At last there is widespread interest in Treasury (and Bank) orthodoxy. I have been critical for sometime of the models and forecasts the Treasury and Bank provide, which do not help policy makers make good decisions. I have also been critical of the fiscal rules, which are the repackaged Maastricht rules. Under these controls and with these forecasts we have ended up with inflation five times target, and with the threat of a five quarter long recession according to the Bank. We can do better.
I have drawn attention to the Bank’s confident forecasts last year that inflation this would be 2%. I queried if it was wise to continue creating so much money and keeping longer term rates so low last year when recovery was well set. I have also pointed out in answer to a Bank which says they only got it wrong because of the war in Ukraine, that inflation had already hit 5.5% in January 2022 before the war. That was some 275% of target. I disagreed with the Treasury at Budget 2021 when they forecast a huge budget deficit for 2021-2 and when Treasury advice told the Chancellor he needed to put in tax rises to plug the gap. Come the end of the forecast year they reported ÂŁ131 bn less central government borrowing than estimated! I said revenue would grow faster with faster growth which we achieved. This was before any of the tax rises came in to damage it. As a result last year revenue beat forecast and model prediction by ÂŁ77bn. The OBR said they did not understand why company tax had been so good, the very company tax they wanted to increase in later years by putting the rate up. It is likely the Treasury/OBR forecasts of increased revenue from higher rates next year will prove optimistic against the background of recession.
It is important to get a common understanding of OBR and Bank independence. I am not recommending less discipline or less independence. Indeed we clearly need more discipline on inflation as the current rates are unacceptable and wide of the plan and targets. Let me have another go at explaining the facts about the current control system. The Bank’s MPC is independent when it comes to setting the official short term interest rate, and no-one is suggesting taking that power away. It is not independent when it comes to influencing the other key interest rates. These have been manipulated on the market by the Bank creating money and buying up large quantities of bonds to keep longer term rates down. These programmes have always required the written consent of the Chancellor, and a full Treasury guarantee against losses on the bonds. No-one can seriously claim the Bank is independent when it came to printing ÂŁ895bn of new money and buying such a large portfolio of bonds. These decisions dominated money policy and interest rates for most of the last decade.
The OBR is free to publish what forecasts it wishes based on the OBR economic models at Budget time. However, the model they use is the old Treasury model they inherited. Any amendments to the model are decided jointly by the Treasury and OBR. The assumptions used to produce an official forecast run are often decided by or influenced by Treasury officials. There is much close and iterative working between Treasury and OBR officials throughout. Any government should in a free society be open to challenge over the conduct and outcomes of economic policy. It is open to any expert forecasting House to be very critical of policy or to take on official forecasts. Sensible Ministers look at outside forecasts as well as the official ones and take interest in relative success rates of forecasters.
In a later piece I will go into what may be producing poor outcomes in these official models.
August 18, 2022
Indeed gross incompetence at the Treasury, the BoE and at no 11.
Meanwhile Boris, whom I supported as being better than any alternatives, really has gone totally round the bend with his new â10,000 days to net zeroâ video. He used to be a climate realist and economically etc. fairly sensible. He now seems to think a bit of dry grass is proof of imminent catastrophic climate change, he thinks EVs are clean and save CO2, he thinks if the UK saves a tiny bit of CO2 it will change the climate & save the World. What has driven him totally mad? Is it Carrie, Covid, the Vaccines, his civil servants, the bonkers climate change committee âŠ? A shame he did not study physics or engineering. Let us hope Truss ditches fully this blatant net zero con trick.
August 18, 2022
Until this whole net zero nonsense is quashed we are going to be increasingly poorer.
The threat hanging over the motor industry needs lifting with evolution not revolution being the driver of change.
All green subsidies should be removed. If it can’t stand on its own 2 feet then it doesn’t work.
August 18, 2022
Ian
Agree with you, but it’s not just the motor industry, a whole host of other sectors are suffering as well.
August 18, 2022
Sad but I predict that the new leader will keep the current policies of net-zero, HS2, immigration, foreign aid and NIPâŠ..but temporary reduce and tweak the tax ever so slightly
August 18, 2022
+1
Allister Heath today:- âEntitlement Britain is becoming a poor country and too many people donât care
Liz Truss is right: it will take hard graft and an end to wilful denial if weâre ever to escape this disasterâŠ
âŠIt has been a disaster: real wages, the ultimate measure of a countryâs economy, havenât gone up, on average, since 2006, the year before Northern Rock went bust. Output per worker hasnât risen, and given that what we earn is usually related to what we produce, pay has stagnated.â
Largely caused by excessive red tape, net zero rip off energy lunacy, open door low skilled immigration, government market rigging and lack of real competition in employment, energy, housing, transport, education, healthcare, endless waste⊠and the bloated (and generally dire) state sector.
August 18, 2022
Before being granted access to the Grid, all electricity providers should be made to guarantee a minimum capacity factor. Solar, in reality provides about 11% of its nominal rate, onshore wind 25% and offshore around 35%. This is useless as a basic on which to run our society.
Let BigSolar PLC guarantee 93%, same for nuclear, same for gas, same for Shanghai BigWind. Everyone will then have to put in place backup systems and PAY FOR THEM, instead of making unrealistic forecasts that they have no intention of sticking to.
JF
August 18, 2022
I don’t think offshore is anything like 35% capacity.
August 19, 2022
Even year to year it varies enormously. It can go much higher, leading to extensive curtailment often of onshore wind in Scotland which is cheaper to curtail, or it can end up lower as it did last year. This quarter is looking very poor so far.
August 18, 2022
We are truly doomed.
August 18, 2022
Yes.
August 18, 2022
Video of Boris demonstrating his total climate and energy ignorance and gross stupidity (on 10,000 to net zero) is on the official No10 youtube channel.
August 18, 2022
LL you know full well that Boris is a chancer and opportunist so he will bend to whatever way the wind blows. There’s money in it.
August 18, 2022
LL :
Yes, BJ is totally deluded if he thinks that his Net Zero Strategy can be achieved by the impractical and expensive electrification of heating and transport supplied with power from expensive, intermittent, low energy density renewables. The attempt will destroy our economy.
