Think where interest rates would be now without the Coalition

The Bank of England interest rate has been held again at the record low of 0.5% by the Monetary Policy Committee. This may continue for some time yet, despite the growing threat of inflation. The current inflation rate is significantly above the target set by the last government, a target which is continued by the Coalition. At some point, the ultra-low level of interest rates will not be able to be sustained. Interest rates will have to rise, especially once the £150 billion of "quantitative easing" (ie printing money) starts to work its way through into prices rather than simply bolstering bank balance sheets and reserves.

Businesses will clearly want to keep interest rates low for as long as possible (though savers may think the opposite). The formation of the Coalition almost certainly saved the country from an immediate interest rate rise and therefore put off the day that business fears.

Had there been no coalition, the likely outcome would have been a minority Conservative government, with or without Lib Dem support. The summer would have been spent as an extended election campaign with an October election a strong possibility. Business and the international markets would have feared that the action needed to tackle the deficit and economic problems was at best delayed by a government lacking the majority to do anything anyway. There would have been a run on the pound with interest rates going up to support it. The knock on of that would have been higher costs for business, more unemployment, an even bigger government deficit.

I have argued from the moment the election result was clear that Coalition was the right thing to do in the national interest. Today's interest rate decision is a vindication of the creation of the Coalition. Everything could have been so much worse without the Coalition being brought into being.