Sir: While a rise in interest rates would not be helpful at the present time, it is unlikely to be disastrous for the prospects of the British economy. After all, high interest rates took a very long time to curtail the boom, and falling interest rates have so far had little effect in reversing the slump.

Indeed, the severity and prolonged nature of the present recession suggest that we should stop relying so heavily on market instruments to boost private-sector spending. Since consumers are not prepared to increase spending and businesses are not prepared to increase investment, the Government must increase its spending, and finance it by increases in taxation if necessary. It is time for a 'new deal' and there are plenty of worthwhile investment projects to spend the money on.

Yours sincerely,

PETER GRIPAIOS

Head, The South West Economic Research Centre

Plymouth Business School

University of Plymouth

27 August

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