Bank prints extra £75Billion to avert ‘worst crisis ever’

BRITAIN is facing its worst-ever financial crisis, the Bank of England warned yesterday as it pumped an extra £75billion into the ailing economy. The Bank’s Monetary Policy Committee boosted its quantitative easing programme by printing more money to take the total up from £200billion to £275billion to fight off the threat of a double-dip recession. Bank of England governor Sir Mervyn King said: “This could be the most serious financial crisis ever, certainly the worst since the 1930s. In the past three months the UK economy has been turned on its head. “I don’t know what is going to happen over the next few years but countries cannot go on spending what they cannot afford to spend.” Despite concerns of rampant inflation – with Sir Mervyn admitting it could well hit five per cent in the coming weeks – hopes are that the new money will free up capital and encourage banks to lend. The FTSE 100 responded well to the move, finishing up 189 points to add £47billion to the value of the UK’s top blue-chip firms.Interest rates will stay at their record low level of 0.5 per cent for the 32nd consecutive month. Ian McCafferty, CBI chief economic adviser, said that by increasing QE the Bank had “acted promptly”. He said: “This measure will help support confidence, but we need to recognise that its impact on near-term growth prospects is likely to be relatively modest. “Only once the turmoil in the euro zone is resolved will confidence be fully restored.” John Walker, national chairman of the Federation of Small Businesses, said: “It is important that small businesses can directly benefit from this cash injection and that the banks use it to decrease the cost of credit and to increase the availability of lending.”But Dr Ros Altmann, director general of over-50s lobby group Saga, said: “The last round of QE was supposed to stimulate UK growth and fight deflation but instead it boosted prices, bank bonuses and borrowers’ balance sheets. “It actually created asset bubbles and inflation, not sustainable growth.” Joanne Segars, chief executive at the National Association of Pension Funds, said: “QE makes it more expensive for employers to provide pensions, and will weaken the funding of schemes as their deficits increase. All this will put additional pressure on employers.” And David Whittaker, managing director of Mortgages For Business, said: “The prospect of the cost of living becoming ever more expensive will be little comfort for those trying to put money aside and save.”