took office. But, she acknowledged, the government needed "to be honest about where it is not currently working".
Prior to that, interest rate decisions were taken by the chancellor, rather than by independent economists. The Bank of England was given the independence to decide interest rates on its own on 6 May 1997 by then Chancellor Gordon Brown, just days after the new Labour government took office.
That meant changes were often driven by politics, for example lowering interest rates after a budget to boost the economy, or raising them immediately after a general election. Prior to that, interest rate decisions were taken by the chancellor, taking into account advice from the Bank as well as Treasury officials.
The Bank has since gained further powers including financial stability and the regulation of financial firms, such as banks and insurers. That meant changes were often driven by political considerations, for example lowering interest rates after a Budget to boost the economy, or raising them immediately after a general election.
Current Bank governor Mark Carney will host a two-day conference on Thursday and Friday to mark the 20-year anniversary of its independence. Speakers will include Mr Brown and his then adviser Ed Balls. Mrs May said that giving the Bank the power to decide interest rates had been crucial to keeping inflation low in the past two decades.
Other central bankers including European Central Bank president Mario Draghi, Federal Reserve vice chairman Stanley Fischer, as well as International Monetary Fund managing director Christine Lagarde are also due to attend. For his part, the current Bank Governor Mark Carney restated that the Bank would be vigilant to counter any economic or financial disruption from the Brexit process.
"Banks will be capitalised so that they can withstand any severe shock that could be associated with Brexit - however unlikely - and still meet demand for credit," he said.