The Bank of England has been up to its old tricks, hiking rates and selling bonds to hike mortgage rates some more. They think taking money away from mortgage holders will squeeze their ability to spend which will cut inflation by reducing demand.
Will it? The extra money mortgage holders pay in interest certainly cannot be spent any longer by them on goods and services. The money however does not disappear. Much of it is passed onto savers who have deposits in the banks that lend the money. They will have more income to spend. Some of the extra interest is extra Ā bank profit, which leads to higher dividends so shareholders will have more money to spend.
Higher mortgage rates therefore will not limit demand for goods and services as much as the Bank seems to think. It is possible the savers will not spend all their extra interest income, whilst it is likely the mortgage holders would have spent more of the money they now have to pass to the lenders. This is however a matter of degree. It is also likely the savers who tend to be older may well pass some of their deposit interest gain onto their children with mortgages to help them out.
The further sell off in bonds underwrites my argument that the high mortgage rates come mainly from Bank of England rate hikes and bond sales.
July 10, 2023
Surely, it is now clear the BoE board are not fit for purpose. This mismanagement of our funds is not down to stupidity or negligence. It is a planned arrack on the people & our country. Why?? So, we become so ruined we must rejoin the EU to save us??? If this is the game then democracy is dead!
July 10, 2023
The Maastricht Treaty requires member states to have a debt to GDP ratio less than 60%. The UK has no prospect of achieving that target, so the EU will have to scrap the Maastricht Treaty before the UK can ever rejoin.
July 10, 2023
That’s one of the reasons why they’re creating the 2-tier structure: inner tier = Eurozone. Outer tier those outside the Eurozone who will be Associate Members. We are being signed up, step by step, as an Associate Member.
July 10, 2023
Dave
The EU is perfectly capable of ignoring its own rules when it suits, as we have seen many times – to give just a few examples, France giving hefty subsidies to its national airline, preferential treatment to its farmers etc and Greece (financial circumstances didnāt fit the criteria, but was admitted to the euro anyway).
July 11, 2023
Yes, on fiddled figures which Greece paid a well known bank to produce.
July 12, 2023
Nah – the EU has a way of bending/breaking/ignoring its rules when it suits them.
Isn’t it great not to have to face an electorate?
July 10, 2023
@Jude – the problem is they are the ‘Boss’ of this Conservative Government, when they say jump our 2 Chancellors say how high. They know what happened to Truss for challenging this corrupt orthodoxy
July 10, 2023
Truss sank herself by refusing to āpayā for tax cuts with spending cuts. He had a very high quality individual available to appoint to Nr 11. She failed to do that.
Truss is the author of her own demise.
July 11, 2023
When was hat ever done? Why do we have a debt approaching 3 trillion? We’ve had plenty of wrong cuts, but still the debt keeps growing and things keep getting worse. Now we’re worse off than we were when Truss came in and went out, but that’s o.k. we’ve got a globalist in charge.
July 10, 2023
Neither are the FCA fit for purpose. Even when given proof of fraud and other outrageous behaviour in our biggest financial institutions they do precisely nothing. The standard of their work is shocking.
July 11, 2023
Iain,
My small business is regulated by the FCA, and the overreach is truly staggering. Endless reports that nobody reads, constant demands for money, mindless additional regulation. The result hundreds of insurance brokers and financial advisors are selling up and retiring. The costs of starting an new business are prohibitive, as are the regulatory hurdles. Choice is being restricted and people with modest means will not be able to access advice.
You can bet that when the next large scale financial scandal breaks the FCA will nowhere to be seen.
Lets pick on the little guy.
July 11, 2023
I have been inside the FCA and like much of the public sector they are truly shocking inside too. A few good staff trying to do the right thing swamped by woke BS from the clueless. Head man being there primarily because he is a friend of Cameron’s says it all.
July 10, 2023
There was a good article in The Telegraph recently, co-authored by Max Rangeley, explaining what’s happened to the Bank of England and the money supply since 1997 and what he thinks should be done by Rishi Sunak to the Bank of England’s mandate. https://www.telegraph.co.uk/news/2023/07/09/rishi-sunak-bank-of-england-mandate-economic-growth/
July 10, 2023
Good morning.
