Martin Weale to help set interest rates at BoE

Updated: 17:25 EST, 5 July 2010

An economist who was sharply critical of the breakneck increase in consumption under Labour has been appointed to the Bank of England's rate-setting monetary policy committee.

Martin Weale, head of the National Institute of Economic and Social Research, is expected to back the MPC's majority view that interest rates need to stay low.

Three years ago, before the global financial crisis, he said: 'The real problem is that as a nation we just haven't saved enough - and there is no sign that Gordon Brown has given any thought to that at all.'

But recently he said the new government's severe austerity measures are likely to hold back growth and increase the risk of a sharp slowdown.

Weale's appointment came yesterday as new data suggested Britain's key service sector is growing at its slowest rate for almost a year. A survey of purchasing managers revealed a growing nervousness about the impact of government spending cuts on economic activity.

Vicky Redwood of Capital Economics said the data 'cast doubt on the ability of the private sector to weather the fiscal tightening when it begins in earnest'.

But the British Chambers of Commerce said a survey of members 'provide hope that the UK recovery is consolidating'.

Although confidence among service companies fell, manufacturers were optimistic.

Weale will join the MPC for its August meeting. His appointment, replacing Kate Barker, means the rate-setting committee will be without a female member for the first time since it was set up in 1997.

American DeAnne Julius was appointed to the MPC in 1997. Its members have subsequently included Marion Bell, Rachel Lomax and, most recently, Kate Barker, who herself spent four years with NIESR.