Inflation is not a problem

The small spike upwards in inflation last month is likely to be temporary. Inflation remains below the 2% target. The recent 20% fall in the oil price, and the fall in a range of other raw materials is likely to push the CPI figure back down again.

In the Euro area and in Japan the authorities are desperate to get inflation up a bit. The general disinflationary and deflationary forces worldwide remain a worry. The virus has struck China and made a temporary hole in her output. It has also hit international travel and tourism. Japan reported a fall in GDP in the last quarter of 2019 owing to her tax rise and is still weak owing to the effects of the epidemic. The car industry everywhere is reeling from the tax and regulatory attacks on diesel and petrol vehicles. US GDP is losing important output from Boeing with the current cessation of manufacture of what was the firm’s best selling plane, the 737 Max.

Meanwhile the media that spent three years boring us rigid with silly false scare stories about supply chains after Brexit say very little about the genuine threat to our supply chains from the big decrease in Chinese production this month. We are currently living on product made before the Chinese New Year, as it takes a month for product to reach us by ship. What happens next month?

The Bank of England will doubtless use the uptick in inflation and the stirrings in the housing market as an excuse to do nothing. The rest of the world is busy fighting the downturn with monetary as well as fiscal action. The Bank should join in. The government may face pessimistic OBR forecasts of the kind they specialise in. To the extent that they are sensible, based on the big world slowdown, the problems in  the car industry and the effects of the virus, they need to be offset by positive action.

One of the follies of the UK system is it is usually pro cyclical. When a downturn or slowdown hits, forecasts show revenues falling and spending rising, so the demand goes up for  spending cuts and tax rises. Instead policy needs to seek to offset any slide to low growth or no growth.

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96 Comments

  1. Lifelogic
    Posted February 21, 2020 at 6:30 am | Permalink

    Indeed above all get some real competition in banking and lift all the government red tape off them. Margins, fees, loan to value and terms are very restrictive and they are absurdly slow to act too. The 40% and even 78% overdraft rates (.2% on deposits) is a sick joke. Encouraged as it has been by the inept FCA. As are the idiotic and damaging attacks on the buy to let industry.

    You rightly say:- One of the follies of the UK system is it is usually pro cyclical. When a downturn or slowdown hits, forecasts show revenues falling and spending rising, so the demand goes up for spending cuts and tax rises. Instead policy needs to seek to offset any slide to low growth or no growth.

    In essence we have government by the state sector for the state sector. What is needed is a policy to lift suffocating government off the 80% in the private sector who generate the vast majority of the wealth and grow the tax base. High taxes and hugely over the top red tape is hugely damaging.

    • oldtimer
      Posted February 21, 2020 at 8:44 am | Permalink

      The interruptions to component supplies from China will cause mayhem for many businesses, stopping production, sales and cashflow. The banking system needs to be on high alert to offset this if bankruptcies are to be avoided. This is what happened in the early 1980s. Then it was a mixture of high inflation, US Fed rates of c14% and the collapse of sales in many over indebted markets that devastated wide swathes of UK manufacturing industry. If covid-19 keeps much of China’s industry shut down for any length of time the consequences will be serious for those businesses that depend on it.

      • Lifelogic
        Posted February 22, 2020 at 4:57 am | Permalink

        As indeed will a 2% death rate from the very many who look likely to get infected by the virus if this comes about – as looks quite likely.

        • Narrow Shoulders
          Posted February 22, 2020 at 9:06 am | Permalink

          I doubt many 70 and 80 year olds are still working @LL in China they look after the kids while the parents work.

          The mortality rate in working age people is quite low.

    • kzb
      Posted February 21, 2020 at 1:49 pm | Permalink

      All this private business is working out really well for us, isn’t it ?
      Can you recall a time when customers were treated with more contempt than today?

  2. Henry Jailer
    Posted February 21, 2020 at 6:33 am | Permalink

    So was Mr Gove’s speech last week, when explained in detail all the new customs posts and border checks that will be put up at our borders at the end of this year, a silly false scare story? And how do Mr Gove’s comemnst square with your and other Brexiters promises that there would be no new obstructions to imports into the UK after Brexit?

    Reply I always said trading under the Facilitation of Trade WTO rules would be fine. It will be as easy to import from Germany as it is from the USA or China

    • Andy
      Posted February 21, 2020 at 7:45 am | Permalink

      But it will also be harder to import (and export) from the EU than it currently is.

      There will be extra Brexit red tape for companies. There will also be extra Brexit red tape for individuals who dare to want to take a holiday to Europe.

      Your Brexit bureaucracy is inconvenient and pointlessly expensive. It will push ups prices for consumers and make businesses harder.

      Most importantly it is precisely the opposite of what Brexiteers said would happen. You said less red tape and you are creating more of it.

      Reply We will be cutting tariffs on non EU items to make things cheaper

      • Andy
        Posted February 21, 2020 at 9:11 am | Permalink

        But you Brexiteers said you would cut red tape – and you are demonstrably making significantly more of it.

        Why are you doing the opposite of what you promised?