One could make the argument that this is of course quite deliberate. I mean, someone has to live in these homes after they have been repossessed ? And with so many people living in paid 4 Star hotels and our government willing to give them money to buy a home of their own, who is to say that is not the plan. Also. I believe a certain company that undertakes work for the government is very keen to rehouse said illegal immigrants and what better way for cash strapped Landlords to sell out or accept the aforementioned individuals.
When things do not make sense, it makes sense to do things.
July 10, 2023
Addendum. A lot of people are either in fixed mortgages (someone I know has his fixed until 2027) and others, like one of my next door neighbours, own their home outright. How is raising interest rates going to affect them and their spending ?
Also. High interest rates affect companies investing and creating jobs. Would be better to raise interest rates and reduce corporation tax.
But hey, what do I know.
July 10, 2023
Your Chancellor is agreeing with it so down to the government..
July 10, 2023
Inceasing UK interest rates are agreed and authorised by the BoE, the Chancellor, UN WEF and China
July 10, 2023
Quite right! It’s never just the BoE, we all know it so why the charade. More important than the headline interest rate is the reduction in liquidity, ie QT. Removing ‘money’ from the system will push up wholesale rates and reduce lending by banks.
We’ve a long way to go to payoff the excesses of the last 15 years.
More trouble to come.
July 10, 2023
Higher interest rates will make people and business think harder about whether to borrow money. That is a good thing.
Ideally, the same effect will be seen in Government borrowing, but I fear this will not be the case. Much easier to borrow and spend other people’s money.
July 10, 2023
@PeteB You are correct for new borrowings, but the UK is upto the hilt in debt and the impact is different see -@Bloke below
July 10, 2023
But what is this Government spending beyond our means on? Answer. FORIEGN AID (including EU AID), LEGAL AND ILLEGAL IMMIGRATION and their associated health, education and housing costs, HS2, UNCONTROLLED WELFARE with no limits on time, housing subsidy or children. WEF, UN, WHO and other unelected left wing bodies controlled by Mr Hunts mates. This Government has no care or compassion for English taxpayers who, they send to the back of the queue in favour of every woke minority cause, but are expected to pay the bills.
July 10, 2023
+ 1
July 10, 2023
Not to mention their foreign wars, including the ‘Forever War’ in the Ukraine.
July 10, 2023
UK up to hilt in debt – agreed. Perhaps higher interest rates 10 years ago would have disuaded some of the excess borrowing since then…
Base rates today are still attractive if you compare back to the 50 years 1957-2007. It should cost to borrow.
July 10, 2023
Increased interest rates are increased costs, inflating the prices people need to charge for their services to pay for them. Even the prices of essentials increase. Inflation self-generates almost as rapidly as the Treasury and Bank of Englandās attempts to be the most idiotic waster of each month.
July 10, 2023
@Bloke +1 agreed, – however our PM in a Medai interview called for more maths to be taught in schools and at the same time stated that high interest rates reduce inflation. I guess we all know who needs to understand maths
July 10, 2023
Ian Sunak asks for more maths, so Starmer asks for more English. The truth is that there has already been since 2010 two years more maths and english as if the required level wasnāt achieved by age 16 children were forced into college or 6th form or apprenticeship and had to retake both.
In 2007 it was agreed to two more years education, why isnāt anyone asking what that investment is actually producing, what gains has the UK made in the last decade because all I read about is more depressed teenagers, more male suicide, everyone likes to blame government but really isnāt it time we start looking at the people who run these important services we are paying extra for. The curriculum setters if, as Starmer says, children leave school unable to articulate in order to compete and get good jobs!
July 10, 2023
Ian B : “I guess we all know who needs to understand maths.”
I wish he would learn that when it comes to energy from renewables N x 0 = 0
July 10, 2023
LOL.
