Howard lauds Brown on interest rates

Shadow chancellor Michael Howard yesterday chose the platform of a centre-left think tank to declare there is now a consensus between Labour and the Conservatives over interest rate policy.

Praising chancellor Gordon Brown for his decision in 1997 to grant the Bank of England independence to set base rates, which he opposed at the time, Mr Howard further underlined the Tories' new determination to avoid kneejerk opposition.

His choice of the Institute for Public Policy Research, regarded as the think tank closest to the government, to announce his conversion also highlights the Conservatives' desire to be seen to move back towards the centre ground.

However, while he pointed to a "new economic consensus" over Bank of England independence, Mr Howard declared that only the Tories could be trusted to retain the existing monetary policy framework.

He sought to highlight the "supreme irony" that, just as both main parties reached agreement on the framework, Labour wanted Britain to join the single currency, shifting responsibility for interest rates to the European Central Bank.

"Given how well the current monetary framework is performing - low inflation, low interest rates and low unemployment by comparison to the rest of Europe - it is somewhat surprising that the government supports giving it up in its entirety."

The divisions between the two parties were also highlighted when Labour attacked Mr Howard's comments on full employment, accusing him of following former chancellor Lord Lamont and prime minister John Major in suggesting that the wider economic national interest could mean short term unemployment.

Mr Howard said that the Tories would introduce only "minor amendments" to the system for fixing interest rates put in place by Mr Brown.

Members of the bank's monetary policy committee, which sets the rate at a monthly meeting, would have non-renewable four-year terms, enhancing their independence by removing the temptation of trying to please the chancellor to win reappointment. A joint committee of both houses of parliament would oversee the Treasury's appointment of the governor, deputy governors and MPC members.