        This is an important question of trust. I expect politicians to do what they say. You claim you are different sorts of politicians and yet you are clearly doing the opposite of what you told voters. Why?

        • Edward2
          Posted February 21, 2020 at 11:35 pm | Permalink

          I dont know why you are concerned about red tape that might increase whrn importing and exporting goods.
          You don’t get involved in this process.
          Professional businesses who are experts and do this every day will take care of it.
          An extra bit of paper, is about it.
          Your trendy shops will still have your favourite bits and pieces in them.
          In the decades I have been involved in this area the difference in complexity in dealing with EU and non EU countries has been marginal.

        • NickC
          Posted February 22, 2020 at 1:52 am | Permalink

          Andy, You Remains told us that supply chains only extended to the EU and therefore we were doomed by Leave. The spread of Covid-19 in China and the subsequent disruption shows that what we told you – supply chains are now global – was correct. Are you going to apologise?

          And red tape will be cut – the bulk of our economy (c88% of UK GDP) will no longer need to comply with EU red tape – when we finally and fully Leave, of course.

      • Martin in Cardiff
        Posted February 21, 2020 at 10:03 am | Permalink

        Clearly Minford’s prediction that leaving the European Union would be fatal to UK manufacturing and agriculture has been accepted, and factored into the Tory calculation that it is quite acceptable for the increase in power which they expect to reap.

        Eroding the value of people’s savings, pensions, and assets seems to be equally blithely contemplated too.

        • Edward2
          Posted February 21, 2020 at 11:29 pm | Permalink

          He didn’t say that.
          You are twisting his words.

        • NickC
          Posted February 22, 2020 at 1:55 am | Permalink

          Martin, Leave is not a monolith, and has never pretended to be. There is a range of opinions – as you would expect from different people attempting to predict the future. Humans do not *know* the future, all we can do is guess – as I have told you many times.

      • DaveK
        Posted February 21, 2020 at 10:23 am | Permalink

        Actually the “red tape” for individuals is being created by the EU (probably as a fund raiser). It’s called the Etias (European Travel Information and Authorisation System) and will cost €7 (£6.30) and be valid for three years.

        So just get your secretary or other grown up to add that to the car hire, insurance, skis & boots, 14 pairs of socks and underwear etc

      • jerry
        Posted February 21, 2020 at 10:38 am | Permalink

        @Andy; “it will also be harder to import (and export) from the EU than it currently is.”

        But no more complex than it will be to import from a non EU27 country!

        Your EU bureaucracy is inconvenient and pointlessly expensive. It has pushed up prices for consumers and actually makes businesses harder for many, ho-hmm….

        “Most importantly it is precisely the opposite of what Brexiteers said would happen. You said less red tape and you are creating more of it.”

        Tell that to those who need to import/source products from the RotW, especially countries were there is no FTA with the EU, Brexit will thus bring great simplification to all, at the moment many companies have to comply with two or tree sets of regulations – EU internal market, FTA and WTO.

      • NickC
        Posted February 21, 2020 at 1:53 pm | Permalink

        Andy, To compensate there will be no more red tape imposed by the EU on our non-EU business. Since the vast bulk of our economy is domestic or exports to RoW (c88% UK GDP), that’s a massive reduction of red tape.

  3. Mark B
    Posted February 21, 2020 at 6:37 am | Permalink

    Good morning

    So no more boom and bust then ?

    It would be interesting to know how our inflation figures are calculated. Do they just take into consideration some basic items or, more broader costs ? Only I ask as we are expected to have higher costs in fuel transport and council tax.

    I am against lowering interest rates and more money printing. I believe our currency should be supported and that government need to stop looking to others to help them out. If you want more spending raise taxes or borrow more.

    As I keep saying, we voted Leave for you to govern us and take responsibility.

    Reply The CPI index contains a wide range of costs and is published by ONS

    • Bryan Harris
      Posted February 21, 2020 at 7:53 am | Permalink

      It was Brown that declared that infamous phrase, but what he meant was no more bloom…

      He knew of course we’d be in an EU economic straight jacket, which has had the effect of impoverishing us with low wages due to stagnation.

      Under socialism, keeping the economy stagnant is par for the course, but in a free market economy inflation is a natural by-product and a vital part of the cycle of life – Let’s stop overdoing the artificial restraints on inflation – It doesn’t help

    • Mitchel
      Posted February 21, 2020 at 10:23 am | Permalink

      “So no more boom and bust then?”

      You beat me to it!

      Long live the planned economy,comrades!

    • Lifelogic
      Posted February 21, 2020 at 12:59 pm | Permalink

      Inflation for one person is very different from inflation for another person. On low income then rent, heat & light, water/sewage, council tax, transport to and from work, insurance and food are probably the major items. Most of these are going up rather alot.

      • Lifelogic
        Posted February 21, 2020 at 2:15 pm | Permalink

        Council tax up again by 4% in nearly all areas it seems. Yet even keeping the odd public loo, water fountain or library open and collecting the refuse efficiently is beyond most councils. Let alone fixing the massive pot holes everywhere. All those salaries and gold plated pensions to pay first! Diversity liaison officers and gender equality officer do not come cheap.