July 10, 2023
Dear Sir John. I think you are referring to the traditional view on which the B of E are trying to impact the money supply in the economy but given the far larger amounts of debt across the economy I think the ongoing rate increases will have a far wider impact that means that as there is always a time lag for rate increases to take effect there is a genuine risk that they will tip the economy into a recession and impact most participants in the economy when alot are just trying to survive on the net cash they receive from their efforts.
The reason for this is that debt products that link to base rate are not just mortgages but personal loans, overdrafts, buy-to-let mortgages, and business loans, to name a few. I most of these areas, the borrowers have also been impacted negatively by changes in fiscal policy that were reducing their free cashflow anyway, therefore increasing interest rates is compounding this further. The impact on the buy-to-let market, and even institutional investors investing in the private rental market, could be profound, as they are going to look to increase their rents potentially significantly due to the fast increase in the cost of borrowing, thereby hitting people that were not driving excess demand in any way, but were requiring their free cash just to maintain a basis standard of living. The increasing cost of debt for SME’s will be very damaging as well, especially as alot of SMEs only employ a small number of people and it will typically be the only source of income for the owners.
Overall as this current bout of inflation is more about supply issues than demand, the way in which this is problem needs to be addressed is by a joined up programme of both monetary AND fiscal policy, as well as broader measures by the government to increase supply where it is needed (ie. freeing up labour from the public sector into the private sector, facilitating an accelerated increase in house building etc), as the Bank of England, with its very blunt tools, is in no way able to solve the issues alone. The fact that the leaders in both the Bank of England and Government/Treasury, cannot see this, is extremely worrying, which is why I feel the outcome for the UK economy at the moment is pretty dire.
July 10, 2023
Truss had a feasible plan and had to go.
Not being part of the WEF group think led to her demise.
It starkly illuminated who actually is incharge of the country and it certainly isn’t the present government
You deserve all that is coming.
July 10, 2023
Any feasible plan needs to have a plan how to reduce waste. Truss had no suggestions in that direction, she just wanted to reduce taxes whilst carrying on spending just as much.
July 10, 2023
+1. She is also committed to fighting Russia and China, so we would be on a war-footing sooner rather than later which would devastate the economy and life in Britain!
July 10, 2023
She never got the chance Dave.
July 10, 2023
Talked to my daughter and son-in-law in Australia yesterday. What we are experiencing is very similar to their experiences too. Their fixed rate mortgage ends very soon and the new rate will be 5% an increase of a 1000ā¬ au a month! Their friends are horrified at some of the sex Ed in schools…but they don’t seem to have 15 mins cities yet!
July 10, 2023
I read Americaās mortgage interest rate is 7% now, where America leads we seem to follow.
July 10, 2023
…………………..Their friends are horrified at some of the sex Ed in schools…………..As a Grandparent of eight I’m horrified as what passes for education, let alone sex education at young ages. I’m afraid it wouldn’t have happened during my children’s time in education as I would have removed them from the state sponsored propaganda we are all seeing through the state and msm. Climate change, net stupid, trans rubbish etc etc.
Concentrate on basic delivery of health and public services for English people……..the rest can wait. How many boat people deported today Sr John…………..oh, yes, more lies and propaganda on your Governments true policies and intentions.
July 10, 2023
But the Oz Govt order live ammunition to be fired on protesters against the CV shot.
The U.K. is nowhere near that level of debasement yet,
July 10, 2023
It’s a similar picture in Canada too from what friends say. The West seems doomed and we can’t even pray to Our Father.
July 10, 2023
My friends in the far-east say its not on their horizon, nobody is interested nor talks about net-zero, diversity or wokeness (or mortgage rates) ā to them itās a western thing
July 11, 2023
They’re all busy living, working, making money and having fun
July 10, 2023
Agreed.
Unlike Sunak, Starmer effectively admitted who is actually running the country when he said he prefers Davos to Westminster because that’s where things get done and Westminster is just tribal pantomime.
July 10, 2023
Oh no it isn’t!
