Higher interest rates?


The excellent news on job creation in the UK has taken the unemployment rate down to 7.1%. It now hovers above the magic 7% level. That’s  the level the Bank of England said it would need to reach before they would even consider a rise in interest rates.

Clearly the economy has excelled compared to the Bank’s forecast. The Bank thought it would take longer for unemployment to fall that far. They would have taken into account the new job creation rate, the rate of public sector job loss and the likely flows of migrants. So why has it fallen more quickly?

The main reasons are good ones. The economy is growing faster than they thought. More of the new jobs are going to people already settled here and out of work.  Some are now saying they were wrong about unemployment because productivity has disappointed. Is that true? Does it matter?

I have not been expecting productivity to do that well, given the continuing decline of North Sea oil and the loss of high end jobs in banking and financial services. I have commented before on how we have by accident and design been cutting our highly productive well paid activites. The former  50% tax rate, a high CGT rate and a mature oil province were all going to cut incomes and productivity.

I wonder if something else is also happening. Could it be that output is understated, because more is being done in the informal or cash economy? By definition the authorities cannot estimate reliably the amount of economic activity that some people do not put through the official books.

Now we are fast approaching 7% unemployment, that Bank will review interest rates. I expect they will conclude they need to keep short rates low for longer, as they will argue that at last inflation is coming down and is under better control. They will not want to do anything to curb the recovery. Meanwhile, the markets have put up other interest rates. Government bond yields and some savings rates are edging upwards, away from the crisis levels that left savers with a rotten deal.

Savings does need to be more worthwhile. We are gradually getting there. Good jobs news is another step in that right direction.

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  1. Gary
    Posted January 24, 2014 at 5:44 am | Permalink

    Falling productivity is inevitable when your only policy is to mask true pricing by rigging prices lower with more debt through money printing. If a producer can get pricing advantage the easy way, by debt and not by increasing productive efficiency, sooner or later that producer will go out of business. But not before they have a short term bonanza.

    You just threw £136 bn new HTB debt at the economy and stoked the mother of all housing bubbles. That surely generated some jobs and revived the house-as-atm consumer bump. They say inflation is benign but housing prices are conveniently excluded from the inflation basket.

    Carney has just moved the goalposts and said yesterday that 7% unemployment would not trigger a rate rise. Why is that if everything is coming up roses?

    The productivity numbers and Carney’s u-turn tell all we need to know about this so-called recovery. It isn’t.

    • yulwaymartyn
      Posted January 24, 2014 at 11:45 am | Permalink

      Gary: “why is that” ? Because, as you rightly indicate, Carney knows the true monetary value and implications of these employment figures. If we are all paid less in real terms (other than the bankers of course) with a proportionate decline in those unemployed are we any better off? Of course not. The government rely upon the head count – Carney is looking at the current costs of labour. He has decided, suprise suprise, that these are not inflationary.

      Also Carney is looking around the world at the effects of deflation which is everywhere. Deflation I think is going to be the big issue in the next few years; forget interest rate rises especially if deflation in the eurozone becomes an even more serious issue than it is now.

      • waramess
        Posted January 24, 2014 at 5:39 pm | Permalink

        Actually I’m not sure it is that simple. Why should a declining wage signal problems? It is a signal that what you are doing is overpriced.

        More to the point is that they are blowing a big bubble by keeping interest rates low and at the same time causing more credit to be made available.

        Gary has it absolutely right; it has nothing to do with the current cost of labout and everything to do with a further unsustainable increase in the size of the bubble.

    • behindthefrogs
      Posted January 24, 2014 at 2:00 pm | Permalink

      The reason for increasing interest rates is increasing inflation. In the case of housing prices there are other ways of controlling inflation in that area but at the minute it is more important to stimulate that market and employment by bulding more houses.

  2. Arschloch
    Posted January 24, 2014 at 5:50 am | Permalink

    Yes and a few other points to keep in mind that will take the shine off the above:

    * Youth unemployment. In my town there a 1000 16 year olds chasing 1 job
    * The number of people still working in their 60s. Why have they not been able to retire?
    * How many of the above new “jobs” are not part time low payers with few fringe benefits?
    * How many “discouraged workers” appear in the survey? If people simply drop out of the work force the unemployment rate drops naturally.
    * Where is the demand going to come to make the “green shoots” of the “recovery” sprout further if national average earnings are going down?

    • Handbags
      Posted January 24, 2014 at 10:47 am | Permalink

      Why don’t you set up in business and employ these people?

      There are thousands like you – whinging but doing nothing about it.

      This is the problem in a nutshell – YOU!

      • Arschloch
        Posted January 24, 2014 at 12:13 pm | Permalink

        If you are a regular reader here you know what I do for a living. What about you are you some sort of captain of industry or something?

        • Handbags
          Posted January 25, 2014 at 2:09 pm | Permalink

          I’m not a regular reader (I have work to do) – so I’ve no idea who you are or what you do.

          I’m simply commenting on your submission which, put simply, is ‘it’s nothing to do with me’.

      • Edward2
        Posted January 24, 2014 at 2:14 pm | Permalink

        Indeed Handbags I agree.
        And 16 year olds have always struggled to find full time jobs.
        Really they need to continue their studies and gain some qualifications or learn some skills before employers can see them as useful.
        Some I have interviewed want several hundred pounds a week but have little to offer and obviously need training and close supervision.
        In much admired Germany 16 year olds have to do part time study and only work part time.

        • Arschloch
          Posted January 24, 2014 at 5:39 pm | Permalink

          Handbags if you can just put you John Bull printing set down for a moment and consider the following. The kids cannot find work because they are still being failed by the schools, take a look at the international league tables for literacy and numeracy and see where the UK appears. So its hardly a surprise if so many of them can barely read or write that no one will take a chance on them.

          I hope you are not a conservative by any chance, as supporting a policy of linking interest rates to unemployment is just state planning in the extreme. The Fed in the USA has had that as part of its mandate since 1977 and it has failed miserably. Only people with the mindset of Ralphie Miliband do not believe that you create jobs through innovation, encouraging entrepreneurs and supplying them with a skilled workforce. The UK fails on all three points at the moment with no forecast for change either

      • uanime5
        Posted January 24, 2014 at 4:18 pm | Permalink

        Handbags I noticed that you’re not creating jobs either, so it’s somewhat hypocritical of you to complain about others not providing jobs.

        • Bob
          Posted January 24, 2014 at 11:15 pm | Permalink

          Handbags is merely saying that those people like yourself who complain about the way employers treat their staff should perhaps have a go at starting a business and employing staff themselves so that they can demonstrate how it should be done instead of telling others how to do it.

          Do you see?

        • Handbags
          Posted January 25, 2014 at 2:11 pm | Permalink

          I’m simply pointing out an easy solution for serial whingers – set up in business and show us how it’s done.

          Put your money where your mouth is.

        • petermartin2001
          Posted January 30, 2014 at 9:15 pm | Permalink

          I’m simply pointing out an easy solution for serial whingers – set up in business and show us how it’s done.