    • NickC
      Posted February 22, 2020 at 2:00 am | Permalink

      Mark B, I suspect the Covid-19 virus will cause some shortages because supply chains are now global, and not merely local to the EU. That will lead to some panic buying, knock-on shortages, and price spikes. I could easily see 4%+ CPI inflation this year because of it.

  4. agricola
    Posted February 21, 2020 at 6:39 am | Permalink

    Yes with product at sea you have a safety buffer as you do with what is held in a UK wharehouse. When all this is used up and dependant on unit value and it being critical to the end customers production the answer is to airfreight. This assumes that production starts again in China. If not it brings into question buying critical components from as far as China.

    For all the rest, the Treasury, the BoE, and the Government need to start singing from the same hymn sheet.

    • Lifelogic
      Posted February 21, 2020 at 7:56 am | Permalink

      The hymn chorus should be – Lower simpler taxes, cheaper reliable energy, far, far less government and a bon fire of red tape.

      • Lifelogic
        Posted February 21, 2020 at 11:03 am | Permalink

        Perhaps to the tune of:- On the first day of Christmas my true love gave to me!

    • NickC
      Posted February 21, 2020 at 2:37 pm | Permalink

      Agricola, As a shareholder in a UK business with a production facility in China, I have been informed that production has re-started. There will be some continuing global disruption but how much obviously depends on the spread of Covid-19.

      • agricola
        Posted February 21, 2020 at 10:06 pm | Permalink

        Lets hope all goes well. I based my comments on personal experience of the Kobe earthquake. The Japanese were brilliant and UK production continued without a hitch.

  5. Narrow Shoulders
    Posted February 21, 2020 at 6:41 am | Permalink

    20% fall in the oil price?

    When will that be reflected at the pumps?

    To think yesterday we were being encouraged to feel sorry for business with its “skills shortage”

    reply The oil price fall us coming through now at the pumps. You never see the same cut in petrol as almost two thirds of the price is tax

    • Lifelogic
      Posted February 21, 2020 at 7:52 am | Permalink

      “You never see the same cut in petrol as almost two thirds of the price is tax” indeed governments do not like cutting taxes as they just love tax, borrow and piss down the drain policies.

      Why do we have to have so much tax on petrol and diesel? Yet virtually no taxes on electricity for electric cars or indeed trains. If trains are so efficient why to they need to have vast subsidies and pay no VAT or fuel taxes? Cars are hugely over taxed and car drivers mugged at every turn yet they do not even provide sufficient road space for them? Why does it cost £360 per person for an open return by train from London to Manchester when seven people can go in a car for about £40 with more than half of this £40 being taxes too?

      • Lifelogic
        Posted February 21, 2020 at 9:31 am | Permalink

        Plus the train still leaves you the two connections to and from the stations (often a taxi or car doing double journeys at each end).

    • Matt
      Posted February 21, 2020 at 9:51 am | Permalink

      Reply to reply: Meaning that 200% of the price is tax !!!

      If something costs 50p and the government adds £1 in tax to make the till price £1.50 then it’s just charged its citizens 200% tax, surely ? Not “two thirds”.

      So no wonder we don’t see the oil price fall as the commodity itself is a tiny component of the punishment tax that the government levies against us for driving to work and being independent.

    • glen cullen
      Posted February 21, 2020 at 10:48 am | Permalink

      If you overlay historical chart ’oil price’ with ‘fuel pump’ price you will see that when oil is $60 or less the pump price is per litre £1 or less…..but not since 2014. The oil price has been below £60 for 6 years with a circa £1.20-£1.30 pump price ? But then again the government like a high pump price as it increases its tax take

    • graham1946
      Posted February 21, 2020 at 10:51 am | Permalink

      Reply to reply

      And there is speculation that fuel tax freeze will be lifted by the new Chancellor so it will be even worse. Heard MP for Harlow on radio today saying he is going to write to the Chancellor next week about this! Surely the budget is more or less already done and such a letter should have been sent long ago. Inflation not a problem? It is if you live on a small fixed income and have a little savings money being eroded every year. Council Tax inflation alone will hit people hard. This government very disappointing, just keen on raising taxes and banning things.

  6. DOMINIC
    Posted February 21, 2020 at 6:54 am | Permalink

    Keynesian policy isn’t the solution. Reform is the solution. Keynes equals short term, easy politics, no downside, positive press coverage, keeps the left silent. Reform on the other hand. Well, we know why politicians hate reform.

    You keep spending and don’t forget to tell the younger generation that they’ll be picking up the bill when they’re 40-60 years old

    Reply I have put forward a large number of proposals for reform and spending cuts.

    • Andy
      Posted February 21, 2020 at 7:52 am | Permalink

      Your plans to cut public spending nibble at the edges. International aid – a predictably easy 0.7% to want to cut because your supporters largely don’t understand what it’s for and don’t like foreigners. EU membership fee ditto. Add all you saving together and you could cut the budget by a few percent.