He also fails to realise there will be no energy security when 95% of wind turbines and 100% of solar panels are supplied by a hostile state, China, who also controls the Worldâs supplies of raw materials for batteries and motors/generators.
He mentions in the video about massive amounts of increases in renewable power. The massive amounts of tax-payer subsidies brought just an average of 7.4 GW of power in 2021 (BEIS Energy Brief 2022) from an installed capacity of 27 GW.
The basic scam is that anthropological emissions of CO2 are increasing the planetâs temperature and causing âclimate breakdownâ, âextreme weather eventsâ and a âclimate crisisâ â just because 3 CO2 molecules per 10,000 (300 ppm) have become 4 molecules per 10,000 (400 ppm)!
The long-term historical data shows there to be no correlation between CO2 levels and temperature, let alone from man-made CO2. For instance, there is no anthropological CO2 explanation for the last ice age (maximum 20,000 years ago) or why the temperature suddenly climbed upon exit.
Furthermore, for the last 6000 years the temperature has been falling whilst the CO2 has been rising from a low of 180 ppm at the exit of the last ice age to 280 ppm the start of the Industrial Revolution, during which time we had both warm periods and little ice ages.
The real climate deniers are those who deny there was any climate changes before the Industrial Revolution, such as BJ.
August 18, 2022
Never hear a out CO2 from natural sources, milanovic cycles, Earth’s orbit changes and tilt, our oceans, volcanoes, tectonic plates, the Sun’s intensity etc etc but 0.04% of our atmosphere is CO2 is causing change! Really water vapour, destruction of the rain forests etc have a bigger impact all round. Besides adding a million to our population every year is Tory policy so they can’t be serious about net zero, energy policy, infrastructure needs or health or public service provision. Fools one and all.
August 18, 2022
OR a chap on television said that many of the studies on CO2 were based on Venus which is the hottest planet at 465°C and its gaseous envelope is composed of more than 96 percent carbon dioxide. It would appear that Mars is 95% by volume of carbon dioxide (CO2) yet a summer day on Mars may get up to 70 degrees F (20 degrees C) near the equator, but at night the temperature can plummet to about minus 100 degrees F (minus 73 degrees C) [other temperature ranges are available].
Obviously copied and pasted and I’ll leave it up to you to decide why men are from Mars and women are from Venus. Where net zero climatologists are from is a mystery.
August 18, 2022
Indeed and the solutions they push wind, solar, EVs, heatpumps, walking, cycling, public transport… save trivial often no CO2 anyway!
August 18, 2022
A very interesting comment Richard.
Thank you
August 18, 2022
I second that, Lifelogic,
But will not hold my breath!
August 18, 2022
More news today (though you probably haven’t heard it) proving that Boris and his useless puppet Kwasi Kwarteng – Secretary of State for Business, Energy and Industrial Strategy – are not just imbeciles but TRAITORS too. Let me justify that. They decided to make electric cars compulsory from 2030; you may rail against this but that ship has sailed, not just in the UK but the whole of Europe (though I suspect that hybrids will get a stay of excution). Having done so, surely they should be ensuring that there will be an industry in Britain to build these things? Isn’t that exactly what an ‘industrial strategy’ should be about, eh Kwasi?
But instead they are letting opportunities slip through their fingers, with the UK losing out to our foreign enemies. So today it is revealed that the Anglo-Korean battery manufacturer Eurocell has chosen the Netherlands as the location for its first gigafactory, even though it had looked into a UK site first. But they did not get the help and encouragement from Boris and Kwasi that they needed. Instead, as the company said: “Eurocell is encouraged by the positive engagement we have had with both the Dutch government and NOM investment and development agency for the northern Netherlands over the last few months”. Eurocell will be investing ÂŁ1.65 BILLION, creating hundreds of jobs, supporting a local supply chain, and attracting car manufacturers to build their factories nearby. There is a HUGE market for batteries, both for the UK domestic market and as exports, and Eurocell was an easy win. Instead Boris and Kwasi have betrayed Britain by pushing them away. Who in their right minds would vote Tory again?
August 18, 2022
X-Tory :
The point you may be missing is that the Net Zero Strategy plans for a massive reduction in personal transport and hence the need for ev batteries.
Firstly, the plan for just 96 GW of electrical power by 2050 is insufficient to provide the power for 28 million 4 KW heat pumps (= 112 GW), let alone the power required for transport.
Secondly we have already been informed not to expect to own a car when the transport minister, Trudy Harrison said last year :
âOwning a car is outdated â20th-century thinkingâ and we must move to âshared mobilityâ to cut carbon emissionsâ.
August 18, 2022
Lifelogic.
I really like your comment.
Something does seem to have sent Boris mad since we elected him to Get Brexit Done.
All your suggestions as to what, make a lot of sense, though I can think of one or two other possibilities.
August 18, 2022
LL, I think this tells us what sort of job Johnson is aiming for when he decamps from no. 10, and with what sort of employer. The UN perhaps?
August 19, 2022
Perhaps so maybe he still thinks it is b/s but just parrots this net zero drivel for career advancement?
August 19, 2022
The nail and the hammer perfectly connected. Well done.
August 19, 2022
The Tories have been in for twelve, yes, for twelve years.
Whether the accusations above were true or not, twelve years suggests that the relevant institutions have all been shaped by now in the Tory image.
You accuse them of incompetence?
Well, who’d have thought it?
August 18, 2022
Whilst we have “a Bank which says they only got it wrong because of the war in Ukraine…” the game was given away for central bankers By New Zealand’s Adrian Orr who recently has apologized locally for policy errors (the same as we have had here) contributing to inflation.
(Why should we trust the MPC to go on deciding short term rates? If the rates are going to be wrong, let them be set by someone we can sack.)
August 18, 2022
Boris in his new â10,000 day to net zeroâ video shows his total ignorance of energy, physics, climate, logic and engineering. He talks of an âamount of powerâ – an amount of energy perhaps not really an amount of power Boris (rather like saying an amount of (sound) volume). He talks of emission free planes, sure Boris – emissions elsewhere planes perhaps but hugely impractical due to weight, limited range, safety (fires and range), charge times, energy inefficiency and the vast cost of the short lived and v. heavy batteries.