          Well – having done it I can tell you it is not easy. But it is not too difficult if:

          1) You have some money behind you
          2) You have a good network of contacts.
          3) You possess marketable skills
          4) You have a knowledge and experience of the chosen market.

          I don’t know about anyone else but I needed to build up on all four and I was only able to do it by having had a number of reasonably well paying jobs over the years.
          I wouldn’t have stood a chance at the age of 16 or even 26.

          It is a callous suggestion to make to any unemployed youngster.

    • alan jutson
      Posted January 24, 2014 at 1:53 pm | Permalink


      How ironic when on the day government says all about is improving, my Daughter along with all others in her office, are told they are being made redundant.

      They are moving the operation up north where they believe costs are less.

      Thus one persons loss is anothers gain.

      You may therefore benefit with some more jobs on offer in your area, if you are beyond the midlands.

      Not unusual for this to happen in our family.
      I have been made redundant 4 times before I decided to start up my own business.

      My wife has been made redundant 3 times in her working life, and now my daughter twice.

      I have no doubt she will get over it, she has a very good work ethic, and is good at her job, but very frustrating all the same.

      • Arschloch
        Posted January 24, 2014 at 5:48 pm | Permalink

        Commiserations Alan! However I do not buy into the idea of moving businesses up Norf. Just looking at the UKs chronically bad transport infra structure, cost of fuel and being further away from where the action is in the SE and Europe that must wipe out any savings.

        The most amazing thing I came across when I came here from the more economically productive SW was the cost of housing, they are virtually the same. So the workers cannot be doing it for peanuts and the Council Tax was actually higher so how is moving a business here going to cut costs

    • behindthefrogs
      Posted January 24, 2014 at 2:05 pm | Permalink

      Youth employment should stimulated by getting rid of employers’ NI contributions for under 25s. There is also a need to encourage more apprenticeship particularly in thehigher skilled areas. However any apprenticeship lasting less than six months must be regarded as questionable.

      • Lifelogic
        Posted January 24, 2014 at 5:44 pm | Permalink

        Get rid of employers NI completely it is a tax on jobs, also lets have easy hire and fire at they both deters employment. The only way for people to learn how to work is to get them working. They will not learn it watching daytime TV.

        • petermartin2001
          Posted January 30, 2014 at 9:31 pm | Permalink

          I’m pretty much, but not entirely, in agreement with you for once. Payroll tax is another jobs tax that could go.

          There already is easy hire and fire. Those who say it needs to be even easier really don’t know what they are talking about. Any employer should be able to decide on a person’s job suitability within 2 years and it is only after that workers even start to build up some employment rights.

          But yes the first thing is to get the long term unemployed away from the TV and back into the routine of working.

    • David in Kent
      Posted January 25, 2014 at 12:28 pm | Permalink

      Arschloch. I believe you misunderstand the motivations of people who work in their 60s.
      Maybe you made an unwise choice of career, selecting one which you did not enjoy, but you should not think that everyone wants to stop working at the first available opportunity.
      I worked full time until 68 and would have worked part-time longer if I’d been able to. I did so because working keeps you from going nuts, it gives you money to spend, it can be fun and I was still able to do it.

  3. margaret brandreth-j
    Posted January 24, 2014 at 6:09 am | Permalink

    Fingers crossed that the figures are not being massaged as some people have commented. Fingers crossed that the figures do not include the many zero hours contracts where the worker gets precisely that : zero hours.
    Hopefully for those without pensions the savings deal will be improved.

    • Edward2
      Posted January 25, 2014 at 10:17 am | Permalink

      Zero hours contracts are oddly named because the average hours worked are mid twenties per week.
      For those of us who are self employed we have always worked varying numbers of hours depending on customer requirements.

      • margaret brandreth-j
        Posted January 27, 2014 at 6:13 pm | Permalink

        I have two zero hours contracts and that is what they are!

  4. Lifelogic
    Posted January 24, 2014 at 6:18 am | Permalink

    Well we have income tax at 45%, NI (combined) at about 26%, CGT at 28%, VAT at 20%, stamp duty up to 7+%, IPT 6%, IHT 40%, fuel duty, air taxes, road tax, parking fines, bus lane fines, also the back door pension annuity (artificial suppression of) tax …… then the costs of getting to and from work + other work related costs and soon compulsory pension contributions too. Then we have housing benefit, tax credits and endless other benefits that are lost if you earn too much and you also lose your child benefit at £50K and your personal allowances at £100K.

    It would hardly be surprising if a few crooks were not tempted into a little barter, cash in hand or black market just to survive. Particularly as this government clearly wastes so much tax on green crap, the EU, damaging wars, endless pointless or damaging activities, HS2, bad portraits of MPs and paying the state sector (including pensions) 50% more than the private sector who bear the costs.

    Most of whom have virtually no pensions beyond the state one.

    Not that I would encourage it.

    The fact that the UK is a superb tax haven, but only for rich non doms or those with money & good accountants, the problems in the EURO area and the Arab spring, and the foolish policies, but now (fortunately) distracted, François Hollande has also helped.

    • Lifelogic
      Posted January 24, 2014 at 6:35 am | Permalink

      Oh and why lend unsecured to a bank at say 1% or less, merely to watch them lend it on, fully secured, to others at base plus 6% or more? Cut out the middle man surely if you can. Inflation and tax gives you a negative return anyway. Better to buy a real income producing asset perhaps.

      Government bond yield are now about 2.8% for 10 years and 3.6% for 30 years. Bank margins of 6% on your loan might not look too clever quite soon.

      The economy of course could have excelled far, far more with lower taxes, a sensible much smaller government, a proper Tory in charge, cheap energy, far less EU, no green crap, no counterproductive wars and no Libdems. But alas Cameron threw the last (and soon the next) election away.

      We are gradually getting there, well perhaps, but it should have been far sooner. Will Miliband reap the benefits in 15 months or just destroy it again as Labour usually do?

      • Max Dunbar
        Posted January 24, 2014 at 1:54 pm | Permalink

        Completely agree with your last two paragraphs Lifelogic. It’s just a shame that the ‘excellent news’ could not have been announced sooner. Furthermore, it remains to be seen for how long this recovery continues.

    • Arschloch
      Posted January 24, 2014 at 12:36 pm | Permalink

      LL looking at the prevailing tax regime in the UK what benefit do you gain from spending so much time outside of the UK if you are not a non dom?

      • lifelogic
        Posted January 24, 2014 at 5:10 pm | Permalink

        It saves me a seven figure sum each year and thus allows me to reinvest this in expanding my businesses and creating jobs. This despite the lack of any sensible banking or sensible government.

      • Bazman
        Posted January 24, 2014 at 8:55 pm | Permalink

        Permanent holiday thanks to inherited wealth. All evidence points to this.

        • lifelogic
          Posted January 25, 2014 at 10:02 pm | Permalink

          I have inherited nothing. I am not that keen on holidays preferring to work.

    • Bazman
      Posted January 24, 2014 at 6:57 pm | Permalink

      You propose to reduce benefits for those in low paid jobs plus no minimum wage. I put it to you yet again how would they live. Employers would pay them more? Are you sure. So what do they then do? No reply as you have no idea. Someone on 50k and a 100k is on 1-2k a week before deductions. We are to be concerned about how they survive, but not someone on six quid an hour in the public sector should be on three quid or less? Maybe as you say they could stop eating? You are deluded yet again.