      How about my plan – which would enable to to halve taxes? Axe all state pensions. Require the elderly to pay for their own social care through their assets. Axe all pensioner benefits. Charge a premium for pensioners to use the NHS – seeing most of it goes on them. The over 65s are a huge drain on resources – they take significantly more than they contribute. They are mainly economically inactive. The type the Home Secretary wants to pick fruit and wait tables. Real economic reform comes with finally telling the something for nothing Baby Boomer generation that enough is enough. Their handouts are stopping.

      • Edward2
        Posted February 21, 2020 at 11:37 pm | Permalink

        Let’s have a vote on your manifesto Andy.
        You being a real Democrat will of course accept the result.
        I’m sure it will gather at least one vote.

      • Richard1
        Posted February 22, 2020 at 12:52 am | Permalink

        Great ideas. I imagine you will be supporting Labour once Keir Starmer becomes it’s leader. Any chance you could get them to adopt these policies in time for the next election?

      • NickC
        Posted February 22, 2020 at 1:28 am | Permalink

        Andy, Read “Dead Aid: Why aid is not working and how there is another way for Africa” by Dambisa Moyo.

        What Africa needs is not government aid, which distorts markets and engenders corruption, but cheap energy. And you CAGW fanatics are preventing them from having it.

      • a-tracy
        Posted February 22, 2020 at 9:04 am | Permalink

        Andy, stop trying to wind people up with your inflammatory views.

        The National Insurance Fund is actually a thing, you know, the payment we were all making out of our wages to pay for our State Pension, it is not a benefit that we didn’t contribute to. Don’t blame the recipients if the Guardians of this money spent it elsewhere!

        I don’t think you get social care, currently in England those that have assets and savings or regular private pensions contribute to their own care, what do you suggest is done with the rest who either were incapable of working, or didn’t work sufficient years to obtain a full pension? Do we perhaps send them around to yours?

    • Otto
      Posted February 21, 2020 at 4:33 pm | Permalink

      ‘Reply I have put forward a large number of proposals for reform and spending cuts.’

      As usual no links to find out what they are. Don’t blame me if I wonder if they really exist.

      • NickC
        Posted February 22, 2020 at 1:30 am | Permalink

        Otto, Yes, I will blame you. If you don’t know what JR has put forward you are just bone idle – look through his postings.

  7. Javelin
    Posted February 21, 2020 at 6:58 am | Permalink

    The reaction to inflation depends on what is inflating.

    If house prices or wages are inflating too fast then various brakes can be used.

    If we are importing goods that are going up in price there is nothing the Government can do.

    The Government cant fix every problem and need to rely on the nature of the market.

    • Lifelogic
      Posted February 21, 2020 at 7:25 am | Permalink

      You say “The Government can’t fix every problem and needs to rely on the nature of the market.”

      Indeed they are pretty useless as fixing any problem as we see almost everywhere. In areas like the NHS, the BBC, schools they kill any real or fair competition (by forcing us to pay a tv or other taxes and suppling free at the point of use. This gives us fairly dire state, sector sector run virtual monopolies. These are then rationed by back door methods (delay, turned away etc.) as there is no price mechanism. Other than buying a house in a better catchment area or pretending to take up a religion for a few months. Stop taking the money off people and give them freedom and choice as to how they spend it. Give parents education vouchers to spend as they wish, give schools more freedom to expand and innovate.

      • bigneil(newercomp)
        Posted February 21, 2020 at 10:35 am | Permalink

        “Stop taking the money off people”? – if they did that how on earth would they hand over a pile of cash as Foreign Aid? How would they fund the lives of all those who catch a boat or lorry in Calais? How much have the nigh on 200 who arrived the other weekend already cost us? And yet they still come, needing more and more of our taxes – and the govt waves them in. Throwing other people’s cash about is the main priority of our govts – BOTH parties.

    • Lifelogic
      Posted February 21, 2020 at 9:33 am | Permalink

      House price inflation is largely caused by planning restrictions, OTT building controls, daft employment laws, too many people for too few houses.

    • Martin in Cardiff
      Posted February 21, 2020 at 2:44 pm | Permalink

      Ah, so, like, what brakes have been applied to date, to deflate the UK’s preposterous residential property bubble?

      • NickC
        Posted February 22, 2020 at 2:07 am | Permalink

        Martin, Increased taxes on landlords, and increased stamp duty. Do wake up. But what we really need now is some of the 9m (probably nearer 15m) immigrants to go home. That could free up millions of houses, thereby reducing prices (you know, supply and demand?).

        • bill brown
          Posted February 22, 2020 at 3:08 pm | Permalink

          Nick C

          Kindly confirm the 15 million in facts and figures so we can take your statements seriously?

          thank you

  8. Ian Kaye
    Posted February 21, 2020 at 7:12 am | Permalink

    There should be a statement from the Chancellor about the Government’s policy with regard to VAT ; it’s scope and the rate at which it is levied. There should be coordination with the Bank as to the timing of any easing up of credit,perhaps there already is.