Grow up you deluded net zero, scientifically illiterate, classics moron. Gov. can change some laws but not the laws of physics, engineering or energy economics.
August 18, 2022
A few dry sunny days and a bit of dry grass is just a nice summer Boris grow up and ignore you deluded wife.
Pissing it down in London yesterday anyway.
August 18, 2022
Didn’t take long for people to complain about the wrong sort of rain, did it?
I am in despair at the lack of talent and skill within the Government and the Civil Service.
Heaven help us all!
August 18, 2022
None of the Above: H O obviously looking to tackle that lack of talent & skill it seems as 370 new Civil Service jobs being advertised on the gov.uk civil service jobs section. New key immigration roles for Dover, Ramsgate & Manston including Kent Intake Unit, Manston Initial Processing & Triage Centre (Near Ramsgate ) & Immigration Enforcement Officers, in connection with Immigration Enforcement Clandestine Channel Threat Command (CCTC) & Asylum & Protection-National Asylum Intake Unit (NAIU) With the numbers being brought in recently I assume the Call Centre is also very busy presently, would like to be a fly on the wall there.
August 18, 2022
LL demonstrated yesterday his poor grasp of reality (and misuse of statistics) with his â one in a thousand Londoners at risk of being murderedâ . He continues to peddle the view that climate change is nonsense. When will he realise that net zero is a cypher for â we cannot just continue as we areâ . If we continue to use fossil fuels without alternatives they will run out and we will poison many of our city dwellers with carbon output. Deforestation will lead to a collapse in our eco- system and the warming of the polar regions may well result in a devastating impact on many communities. We have to change but not with instant results but by plotting a path which allows technology to resolve many issues while maintaining some, but not all, of our present day privileges that have arisen over hundreds of years of innovation, invention and discourse.
August 18, 2022
PE : âHe [LL] continues to peddle the view that climate change is nonsense.â
Of course there is climate change, the deniers are those who deny there was any climate change until the Industrial Revolution, such as Boris Johnson.
CO2 is not a pollutant. It is plant food. Its concentration in the atmosphere fell from 6000 ppm 570 million years ago to just 180 ppm during the last ice age, which was dangerously close to the minimum 150 ppm plants, and hence all life on Earth, require to survive.
The historical data over the last 570 million years, or indeed for the last 10,000 years after we exited the last ice age, shows no correlation between temperature and CO2 levels and the CAGW/Net Zero CO2 scam merchants have no explanation at all for why the last ice age, maximum 20,000 years ago, occurred or why the planet warmed up from 10,000 years ago.
Fortunately we still have many years left of fossil fuel to keep CO2 levels high enough for plants to survive and even if we must resort to nuclear for our power there are still millions more years of CO2 left trapped in carbonaceous rocks that can be released.
For most of its life the planet was far warmer than it is today and the poles contained no ice. We are in an interglacial period and more likely to be on the path to another ice age than over-warming.
August 18, 2022
+1
August 18, 2022
Paul Edwards. How can continuing to use FOSSIL fuels cause deforestation now?
August 18, 2022
Where was the misuse of statistics? If you live 70 years in London at current murder rates your average chance of dying by being murdered is circa 1/1000. Do you dispute this and if so why?
August 18, 2022
According to macrotrends.net there were a bit more than 8m people in London in 1950, it decreased to 6.9 m in 1980, then went up to the present 9.5 m today. Assuming an average population over these 70 years of about 8.2 m. Looking at the murder rate for London in crimerate.co.uk and statista.com âNumber of police recorded homicide offences in London between 2015/15 and 2021/22 (an average of 130 over these past seven years) I would conclude the murder rate to the London population is 130 / 8,200,000, ie, 0.00001585 or in the way you present the rate 1 / 63,000. It would seem you are way off by a factor 63.
Do you dispute this, if so why? And so show your reasoning.
I think you are mixing up the homicide rate and the crime rate, this last rate including Anti-Social Behaviour, Bicycle Theft, Burglary, âŠ, Theft from the Person, Violence and Sexual Offences, a total of 14 different crimes.
August 18, 2022
There has been an average of about 125 murders in London each year since 2015. For a population of 9.5 million that is a 1 in 76000 chance. The ages of victims are irrelevant unless they are a particular homogeneous group – which of course they are; mainly young men involved in gang violence. The rest of us have a very low risk unless living with a violent partner. To suggest 1 in 1000 is just scare mongering.
August 19, 2022
Hefner the 130 murder rate is per year so after 70 years it is 70 times this. So roughly 1/1000 chance of you life being ended by a murder (not in one year but over you lifetime). So 130*70/8200000 = 0.0011 or just over 1/1000. Worse still if the murder rate it keeps increasing.
August 19, 2022
Hefner if your chance of being murdered, or being struck by lightning is 1/x one year the chance of it happening in 2 years roughly 2/x. As they are largely independent true different profiles of people, class, gender, gang members, age will vary but it is basically roughly correct. If you toss a coin ten times the chance you get 10 heads is 1/2^10 if you do it for 70 years once a year chance of getting it once is ~ 70/2^10 or 70/1024.
August 18, 2022
Paul – People will soon be paying ÂŁ100 per week in energy bills and everything else is going up too.
How do you think this will end ?
August 19, 2022
People wearing more thermals and jumpers, bathing less and only heating one room.
August 19, 2022
LL, your grasp of statistics is a bitty strange for a Cambridge graduate:
If an event has a probability of 1/n in a year, its probability over two years can be 2/n as you say or 1/n^2. It all depends whether the events are statistically independent or not.
So if you survive murder after year one, does if affect or not the probability of you being murdered in year two? It all depends whether you are in a gang or not đ . For a person lambda, I do not think so as it is very unlikely that the overall probability has changed much. So the probability of being murdered over two years is multiplicative not additive, ie is 1/n^2.
From that I conclude that Paulâs and my estimates are much closer to the reality than yours.
(Charles Wheelan, Naked Statistics, 2013).
August 18, 2022
1 People have been saying fossil fuels will run out for over a century and today we have, just with currently known reserves, more than ever.