  5. Brian Taylor
    Posted January 24, 2014 at 6:22 am | Permalink

    Andrew Neil on the daily politics talking about the Employment Figures pointed out that the numbers in the public sector are now on the Increase.
    On the cost of living crisis (Labour Phrase) he pointed out Retail Sales were up by 5% therefore it maybe borrowed or it maybe the Cash Economy!!!

    • lifelogic
      Posted January 24, 2014 at 11:28 am | Permalink

      “numbers in the public sector are now on the Increase” – if true, this is needed about as much as HS2 or all the green crap.

  6. Ralph Musgrave
    Posted January 24, 2014 at 6:31 am | Permalink

    JR, You accept the conventional wisdom, namely that governments / central banks should manipulate interest rates. Along with many others, I believe that prices (including the price of borrowed money) should be the free market rate.

    Put another way, given a recession, whence the assumption that it’s economic activity based on borrowing and investment that should be boosted rather than other forms of spending?

    As to how to boost spending in a recession while leaving interest rates untouched, that’s easily done by a combination of fiscal and monetary policy: i.e. print new money and spend it into the economy (and/or cut taxes).

  7. Lifelogic
    Posted January 24, 2014 at 6:49 am | Permalink

    The “BBC think” Cameron types of this world always seem to believe there is a limited number of jobs, when in fact jobs can be created very easily and very quickly. Just get the government to lower taxes, reduce benefits, get cheap energy, functional banks, fewer regulations and some easy hire and fire. In short get out of the way of the private sector juggernaut stop pressing the brake and throwing nails on the road.

    They also seem to believe that governments can create jobs with daft things like HS2, the green deal, wind farms subsidies, the EU – all this clearly destroys jobs. Tax and endless waste is no solution to anything.

    • Kenneth
      Posted January 24, 2014 at 1:27 pm | Permalink

      Quite right.

      It is crazy that anybody should be unemployed. Just allow a free market economy and everybody will be valued again and I am sure will be a lot happier with life.

      • Bazman
        Posted January 24, 2014 at 8:50 pm | Permalink

        This would provide everyone with a living wage job and infrastructure. Get real

      • petermartin2001
        Posted January 25, 2014 at 8:52 pm | Permalink


        Yes it is crazy that anyone, or anyone who is capable of making a contribution, should be unemployed.

        I think you are saying that if wages could respond to the forces of supply and demand there would always be full employment. If anyone is out of work they’d find it by lowering their wages?

        But would this work? You can think of all the goods and services that are produced in the economy as being for sale in a giant retail store.

        The goods have to leave the store at exactly the same rate as they arrive for everything to be in equilibrium. If they are going out too fast the store owner will put up the prices and you’ll have inflation.
        If they are going out too slow the store owner could reduce his prices. But, he won’t want to do that as he’s already paid for them and doesn’t want to sell at a loss. So he just orders in fewer the next week.

        That means the makers of the goods and services have less work and so the workers will get laid off.

        The store owner has to be able to sell all his goods and services for a sufficiently good price to pay all his staff and all his suppliers and have enough left over to give himself a reasonable profit. Its the same for his suppliers. They have to be paid enough to cover the costs of their workers etc and give themselves a small profit too.

        The workers are also, ultimately, the customers. If their wages are too low they don’t have the the purchasing power to buy everything unless their bosses help out by spending/re-investing their profits too. But sometimes they don’t do that. Do you see the problem?

    • Max Dunbar
      Posted January 24, 2014 at 2:08 pm | Permalink

      As long as the ethos of all the main parties is that the creative sector is simply a cash cow to be milked for money to support public sector jobs/votes then there will not be any change, and any talk of lowering taxes will simply have the objective of raising more money by attempting to fool us into thinking that the politicos have the interests of the wealth creators at heart. A party that genuinely put the creators before the public sector at all times would be truly revolutionary in this country now.

      • Bazman
        Posted January 24, 2014 at 7:00 pm | Permalink

        Who is this creative sector? Banking? They are creative this is true with everyone else’s money and like many in receipt of massive corporate welfare and tax evasion not to mention not bearing any detrimental cost of their operations.

    • uanime5
      Posted January 24, 2014 at 4:22 pm | Permalink

      Just get the government to lower taxes, reduce benefits, get cheap energy, functional banks, fewer regulations and some easy hire and fire.

      Care to explain why reducing benefits, regulations, and employee rights will increase jobs available to the British people. Make sure you explain why making jobs as unbearable as possible won’t just result in them only going to immigrants.

      • lifelogic
        Posted January 24, 2014 at 5:12 pm | Permalink

        Surely it is very obvious!

      • Bazman
        Posted January 24, 2014 at 7:01 pm | Permalink

        Less money and rights will be good for them they believe, but noticed when challenged they have little to say.

      • Edward2
        Posted January 25, 2014 at 10:31 am | Permalink

        Care to explain yourself why despite many predicions from you of doom and gloom, here in the UK growth is returning and unemployment is reducing despite large increases in immigration, whilst in your beloved EU the opposite is happening?

      • petermartin2001
        Posted January 25, 2014 at 10:16 pm | Permalink

        \…… despite many predicions from you of doom and gloom, here in the UK growth is returning and unemployment is reducing…………

        Yes. It is falling. Unemployment fell in the Lawson boom of the late 80’s too. It’s done by creating the conditions, by setting interest rates too low, for the private sector to overborrow and create an asset bubble which eventually bursts and leads to yet more recession afterwards.

        Its a mistake that can perhaps be made once but you have to wonder what is going on when it is repeated time after time.

  8. Richard1
    Posted January 24, 2014 at 7:18 am | Permalink

    Someone should explain to Ed Miliband that if you bring down earnings at the top, average earnings – his latest fad – will fall. Also, that it is better people are in employment, thanks to the Thatcher Govt’s Labour reforms, even if it means pay has been stagnant due to the recession.

    • behindthefrogs
      Posted January 24, 2014 at 2:10 pm | Permalink

      The important figure is not average earnings but median earnings. We need the minimum wage to be more closely linked to median earnings with the objective of also raising it towards the living wage.

    • petermartin2001
      Posted January 25, 2014 at 10:31 pm | Permalink

      “…if you bring down earnings at the top, average earnings – will fall”

      That’s true. I can’t argue with that.

      Its equally true that if any percentile group of incomes fall, lower, middle or top , then average incomes will fall. If all incomes fall the average will fall too.

      I think we all knew that already! So your point is?

  9. Andyvan
    Posted January 24, 2014 at 7:39 am | Permalink

    Why pay any attention at all to these figures when we know they have been so thoroughly massaged as to be meaningless compared to those 30 years ago? Why believe the economy is doing well when the Bank of England has injected such a huge amount of money into it with the sole intent of propping up a failing system? You may as well consult a fortune teller or the tea leaves in the bottom of your cuppa.

  10. APL
    Posted January 24, 2014 at 8:44 am | Permalink

    JR: “Could it be that output is understated, because more is being done in the informal or cash economy? ”

    It could be.