    • Lifelogic
      Posted February 21, 2020 at 7:41 am | Permalink

      They new chancellor should indicate that he is going to lower and simplify taxes to grow the tax base. He should do this now to give people investment confidence. Stamp duty at 15%, inheritance tax at 40%, the endless mugging and rule changes on private pensions, capital gains at up to 28% without indexation, the attack pushing NonDoms out of the county, income tax at 45%, the abolition of personal allowances and child benefit for many, the taxation of landlords (and thus tenants) on profit they have not even made, the 12% IPT tax on insurance (including medical insurance) …..These are all absurdly damaging to the real economy, to the tax base and even to tax revenues.

      Indeed undo all the damage done by the daft socialist dopes Brown, Darling, Osborne and Hammond.

      • Lifelogic
        Posted February 21, 2020 at 8:42 am | Permalink

        Some smaller state vision is desperately needed from the current, hugely over taxed and regulated position. Despite all the taxation we get fairly appalling and still declining public services almost everywhere too.

    • glen cullen
      Posted February 21, 2020 at 10:54 am | Permalink

      We need a statement from the government as to when VAT is going to be removed or changed once we are fully out of the EU….A policy would be welcome or will we continue to send VAT reciepts to the EU

  9. rick hamilton
    Posted February 21, 2020 at 7:40 am | Permalink

    Perhaps Sir John could explain where this 2% target comes from and why is it important ?

    I always assumed that governments wanted inflation – but not too much – in order to erode the real value of the national debt, and almost zero interest rates to reduce their cost of borrowing. (The concerns of lifelong savers being of no concern, despite childhood lectures about thrift and looking after the pennies etc). Logically if too many billions are created out of nothing, as central banks do, the external value of the currency will fall. Short term, a downward movement in the sterling exchange rate could more than offset any new tariffs that our exports face in the EU. There is precious little discussion of this in the media but exchange rates are a top everyday issue for traders around the world.

    When I started trading with Japan decades ago the pound would buy 520 Yen. Today it will only buy 144 Yen. That puts our overall productivity as a manufacturing nation in a very negative light compared with Japan, but nobody wants to talk about that.

    • formula57
      Posted February 21, 2020 at 7:06 pm | Permalink

      @ rick hamilton – you question the 2 per cent. figure. I hope you do not suppose it was just plucked from the imaginations of central bankers and its dubious validity rests upon them then being able to pretend they have some worthy goal to pursue?

      All I can say is (with apologies to Blackadder Goes Forth) you just stop that conscie talk right now. It’s absurd, it’s bolshevism and it wouldn’t work anyway. Why not? W-well what do you mean? Why wouldn’t it work? It wouldn’t work, it wouldn’t work because the, now you just get on with polishing those boots all right. And let’s have a bit less of that lip.

      (I think I managed to crush the mutiny there Sir John.)

  10. steadyeddie
    Posted February 21, 2020 at 7:41 am | Permalink

    Once again we have a blog from the “free lunch school of economics”. If what you say is true then why are you not :a) Chancellor of the Exchequer, b) in No.10 every day to persuade the PM that he is wrong. The Conservative Party have had 10 years to put these easy answers in place- ie; print more money and let the City do as it pleases. Instead focus on a good standard of education for all, solving elderly care and taxing the profits sent to tax free islands.

    • NickC
      Posted February 21, 2020 at 3:01 pm | Permalink

      Steadyeddie, Why? – because the UK has had to obey the EU (Maastricht) rules up to now. As JR explained only a couple of days ago (Maastricht should no longer rule our economy, 18 Feb). Doh . . .

      • steadyeddie
        Posted February 21, 2020 at 10:00 pm | Permalink

        If you believe that, you’ll believe anything!

      • bill brown
        Posted February 22, 2020 at 2:13 am | Permalink

        NickC

        what does the monetary policy have to do with Maastrict?

        • Edward2
          Posted February 22, 2020 at 9:32 am | Permalink

          bill,
          It amazes me how you can be so enthusiastic about the EU and yet be so uninformed about it.
          Do a search on “Mastricht and debt” and have a read.

  11. Bryan Harris
    Posted February 21, 2020 at 7:45 am | Permalink

    I trust the new Chancellor can do something for those of us who have been suffering the effects of low income due to the low inflation rate, for a very long time – a reduction in income tax is well overdue.
    More needs to be done about the annual increases we see on everything from insurance premiums to water rates, phone services, and council tax. An average 4% increase to them may not seem much, but it is accumulative, painful, and without extra benefit.

    Such regular price rises certainly increases the cost of living for most of us, and should be regulated better – and fully reflected in the headline inflation rate.

    • Lifelogic
      Posted February 21, 2020 at 8:49 am | Permalink

      Indeed Insurance Premium Tax has gone from nothing to 12%. My general advice is not to insure (unless you have to or you are a rather higher risk that average for some reason but can get an average premium). Otherwise you are just paying money for insurance company overheads, their profits and all the fraudulent claims – plus a 12% tax on top of this. Insurance on balance is a bad plan. Plus you have all the hassle of arranging it and then claiming. Save the premiums and self insure.