2 You won’t poison city dwellers with carbon and not with carbon dioxide.
In fact over the last decades air quality has improved hugely in the UK due to less coal and wood burning, better technology , better engineering and sensible legislation.
3 Deforestation disaster is another myth
Natural forest loss is declining by 0.059% per year and is heading towards zero.
The rate has halved since 1990 and is still reducing.
4 Remember the polar bear claim…they will all die due to global warming .now we strangely have record numbers
5 Remember Great Barrier Reef claim…its dying..now its miraculously re grown
6 The Maldives…still visible above the sea….another green claim that never came true
August 19, 2022
+1
August 18, 2022
I don’t know about LL, but it seems you need to realise CO2 is a necessity for life, not a ‘poison’, Paul.
Also, could you tell us about the warming of the Antarctic polar region (clue: there hasn’t been any)?
And who gets to decide which ‘privileges’ we are allowed to keep, and those which you want us to lose? Those who in any case will still have their private jets, perhaps?
August 19, 2022
Are you aware that Arctic ice coverage is the highest it has been for some years by a wide margin, and that the trend in recent years has been for more ice coverage? Russian ice breaker LNG carriers are having a short season of transiting via the Bering Strait to Asia this year.
August 19, 2022
Still much lower than the 1981-2010 average (nsidc.org, 17/08/2022, âArtic Sea Ice News and Analysis: Summerâs waning lightâ, see Fig.1b).
August 19, 2022
Heffer
If the trend continues it won’t be too long before we are back at that average. We are certainly diverging significantly from the forecasts of no ice in summer, and the divergence is increasing.
August 18, 2022
You don’t really understand climate change do you .. what are you waiting for el nino everywhere?
August 18, 2022
It has always changed and always will millions of factor affect the climate C02 is not even a very significant one!
August 18, 2022
Boris looking for his next job as UN net-zero envoy
August 18, 2022
Thanks L/L your last paragraph has me genuinely laughing out loud.
August 18, 2022
Like as not he’s just regurgitating what he’s been instructed to say by those of equal ignorance.
I will start to listen when and only when those who offer a different opinion or perspective and those with more knowledge on the subject, are allowed a platform and with equal time on it.
August 18, 2022
Good morning.
It was the Labour Party that gave the BoE its so called independence, and it was the Conservative Party created the OBR. All political decisions. So to cure the ills those two parties created one needs at least one of them to first recognize the mistakes and, then correct them.
In summary. Nationalise the BoE and abolish the OBR.
If you can bring in legislation to lock down an entire country in a week you can do all the above in a day.
So what is stopping YOU ?!?!?!
August 18, 2022
Gets my Vote
August 18, 2022
Or in summary get rid of both the guilty parties!!
I’m always amazed at how some things just simply can’t be done, because of X.Y,Z.
It’s too complicated, it will take years, this law doesn’t allow for it, Parliamentary rules don’t allow for it, X or Y won’t like it….yet as you say shut the Country down in the blink of an eye
August 18, 2022
The BoE was nationalised in 1946. Gordon Brown gave it notional independence from the Treasury to set the discount rate whilst removing its supervisory role over the banks. The latter was shortly followed by the 2008 financial crash cause by US banks introducing fraudulent derivatives into the London market for which they have never been held to account.
The government appoints the Governor and is therefore responsible for his performance in meeting the 2% inflation target but has so far failed to act to address his malperformance.
August 18, 2022
Even economic modelling has been infected by political ideology. No wonder its conclusions are horseshit
I see Stonewall are now in charge of UK defence policy. Welcome to C21st Tory party. A party so infected and corrupted by woke and progressive appeasers that it doesn’t know which way to turn. Maybe this party should focus on the multiple cancers that they have opened to the door rather than Omphaloskepsis
August 18, 2022
Put rubbish in you get rubbish out
August 18, 2022
Indeed.
On the military angle China and Russia must be quaking in their boots.
Any day now I will expect to see our armed forces uniforms take on a rainbow effect.
August 18, 2022
Right on the (belly) button, as usual.
August 18, 2022
It should be needless to say that these criticisms also extend to the official UK modelling for Brexit, which has had a major negative influence on the course of events since the referendum. I have stuck up on my wall here a cutting from CityAM dated June 27 2017 with an article by Graham Gudgin headlined:
“The Treasury’s economic models have grossly overestimated the cost of Brexit”
and that incorrect appreciation of the various impacts of Brexit on the UK economy still runs through to today and is significantly undermining the process of choosing a new Tory party leader and Prime Minister.
August 18, 2022
The economic and social interference has all gone too far.
Why not just let those who wish to sell goods and skills for profit?
Minimal tax ( if at all ) at local level.
Why are we paying ÂŁsquillions to charlatans to take our money and screw us up?
And letâs face itâŠscrewed we are.
As anyoneâŠ. sans runes, chicken guts or crystal balls⊠could have predicted!
August 18, 2022
Thank you for investigating these models. There are 3 aspects I am interested in
1) Assumptions – about subjective aspects such as peoples behaviour.
2) Intermediate Results – to see if they can be tracked for accuracy.
3) Auditing – Can the models be downloaded and checked by economists.
BTW if these models actually worked then hedge funds would be using them and (just like Einstein observed) the observer would change the predictive outcomes.
August 18, 2022
I for one, didn’t realise that JR is an expert in Dynamic Stochastic General Equilibrium modelling.
August 18, 2022
That’s the age old idea that you cannot and must not challenge the experts.
They are like the modern day high priests.
It is heresy to criticise them
Sorry acorn it is not going to work.
They are failing us.
Change is needed.
August 19, 2022
I know he interacts with those who are at St Anthony’s and probably has access to the very finest tuition on the topic. You can expect the topic will have been discussed, along with identification of the shortcomings of the OBR and Treasury models by people who have examined their entrails..
August 18, 2022
This is what the BoE claims about its own independence:
“Where does our funding come from?
Some of our funding comes from printing banknotes. While we only spend a few pence to print each note, banks buy them from us at their face value: ÂŁ5, ÂŁ10, ÂŁ20 or ÂŁ50. We invest this money in financial assets like government debt, which pays interest and so generates an income.”
