The Monetary Policy Committee


Yesterday I heard the story of the Monetary Policy Committee at a meeting where we were told we should not quote the source. I am pleased to say it was just the same as the story you can read on their website or hear in the public media. I will draw on the public materials.

Thinking again about  it all, I was struck forcefully   by the question what is the point of it? What can the MPC do that the Chancellor and Governor cannot do, as they used to without an MPC?  Interest rates have stayed at 0.5% for more than 5 years. Quantitative easing is now in the past, and anyway needs Chancellor’s  approval. The Committee has leant over backwards to say they are most unlikely to raise interest rates for the next two years. Nine people solemnly read and think a lot, discuss at some length, and conclude each month to keep rates on hold.

Inflation has averaged around 3.5% compared to the 2% target. The MPC tells us inflation was higher because the devaluation of sterling had a big impact on import costs, because oil and energy prices rose, and because  commodity prices generally did go up a lot in the period, though have since come down. The MPC would only be concerned about higher inflation if it came from “domestic pressures” like wages, where increases  have stayed low.

The MPC recognsies predicting international commodity and oil prices is very difficult. They just use market futures prices, which of course shift around a lot. They have produced a series of forecasts of the UK economic future over the years of their existence that have not excelled compared to the forecasts of many private sector commentators. They duplicate the work of the Office of Budget Responsibility, who also use public money to produce forecasts, often similar to the Bank’s.

During the crisis the old MPC did badly. It kept rates too low for too long to help the boom. It then kept them too high for too long to ensure the bust, as I complained at the time. Now it has created a lot of new money to make up for the weak banks it helped weaken. It has not hit its inflation target for a long time.

I wish today’s MPC well. It seems more balanced than the MPC that cheered the boom on, or the MPC which gloomily assisted in the crash. Maybe we want it to do nothing elegantly for a bit. These are early days for the recovery. Monetary activism in the form of printing  more money could trigger more inflation which we don’t want. A rush to push up interest rates could throttle the recovery.

The markets have their own way of doing these things. They are putting up market interest rates anyay. The MPC does not seem to have a plan to make the markets do what the MPC wants.

So do we need both Bank and OBR economic forecasts?   How much more value does an MPC of nine expensive people provide rather than one of say 5? As most agree we need the good bits of the public sector to do more with less, and other bits of the public sector to do less with less, could we find a few savings here as MPC members reach the end of their terms?

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  1. lifelogic
    Posted September 18, 2013 at 5:25 am | Permalink

    The purpose of the MPC is surely (like most things in the state sector) just to provide and excuse to waste tax payers money in the direction of friends and contacts of the people with power and to provide a bit of theatre and PR drivel. That and to give the BBC an excuse to complain as usual about the lack of women on it.

    This also seems to be the main BBC interest in the new Tony Abbott’s new Australian cabinet too, not his sensible line on Carbon and the potty AGW religion which they largely ignore.

    Personally I would just put one sensible woman like Ruth Lea in to advise Carney and sack all the rest of the MPC and hangers on. Still I suppose it is far cheaper than the incompetent NHS £12.7 bn IT project the patient record computer scheme that had to be abandoned.

    £12.7 bn must be quite a lot of cancelled operations.

    • lifelogic
      Posted September 18, 2013 at 7:30 am | Permalink

      Even that is cheaper than perhaps £80Bn for a largely pointless HS2 train line though.

      • Single Acts
        Posted September 18, 2013 at 12:14 pm | Permalink

        Sorry for being O/T but as you are in government with ‘em could you ask the Lib Dem deputy leader if he supports lib dem policy on “free” school meals; could you ask the business secretary if he supports ‘help to buy’ which is government policy and could you ask the parliamentary under secretary at the department of transport how he imagines banning cars from town centres will help the high street (sic).

      • Hope
        Posted September 18, 2013 at 4:33 pm | Permalink

        It will be next year when the European elections take place. Moreover it will now sink in that the Lib Dems will be in government with whoever will have them, that means more expensive energy, more EU and no chance of an EU referendum if they form a coalition with the Tories. In effect Clegg has just blown Cameron’s pledge out of the water.

        Cut child benefit, under the guise everyone has to make a fair contribution and then make taxpayers pay for children to have schools meals on the state- good plan. What was JR blogging about the economy and austerity? Once more, it is choices and the choices Cameron makes are disastrous.