July 10, 2023
@Ian+wragg +1
July 10, 2023
Correct
July 10, 2023
……………………..You deserve all that is coming……………….. Not just the Consocialists but all the mainstream parties need irradicating from our life and any influence or control. They had their chance and have blown it. Just look at the state of this Country and what they have done to it!
July 10, 2023
And of course with a goodly proportion of mortgagors having fixed the interest rates they pay, the Bank will have a longer wait to see what it seeks than in times past when nearly all mortgages were floating rate.
Time again for the Governor to make some disobliging references to Mr. Putin’s antics?
July 10, 2023
It might not limit demand for goodsā¦but surely it will deprive many of their unaffordable houses in a vast house price crash? ( to be hoovered up for a song)
Maybe thatās the hope?
You will own nothing.
July 10, 2023
@ Cuibono “..a vast house price crash” – not yet a while for interest rates remain for now within the limits of the stress tests mortgagees performed before agreeing to lend.
Also, there remains a shortage of housing so expecting more than a softening of prices as prospective buyers hold off from activity in the face of elevated rates is likely misplaced.
July 11, 2023
Formula 57
What do President Putinās antics have to do with interest rates
Surely he didnāt ask us to declare war on him, that was the governmentās decision in conjunction with NATO and the United States?
July 10, 2023
+1
Some banks are already looking at getting into the home rental market.
July 10, 2023
+++
Yes ā¦a real fire sale.
I suppose that in a sense lenders were always landlords but now they want full ownership.
They wonāt āown nothingā!
I bet the banks already own vast tracts of new estates just waiting for the little boats?
After the āorganisersā have taken their cut of our taxes of course!
July 10, 2023
Our banks would do it by foreclosing on people having difficulty with mortgage payments and acquire property on the cheap. Perhaps we should legislate on their business model.
July 10, 2023
Cuibono I wondered how the phrase ‘you will own nothing and be happy’ would or could come true …beginning to see the possibilities of how.
July 10, 2023
+++
Using governance, lies and carefully crafted laws to steal from us!
Sitting ducks is what we are š¦
Lessons learned by the uppermost ruling classes since at least Henry 8th.
We actually escaped the bondage of Feudalism ( which I believe bestowed a few rights)
And then happily submitted to vast transfers of wealth, (enclosures, industrialisation, WW 1 & 2 etc etc)
Whatever happened to Magna Carta?
July 10, 2023
I can envisage all too easily the ‘you will own nothing’ bit, but the ‘being happy’ component seems a bit of a stretch at the moment.
July 10, 2023
The international institutions that finance us on a day-to-day basis want increasing interest to compensate them for the perceived risk of lending to a country with no exports, which has a government that routinely spends more than it raises in tax. In May Hunt borrowed Ā£20billion alone. in June 2023 Bank of England gross foreign currency holdings were only Ā£22.5million and UK governmentās official gross gold and foreign currency reserves were only Ā£184.5 million (source; HM Treasury Statistical Release 5 July 2023). The UK is only one crisis away from bankruptcy and a visit from the IMF
We are like people who have three jobs but cannot afford to pay the rent and have to borrow from loan sharks each month to make ends meet. The BoE has to increase the bank rate further to cause a deep enough recession that gets inflation under control. With the national debt at 105% of GDP this is a crisis of our own making.
July 10, 2023
1 savers get taxed on interest, mortgagees don’t get tax rebates on interest paid, so less in the economy
2 high interest rates cut business investment and increase redundancies, so less in the economy.
However none of this will improve matters untill structural reform of benefits and NHS undertaken, and that’s at least 10 years away.
July 10, 2023
People will say ISA savings donāt pay tax on interest, yet when ISA interest falls away (as they are, people are carrying big losses right now) who gains?
July 10, 2023
oh dear – it seemed a good idea at the time. Now you’ve gone and spoilt it!
July 10, 2023
I do hope Jeremy Hunt is not reading this blog. If he can’t use interest rates to reduce demand he will come for taxes.