    The UK is getting more and more to resemble Italy in the ’70s and ’80s. Half the economy was ‘off the books’ because of excessive regulation, graft and high taxes.

    While excessive taxes will be a factor, importing huge numbers of folk from countries where it is normal behavior to operate in the ‘black’ economy, will have a knock on effect on everyone else too.

    One other reason Cash is popular, two recent instances where RBS’s systems failed, it turns out your debit card is nothing more than useless plastic.

  11. John E
    Posted January 24, 2014 at 9:04 am | Permalink

    I expect you are right about the growth in the informal economy. But I would not be overly concerned about it.
    I say that because I see that new immigrants often take cash-in-hand work as a way of getting started here. But they aspire to the same things as everyone else and move on to jobs in the formal economy as soon as they can as their connections and language skills improve.

  12. Mike Stallard
    Posted January 24, 2014 at 9:15 am | Permalink

    “Could it be that output is understated, because more is being done in the informal or cash economy?”
    Hints down at the gym yesterday would confirm your suspicion.

    • Leslie Singleton
      Posted January 24, 2014 at 11:06 am | Permalink

      Mike–Absolutely right and one of the reasons why for me the GDP numbers are so much junk. It’s as if the statistics wallahs say, We are doing the best we can, which is all very well; but, as I keep saying, big decisions get made on tiny movements, very likely way below the margin of error.

  13. Lifelogic
    Posted January 24, 2014 at 9:17 am | Permalink

    I see that Cameron’s “I can do it in three letters: NHS” is failing the over 65 cancer patients hugely, as well as the weekend callers to A&E and many others. It is the way the NHS is organised and funded that can never work.

    Young lung cancer sufferers are 10% more likely to die within five years than their continental counterparts. But pensioners with the disease have 44% less chance of survival. The figure for stomach cancer at 45% is even worse. How many avoidable deaths is that I wonder in total?


    • Bob
      Posted January 24, 2014 at 1:48 pm | Permalink


      NHS” is failing the over 65 cancer patients hugely,

      The incentive for government is to maintain the status quo.
      It takes pressure of off state pension liabilities, the housing shortage and the NHS, with the added bonus of and IHT payola.


    • uanime5
      Posted January 24, 2014 at 4:24 pm | Permalink

      Well that what happens when the UK spends less as a percentage of GDP on healthcare than our continental counterparts.

      • Iain Gill
        Posted January 24, 2014 at 4:32 pm | Permalink

        Its not a money problem, its a lack of customers being empowered to force the providers to change

        • lifelogic
          Posted January 24, 2014 at 5:13 pm | Permalink


        • Bazman
          Posted January 24, 2014 at 7:02 pm | Permalink

          Like takeaways?

        • Edward2
          Posted January 25, 2014 at 5:41 pm | Permalink

          Indeed Iain,
          Brown and Blair doubled the money spent on the NHS (the biggest increase in funding in the history of the NHS) proving beyond doubt that just pouring more and more money in is not the solution.

          In some now very well known cases, standards, patient care and patient outcomes actually fell.

    • Iain Gill
      Posted January 24, 2014 at 4:32 pm | Permalink

      the out of hours GP service in my area has become an answer phone message which just says ring 999 if you are an emergency, thats it nothing else over the weekend at all

      • bigneil
        Posted January 24, 2014 at 4:54 pm | Permalink

        the EU has just issued a directive that English people are not allowed to be ill over the weekend.

  14. Roy Grainger
    Posted January 24, 2014 at 9:46 am | Permalink

    You might be right about the “informal” economy. Certainly (there are ed) builder(s) (words left out ed) is keen to be paid cash-in-hand. I wonder if it is a function of immigration rate ? To be fair though the building trade has always been like that.

    • Lifelogic
      Posted January 24, 2014 at 5:53 pm | Permalink

      I cannot help thinking that immigrants with perhaps no long term connection with the UK are perhaps rather more likely to work cash in hand. Taxes are too high and the administration of taxes far too complex. I am not sure I cope with all the returns and rules if I spoke only foreign language.

  15. alan jutson
    Posted January 24, 2014 at 9:51 am | Permalink

    Well it certainly is good news that unemployment is at last coming down, and trade is getting more busy.

    You ask.
    “Are the figures still being understated with the alternative economy growing” ?

    I think the answer is probably yes.
    With VAT @ 20% many customers would wish to reduce their outgoings where possible.
    With High rates of income tax, many suppliers would prefer to keep most of what they earn.
    With the above of benefit to both buyers and sellers, it would be strange if it did not happen.
    Then you have to factor in the influence of human nature of those who have recently arrived here, where (some like the alternative economy – as do some long settled here ed).

    Thus it is another reason for Government to control and cut spending, because the less tax you demand, the less you make it worth while to trade illegally.
    Thus the less impact it has on real GDP.

    With regards to jobs growth, we still need to get to control immigration, because as it is seen that the Country is growing more and more will want to come here.

    Perhaps the recent benefits cap (still too high in my opinion) is at last having some effect as well in encouraging people back to work.

    Let us hope we are at last moving in the right direction, and it is sustainable.

    • Bob
      Posted January 24, 2014 at 3:03 pm | Permalink

      @Alan Jutson
      “Then you have to factor in the influence of human nature of those who have recently arrived here, where some like the alternative economy (as do some long settled ed.”

      Talk about favouritism.
      If I said that it would have been heavily redacted by our esteemed and ever vigilant host. I suppose that being a Tory voter living in Wokingham comes with certain privileges.

        Reply I missed that one and agree it is unfair. I am amending it as with this quote.

      • Bob
        Posted January 24, 2014 at 11:33 pm | Permalink

        Oh no! I should have kept schtum.
        I was just so delighted surprised to see a non PC comment published.

        • alan jutson
          Posted January 25, 2014 at 2:16 pm | Permalink


          I can only talk from experience of dealing with such people in the past.

          It is logical that if you have been bought up in a country where the alternative economy is second nature to yourself and many others, then it would be surprising if it did not influence the way you also may tend to think and and work, even when in a different country.

          No different to when some of our people go to other Countries and behave not as their locals do but as they do here.

          Simply do not understand what was wrong or offensive with making such a comment.

          • Bob
            Posted January 25, 2014 at 7:19 pm | Permalink

            @Alan Jutson

            Simply do not understand what was wrong or offensive with making such a comment.

            Agree 100%. That’s why we need to dump the political correctness which is like a virtual gag on everyone nowadays.

            Reply I do not agree with political correctness about things like global warming theory, but if political correctness means being courteous about other people we share our country with there is a lot to be said for it.

  16. Kenneth
    Posted January 24, 2014 at 10:01 am | Permalink

    John, I believe one thing the coalition government did has made quite an impact.

    Job Centres and private contractors have increased monitoring of unemployment benefit claimants and demanded far more job-seeking activity from them.

    My understanding was that many of them were working anyway and this increased pressure from Job Centres has moved them from the grey economy to the legitimate economy.