That is tantamount to claiming they are rewarded for keeping us in debt.
August 18, 2022
So they profit from QE.
August 18, 2022
The BoE did not print “ÂŁ895bn of new money and buying such a large portfolio of bonds”. It just swapped the “money” in those Bonds back into the cash that bought them originally. That cash turns up in the Bank accounts of the entities that sold them, for a profit, to the BoE; mirrored by an identical amount in “reserves” accounts of the Banks that hold those deposits, to keep their balance sheets balancing. Those Bonds the BoE purchased are now just empty shells, with no cash in them, but they still pay interest which ends up back at the Treasury from whence the interest came in the first instance. The net worth of the economy, the currency in issue, did not change, it just changed its form.
BTW. The BoE gets paid (ÂŁ400 k a year) for printing cash notes for the Treasury; but the Treasury has to fund the BoE the face value of all those notes. High Street Banks buy those cash notes with their “reserve” accounts
August 18, 2022
Pedantic as usual acorn
Printed ..is a commonly used shorthand for the creation of money.
You know that
August 19, 2022
Not in neoliberal land it isn’t. They actually believe that is what happens. And, they don’t believe in the magic money tree. By your use of the word “creation” l read that you are now a believer.
August 19, 2022
Nonsense acorn.
Creating or printing.
It’s two words that mean the same thing in the end.
We see the effects of too much of it right now with inflation.
August 18, 2022
The Guardian 2nd September 2017 Adam Shaw
While accepting the Nobel prize for economics, Friedrich Hayek made an astonishing admission. Not only were economists unsure about their predictions, he noted, but their tendency to present their findings with the certainty of the language of science was misleading and âmay have deplorable effectsâ.
He wasnât wrong, was he?
August 18, 2022
+1 also many have political views and political masters so warp their agenda to suit the politicians and state sector. Politicians and civil servants who generally want more money to spend/waste, more regulation and ever more red tape. Just as climate experts say the drivel fools like May and Boris want to hear on climate alarmism and renewables.
August 18, 2022
+many
August 18, 2022
Well we managed to get rid of the Chancellor who (putting it politely) messed up big time. Why haven’t the Treasury Officials who recommended these policies been removed from position?
And come to that, why haven’t the services of Andrew Bailey been dispensed with? The B of E has one job: to keep inflation at 2%. He has comprehensively failed to do that. In the private sector, he would be held to account.
Like every other of the all-too-numerous failures in the British Establishment, they seem to be completely immune from any consequences of their failures.
August 18, 2022
Why havenât the Treasury Officials who recommended these policies been removed, Donna? Because they’re in the permanent government. Sunak wasn’t, he and his collegues are merely elected by the voting public, and are therefore dispensable, it seems.
August 18, 2022
Good Morning Donna,
The answer to your question is, “They are all from the same echo chamber”.
It is high time to change the interview board.
August 18, 2022
Andrew Bailey left his last job under a cloud.
Who appointed him as Governor of The Bank of England ?
August 18, 2022
That bit we know, Bob. ‘The Queen appoints the Governor of the Bank of England following a recommendation by the Chancellor of the Exchequer.’ https://www.bankofengland.co.uk/faq/general
Which Chancellor recommended him? Sajid Javid. ‘Sajid Javid says he had no hesitation in appointing Andrew Bailey. He was the standout candidate in a competitive field, he says.’ Guardian 19th December 2019.
https://www.theguardian.com/business/economics
The other candidates must be unemployable, I reckon.
August 18, 2022
Some of us have been reporting high inflation for a while now, including shrinkflation, to which add E10 petrol.
High inflation benefits the treasury with a windfall of new tax because it also inflates VAT which goes back into the inflation feedback loop.
The one thing in the Government’s power is to CUT VAT. Why doesn’t it ?
It can do nothing about the inflation busting profits of private companies which are registered offshore. Instead of lecturing workers in an Anne Widdecombe finger-wagging style about the threat of a “wage price spiral” (when wages are, in fact stagnant at this time of high inflation) CUT VAT.
Cutting VAT is the reverse of inflationary. VAT on price rises IS inflationary and the Government is driving it with its suicidal Net Zero agenda.
August 18, 2022
Rather than cut VAT, which affects both domestic and imports equally, cut business taxes, which stifle British industry in favour of imports.
August 18, 2022
That is interesting Dave Andrews.
I hadn’t thought about cutting VAT reducing the price of imports.
Sunak was definitely wrong to raise business taxes.
Also his national insurance rise penalises business as well as wage earners – wrong again.
August 18, 2022
You write “The Bankâs MPC is independent when it comes to setting the official short term interest rate”.
That may be true, however it is a useless independence if they all suffer from group think and behave like sheep, following the lead of the Fed and ECB. In the years from 2008 how often did an MPC member argue for a return to normal, historic interest rate levels? How many spoke out against the QE that devalued our currency and increase government debt to unsustainable levels? Who speculated that a decades long trade deficit would leave the UK dependent on foreign lenders?
August 18, 2022
With regard to the notion of discriminating in education against the assumed-to-be-high-income pupilâŠand how do they KNOW? Spying on bank accounts?
We see all around us that nothing is functioning as it should.
The bottom line is âŠit is not KIND ( or FAIR..bleat đ) to put people into positions they canât cope with.
Already there are reports of students who canât handle university course matter, also being especially vulnerable to indoctrination by the forces of evil.
And those people will no doubt end up in high positions making everything worse!
August 18, 2022
Recent reports conclude that the national IQ is going down, in spite of record numbers of students at university.
One of my lad’s recent graduations (Southampton, at the hired Southampton football ground … lush ! ) was no more special than watching tins of beans coming off a production line.
So, for sixty grand of debt, my poor lad had to endure over 2 1/2 hour’s queuing with other grads from THREE YEAR’S of courses, the awards being delayed by the pandemic and presented in one job lot (I suppose it saved the lecturers having to go through it three times.)
We felt he still deserved the special day that he should have had and that the University should still have done it over three separate days and so we left early against orders otherwise everything we had planned for the day would have been cancelled.
This was more like punishment than reward and showed how cheap in all respects (except costs, of course) that degrees have become. Most of the students appeared to be from overseas.
