Clegg calls for new policy to control house prices

Clegg calls for new policy to control house prices

The Bank of England should be seeking to set its interest rates in a way that prevents "boom and bust" in the housing market, Liberal Democrat leader Nick Clegg has argued.

Addressing a meeting of the Campaign to Protect Rural England (CPRE), Mr Clegg said that there should not be a return of high house price inflation when the market picks up again.

He stated: "The Bank of England should take house prices into account when calculating inflation, something it presently does not do."

The Bank is required to set its rates to keep the consumer prices index (CPI) - which does not include house prices - at two per cent.

Under Mr Clegg's proposals, the Bank would be more likely to use the retail prices index (RPI), which does include house prices.

The latest RPI figure was five per cent, less than the 5.2 per cent CPI figure.

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