- Five years of record low interest rates have saved borrowers with a£100,000 mortgage about £19,000 while savers with £100,000 in a cash ISA are £18,500 worse off, according to a former Downing Street adviser.

Ros Altmann - a pensions adviser to Tony Blair during his premiership - says the policy of low interest rates and quantitative easing has been brilliant for powerful groups but has caused economic distortions and increased inequalities.

She believes rates have been kept far too low for too long.

She says: "Too many powerful groups have vested interests in keeping the monetary taps open. As the economy is clearly recovering, rates should already be rising. A small rise in rates is long overdue and would send a helpful signal to borrowers to plan for more normal interest rate levels. Monetary policy seems much more about politics than economics, as politicians want the short-term benefits and leave future governments to deal with the longer-term losses."

She says many less powerful groups are hurt or have failed to benefit from these policies. These include:

- Small firms which still cannot borrow on decent terms despite low rates - Bank of England figures just released show bank lending to small firms still falling

- Youngsters struggling to pay increasing rents and cannot afford to buy a home as house prices are boosted by low interest rates

- Older generations whose pensions and savings income are much lower

- Savers whose income has been cut dramatically

- Less well-off who have struggled with the cost of living, do not benefit from strong financial markets and cannot borrow cheaply despite low official rates

- Annuity-purchasers whose pension income will be permanently lower

- Defined benefit pension schemes whose liabilities have increased by far more than their assets (sometimes bankrupting their sponsors).

Story provided by