(My boy did STEM and has a very good job in his field, so I’m glad of that and very proud of him.)
There is not only discrimination based on income, there is clear discrimination against white boys. Either that or they are being let down by the education system, so poorly represented are they on certain STEM courses, especially medicine. Any other group and there would be outcry and remedial action taking place.
August 18, 2022
ÂŁ60 k âŠgood grief I had no idea it had got that bad!
Utterly disgusting.
At least he got a good job out of it all!
August 19, 2022
Good luck to him Southampton is a good at most stem subjects. Graduation ceremonies though are just more money making exercises with gown rentals, seat charges at some universities, photographyâŠand rather boring too.
August 18, 2022
Don’t worry about the indoctrination. These students will come to their senses in time.
I do wonder sometimes that old socialists no longer believe what they used to, but pretend they do because their livelihood depends on it.
August 18, 2022
+1
I do hope so!
What worries me is that there is now no normal world for them to join post grad.
August 19, 2022
One surely has to be very stupid indeed to be a socialist past about age 25. I do not think I ever was leftwing, but certainly not after reading Friedman’s free to choose book at about age 11.
August 18, 2022
cuibono : âThe bottom line is âŠit is not KIND ( or FAIR..bleat đ) to put people into positions they canât cope with.â
This is the plan of the fifth column communists who desire to bring social chaos and economic ruin to the West.
So they are employing diversity as a device to destroy meritocracy, one of the Westâs most powerful tools, together with freedom of speech, for bringing equality and prosperity.
August 18, 2022
+100
So well put.
Agree entirely.
August 18, 2022
The whole of this supposedly ‘Conservative’ government is now determined to discriminate against the middle class, whites, men and heterosexuals. In education, Cleverly today confirmed that he is happy to see the discrimination in universities, with Oxford, Cambridge and other top universities have stating that they will discriminate in favour of those from “disadvantaged backgrounds” – ie. they will discriminate AGAINST those awful white, middle class students. [As an aside, I see that even students with 3 straight A* passes at A-level will now fail to get into medicine courses at university, as the number of entrants has been artificially reduced below what we actually need. Extreme stupidity by the government or deliberate treason? You decide].
In defence, the government has given the military “diversity targets”, which the new Head of the Armed Forces, Admiral Sir Tony Radakin, has enthiusiatically adopted, instructing service chiefs to make diversity a priority. He stated – and I kid you not, this is a direct quote – âIt is about woefulness. The woefulness of too few women. The woefulness of not reflecting the ethnic, religious and cognitive diversity of our nation.â No, this isn’t “woefulness”, it is MARXIST MADNESS. Will Liz Truss put an END TO ALL DIVERSITY TARGETS? No, of course not. She is just as culturally marxist and obsessed with waging war against the white, middle class – and especially men – as the rest of them. The only question I cannot answer is why these people still vote Tory. I don’t any longer. If the government hates people like me then I hate people like them.
August 18, 2022
+1
August 18, 2022
Agreed X-Tory. Meritocracy takes second place to diversity in the UK. As I said previously, (but it didn’t get past moderation) we should all self identify as black (and maybe gay as well for good measure) in order to regain equality.
August 18, 2022
Post Code
August 18, 2022
A lot of the trouble is government splashing the cash all over the place and the public (that is me) depending on it and expecting it and getting very upset when the government doesn’t cough up for us again.
That is why the government is in such debt, why it has borrowed itself into inflation and why the interest on savings has to be so low. And the strikes…
We – that’s me – the general public – have to cut back on our hand-outs.
Nobody owes me a living. Nobody.
August 18, 2022
Would the UK economy be better or worse off if there wasn’t an OBR….would anybody even notice…just disband the office
August 18, 2022
Duplication. That is what we are paying for – duplication & failure.
August 18, 2022
Government is always too unresponsive to changes to the fiscal position through any economic cycle.
Take road fuel pricing. The recent very high prices have allowed the Treasury to rake in billions of extra revenue, making everyone poorer and exacerbating the rising rate of inflation through rising transport costs.
Why can’t fuel taxes be on a sliding scale so that increases (and decreases) in the actual wholesale cost of the fuel, above inflation, do not raise extra taxes? With VAT and Duty normally making up 50% of the price at the pumps, this would have a significant damping effect on the current round of very high inflation. This would also ensure that the price of an essential commodity would be more stable, benefitting everyone.
August 18, 2022
ChrisS
This is what is known as payback time. Payback for paying people to sit at home and not work with the exception of standing on their door steps on a Thursday evening baging their little pots and pans and clapping ‘Our wonderful NHS’
Kama
August 19, 2022
The problem is and was that generally the staff are fine decent people who care about the nation’s health. The problem is with the incoherent maze of an NHS structure, the senior administrative ‘managers’ (I would prefer not to use that term, it should mean ability) and the idiotic money thrown at it to appease concerns, when in fact that merely means carrying on as before.
August 18, 2022
Poor old Ukraine is going to be blamed for just about every failure.
Can’t afford to heat your home… it’s Ukraine
Can’t afford to buy all your groceries….it’s Ukraine
Finding a huge amount of your money is being spent just in getting to work…it’s Ukraine
Thank you for pointing out that no, in this instance it isn’t Ukraine it’s bungling inefficiency, and don’t care because I don’t have to care attitude.
All our current woes were already on the cards a long time before the events in Ukraine and it sickens me to think many will use it as a cover up/excuse for their failings.
August 18, 2022
Except Michelle it is not Ukraine being blamed it is that terribly wicked man Putin.
Him who has the audacity to look after the interests of his own country.
When did the U.K. last have a P.M., government, civil service, armed forces, etc. who worked for the interests of their own country?
August 19, 2022
So because we fear the encroachment of France and its immigrants from the South and East, we are justified in invading and destroying major cities in northern France.?
August 18, 2022
AKA Blame Putin.
The fact is that most of this is Net Zero and Lockdown to blame.