      If you have to insure by law then take a large excess to reduce the premium is usually a good plan.

    • BJC
      Posted February 21, 2020 at 11:11 am | Permalink

      Bryan Harris: Those of us who are asset “rich” and income poor dread the annual above inflation rise in the Council Tax bill. The size of a property bears no relation to affordability of these rises, à la income tax, or the demand on the services that individuals use. If only the Tories had held their nerve over the Community Charge, there would now be a wider, fairer distribution of the costs and each individual would be paying far less. As it is, it’s being rumoured that the bill for my bog standard Victorian terrace will be in excess of £2k p.a. for the first time this year, so it’s unlikely I will be able to afford to live in my home for much longer.

      • Lifelogic
        Posted February 22, 2020 at 5:02 am | Permalink

        And if you move you will be mugged by excessive stamp duty and other costs.

    • miami.mode
      Posted February 21, 2020 at 11:29 pm | Permalink

      …….and fully reflected in the headline inflation rate…….

      Bryan, they find ways of keeping the most damaging inflation out of the figures.

  12. Richard1
    Posted February 21, 2020 at 7:59 am | Permalink

    Let us hope we get some robust radical measures in the budget. The tax code trebled under brown and then doubled again under Osborne, it’s now 10m words. Mr sunak should at a minimum have as objectives 1) to halve it at least during this parliament and 2) to abolish a tax with each budget.

    Yet today we have reportedly another piece of fatuous green virtue signalling – the effective banning of open fires. Has a calculation been made about the emissions effects of the resulting increased use in central heating, fires being an effective way of heating just one room?

    Climate hysterics and guardian reading leftists will never vote conservative, there really is no point trying to virtue signal the way to their votes. Focus instead on making the U.K. the most competitive and most attractive place for entrepreneurship and investment in Europe. Boris has got one shot or Brexit will be deemed a failure. Don’t waste it Blair style.

  13. John S
    Posted February 21, 2020 at 8:02 am | Permalink

    Treasury forecasts used to be unduly optimistic. What has changed?

  14. Kevin
    Posted February 21, 2020 at 8:13 am | Permalink

    Four months ago, you complained that the BoE was standing out against the trend of the world’s main central banks towards easing, “as the world manufacturing downturn intensifies” (emphasis added). Today, you write that, still, the “rest of the world is busy fighting the downturn with monetary…action”. Surely, by now, the Bank of England should have been embarrassed into following suit, as the rest of the world leaves us in its wake?

    Perhaps “monetary easing” – which I take to mean, creating money – is not working, and the BoE has been right to balk at the international trend, since, as you wrote last Friday, “pumping money into the system at low interest rates” has meant, among other things, that “home prices…have risen”.

  15. Kevin
    Posted February 21, 2020 at 8:21 am | Permalink

    Off topic –

    315 days till the Conservatives’ gift to the EU of legislative power over the UK expires (Arts. 126 and 127 of the Withdrawal Agreement); or,
    1,045 days if Boris offers it the three-year, “premium vassalage”, upgrade (Art. 132).

  16. Dave
    Posted February 21, 2020 at 8:45 am | Permalink

    Perhaps the Bank of England appreciate that monetary policy is not going to do much if the second largest economy in the world goes offline followed by most of Asia. If they had any sense they’d be buying gold, silver and all the food they can get hold of because when this months statistics come out it’s going to worse than bad for a large part of the world.

  17. Iain Moore
    Posted February 21, 2020 at 9:03 am | Permalink

    I didn’t vote for this eco authoritarianism, after a few months of Boris’s Government I have pretty had my fill of it , and we have yet to get past this climate change circus later in the year, god alone knows what lunacy will be inflicted on us by then. I live in the sticks, if my coal merchant will sell me fuel for my stove after next February I will buy it regardless of what Boris is saying what we can or can’t do in that foreign land London.

    • Mark
      Posted February 22, 2020 at 4:39 pm | Permalink

      I discovered that the edict appears to be a belated attempt to comply with an EU Directive. 2020 National Emissions Ceilings Directive and the Gothenburg Protocol, which require us to cut PM2.5 emissions by 18% compared with 2017.

      Emissions are already down from about 430kt in 1971 to just over 100kt in 2017. When will we be rid of EU law?

  18. DOMINIC
    Posted February 21, 2020 at 9:11 am | Permalink

    Why John and his colleagues are focusing on those macro issues they can’t control, the left and Labour are focusing their efforts on taking control of local services, local councils, infecting Depts of State using political activism, direct activism and all the other positions of political power using their skills gleaned from Gramsci. We see this for example at the BBC that’s now fully embraced a hatred for all things indigenous and British

    So yes John, you keep pontificating about issues that are beyond your control while the left are consolidating their grip over our lives using activist tactics

    Wake up and smell the coffee before it’s too late

    We want REFORM not more spending on the left’s political power bae

  19. jerry
    Posted February 21, 2020 at 9:16 am | Permalink

    The economic policy U-turns continue, what next, our host extolling the virtues of Keynesian economics?…

    Not that I’m complaining, just surprised (to read about it here), I’ve always being something of a ‘wet’ when it came to Thatcherism and Monetarist theory, probably because the promised tax cuts were always for others, never on the everyday basket of goods and services the average pleb carries on their shoulders, more often than not our baskets got heavier due to stealth taxes.

