Two of the most significant policy changes made by the government since coming to office are the transfer to the Bank of England of the power to set interest rates and the announcement of large increases in public spending following its Comprehensive Spending Review (CSR). The unexpectedly fast growth in future public spending is bound to have an immediate and important bearing on the setting of interest rates. As such, the development of the economy over the coming years will be affected by the interaction of these two separate policy changes.