        Now it makes it a clear choice for UKIP if you want conservative policies and a reduction in government and the state ie MPC type departments. Didn’t Cameron make a promise about a bonfire of quangos then increase the number in power.

    • GrahamC
      Posted September 18, 2013 at 8:50 am | Permalink

      It’s main purpose is for the politicians to hide behind and to deflect any blame from them.

      If things improve then credit for performance will be retrieved and the bluster will re-commence.

    • lifelogic
      Posted September 18, 2013 at 12:20 pm | Permalink

      I see Cameron has so far managed to halve the membership of the Tory party during his period of leadership. With his pro EU ratting, IHT ratting, his soft socialism, right on, BBC think, fake green, over tax, regulate, borrow and waste agenda then I would have expected it to have been even lower still.

      • Ralph Musgrave
        Posted September 18, 2013 at 8:38 pm | Permalink

        Is your point remotely relevant to JR’s central point?

  2. Brian Taylor
    Posted September 18, 2013 at 5:32 am | Permalink

    Sounds like a good idea,although will be surprised if it happen, how many Quangos have been cut since 2010 and as things improve so it will be more difficult to cut anything.
    There should have been major cuts in 2010 when the voters expected it,by now the situation would be better!

  3. Richard1
    Posted September 18, 2013 at 6:04 am | Permalink

    Good questions. The right conclusion must be that the whole game of trying to manage the economy by fixing the price of money artificially is a bad idea.

    More generally, the govt needs to go through every area of the public sector bureaucracy and ask the same question. To many, the question of whether the MPC should be abolished, or halved, would never occur. So it is I am sure with many other quangos, which exist to make work for themselves, and at the margin to impose extra costs on the rest of us. There needs to be a burden of proof on all quangos. The default position should be close them unless they are clearly of net public benefit.

    • Ralph Musgrave
      Posted September 18, 2013 at 8:47 pm | Permalink

      “the whole game of trying to manage the economy by fixing the price of money artificially is a bad idea.”/

  4. Mike Stallard
    Posted September 18, 2013 at 6:21 am | Permalink

    “Announced on 6 May 1997, only five days after that year’s General Election” – Wikipedia.
    Says it all really…

    • oldtimer
      Posted September 18, 2013 at 8:09 am | Permalink

      IIRC this was one of Mr Brown`s wheezes. As such it should be regarded with suspicion. Surely, sixteen years on, the MPC is now well past its “use by” date.

  5. margaret brandreth-j
    Posted September 18, 2013 at 6:42 am | Permalink

    I have had many years of my work or thought being rubbished only to find 10 years later it appeared in official documents and from people with very high salaries. The same people who rubbish it would also rubbish this comment. I suppose the spoon was only stainless steel. We really need more of our own commodities . This is one reason I don’t think we should give up on alternative energy or finding ways to use our own farming land more effectively. We must stop the expansion of cities on to the arable land and reduce the population growth.
    Is it Mr Carney who chooses the other 8 members ? the cabinet within or (without a cabinet) Is the target still 2 % and over how long. How long is the MPC’s term and how was Mr Carney originally chosen?

    Reply: The CHancellor chooses the members with the advice of the Governor, and subject to Parliamentary ratification. The target is still set at 2% by the Chancellor and Parliament. Each MPS member has a fixed term contract.

    • Bob
      Posted September 18, 2013 at 5:46 pm | Permalink

      @margaret brandreth-j

      ” We must stop the expansion of cities on to the arable land and reduce the population growth.”

      The whole EU idea of expanding our population (esp. the unskilled) and wrecking our agricultural and fishery resources is to make the UK dependent on imports and incapable of supporting itself. Dave Cameron is a loyal servant of Brussels, make no mistake.

  6. Brian Tomkinson
    Posted September 18, 2013 at 7:07 am | Permalink

    JR: ” could we find a few savings here as MPC members reach the end of their terms?”
    So that it can be wasted on trying to bribe the electorate? How on earth can you support giving free school meals to all chidren in the first 3 years at school when we are running an annual budget deficit of £120 billion due to rise to £121 bn following this and tax breaks for married couples? I keep writing it, and each day there is more evidence, – the three main parties in Westminster have a shared economic manifesto – tax, borrow, spend and waste.