    As you hinted, the grey economy should not be underestimated. I believe it is still a strong force for growth in the UK and is, to some extent, helping to prop up countries on the continent where there is evidence of mini busses sitting outside dole offices ready to take them to clandestine factories.

  17. alan jutson
    Posted January 24, 2014 at 10:02 am | Permalink

    Good news for savers?

    Far too early to say yet, for at the moment many rates are still being cut.

    Certainly savers have had a miserable time over the last 5-6 years where inflation has reduced the purchasing power of their money, and annuity rates decimated pension returns.
    You now have to live more than 20 years after retirement to even get your own money back, without any interest included at all, such are the present rates being offered.
    No wonder many people now think pensons are simply a con trick which only benefit the Insurance companies who sell them.
    No wonder so many people are now going for income drawdown.

    Time for this “must purchase an annuity” fiasco to be outlawed.

    • lifelogic
      Posted January 24, 2014 at 11:49 am | Permalink

      “Time for this “must purchase an annuity” fiasco to be outlawed”

      Indeed absurdly government manipulated annuity rates and now we are to have compulsory contributions – yet another tax – perhaps the one to take Camerons 299 increases to 300. A very large tax too.

      Private sector pension pots are only about £30K on average I read. They largely cannot afford to save as they are already paying for all the state sector workers pensions from their remuneration which including pensions is only about 66% of the state sectors.

      • bigneil
        Posted January 24, 2014 at 5:25 pm | Permalink

        you forgot the third section of pensions being paid for – -the freeloaders -both English and foreign who have come here – who have NEVER worked or paid in

        if Cameron got a pair of “real world” glasses on – and stopped dishing millions out to other countries – and going ahead with £bns on a stupid train -we would be a lot better off.

  18. Bob
    Posted January 24, 2014 at 10:17 am | Permalink

    Now we are fast approaching 7% unemployment, that Bank will review interest rates. I expect they will conclude they need to keep short rates low for longer

    Yes, I expect you’re right John, because Mr Carney was on R4 last night saying exactly that. The unemployment rate was obviously just an excuse to knock the issue into the long grass, and now the grass has been mown so they’re looking for other factors to continue stealing from savers and pensioners to placate the borrowers.

  19. Bert Young
    Posted January 24, 2014 at 10:33 am | Permalink

    It is interesting that the growth in our economy has not been due to our membership of the EU – other leading economists have predicted further decline in the EU ; our results show that growth is down to the success we have had in sales to the USA and China . Bearing this in mind , why are some of our business leaders expressing the need to stay in the EU ? the Chief Exec of British Aerospace yesterday made his preference known although his results show that only 20% of his revenue was with the EU . Is there some intrigue going on to put pressure on DC to ignore the eurosceptic pressure group ? . Has the CBI been similarly influenced ?. I would appreciate the views others have on this .

    Reply He also said they did not do much business with the rest of the EU and leaving would not make much difference.

    • lifelogic
      Posted January 24, 2014 at 11:52 am | Permalink

      Big business loves things that kill smaller competition. The EU does that in spades.

  20. Lindsay McDougall
    Posted January 24, 2014 at 11:03 am | Permalink

    Yes, please, and sooner rather than later. How many people do the Chancellor and the Governor want to see taking out mortgages that they won’t be able to afford?

    Why is everybody buying this line that inflation is falling? House prices are rising and that should be taken into account.

    • lifelogic
      Posted January 24, 2014 at 11:55 am | Permalink

      Housing cost are rising, taxes are rising inflation figures are manipulated politically just like crime figures, NHS waiting times and almost everything else.

  21. Neil Craig
    Posted January 24, 2014 at 11:07 am | Permalink

    GDP marches in lockstep with energy use. Thus, because the government is actively cutting energy use and making it more expensive productivity per capita cannot rise. This means that even if, by cutting dependency culture (& by immigration) we are increasing the workforce, we get some growth it is severely restricted.

    The answer is obvious. The US currently uses 2.25 times more energy per capita than us, which is a strong sign of how much we are crippling our economy by windmillery. I am not certain that our GDP would increase 2.25 times if we had a free market in energy, but there is certainly the pent up demand to try.

    • lifelogic
      Posted January 24, 2014 at 12:06 pm | Permalink

      “a strong sign of how much we are crippling our economy by windmillery.” Indeed we have a policy to double energy costs intentionally.

      We still have Ed Davey in charge inflicting damage through the green religion but at least Huhne has gone and Tim Yeo hopefully too.

      Energy cost at 1/3 of current as in much of the US would be quite a boost to the UK.

      • Bazman
        Posted January 24, 2014 at 7:09 pm | Permalink

        Nuclear and fracing will provide this? It will not. Massive tax cut to the energy industry already in receipt of massive subsidy funded by cuts to the poor is what you mean is it not? What will you say when you find out this will not be tolerated?

        • Edward2
          Posted January 25, 2014 at 5:55 pm | Permalink

          What is happening Baz is that renewable industries are getting huge sums in subsidies to produce their limited amounts of energy.
          In the case of tidal power this is a subsidy of over six times the cost of gas generated energy.
          Wind and solar are not much less subsidised.
          The money to pay these subidies is being collected from you and me in the form of artificially inflated energy bills.
          In addition the energy companies are forced to pay for others to have their homes insulated for free.
          Again you and I pay for this through higher energy bills.

          You may argue that doing both these things is is a “good thing” but it is making us a nation with very expensive energy.
          This affects disproportionately industries like castings, heavy engineering, steel making, aluminium smelting, brick making, glass making. pottery and ceramics to name just a few who struggle to compete in world markets with nations where their energy is much cheaper.
          More importantly this current policy of trying to depend more and more on renewables will lead to power cuts in the future, at a time when our modern computer driven world cannot work without stable reliable power.

          • Bazman
            Posted January 26, 2014 at 1:46 pm | Permalink

            How much does nuclear add to bill. You seemed to have not mentioned this. In many cases the houses are owned by landlords who will not pay for insulation so how are you going to address this. You will not be paying higher energy bill if your home is insulated. Having massive profits hidden by transparent accounting of energy companies is also something you forgot to mention.

          • Edward2
            Posted January 26, 2014 at 4:16 pm | Permalink

            Still waiting for your master plan to be revealed showing how the UK manages to generate sufficient power using only expensive renewables, no nuclear and very low levels of fossil fuels which you keep telling us is your preferred energy mix.

          • Bazman
            Posted January 27, 2014 at 11:26 am | Permalink

            As pointed out to you before clean energy is the end game. Coal and gas is the answer in the short term with no nuclear the money used to subsidise this being put to research into clean sustainable energy and the energy companies nationalised to put the needs of the country first and not companies owned by foreign governments to subsidise their own domestic energy costs. Threatening to close down power stations is not acceptable and we do not respond to threats by companies or individuals do we? Toodle pip.

  22. Leslie Singleton
    Posted January 24, 2014 at 11:21 am | Permalink

    Dear John–Did I see a reference in there to Savings’ perhaps being a good thing? I thought I read somewhere that the Savings Ratio was too low which would hardly be a surprise. One also hears about the desirability of a so-called “balanced economy” but my idea of more balance would be higher rates so people’s Savings gave them a decent return instead of “silently stealing” their money. Mind you I also read just a few days ago that any “meltdown” in the value of Savings “could threaten both the euro and the EU” so there is that.

