Bernard Ginns: on variable interest rates, Manchester and HS3

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LONDON should probably have a higher interest rate than elsewhere in the country.

So said Rob Perrins, managing director of Berkeley Group at press conference for the upmarket housebuilder’s annual results.

“London is getting self-sustaining now - it doesn’t need the stimulus,” he told journalists.

According to the Office for National Statistics, London house prices were up 18.7 per cent in the year to April.

Outside the South East, the cost of a home was 6.3 per cent higher in the same period.

London is streaking ahead.

A strong capital, which is creating much of the growth in employment and wages as well as house prices, might persuade the Bank of England to increase interest rates.

But what effect would a rise have one part of the country versus another, say London versus Yorkshire?

I put this question to Andy Haldane, the new chief economist at the Bank of England and a member of the Monetary Policy Committee, who was in Yorkshire on Thursday.

He said: “When setting interest rates, we know we can’t set different interest rates for the north of the country and the south of the country. Maybe it would be nice if we could but we can’t.”

I pointed out what Mr Perrins said about London having its own rate.

Mr Haldane responded: “As long as you have all got common currency it would be very difficult to set different interest rates.

“There is only one interest rate we can set and it is the interest rate for the UK and we should set that interest rate with an eye to the whole of the UK.

“Now, any change in any policy tool does affect different people in different ways, different sectors in different ways and different regions in different ways.”

One UK, one interest rate. Imagine though if London did have its own higher rate. It might cool the overheating housing market.

Higher returns might attract more funds into the City of London, which our institutions could lend to businesses with growth potential in the regions.

Places with strong manufacturing bases, like Yorkshire, the West Midlands and the North West, might see their goods and services becoming more competitive in the global marketplace if these regions had lower interest rates.

Just an idea, albeit a rather fanciful one.

* HS3 is an absolute no-brainer.

I always hear business leaders moaning about the length of time it takes to travel between Leeds and Manchester.

These two great cities of the North feel much further apart than they actually are.

The current journey between the two has been accurately described as one of the worst in the country.

Leeds could learn a lot from Manchester and its approach to growth.

The city has benefited from consistency of leadership over the last 30 years.

In Sir Howard Bernstein, it has one of the great metropolitan chief executives of all time. He is a man at the height of his powers.

The city knows how to generate revenues for itself. It knows how to look after its wealth creators. It finds ways to improve local transport.

Its attractive offer of employment, housing and lifestyle is persuading graduates to stay in the city and not expend their energies elsewhere.

Manchester has a conveyer belt of foreign direct investment projects that Yorkshire would die for.

Certainly, it helps that Chancellor George Osborne’s constituency neighbours the city. He takes a close interest in its success. But he also knows that it delivers.

Leeds can learn a lot from Manchester, particularly in the way that its surrounding towns and cities have pulled together for the greater economic good.

Roll on HS3.