    Reply This proposal was not one I advocated and was not in the Conservative Manifesto. Apparently it is a deal with Lib Dems to secure some other Conservative tax proposal which was in the manifesto. All part of the price of Coalition government.

    • Brian Tomkinson
      Posted September 18, 2013 at 7:40 am | Permalink

      Reply to reply,
      “All part of the price of Coalition government.” – for which we have to pay. What happened to eliminating the deficit and not burdening our children and grandchildren with debt? Silly me at the last election for thinking that your party was doing anything other than lying. Never again.

      Reply If the public does not give us a majority to implement our proposed manifesto, then we have to negotiate a new mix of policies that can go through the Commons. That’s not lying – someone has to govern the country, no-one can govern as they proposed to the electors.

      • Brian Tomkinson
        Posted September 18, 2013 at 7:46 am | Permalink

        Reply to reply,
        What about eliminating the deficit – or do none of you care any more?

        Reply I would cut certain areas of public spending as identified here in the past as I do want the deficit down.

        • Bob
          Posted September 18, 2013 at 6:00 pm | Permalink

          @Brian Tomkinson

          There’s an election next year for the EU Parliament, and a General Election in 2015. The Tories and Lib Dems trying to make up ground, because so little (if anything) of their manifesto pledges have been implemented.

          The Tory married couple bribe will soon be eliminated by fiscal drag, but the free school meals once implemented cannot be easily undone and will probably increase year on year with inflation and children living in mansions will have their meals provided at the expense of low wage earners.

          It’s just shameful electioneering, bribing voters with other peoples money.

      • Leslie Singleton
        Posted September 18, 2013 at 10:52 am | Permalink

        Dear John–You know that that is not true as written–Should have been a Minority Government and if another Party had brought the same down that Party would have had to explain that in the subsequent and probably fairly immediate second Election. Anything better than letting Liberals strut around just because they had balance of power with few actual votes, and even fewer now. According to rent-a twerp Clegg, he has the right to be Deputy PM no matter who PM even if percentage results 49.5 49.5 1.0. Absolutely preposterous and a blot on our electoral system. It is simply a lie that he is a moderating influence in between the two other parties, indeed my memory says they used to deny they were in between till Xmas came early for them with the balance of power–now all of a sudden one hears (Mr Cable), now that it suits, that Liberals are (exactly) “mid way” between. Mind you who would want to believe anything Cable says? Don’t all rush at once.

        • Denis Cooper
          Posted September 20, 2013 at 9:10 am | Permalink

          Belgium has always had at least a caretaker government, while the parties sorted themselves out. It was a caretaker government under Guy Verhofstadt which signed the Lisbon Treaty, even though some argued that this was unconstitutional.

          • Denis Cooper
            Posted September 20, 2013 at 3:09 pm | Permalink

            Sorry, that was intended as a reply to libertarian.

      • libertarian
        Posted September 19, 2013 at 10:23 pm | Permalink

        JR ” someone has to govern the country”

        Er Belgium seemed to do fine for quite a long time without a government. As someone who thinks politicians are the problem rather than the solution I’m afraid i cant totally agree with you. As to hung parliaments if we actually had democracy in this country ( rather than bombing people into it in other countries) we might actually be able to get a directly elected minimalist government capable of responding to majority needs instead of pandering to special interest rent seekers

    • Iain Gill
      Posted September 18, 2013 at 10:50 am | Permalink

      To quote Robert Halfon MP on Conservative Home “The policy on free school meals would not have happened without Michael Gove. It is up to all of, as Conservatives, to own this policy and shout about it from the rooftops.”

      Somebody is telling porkies

    • Hope
      Posted September 18, 2013 at 8:18 pm | Permalink

      Apparently the marriage tax break was in the coalition agreement, the free meals was not. Where was the a deal? Listening to Clegg, Cameron capitulate on most policies Tory supporters wanted. I suspect this was deliberate too change his party rather than necessity. Did the Tories get anything from their pact with the devil?

  7. Stephen Almond
    Posted September 18, 2013 at 7:15 am | Permalink

    “could we find a few savings here as MPC members reach the end of their terms?”

    Why do we have to wait to start saving taxpayer’s money? Are we to treat them differently than ordinary folk?