  23. Robert Taggart
    Posted January 24, 2014 at 11:32 am | Permalink

    Higher interest rates ? – yes please + a higher capital allowance – for the sake of us scroungers !

  24. acorn
    Posted January 24, 2014 at 12:03 pm | Permalink

    The last thing the economy needs is higher interest rates, we need to keep the Pound down and nearer £1 to €1. Economy or savers’ votes, place your bets.

    I have given up trying to make sense of these unemployment numbers, I just can’t get them to fit in with the other headline metrics that came out this week. I am fairly sure that “real” (constant volume) GDP per head per year is circa £24,200, at the moment. The Darling low austerity plan would have had us at £26,400. If western style neo-liberal economics had not blown up the planet’s finance system, we would today be circa £29,600, up from the pre-crash (2007 Q4) of £25,600.

    Over that period, UK population has been growing at circa 0.8% per year. Normally the economy would expand at a similar rate, all things being equal. So that alone would put us circa £26,850; that is £2,650 above where we are now. Wages are about 54% of GDP at the moment and have been dropping, as a share of GDP, from circa 62% in the fifties; profits have similarly gone up. Hence, corporations have been banking those extra profits and the banks have been lending them to you, to make up for the reduction in your wages.

    Be thankful you are not in the Eurozone. Eurozone austerity is about two times Osborne austerity, and they haven’t actually got an Osborne equivalent, work that out. 😉 .

    Reply Population growth does not automatically give you growth in GDP per head or income per head. You have to earn that through productivity growth.

    • acorn
      Posted January 24, 2014 at 5:00 pm | Permalink

      Agreed, that sentence should not be in this version. Apologies, bad editing on my part.

    • ian wragg
      Posted January 24, 2014 at 5:19 pm | Permalink

      It would be amazing if GDP didn’t increase when you are letting half a million immigrants in each year. Per capita doesn’t increase and it doesn’t look like the tax take increases as we are all worse off. Milipede is quite correct that we are worse off, nothing to do with 5 million immigrants in their ruling spell and 2 million since the last election.

  25. petermartin2001
    Posted January 24, 2014 at 12:24 pm | Permalink

    It would be a good thing if interest rates went up slightly. They can’t go up too much, or too quickly, because that would certainly lead to bankruptcies and home repossessions.

    It would be even better if government realised that there were two main control levers to the economy. There’s not just one and they can both be adjusted. There’s no need to choose one or the other. There’s the fiscal control lever. Government can issue money into the economy by deficit spending. Neo-liberals don’t like the idea of deficit spending, of course. That’s the bad lever. They compare governments to householders and businesses. They should live within their means etc etc. It’s true that excessive budget deficits can cause inflation but that not really a problem at the moment. So there’s no reason why fiscal stimulation shouldn’t be used more in a fiat money based economy.

    Then there’s the monetary control lever. This is the neo-liberal control lever of choice. It’s the good lever. But is it? How does it really work? The idea is that lower interest rates promote lending which stimulates the economy. Somehow neo-liberals have convinced themselves that the extra money generated by private banks when they issue loans is non-inflationary.

    Most people have no idea that banks can create money when they lend. They think they hand out money that other people have on deposit. It’s just not true. The banks hold any money from government sources as reserves which they definitely don’t lend out to the public. They do though create their own IOUs by simply editing accounts of borrowers. Any bank issuing out a mortgage for say £250,000 is adding £250,000 of new money into the economy and it’s all outside of government control. 95% of what we call money is in fact a bank IOU and nothing directly to do with government at all. The creation of new money by banks is much more important, especially in the boom times, than any government deficit.

    As the banks are now starting to lend, newly created money is added to the economy as people and businesses borrow, much of which will end up in the property market. Some will go into the share market. As asset prices rise we’ll see a boom. The spending will stimulate the economy and bring down unemployment. But it’s not sustainable. When the property and share market reaches a peak, banks will get nervous about lending more. As lending falls property and share prices stop rising and may even fall. The boom will turn to bust.

    We’ve had the Barber boom. And the bust to follow. The Lawson boom and the bust to follow that. Are we going to have the Osborne boom and the bust to follow that too? There’s a quote by Einstein that insanity is doing the same thing over and over again and expecting different results. I’d say it was perhaps more ideology than insanity. The economy is manageable though. There doesn’t need to be bust followed by boom. There doesn’t have to be high unemployment and/or high inflation. But there does need to be much smarter thinking on the economy and a better understanding of how it works.

    • Denis Cooper
      Posted January 24, 2014 at 6:43 pm | Permalink

      “Government can issue money into the economy by deficit spending. Neo-liberals don’t like the idea of deficit spending, of course.”

      I’m not a neo-liberal, at least I don’t think I am, but I don’t like the idea of the government spending beyond its means and having to borrow existing money from investors, and then having to repay all that borrowed money with interest and therefore having to extract higher tax revenues from the population.

      And nor do I like the idea of the government getting itself into such a desperate position that it can no longer rely on being able to borrow enough from normal lenders and instead it has to arrange to indirectly borrow newly created money from the Bank of England, albeit that when the money is repaid it will in effect be without interest, while in the meantime the population is subjected to what is in effect stealth taxation through higher inflation, cumulatively over the past five years 6.2% extra on CPI over and above the 2% a year target, and all this without proper democratic debate and control and possibly even in contravention of the law as passed by Parliament.

    • Iain Gill
      Posted January 24, 2014 at 8:11 pm | Permalink

      bankruptcies and home repossessions are part of the normal cycle and are needed to equalised the economy, and in their own way act to stop people over stretching themselves. my own view is houses are massively over priced and the government continually rigging the market to prevent the natural corrections can only go on for so long, it will just lead to a bigger pop when the bubble does burst eventually. massively overpriced housing is a bigger social evil than normal market corrections. the government should stop rigging the markets.

    • John J
      Posted January 24, 2014 at 11:38 pm | Permalink


      Your figure of 95% for money created by private banks is an underestimate. It is more than that!

      But you are right the money that banks create isn’t the paper money that bears the logo of the government-owned Bank of England. It’s the electronic money that flashes up on the screen when you check your balance at an ATM. Right now, this electronic money (bank deposits) makes up over 97% of all the money in the economy. Only 3% of money is still in that old-fashioned form of real cash that you can touch.

      Banks can create money through the accounting they use when they make loans. The numbers that you see when you check your account balance are just accounting entries in the banks’ computers. These numbers are a ‘liability’ or IOU from your bank to you. But by using your debit card or internet banking, you can spend these IOUs as though they were the same as £10 notes. By creating these electronic IOUs, banks can effectively create a substitute for money.

      They aren’t allowed to print banknotes so why are they allowed to create electronic money?

      Every new loan that a bank makes in this way creates new money. While this is often hard to believe the first time you hear it, it’s common knowledge to the people who manage the banking system. For example, Sir Mervyn King, the Governor of the Bank of England from 2003-2013, recently explained this point to a conference of businesspeople.

      “When banks extend loans to their customers, they create money by crediting their customers’ accounts.”