August 18, 2022
Climate change ….its Ukraine
August 18, 2022
Computer models are much misunderstood by the many non – STEM senior managers who think they are a cross between Artificial intelligence and the proverbial magic wand. They are a just a tool for number crunching vast data inputs that used to be impossible to render from a macro level down to summary of key information. The more complex models will have many dubious outdated assumptions and possibly bugs built in by the many different programmers over time.
GIGO garbage in garbage out prevails.
Like any complex tool in the wrong hands not knowing its limits of safety it becomes dangerous.
In the private sector heads would roll and the system scrapped and replaced for unacceptable inaccuracy. Nothing happens in the Civil Service. Pathetic.
We need a clear out and proven STEM folk to replace them. That’s why they regarded Dominic as with concern.
August 18, 2022
Cummins
August 18, 2022
JRM “wanted to use a new Cabinet committee to bring in extra savings of ÂŁ5.5 billion a year – but this was stymied by the former chancellorâs unwillingness to engage”.
That fact alone sums up why Sunak should sink. He is not a convincing Conservative but reflects deep concerns for voters.
His long drawn out PR while the nation suffers is just pitiful. It seems he enjoys being the party pooper when he cannot get his own way.
August 18, 2022
I liked him because he wanted to reduce the size of parliament, do things differently and smoke out the old civil service way of doing things
August 18, 2022
You can see from the comments here that confidence in the way things are done here now is extremely low. Common sense and experience so often trumps so-called experts and politicians that we would do better to pull a few good people out of a local Rotary or WI, and give them a week’s holiday in return for writing a common sense report on transport, green issues, inflation etc.
I’m fairly certain that such a person would never have
-locked us up, but instead shielded elderly and vulnerable until a vaccine or cure was found
-therefore spewed free money on furlough
-therefore incurred such local supply chain issues and inflation
They probably would have prepared for us to leave the EU, warned the EU of the consequences of a leave vote based on Merkel’s intransigence, and pushed the blame back on Merkel later for any so-called extra borders in Ireland which would have gone up by end June 2016.
They probably wouldn’t have even thought about so-called smart motorways, and would have thought about the consequences of closing gas storage and reducing our energy independence.
I could go on.
It really doesn’t take much sense. Barring changing lifestyles, we have to live in this country and it really feels like we’re being run by idiots.
August 18, 2022
Sir John, I hope that Liz Truss reads your Diary posts. (Rishi Sunak either didn’t, or he ignored them.)
August 18, 2022
Walt. +1
August 19, 2022
I saw a HoC clip where I kind host spoke in the House on the economy with the Chancellor present. The Chancellor acknowledged our kind host had offered advice. And judging by subsequent actions and inactions I can only conclude that the Chancellor chose to ignore it.
Make of that what you will.
August 18, 2022
Last night I was shocked to see by how much the hospitality industry’s energy bills are going up. I’m sticking with my view that the Bank’s trying to curb this inflation by interest rate rises is idiotic. We are all cutting back on expenditure to pay our bills. Government needs to work on the supply issues.
August 18, 2022
S_W, do you really think the government care about the hospitality industry? Look what they did to it with lockdowns over the last two years. The hospitality industry gives opportunities to ordinary people to get together, talk freely and enjoy themselves, outside the ‘digital cage’. I don’t think our leadership class wants to encourage that.
August 18, 2022
The root cause of energy bills increasing so dramatically is our conservative (with the support of labour) governments policy of net-zero
August 18, 2022
Sir John has Tweeted today (twice!) opposing the rail strikes. And of course the London Underground will also be suffering from strikes. But I have pointed out previously that the answer is very easy, very quick, costs nothing and is entirely in the government’s hands. All they have to do is BAN all strikes by those who work for public transport.
Public transport is clearly a critical sector. People’s livelihoods (getting to work) depend on it. Businesses depend on it (getting their employees in). And the whole economy depends on it (if businesses suffer, so does the whole economy). So a ban on strikes is obviously entirely justified. And it would also be very popular with Conservative voters! But will Liz Truss do this? No, of course not. She hasn’t given any indication whatsoever that she will tackle this properly. Just a load of whingeing and mealy-mouthed hints of meekly scratching at the surface of the problem, trying to make strikes more difficult, or less effective, rather than getting to the root of it and simply BANNING STRIKES ALTOGETHER. She is utterly useless and hopeless.
August 18, 2022
You have to provide an alternative means of redress for workers, otherwise bosses will simply take advantage to slash wages and conditions, renege on pension commitments, and victimise any employee who a manager takes a personal dislike to. The problem with binding neutral arbitration comes when a ruling goes against the bosses and they refuse to implement it.
August 18, 2022
Oh for heaven’s sake, there are plenty of other occupations whose pay is determined by an independent body – even MPs themselves! And the employee’s ultimate weapon if he is unhappy is simply to resign. Going on strike is utterly anti-social and destructive. It needs to be banned for people whose work is so vital to the smooth running of people’s lives and society as a whole.
August 18, 2022
@ X-Tory “All they have to do is BAN all strikes by those who work for public transport. “ – and shoot those who fail to turn up to work, perhaps in some televised game show format to entertain the masses?
Leaving aside the coercion/slavery aspect, acceptability otherwise would surely require the consent of the workforce. That might be obtained, but only if there was some mechanism seen as just and fair that periodically and largely automatically re-set pay such that normal wage negotiations and the ability to withdraw labour became unnecessary.
August 18, 2022
X-Tory
That’s fine. Ban strikes. But it doesn’t get rid of the underlying problem.
The Tories’ one and only solution to inflation is wage depression. Nothing else. The message is loud and clear.
– They won’t cut tax.
– They won’t take on profiteers.
– They won’t take on the welfare state nor the state itself.
Roll on 2024. By then we’ll be back in 1970 minus the pubs.
August 19, 2022
‘All they have to do is BAN all strikes by those who work for public transport.’
and those who work for electricity supply, gas supply, water, teaching, health, postal services, refuse – oh and police.
SORTED.