  8. Andyvan
    Posted September 18, 2013 at 7:17 am | Permalink

    I wish the MPC would disappear along with the whole system of central banking which has done so much to enrich the elites and impoverish everybody else. The main purpose of the Bank of England is to manage the devaluation of Sterling in such a way that allows government to continue with it’s theft, waste and vote buying at the expense of savers and the productive. An entirely unnecessary and counter productive institution that would be best abolished.

  9. John McEvoy
    Posted September 18, 2013 at 7:21 am | Permalink

    ‘could we find a few savings here as MPC members reach the end of their terms?’

    Why should the public pay whilst pointless non-jobbers drift along into easy retirement and pension? They have no moral lien on the public purse. This is the very attitude that has allowed State spending to relentlessly increase, year on year, and in spite of ‘the cuts’.

    Reply MPC members have fixed term contracts, not contracts for life. Breaking the contract early woulod have a price for the state.

    • Duyfken
      Posted September 18, 2013 at 8:32 am | Permalink

      Would the country see improved performance with fewer MPC numbers, alternatively would the benefit of fewer numbers just be in saving fees, or would the benefit only be apparent if particular members were dispensed with? The aim should surely be improved competence and it may be worthwhile indeed to break individual contracts (but not making BBC-like pay-offs).

  10. A.Sedgwick
    Posted September 18, 2013 at 7:22 am | Permalink

    “What is the point of it? ”

    Exactly my recent thoughts – if Mr.Carney had disbanded it as an expensive, self important, waffling quango I would have been impressed. Maybe he will sometime.

  11. lifelogic
    Posted September 18, 2013 at 7:28 am | Permalink

    Did not David Cameron have plans to clean up politics before the election I think he told us about it on U tube while feeding his children breakfast or similar in some stunt? Yet we have David Laws all over the TV this morning. Re-appointed by Cameron after resigning, when his highly dubious expenses claims came to light, and this well after all the huge expenses scandal.

    Why on earth is this man even in the commons, let alone the government? Yet more ratting by Cameron it seems.

    Reply Mr Clegg chooses Lib Dem Ministers, not Mr Cameron. The Commons decided Mr Laws’s errors were not sufficient to warrant removal from the House.

    • lifelogic
      Posted September 18, 2013 at 12:30 pm | Permalink

      I see he gained a double first in economics at King’s College, Cambridge. I had him down as a typical Oxford PPE type. Perhaps we should give him another chance and just be grateful Huhne has gone and will not be returning.

      • lifelogic
        Posted September 18, 2013 at 12:33 pm | Permalink

        Though he clearly does not seem to have much grasp of economics as he joined the Libdems. They still (even after the ERM fiasco) seem to hanker to join the EURO.

      • lifelogic
        Posted September 18, 2013 at 12:40 pm | Permalink

        Was it not Denis (98% income tax, pips squeak) Healey who had a double first. Double firsts at Oxbridge, in Arts subjects, PPE & economics, do seem to have a very high correlation with being as daft as a brush.

      • Bazman
        Posted September 18, 2013 at 5:54 pm | Permalink

        I wonder if he has ever been skint and saw some real economics? Stop sniggering at the back.

  12. Bert Young
    Posted September 18, 2013 at 8:06 am | Permalink

    The function of the MPC is a bit of a charade . I do not decry the talents and experience of the individual members , I do criticise the monthly performance attempting to put its fingers on the pulse of national and international data and coming to a conclusion forecasting how this data is likely to affect us . The City is full of highly intelligent individuals and departments who are minute by minute in touch with the world . It is a simple matter to harness this intelligence and pass on the cumulative advice to the Bank of England and the Treasury . The MPC is a body that does not need to exist .

  13. David Hope
    Posted September 18, 2013 at 8:19 am | Permalink

    The whole pretence of independence does strike me as a waste of time – I mean clearly they do what the chancellor wants. Otherwise we’d have had rates a fair bit higher over the last 16 years when inflation rose.

    Agree they are not competent in their forecasts and duplicating others.

    I think it is dangerous how much attention is given to the MPC and how they are expected to save the economy and get growth, NOT heavy reform of energy and regulation.