      The problem is that they create money only when it suits them. That creates inflation. When it doesn’t they stop lending and that creates deflation.

    • petermartin2001
      Posted January 25, 2014 at 7:56 pm | Permalink

      The Government can never be in a position that it can’t borrow from lenders. Its 40 years since the £ was unpegged to the US$ and therefore to gold. The US $ itself came off the last remaining link to gold at about the same time so since the early 70’s all major currencies have been free floating and non convertible.
      That makes a big difference to the way we all need to think about money and the mistake nearly everyone makes is to think in the old way.
      The correct way to think now, IMO, is that the Government, in collaboration with its tame central bank, can spend whatever it likes as there are no external constraints. There is still the internal constraint of inflation though.
      So the government spends first. Then it taxes and ‘borrows’ back later. Logically it has to be this way around. If the Government hadn’t first spent its money into existence there would be none available to pay taxes and buy bonds.
      Bonds are bought by banks and other financial institutions, in normal times, when they prefer to have their BoE denominated reserves pay some small level of interest. These reserves increase with every Government deficit. So what else can they do with them except lend them back to the Govt by buying Treasury bonds?

  26. Denis Cooper
    Posted January 24, 2014 at 1:37 pm | Permalink

    Everything comes to he who waits, and I expect that eventually the totally independent MPC will find it necessary to raise interest rates to prevent retail price inflation rising above the target set by the Chancellor, as it is required to do by law. But that may not be until after the next general election, not that the totally independent MPC would ever allow itself to be influenced by any political considerations.

  27. ChrisS
    Posted January 24, 2014 at 1:44 pm | Permalink

    The Bank of England has pumped vast sums into the economy through “quantitative easing” Surely this must distort the overall picture of the economy today? I would doubt that we are seeing a real economic improvement.

  28. Max Dunbar
    Posted January 24, 2014 at 2:49 pm | Permalink

    Is there any connection between the strengthening of sterling against the Euro, the 5% rise in gold prices in the last month and political instability in some of the Euro-Zone countries such as Greece and France?

  29. uanime5
    Posted January 24, 2014 at 4:27 pm | Permalink

    The number of people who are unemployed is only falling because the unemployment statistics are being heavily manipulated by the government. This is done in 3 ways:

    1) Only listing those registered with the Jobcentre as unemployed, which removes anyone who is unemployed but not claiming benefits from the statistics.

    2) Introducing numerous barriers to prevent people claiming benefits to ensure that as few people as possible are registered with the Jobcentre. The most popular method introduced by Ian Duncan Smith is to sanction people for years. That’s why 600,000 people have 3 year long benefit sanctions.

    3) Sending the unemployed on pointless courses such as the 2 year long Work Programme or the 4 week long Mandatory Work Activity. Anyone on these courses isn’t classified as unemployed, even though they’re still claiming benefits.

    So far the government has wasted over £5 billion on these courses to hide just how bad the levels of unemployment are.


    Regarding new jobs as many of these are part time, zero hours contracts, self-employed, or low paid many people now have lower levels of disposable income, resulting in them being less able to spend in the real economy. This problem is nothing to do with trying to make the wealthy pay a fair rate of tax.

    Reply The number of unemployed is falling because they are taking the new jobs! Is there anything you like about modern UK?

    • Edward2
      Posted January 24, 2014 at 4:43 pm | Permalink

      Cuba and North Korea is nice at this time of the year I’m told Uni.
      No poverty or any unemployment there at all.
      Seems ideal for someone like yourself.

      • Bazman
        Posted January 24, 2014 at 7:06 pm | Permalink

        You think communism for the rich here is the way forward? Providing poverty jobs propped up by the state. The solution being to reduce benefits which most are paid out to working people and pensioners? How would they live as housing costs and prices rise? If anyone on this site cannot answer this why are you all calling for cuts?

        • Edward2
          Posted January 25, 2014 at 6:09 pm | Permalink

          Its about how you improve the life of everyone Baz
          Your solution is a good hard dose of socialism.
          More central state control, more nationalisation of all big companies, tax the rich until they run away, expel the bankers, more power to the unions etc etc
          I would prefer a solution of a smaller state, lower taxes, more freedom to start your own business, more influence for small companies, less control by the EU, more power and democracy at the local level, together with more choice for parents in education and more power to patients in the health service.
          PS I have never called for reduced welfare levels for the poorest.

          You must have worked for some very bad employers in your life Baz, because if you look at the standards of living in the last 50 years they have risen greatly for most people, all over the world, not just in the UK,.
          Capitalism has done this not socialism.
          The EU in cahoots with big corporations is what sustains your “communism for the rich” as you call it.
          The solution is more freedom and power to the people and a small sized state.

    • bigneil
      Posted January 24, 2014 at 5:33 pm | Permalink

      reply to reply – – – is there anything TO like about modern UK? – probably from your side john -but the rest of us haven’t been recommended for a MPs 11% pay rise (on a very good wage to start with )- -clearly showing that – we are NOT all in it together

    • petermartin2001
      Posted January 24, 2014 at 8:11 pm | Permalink

      Uanime5 makes a fair point and its a cheap jibe to suggest he moves to countries he has no connection with and of for whose political systems he’s expressed no approval.

      He’s saying there has been a excessive reliance on supply side policies wrt unemployment and not enough on the supply side. He’s pointing out that every change made to the collation of unemployment figures is in the direction of their reduction.

      I’d add that the unprecedented growth in tertiary education, and for at least some courses, could be decsribed as “pointless”. Not that this isn’t an argument against tertiary education. That’s a good thing. It’s not necessarily a good thing though if young people drift into it, doing courses they aren’t particularly interested in simply because there is nothing else on offer to them.

      • petermartin2001
        Posted January 24, 2014 at 8:24 pm | Permalink

        should be “….not enough on the demand side”

      • Edward2
        Posted January 26, 2014 at 10:29 am | Permalink

        Uni’s solutions always involve more state spending and higher taxes
        I was illustrating that the unemployment and poverty he constantly whinges about in the UK exists in many other countries and in particular ones that over a very long period have followed policies Uni tells us would transport us to a perfect world.

  30. Iain Gill
    Posted January 24, 2014 at 4:30 pm | Permalink

    Been taking your “happy pills” John?

    I would prefer you taking “Realism pills”

    You cannot justify robbing from savers to prop up mortgage subsidies and over inflated house prices which is what you are attempting

    The economy is not doing that well, in my direct knowledge lots of the best British intellectual property is being moved abroad to be used to undercut us, that will come back to bite us big time

    We need you to be a voice of common sense

  31. Edward2
    Posted January 24, 2014 at 4:40 pm | Permalink

    In the Midlands small manufacturing companies I deal with are reporting they have become much busier from about September last year.
    Several have said to me that they are seeing some UK customers coming back to them from China.
    They say that China are increasing prices, delivery times and especially minimum order levels as they have growing domestic demand.
    UK small manufacturers are able to supply much smaller quantities on a “just in time” basis to a reliable quality standard and this is making up for the more expensive unit price compared to China.
    I would concede this is a small survey sample size but there is a general feeling of optimism in my recent experience.