July 10, 2023
Interest rates are now to the near historic normal, the problem is that for the last 12 years people have been living in a fantasy land of historically impossibly low interest rates, and so have borrowed more than they really could afford, and good luck to them if they had an exit plan, (borrow high and long whilst rates are low, borrow low and short when rates are normal or high) The problem is that all tax rates are now also historically high, as are basic business and living expenses, a very real problem now that disposable income or profits are lower.
Likewise at last savers are getting some sort of a return on their money but in real terms and with inflation it is actually less spending power than before, and is now taxed if you get more than Ā£1,000 per year (standard rate taxpayers)
The only people benefitting are the Banks, who’s margins have grown ever larger, but whose customer service has declined on a massive scale.
Given the BOE is not independent and works with Government, it is the Government who are wholly responsible for the mess we are all in, yes there was the complication of Covid, but I think have said enough about that already.
July 10, 2023
Our government is also suffering from higher interest rates with an interest bill of over Ā£120 billion this year.
Is it not time to make some spending cuts and borrowing is no longer free money and the interest payments have consequences for other budget items?
July 10, 2023
All still waiting for Osborn’s promise top balance the books by…………..2015!! But uncontrolled, unreformed welfare takes precedence over English taxpayers.
July 11, 2023
Anyone with their hand out takes precedence over the English taxpayer
July 10, 2023
Because of high inflation and higher taxes (via fiscal drag etc.,) not matched by pay increases for most, many shops are now closing and yet more will close in the coming months. As the shops close, the goods they sell and services they buy will no longer be required. This will result in more people losing their jobs not only from closed shops but also from the companies that supply them and from the suppliers’ suppliers. So soon overall unemployment is going to increase. So while some sectors, especially publicly funded sectors (e.g. health and social care) might still have labour shortages, other sectors will soon have an oversupply of labour.
So allowing net migration now is short sighted as it will exacerbate soon to be increasing unemployment at least as much as it reduces some labour shortages.
July 10, 2023
Truss failed because forces outside the democratic arena deemed that she did not suit their agenda. If you devolve power from Parliament, BoE, area government, national governments, you do not always get the result you anticipated. If you are intent on devolution to aid democracy then you must go straight to the people and have referendums. The bigger political units can be got at. Banks are one of the areas holding too much power outside the democratic arena. They borrow for next to nothing and charge extorsionate interest on loans. They need to be brought under control.
If you wish to bring normality to the housing market you need to redress the balance between supply and demand. This would involve an assault on Planning, better control of the cost difference between land for agriculture and land for building, and the industrialised manufacture of houses to incorporate energy conservation and serious quality control. The forces that did for Truss would not wish that to happen.
July 10, 2023
[…] Interest rates are higher than they were under Truss ā John Redwood […]
July 10, 2023
I’m going to be selfish here. I’m happy with high interest rates , after being ripped off by too low emergency interest rates by this government and the BoE
July 10, 2023
Shouldn’t we now be asking, “What is the point of OUR Central Bank”?
July 10, 2023
Derek, it could just be a storehouse for our gold reserves assuming we have any. Let the Chancellor and Treasury take responsibility for financial juggling and be directly answerable for it in the Commons.
July 10, 2023
Still not one minister even dares to mention the W word.
When times get tougher due to outside forces that is the time to micro manage every department to reduce or better still wipeout any sources of waste.
The government could save billions if it applied itself but the perception is that it has no intention to do so. Bit like the dingy invaders and the problems and associated costs they bring.
July 10, 2023
We have to get real, our 2 Chancellors are just refusing to āmanageā those they are paid and empowered to manage.
Graham Bailey as part of what looks like a power play has been hitting the media with his fanciful ideas of digital currency, then yesterday inferring the UKās economic woes are not down to him but the UKās Old ā because? – well because they exist. All in all Graham Bailey is Politicising his post to deflect from his failings.
The BoE is not an elected institution, as it is now it is not even accountable or responsible, as such using their position to make Political points, is telling our 2 Chancellors that they are in charge. Truss challenge their(BoE) orthodoxy and as a result seemingly got removed, now those we pay and empower are saying loud and clear we will bow to your superiority and will let you lead us.