    Personally (if the debt ever drops) I’d scrap not just the MPC but the BoE – return to some sort of commodity backed more inelastic sound money. We might just find our economy significantly rebalances and the booms and busts become a lot smaller

  14. Denis Cooper
    Posted September 18, 2013 at 8:23 am | Permalink

    As I recall Lamont was made to carry the can for the ERM fiasco, even though he had not been one of those urging that we should join it, and when Major no longer saw him as a useful human shield absorbing the flak he was replaced by Clarke, who said that he would bring in a committee of “wise men and women” to advise on monetary policy.

    Moreover monetary policy would no longer be set to try to maintain an external exchange rate for sterling against other currencies – previous attempts to fix sterling against the dollar had failed, and now the attempt to confine sterling within the ERM had also failed – but instead to control internal inflation.

    Then after the 1997 general election Brown formalised that as the MPC, but with the big change that he would no longer sit on it and take part in its discussions, the Bank having been given operational independence with respect to monetary policy and the (normal) role of the Chancellor having been restricted to setting an inflation target for the MPC to meet and advising them of his general economic policy as a subsidiary matter.

    And actually that system appeared to work well for quite a few years, with retail price inflation never far off the target, but we now know that beneath the surface problems were gradually building up with insufficient attention being paid to asset price inflation, particularly house price inflation, which were exacerbated by Brown’s decision to change his inflation target from one expressed in terms of RPI-X to one expressed in terms of the EU’s Harmonised Index of Consumer Prices, in the guise of CPI.

    The problem with rigidly enshrining such arrangements in law is that when they go wrong it may become necessary to break the law, while pretending otherwise, and that is what has happened. There is provision in the law for the Chancellor to exercise reserve powers and suspend the normal system, with permission from Parliament, but neither Darling nor Osborne have invoked that; instead they have done what they are not supposed to do, exert influence over the Governor and the MPC, by backdoor methods.

    It is a paradox that “quantitative easing” is very clearly a matter of monetary policy, and indeed it is carefully presented as such in all the public documentation, and yet because the Treasury has indemnified the Bank against any contingent losses the control over the creation of these vast sums of new money rests entirely with the Chancellor, not with the Governor and the MPC, obviously contrary to the intention if not the letter of the law; while so far MPs have allowed themselves to be sidelined, merely informed of the Chancellor’s decisions, not asked for their prior approval of each decision through a vote on a motion.

    Reply These arrangements are much more flexible, and evolve. People do not usually challenge them legally, because they understand that if the politicians have decided to go beyond the provisions of the law for good reason, they can simply amend the law to bring it into line. The government is usually careful to observe the formalities of the law anyway, as we do not and should not amend the law retrospectively in most cases. (This is completely different to a politician for example breaking the criminal law where independent prosecution follows and where the law would not and should not be changed) The biggest occasion when the Chancellor overrode the MPC was the time when Mr Darling rightly said interest rates should be lowered at the height of the 2008 banking crisis. They preserved the form by holding a special meeting of the MPC where they solemnly decided to cut rates, but everyone could see it was the result of the Chancellor’s pressure. We in opposition did not query it because we thought the Chancellor was right.

    • Denis Cooper
      Posted September 20, 2013 at 9:11 am | Permalink

      Comment missed for moderation.

  15. Mike Wilson
    Posted September 18, 2013 at 8:30 am | Permalink

    How much does the MPC cost us each year.

    Where can I get a ticket for the gravy train?

    • Denis Cooper
      Posted September 18, 2013 at 3:20 pm | Permalink

      Very little, compared to the costs of getting monetary policy wrong.

  16. JimS
    Posted September 18, 2013 at 9:16 am | Permalink

    I love the way that they always say that “higher prices have worked their way through” as if ‘inflation’ has disappeared after a year.

    The higher price might have dropped out of their calculations but we mugs continue to pay it.

  17. Peter Stroud
    Posted September 18, 2013 at 10:02 am | Permalink

    The MPC: just another useless Quango, as many others have commented. But more importantly, Mr Redwood, would you please ask whoever might be responsible, to tell us on a regular basis, just how many Quangos have been abolished, since 2010. And how many have been created.

  18. James Reade
    Posted September 18, 2013 at 10:04 am | Permalink

    “Inflation has averaged around 3.5% compared to the 2% target”.

    Looking at the data (, it appears you did a nice bit of cherry picking. Maybe if you just look at 2011 calendar year you’re in business.

    How about I cherry pick an interesting sample too? Say, the last 12 months. Average of 2.7%.