    • Max Dunbar
      Posted January 24, 2014 at 7:29 pm | Permalink

      Good to read that ‘Made in England’ can put the Chinese back in their Christmas Crackers. So much for the Left’s defeatist chant that ‘we cannot compete with China’.

      • Edward2
        Posted January 25, 2014 at 6:18 pm | Permalink

        Indeed Max.
        China is also developing into a good customer for many well known UK companies.
        They need high tech engineering machinery, IT help, consultancy help on things like quality and environmental management and health and safety management, luxury cars like Jaguars, Land Rovers, Bentley and Rolls Royces and desire the goods many top UK luxury fashion brands produce.
        Top end power boats like Sunseeker and construction machinery like JCB make are also in strong demand in China.
        Its not all doom and gloom.

    • Bob
      Posted January 25, 2014 at 12:06 am | Permalink


      UK small manufacturers are able to supply much smaller quantities on a “just in time” basis to a reliable quality standard and this is making up for the more expensive unit price compared to China.

      Agreed. Also, labour costs in the PRC are not as cheap as they once were, which added to the lead time issues could mean that some degree of equilibrium could return if we could ditch some red tape and green crap here.
      Otherwise India may pick up the slack.

  32. waramess
    Posted January 24, 2014 at 5:25 pm | Permalink

    Whatever you do don’t hold your breath. They are all in denial.

    Low interest rates caused the high rate of malinvestment. Lower interest rates and money printing sustain it.

    Governement inspired increased cheap credit is further encouraging even more malinvestment and there is no way out because the alternative would be the collapse of the malinvestmen.

    I suspect Carney and Osborne understand this but neither care because their aganda is simply self serving.

    For those who think this is a recovery, think about it. Sustained malinvestment leads to a seriously undereperforming economy. Just look at Japan.

  33. Bazman
    Posted January 24, 2014 at 9:00 pm | Permalink
  34. sm
    Posted January 24, 2014 at 10:52 pm | Permalink

    Probably not higher interest rates, but definitely higher banking bonuses, housing costs etc, yes,time to move to full reserve banking.

    Allowing banks to create money at nil cost and lend it at a margin, with the profits privatised and the losses socialised. Sorry its broken, the pop will be heard after the election. Its debt serfdom.

    Note to Carswell. The banks probably lend the money first and find the deposits later! (Given the loan gets deposited usually back at the very same banks in the legal cartel)

    If you must create money, do so without the debt attached and spend it into existence on infrastructure projetcs. Bridges/Airports in East London/Estuary or similar.

    If banks want to add value let them seek the funds at market rates. No doubt real competition would soon eliminate fat margins and huge bonuse.

    Also reduce the tax advantages of debt and equity, particularly to offshore multinational funded

  35. helenjones
    Posted January 25, 2014 at 4:21 am | Permalink

    King ,Carney,Cameron,Clegg,Osborne the entire lot of them (have hurt savers ed)
    in 2008 /9 the last 4 PROMISED TO HELP SAVERS when actually (words left out ed) they have robbed every saver and pensioner blind

    Upshot will be mass claims for Pension credit and all associated benefits

    not one single one of them or the entire civil service etc behind them are worth a candle

  36. petermartin2001
    Posted January 25, 2014 at 4:53 am | Permalink

    7.1% ? Well that’s not great but compared to what things would have been like if Britain had joined the Euro, it’s probably not too bad either.

    Instead of looking at the millions of out of work as a problem to be solved why not look at them as a resource waiting to be utilised? Just think of all the things that need doing which supposedly ‘can’t be afforded’ and work out what needs to happen to get those jobs done by those with the need to find a job doing them.

    I don’t mean ‘workfare’. Everyone who works should be treated alike. They should pay NI and income tax. The wage levels wouldn’t be high but they should be enough to live on. They should also work for the public purpose and that doesn’t mean providing free labour to the supermarket companies.

    If the difference between benefits and a lowish paying job is as small as claimed then it wouldn’t cost anything, or not much, to switch people over from one to the other. There’s parts of the UK where unemployment is very high and there could be a voluntary trial scheme started in those places to look at the costs and benefits involved. I’d be very surprised if it didn’t show a profit in the final analysis.

    Welfare isn’t just about supporting the unemployed. Benefits for the low paid are still substantial. It is much more difficult to get a job, especially a reasonably well paying job, if you haven’t already got one so the motivation shouldn’t be to create jobs on a long term basis. The idea would be to offer jobs to the long term unemployed, both to avoid their immediate abilities going to waste and also to give them credentials in the job market. They would be encouraged to quit these jobs if they could find a better paying one. Then of course they would be less likely to need any kind of additional benefits.

    • Edward2
      Posted January 26, 2014 at 10:35 am | Permalink

      Would you stop the payment of welfare for those who refused your offer of a “national service” job?
      Or would you pass laws which made it like being called up in a time of war?

    • petermartin2001
      Posted January 26, 2014 at 2:42 pm | Permalink


      I’d certainly start off with a voluntary scheme to start with, and on a small scale in just the highest areas of unemployment. I do accept that it would need to prove itself before it could be extended. A national service job? I’m OK with the name. National service doesn’t have to involve military service.

      I do think that the take up rate would be high, at the present level of unemployment, providing that the conditions were reasonable.

      If the economy were managed properly ie the correct mix of fiscal and monetary policy were applied to the economy then unemployment should fall to about 5% before inflation became an issue. That would correspond to full employment in most but not all of the country.

      That 5% may at one time have been a reserve army of labour but at the moment they all couldn’t be considered to be so as many have been unemployed for too long. Some are demoralised and have pretty much given up trying. There could be a case for making it compulsory for some young people, to shake them out of a poor lifestyle, but I’d suggest that should only be considered as a last resort.

      • Edward2
        Posted January 26, 2014 at 4:26 pm | Permalink

        You would face great protests and opposition if you tried to force people into jobs chosen for them by the State
        Also you would face problems in setting pay levels which gave people more after tax and ni than the State gives them for doing nothing.
        Would you have many different rates for the same job depending whether the person was a single person with no kids living at home with mum and dad or a family man with four kids in social housing?

      • petermartin2001
        Posted January 26, 2014 at 11:11 pm | Permalink


        I suppose your point is that there are many devils in the detail to be exorcised. I’m sure you are right about that.

        It’s interesting to look at the Works Program Administration program in the USA prior to WW2. There’s a good wiki account of it all. It was criticised by many at the time as a “make work” organisation. However, the WPA was responsible for employing millions of people: building schools, hospitals, bridges, roads many of which are still in use today. The main opposition then came from the Conservative elements in US politics, some of whom saw it as a “seedbed for communists.”

        So its not all pie in the sky. Its been done before so it could be done again. A modern version in Britain would be probably much more modest by comparison and I would expect it would be criticised
        more from the left. But there could be some support too. There’s a lot of uncomfortable shuffling in polite circles on the question of welfare dependency. It shouldn’t just be ignored by those who profess to have the interests of those on welfare at heart. A life in front of the TV is not one that many would choose. It could be one issue where there is a measure of common ground between those of different political views.

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    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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