August 18, 2022
How can the Treasury possibly be producing accurate forecasts when, according to the HoC Public Accounts Committee Net Zero Follow-Up Report dated 02/03/2022, the Treasury either have no idea of the cost of implementing the Governmentâs Net Zero Strategy or, rather, refuse to divulge the enormous costs. To quote the report :
âThe government has unveiled a plan [Net Zero Strategy] without answers to the key questions of how it will fund the transition to net zero, including how it will deliver policy on and replace income from taxes such as fuel duty, or even a general direction of travel on levies and taxation. The Government has no reliable estimate of what the process of implementing the net zero policy is actually likely to cost British consumers, households, businesses and government itself. The HM Treasury witnesses we questioned were reluctant to be drawn on what the future costs of achieving net zero would be, cautioning that while the Climate Change Committee has provided estimates, they contain âheroic assumptionsâ with errors potentially compounding over very long periods.â
https://committees.parliament.uk/publications/9012/documents/159059/default/
August 18, 2022
Of course they have released no estimates of the cost !
They know that nobody would take the policy seriously if they knew.
The government have only got away with it so far because every other party in Westminster is signed up to a more severe and even more expensive climate change strategy than the Conservatives.
A dose of realism is desperately needed across all political parties because on any set of figures, Net Zero by 2050 is completely affordable.
August 18, 2022
Just watched a feature on GB News showing French police playing cat-and-mouse with migrants among the sand dunes. The argument is that as soon as they have launched the dinghy they cannot be turned back because it is ‘too dangerous’. Here is a new idea, instead of paying the French to play this wide game, why don’t we pay the French a ‘handling charge’ per migrant to take them back? At Dover or wherever they are put on a boat back to France using whatever level of force is required. Even if what we have to pay per migrant is substantial (and we would have to pay quite a bit before it became a net loss) the flow will subside and the French will benefit from fewer migrants making their way to their coast.
August 18, 2022
@NLA.
The problem with cutting VAT is that there is no guarantee that a VAT reduction will bring inflation down. Reducing VAT could have the opposite effect. Let’s say the government reduces VAT by 5%, the likelihood would be that retailers/businesses would say mmm if the general public is getting the purchase 5% cheaper then I’ll put my prices up by 3%. I’m with you about VAT, but I would abolish it . We didn’t have VAT before we joined the common market.
August 18, 2022
Stephen Reay
If businesses do that then they deserve to lose trade.
August 18, 2022
Want to improve the economy?
Close the Bank of England and let market forces control the currency.
August 18, 2022
Thanks Sir John.
Even I’m beginning to understand some of your ideas about how the Treasury and Bank of England SHOULD work.
August 18, 2022
tweet…So BBC Newsnight cut out all the factual information I gave them of wrong forecasts and the explanation of the Bank, OBR, Treasury nexus.
What else would you expect from an arrogant organisation that retains most of its powers it had when a wholly-owned state entity yet professes to be totally independent and impartial. Unbelievable that if you refuse to let one of their inspectors into your house to establish whether or not you have watched any live TV, he/she can go to the police/magistrate and apply for a search warrant.
August 19, 2022
insist they must do that !
August 18, 2022
Dear Sir John Redwood
I sincerely hope that Liz Truss, when she becomes the new Prime Minister will have a big “Tough Medicine Is Needed and Not For Turning” speech where she starts by outlining a fact that Britons need to hear loud and clear:
“1) We are 10% Poorer than We Thought We Were as Sterling has lost 10% of its value over the last year. This is pushing up prices and we are all feeling the effects. The Ukrainian War has just exacerbated this by pushing up costs of imported fuel and food.
“2) Tough measures will be needed to stop the slide in Sterling and to reduce Inflation. Starting with a return to the Gold Standard. Fiat currency has been disastrous for Britain. To that end, as the Bank of England unwinds its QE bonds at ÂŁ50 billion a year it will be required to use the proceeds to buy up Gold to back up Sterling.
“3) In the short term there will be a freeze on Public Sector pay for all with salaries over ÂŁ40,000 and the State Pension amount will increase by no more than 5% in nominal terms. Tough measures are required to drain excess Demand from the economy to help bring down prices even as taxes on businesses are cut.
“4) In the medium term savings from the Public Sector and Pensions freezes will be used to get the Budget Deficit gradually on a downwards path whilst also investing in more Infrastructure, helping the poorest with their bills and paying for Private Care for one million folk on NHS waiting lists over the next year to get bills down. The Army will be drafted in to help the NHS. These measures will forestall a meltdown in the NHS.
“5) Foreign Aid will be kept for the remainder of this Parliament at 0.4% of GDP. The proceeds will be used to pay for local business tax cuts to help stimulate growth in Northern cities, in Glasgow, Edinburgh and in South Wales.
“6) Despite the protests I will pursue these policies. Britain needs these before we have Economic meltdown with foreign investors abandoning Sterling and the UK. This Lady will Not Be For Turning. Thankyou.”
That’s what is needed after we have had -0.1% growth in the second quarter of 2022 with Inflation in July surprising on the up-side at 10.1%. A good dose of Reaganomics!
August 18, 2022
Dear Sir John, I have just been re-reading Mervyn King’s letter to Gordon Brown of April 2007, the first needed after 10 years of Bank independence, when CPI inflation had reached 3.1 per cent, outside the tolerance of the 2 per cent target.
In some respects, the soothing words have changed little: The rise in oil and power prices would soon wash themselves out of the system, though the Bank must be on guard against risks. Wages had not taken off.
Poor Mr King did not know what was about to hit.
Importantly, however, the Governor wrote that interest rates take a long time to affect inflation and Bank Rate had risen from 4.5 to 5.25 per cent over the previous nine months : ie about 2 per cent above inflation.
Today, with inflation above 10 per cent and rising, the received wisdom is that Bank Rate will rise from 1.75 per cent to 3 or maybe 3.5 per cent in 9 months time. Not enough to beat inflation (ex gas price) but just in time for recession.
August 18, 2022
‘In a later piece I will go into what may be producing poor outcomes in these official models.’
Sir John may I write this for you?
The official models are inadequate, built using dubious software, using inaccurate data input, not timely, ignoring learning experience from past similar situations. The interpretation is usually a stubborn statement of ‘we know best’ although repetition of the same errors is not a subject of concern and should be embarrassment.
August 20, 2022
In a later piece I will go into what may be producing poor outcomes in these official models.
Above is the last sentence from the post.
It is very important that this is produced.