The Bank of England’s Monetary Policy Committee confirmed its 0.5 per cent base rate of interest yesterday. Thus the UK remains, with the Federal Reserve of the US, the Bank of Japan and even the European Central Bank in the very low interest rate club. Critics argue that this policy – even more than quantitative easing, in which the Federal Reserve is now engaged and the Bank of England may engage again – is unfair and inefficient. Are they right? “Yes and no” is the answer. These are bad policies. But alternatives are worse.

Ros Altmann, a well-known British expert on pensions, has sounded the charge in the UK. She has argued that the policy amounts to an unfair tax on savers, in general, and the old, in particular, undermines pension plans, and distorts the market for long-term government bonds. To this Andrew Smithers of London-based Smithers & Co adds, in a critique of quantitative easing published in October, that the policy can only work by creating new and perhaps even more damaging asset bubbles in future.

Consider these points, in turn.