    Cherry picking with statistics lets you say whatever you want to say – it’s not scientific, it’s prejudiced, and it makes for lousy policy – the kinds of things you regularly promote with regard monetary policy.

    Reply I was quoting an MPC source. Inflation got as high as 5.2% at one stage on the RPI.

  19. miami.mode
    Posted September 18, 2013 at 10:24 am | Permalink

    As you rightly point out, the MPC has to obtain the permission of the Chancellor before initiating QE and I believe that the Chancellor reserves the right to overrule the MPC at any time if he feels that their conduct is not in the best interests of the country.

    I have long been of the opinion that such committees and quangos are more a means of distancing ministers from the decisions they make than a necessity.

    • Denis Cooper
      Posted September 18, 2013 at 3:27 pm | Permalink

      “I believe that the Chancellor reserves the right to overrule the MPC at any time if he feels that their conduct is not in the best interests of the country.”

      Not legally, under the Bank of England Act 1998, unless Parliament agrees to the activation of “reserve powers” under Section 19:

      “19 Reserve powers.

      (1) The Treasury, after consultation with the Governor of the Bank, may by order give the Bank directions with respect to monetary policy if they are satisfied that the directions are required in the public interest and by extreme economic circumstances …

      …. (3) A statutory instrument containing an order under this section shall be laid before Parliament after being made.

      (4) Unless an order under this section is approved by resolution of each House of Parliament before the end of the period of 28 days beginning with the day on which it is made, it shall cease to have effect at the end of that period.”

      • Lindsay McDougall
        Posted September 20, 2013 at 6:22 pm | Permalink

        In practice, the Chancellor would simply twist the Governor’s arm by threatening to use the powers – not very edifying but it’s the way of the world.

  20. Iain Gill
    Posted September 18, 2013 at 10:39 am | Permalink

    Yes good get them off the public payroll.

    Can we add some others to the list?

    Doctors receptionists with no medical training whatsoever currently doing triage duties.
    Doctors with the bottom 5% of feedback from NHS patient feedback.
    School teachers in the bottom 5% of schools.
    All council education authority staff.
    Everyone in the MOD who has spent more than 50% of the last 6 months in meetings.
    The Cabinet office IT CIO and friends.
    Everyone Cameron went to school with who was appointed by him into posts with no proper competitive offer of the role to the market.
    Everyone in the “aid” department.
    NHS Surge Capacity Operations Managers (Winter Pressure) there just to keep patients away from the specialist care they need.
    All “speed camera partnership” staff.
    Teachers teaching mainly children of work visa holders from countries that would not give equivalent British children a free education.
    Everyone running the benefits system, we can turn all benefits into a negative tax and administer it much more cheaply by manipulation of tax codes and putting everyone on a payroll system.

    There you go that’s more a billion quid a year I’ve saved the country from wasting, easy, that’s the way to tackle the deficit!

    • lifelogic
      Posted September 18, 2013 at 8:09 pm | Permalink

      Indeed rather a good list but plenty more around too.

  21. English Pensioner
    Posted September 18, 2013 at 11:04 am | Permalink

    Governments like to get advice from multiple sources. If the sources agree, and things go wrong, they can say “Well all the experts told us that ….” . If the sources disagree, they can pick the one which they think suits them best. Its a no-lose situation.
    Personally, I can’t see why the government should set interest rates. Surely in a capitalist society they should be left to the various banks and other lenders with supply and demand setting the rates – if they are too low, no-one will led them money, if they are too high, no-one would want to borrow from them.

  22. Lindsay McDougall
    Posted September 18, 2013 at 12:26 pm | Permalink

    The Governor and the MPC say that inflation will slowly decline back to 2%. However, the money has to go somewhere and house prices are beginning to rise more than inflation. What we need is an inflation index that includes house prices and excludes VAT and excise duty, the use that as a target for monetary policy.

    The monetary base of the UK has expanded FIVEFOLD since the start of 2008, more than in the US and much more than in the Euro zone. This has been to the benefit of the over leveraged banks and HM Government and to the detriment of everybody else. Read Liam Halligan’s column in last Sunday’s Sunday Telegraph about the consequences and it will make your hair stand on end. We are living through a debt fuelled binge of almost unimaginable proportions.

  23. Rob
    Posted September 18, 2013 at 1:21 pm | Permalink

    Right now, people continue to believe that the same idiots that created all of these problems, namely the central banks, are going to somehow get us out of it with the exact same policies that got us into it.