  20. Everhopeful
    Posted February 21, 2020 at 11:07 am | Permalink

    Actually inflation IS a problem.
    What has happened to people’s savings should be called theft.
    In stubbornly adhering to a fiscal policy that purposely keeps interest rates extremely low … where saving is pointless…a huge problem has been created.
    Maybe Boom and Bust was better?
    We are ruled by theory!

  21. Lifelogic
    Posted February 21, 2020 at 11:21 am | Permalink

    Will the new ban on burning (uncertified) wood apply to bonfire night and garden fires then? Will wood from my land have to be sent away in a truck to kiln dry it and then return it on another truck? Or will I have to pay for a licence to dry it myself? Does not sound very green or well thought through to me.

    • Lifelogic
      Posted February 21, 2020 at 6:24 pm | Permalink

      But then so few things in government make any sense. It is all window dressing, virtue signalling, corruption vested interested pressure group, emotion over brain lunacy in the main.

      Just educate people that burning wet wood is a fairly daft thing to do (as you get very little net heat from it) and are paying for lots of water that boils off and so it does not burn very well. No real need to ban it just dry it in a stack!

      I thought they were in favour of biofuels? Then again they were in favour of diesel and hybrid cars too once.

      • NickC
        Posted February 22, 2020 at 1:41 am | Permalink

        Lifelogic, I share your bewilderment at how daft government is. I suppose I should have learnt not to trust them by now, especially when we were repeatedly told Boris would be different this time.

    • glen cullen
      Posted February 21, 2020 at 9:52 pm | Permalink

      ‘’Trends in annual emissions of sulphur dioxide, nitrogen oxides, non-methane volatile organic compounds, ammonia and particulate matter in the UK 1970-2017’’ (air pollution report BEIS) dramatically down….. ALL trends down so why the ban ? oh yes the green lobby again

    • graham1946
      Posted February 22, 2020 at 10:02 am | Permalink

      The real problem is that government has allowed wood burning stoves to be sold in ‘smoke free zones’ for fashion. They are not a problem in rural areas and the people there know how to handle them as they have done for many years. I buy well seasoned wood, keep it dry and check with my moisture meter that it is ok to burn. What is going to happen to all the waste wood if it is not burned? Left to rot in the forests it will release its locked up CO2 for no good to anyone or we will end up neck deep in the stuff. Kiln dried wood takes energy to dry it, it is then transported long distances by road and once sold there is no control over whether it is stored wet or not. Many a supermarket stores bags of the stuff outside and you can see it getting wet as the bags are not waterproof and lots are even sold in nets.
      Just another idiotic virtue signalling move by an ever more disappointing government, after all our hopes for something more sensible.

  22. a-tracy
    Posted February 21, 2020 at 1:03 pm | Permalink

    John, don’t you think inflation will take of in April with the large increase in NLW 6.2%? This will impact on differential pay too.

  23. NickC
    Posted February 21, 2020 at 1:28 pm | Permalink

    Only a few months ago the Remains on here re-styled themselves as experts in JIT, and predicted doom for industry because we were leaving the EU. Even though it was clear from the way they wrote about modern production methods that they hadn’t a clue.

    The Covid-19 virus has now hit production in China, with an evident knock-on effect on industry in the UK and the EU. So what Remains were told on here – that supply chains are often global, not just in the EU – should now be clear even to them, despite their denials. Can we expect any of these Remains to apologise? I doubt it.

  24. NickC
    Posted February 21, 2020 at 1:47 pm | Permalink

    JR, In my view the main reason we have deflation globally is because China is injecting massive deflation into the global economy. It’s not for nothing that I dubbed CPI as the Chinese Prices Index in 2003 when it became Gordon Brown’s prime measure (nb: I am not claiming to be first, but I had not seen it elsewhere at that time).

    I also believe the c2% target is far too high. It leads to serious erosion of the value of money, very noticeable over a person’s lifetime. Such an inflation target (2%) is predicated on our using turnover (GDP), rather than an increase in wealth(profit), as our measure of national success (or failure).

    Remember the golden rule: turnover is vanity, profit is sanity? GDP may be a useful measure, in its place. GDP per person is more useful. But total national wealth and wealth per person should be our yardstick of sound economic management. Such a radical change in governmental outlook would also help to avoid the waste of politicians’ wheezes.

  25. miami.mode
    Posted February 21, 2020 at 2:08 pm | Permalink

    It is a problem when bank rate is only 0.75% and when Council Tax (probably excluded from it) is rumoured to be around 4%.

    For many people Council Tax will be approaching 10% of their income.

