Tories say they would keep rates low when they win General Election

12:15 15Sep09 UK Opposition Would Seek Loose Monetary Policy From BOE

LONDON--The U.K. opposition Conservative party would want the Bank of England to keep monetary policy loose for as long as possible if it wins a coming general election, economic spokesman George Osborne said Tuesday.

In a speech Tuesday, Osborne said Conservative economic policy would be based on "monetary activism, fiscal responsibility and supply-side reform."

"One of the first conversations any Chancellor would want to have is with the Governor of the Bank of England," Osborne said, according to a text of his remarks.

He went on to say his party's commitment to spending cuts and tight fiscal policy "will allow the independent MPC (Monetary Policy Committee) to keep interest rates as low as possible for as long as possible while keeping inflation and inflation expectations securely anchored."

Prime Minister Gordon Brown must hold a general election by mid-2010. His Labour party currently trails the Conservatives by a double-digit margin in opinion polls.

Osborne criticized the government's economic policy response to the
recession, saying its fiscal stimulus package had been largely a waste of money and that the market's concerns about the U.K.'s fiscal stance will raise long-term interest rates, preventing a sustainable recovery.

Osborne, speaking ahead of a speech by Brown to union leaders Tuesday afternoon in which he is expected to acknowledge for the first time the need for spending cuts, said the Conservatives were right to warn of what he called a looming debt crisis and the need for spending cuts.

"We could have taken the easy route, ducked telling the public the truth and avoided a pitched battle with our opponents on the same terrain on which our party has lost so often."

He said a Conservative government would aim to construct a new model for U.K. economic growth that would require "an economy with a structurally higher rate of national savings, a more competitive export sector and higher rates of private investment in long-term productive assets."

He also said that while making London the world's number one financial center will be "a key objective of policy," a Conservative government would work for increased competition in the banking sector and wouldn't accept large bonuses from banks receiving any kind of government support.

Last month, Financial Services Authority Chairman Adair Turner said the U.K. financial service industry may have grown too big, generating excessive profits and salaries.