  24. forthurst
    Posted September 18, 2013 at 1:28 pm | Permalink

    “So do we need both Bank and OBR economic forecasts? How much more value does an MPC of nine expensive people provide rather than one of say 5?”

    The minimum size of a quorum which was impervious to external pressure and wise enough never to be wrong: probably in excess of 365.

    • lifelogic
      Posted September 18, 2013 at 8:19 pm | Permalink

      “The minimum size of a quorum which was impervious to external pressure and wise enough never to be wrong: probably in excess of 365”

      I am sure that doesn’t apply if they are paid rather a lot, and someone who has a clear agenda appoints them. They soon get the message as to what is required. It is rarely independence of thought.

  25. Brian Tomkinson
    Posted September 18, 2013 at 3:06 pm | Permalink

    On the subject of saving money and government waste, can you please explain to me why today I received a phone call from someone ringing from Barbados (I checked the number) purporting to represent the UK government and trying to encourage me to change my boiler? I don’t want these calls but why not a call from the UK? I get more nusiance calls from people saying they are, or represent the UK government than from anyone else. They are usually to do with boilers, solar panels or loft insulation. I think that the government have handed a perfect opportunity to fraudsters or other criminals to gain entry to particularly vulnerable elderly people with their approach apart from the shear waste of taxpayers’ money given away by such schemes. I should appreciate your comments please.

  26. Denis Cooper
    Posted September 18, 2013 at 3:19 pm | Permalink

    Off-topic, David Attenborough has come out with an outrageous, but true, statement:

    “Sensitivities or no, Attenborough is very clear that unless humans control their population, the natural world will – indeed, has already started to – fight back. “What are all these famines in Ethiopia, what are they about?” he says. “They’re about too many people for too little land. That’s what it’s about. And we are blinding ourselves. We say, get the United Nations to send them bags of flour. That’s barmy.””

    No mention of global warming on this occasion.

    • Lindsay McDougall
      Posted September 20, 2013 at 6:27 pm | Permalink

      David Attenborough also discussed ‘the sensitivities’ and identified likely sources of opposition to his line of argument. The Roman Catholic Church [and much of the rest of the world’s God squad] was right up there.

  27. Terry
    Posted September 18, 2013 at 5:08 pm | Permalink

    The MPC is nothing more than an expensive scapegoat-in-waiting . Should something go badly wrong for George Osborne (and Brown before him), the MPC would be made to shoulder the blame. It would be their fault and not the fault of the Chancellor.
    It’s merely another form of protection insurance with the whole premium paid by the dumb plebs again and unlikely to be disbanded for a long time.

  28. Ralph Musgrave
    Posted September 18, 2013 at 8:36 pm | Permalink

    The conventional justification for an independent central bank (which JR doesn’t seem to have grasped, or didn’t mention) is that it stops politicians getting their hands on the printing press. It stops politicians organising an inflationary boom prior to elections.

    However, various people and groups (with whom I agree) argue that the function of Central Bank and treasury can be merged (as JR suggests) while still preventing politicians behaving irresponsibly.

    Reply But how can you make a Central truly independent in a democracy when Parliament can make and unmake that independence, and the electors will blame the government for any mistakes the Bank makes?

  29. Gary
    Posted September 18, 2013 at 10:35 pm | Permalink

    oh dear ! Fed untapers taper. After pumping a total of $1.2trillion of QE in the past year , the Fed is finding out that QE is like the Hotel California, you can check in any time you want but you can never leave.

  30. Javelin
    Posted September 19, 2013 at 8:00 am | Permalink

    I commented on your site a few years ago that I did not believe that low interest rates were good for the economy. Then I compared interest rates to poor ecology. Simply that low interest rates meant that unfit companies and people were not being “killed” off. I think what I said was that interest rates should be at a level that allowed well run companies to make profits and keep running, provided an incentive for companies to take risks and kept house prices lower – simply because people with better jobs could afford better houses and that there were too many people who had simply lucked-out and bought when houses were cheaper.