  26. Tiny Tim
    Posted February 21, 2020 at 2:13 pm | Permalink

    Our political opponents in regard to Geography and History are indeed guilty of being their own taunt of “Little Englanders”
    The number of Chinese people dead as a result of the Virus, even by Western estimates of that number are in context of the geography of China and its total population . and I despise belittling , and I do not , human deaths, tiny.

  27. DavidJ
    Posted February 21, 2020 at 2:23 pm | Permalink

    Maybe the current and coming difficulties with imports from China might make some consider the folly of relying on such imports. Cheap they might be but quality is often an issue. The “Greens” might like to consider the other folly of exporting pollution to China where it is far less likely to be minimised.

  28. Matt
    Posted February 21, 2020 at 3:34 pm | Permalink

    I’m horrified.

    Just what kind of PM have we voted for ?

    (I urge people to read Frederick Forsyth in The Express today.)

    • Fred H
      Posted February 22, 2020 at 8:57 am | Permalink

      in the footsteps of his two predecessors? I don’t see much to brighten the outlook of this Conservative administration. Underwhelmed is being kind.

  29. acorn
    Posted February 21, 2020 at 4:36 pm | Permalink

    Agreed JR, inflation is not a problem at the current low level of public and private sector spending. We don’t know if there is any spare production capacity left in the UK economy after 10 years of attrition by austerity, inflicted needlessly by your government.

    There needs to be a broad based fiscal injection of circa 4-5% of GDP in the next five to eight quarters, to test where the inflation starts popping up. The ONS needs to be tasked to spot inflation at micro level on a monthly basis. The UK economy will then be able to find out what it is short of and do something about it pronto.

    PS. JR, at last, someone at both the IMF and our own ONS, have figured out what our Treasury WGA department knew already. That is, MMT’s Stock-Flow model of a sovereign fiat currency issuing economy, perfectly defines how such economies actually work.

    • miami.mode
      Posted February 21, 2020 at 11:38 pm | Permalink

      Inflation is like toothpaste, acorn, or similar analogies where it is easy to get out but a terrible job to get back in.

    • NickC
      Posted February 22, 2020 at 1:45 am | Permalink

      Acorn, Magic Money Tree (MMT) only appears to work because the Chinese have injected massive deflation into the global economy for the last two decades.

  30. Rhoddas
    Posted February 21, 2020 at 4:54 pm | Permalink

    COUNCIL TAX will increase in 2020 by double that of inflation, whether it be RPI or CPI, according to many pundits…. for many of us that’s the largest outgoing bill once the mortgage is considered. In N Wales I paid 5% more last year, with some neighbouring Welsh councils closer to 8%. Totally unjustifiable, and all most folk get (for their £2-3k/annum) are grey bins emptied, the recycling and some potholes filled, via expensive 3rd party contracts and poorly administered. Schools have mostly gone to direct funding through academies, so where is the release of council funds from paying for all that? There is rumoured to be a council tax fair funding review in 2021, not before time imho!

    With so many CHARITY shops now in our high streets (all council tax exempt) and who manage to pay some staff and managers quite reasonable salaries, now is the time they should also contribute to council taxation at say 35% of a normal business, why should they get away by not paying anything at all….

    • a-tracy
      Posted February 23, 2020 at 5:29 pm | Permalink

      Rhoddas don’t local Councils pay for your streets to be cleaned, grass cut, shrubs cut back, planting, libraries, a contribution to Police, PCSOs, Fire, Schools and free school meals, Councillors to decide what to spend your money on, council tax collectors, social workers, housing benefits, travellers liaison, translation services, I can’t think what else but there is probably lots they involve themselves with funding.

  31. Time Lord Community
    Posted February 21, 2020 at 5:28 pm | Permalink

    “.. they have a history of creating vaccines within three months…” It takes a long time by train 🙂

  32. Dunc.
    Posted February 22, 2020 at 11:35 am | Permalink

    You really have to be joking, you do know lower interest rates and devaluation,via quantitative easing, are whats causing the current stagnation in western economies ?
    Debt was what caused the 2008 crash , do you really advocate going down that route again?

  33. Lindsay McDougall
    Posted February 23, 2020 at 1:03 am | Permalink

    Look ahead two years when the Conservative Government’s spending binge is in full swing and the fiscal deficit and State debt are rising. It will be very tempting to “print the money” and generate some inflation.

    And let us not be complacent about the current low rates for Government borrowing. Italy and Greece have to borrow short and pay high because the Governments of those countries are on a bankers’ ramp and lending to them is regarded as risky. One day it could happen here.

    Look at the things the Government is going to spend more money on:
    – HS2
    – East/West railways in the north
    – Heathrow expansion
    – Buses
    – NHS
    – Care in the home
    – Roll out of 5G
    – Low cost (subsidised) homes
    – Levelling up State and local authority eeducation

    How many of these ‘investments’ will produce a FINANCIAL return?

    • Richard416
      Posted February 23, 2020 at 11:34 am | Permalink

      Only Heathrow Expansion and 5G communications are likely ever to come near paying for themselves although some of the others will help other areas of the economy, mainly long overdue. HS2 being the glaring odd man out.

  • 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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