    I still believe that – lower interest rates are like killing off all the predators in an eco-system. This Hobbsianistic existensialism – is not a dog-eat-dog view of the world because the existensialism refers to the survival of dreams in the minds of company owners or peoples aspirations. Companies and people – will survive. Perhaps fewer will run into trouble – in the short term – with low interest rates. But in the long term unproductive companies and lucky house owners will turn society into an obese and unhealthy morase. In this globalized world this will lead to a weakened economy that will be out competed by other nations.

    • Javelin
      Posted September 19, 2013 at 8:10 am | Permalink

      I’d just like to add – that I took this same view when I heard the MPC make their 2 year pronouncement. I still believe it. What is their point???

      My other observation of the MPC is that their view points are so consensual and narrow. There is a huge problem because you can’t slide a sheet of paper between their views. The narrowness of their view points leads to a very lazy meeting and very poor value for money for the tax payer.

      Imagine if MPC members had very differing view points – Keynes and Greenspan for example. The arguments would be much broader. If they argued their points well then the discussions would consider more options and different scenarios. It simply doesn’t happen. What happens is group think. What happens is round robin nodding.

      I feel that the because the minutes of the meeting are published when there is dissent it is treated as a problem rather than a constructive argument.

      So I do think the MPC should either be disbanded or radically over hauled. Bring on a Marxist and a Free-marketeer. I don’t agree with either view point but some dialectic argument would be better than none.

  31. Roger Farmer
    Posted September 19, 2013 at 9:23 am | Permalink

    Slightly off piste, but I still await your moderation of my earlier contribution. Check out the BBC Parliament channel programming for 20th September. If you can find a better example of BBC biased news manipulation I would be surprised. All day yesterday we had the Lib/Dems hour after rubbish hour. Tomorrow the BBC offer us Nigel Farage’s speech to the UKIP Conference but preceded by and followed by hours of regurgitated Lib/Dem drivel. A perfect example of the BBC’s agenda to stifle political debate that they do not approve of. I hope the wrath of the electorate is made plain to them. We might hear more on Al Jazeera or RT than on the BBC. BBC = Biased Broadcasting Conspiracy.

    • Roger Farmer
      Posted September 19, 2013 at 9:26 am | Permalink

      Slightly off piste, but I still await your moderation of my earlier contribution. Check out the BBC Parliament channel programming for 20th September. If you can find a better example of BBC biased news manipulation I would be surprised. All day yesterday we had the Lib/Dems hour after rubbish hour. Tomorrow the BBC offer us Nigel Farage’s speech to the UKIP Conference but preceded by and followed by hours of regurgitated Lib/Dem drivel. A perfect example of the BBC’s agenda to stifle political debate that they do not approve of. I hope the wrath of the electorate is made plain to them. We might hear more on Al Jazeera or RT than on the BBC. BBC = Biased Broadcasting Conspiracy.
      PS Sorry. Should have been posted against todays diary contribution.

  32. Mark
    Posted September 19, 2013 at 1:08 pm | Permalink

    The MPC was established by Gordon Brown to insulate himself from the blame for bad decisions. His appointments to the Committee included Kate Barker, whose Housing Review considered it perfectly normal and acceptable for house prices to (reach high levels ed), and Stephen Nickell, who held similar views. These people justified Brown’s property bubble for him. The MPC was no different to so many other quangos, where control of the appointments provided more control than could ever be achieved by retaining formal control of policy and being responsible to Parliament for it.

    Osborne is of course currently looking for support for his own property bubble policy. The Bank, having been bitten by supporting Brown’s, is twice shy.

    The role of the Bank of England’s forecasts and indeed the MPC itself is not to be accurate, but rather to manage expectations, as Mr Carney has made even more explicit via his “forward guidance”. The reality is that the Chancellor and the Bank are de facto ignoring the inflation remit, and paddling their own canoes on monetary policy.

    More questionable is what, if anything, the OBR has added to the sum of human knowledge. It has often messed up in its assessments of the impacts of policy. To cite a couple of examples, it claimed that Osborne’s tax raid on the North Sea would raise revenues and have no effect on production – instead of which it resulted in 28 field closures in less than a year and a halt to investment, necessitating a complete about turn. The OBR also seem to have misjudged the impact of 50p income tax.

    Instead of the OBR, the Treasury should host privately and publicly made forecasts and policy evaluations on a website, and offer significant prizes for accuracy. It should also gazette the most inaccurate forecasters so that we learn to ignore those who spout them to the media.

  • About John Redwood

    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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