The Country is getting trashed and we will be all out come the GE, seems to be this Conservative Governments stance, so why should we care.
July 10, 2023
The BoE along with our government will never admit that its the policy of net-zero fueling inflation
July 10, 2023
Glen, they can’t afford to, it would put an Exocet through the whole facade of energy costs in the UK and their whole myth of fiscal competence or any other form of competence.
July 10, 2023
āExperts fear the eliteās obsession with going green will cause prolonged pain for millions. Nomura analysts say piling levies on consumer bills, promoting green energy and increased investment will all push up prices for decades to come.ā https://www.telegraph.co.uk/business/2023/07/10/central-bankers-spectacularly-wrong-net-zero-inflation/?fbclid=IwAR2ngM0BXGcq49GYzj0LCJEX_fSXaWwWidCjaFSU1cmbmK7_dmiFhUCMZtw
July 10, 2023
Many savers, like me, already buy whatever they want or need, so the extra savings just remain in our accounts. Only HMRC gains as many of us have now returned to paying tax on our interest payments. This will increase further as more people are pushed into the higher rate tax bracket which means a lower tax-free interest allowance.
Your government continues to shower money on those with lower incomes who tend to not have mortgages. This group spends everything they receive so their spending goes up.
It seems to me that only middle-income families are suffering and the benefits of actually working a full-time job are negligible. Ask yourself why so many people choose to only work 16 hours a week as this lifestyle choice gives them the optimum life/work balance subsidised by the taxpayer.
July 10, 2023
Meanwhile Spain’s Consumer Price Inflation is 1.9%.
July 10, 2023
Are you sure, the figures I read are 5.8% for Spain. Still much better than UK performancs. I wish I could still enjoy it.
July 10, 2023
āRishi Sunak said there was no such thing as a Whitehall āBlobā blocking ministers from achieving their policy objectives.Ā ā
āThe Prime Minister said in his experience civil servants have been āincredibly hard working and diligentā in helping to ādeliver what I wantedā. Note āIā
This was said while the PM was Speaking during a Liaison Committee hearing.
So we are all wrong in our thoughts that the Collective āBlobā which includes the BoE, are blocking the Conservative Government wishes when they are actually working to deliver what he wants. Therefore the bad policies at the BoE are the PMās and this Conservative Governments bad policies
July 10, 2023
āWill it?ā
If anything is inexplicable it is because either the full facts or the ultimate aims or both are not divulged.
The country is under attack.
From the communists who wish to destroy the west through the unilateral chimera of Net Zero designed to bankrupt our economy.
From feudal elites/corporates who wish to destroy individual wealth so we āown nothingā and they can own everything. The giveaway was when our PM, then Chancellor, said at COP26:
āSo our third action is to rewire the entire global financial system for Net Zero.ā
From the snake-oil salesmen who peddle the ludicrous idea that the country can run on expensive and unreliable renewables when both the production and consumption require huge taxpayer subsidies and a parallel energy system to exist at all.
From the Malthusians whose religious zealotry to save the planet has effectively brought back the blasphemy laws to prevent any discussion of how the implementation of their ideology will mean the deaths of millions of people through starvation.
All using the completely false narrative that there is a climate crisis brought about by a mild warming of 0.13 degrees C per decade after the Little Ice Age and an increase of CO2 in the atmosphere from 3 molecules per 10,000 to 4 molecules per 10,000.
July 10, 2023
I don’t think they are listening JR.
After all you have written and said in the past few months about this subject, you’d imagine an honest and free press would have taken up the points raised………………..The fact is that we don’t have a free and honest press!
The bank is busy following WEF policies, not ones that would help the UK – You really can see where this is all going now?
July 10, 2023
There is not a free society here. And the smartphone bunnies in their tens of millions will soon sign us up to electronic identification.
July 10, 2023
Good Morning Sir John
I could have thought of some immediate savingsā¦. Somewhere in the region of Ā£4.6B from Ukraine, the Hercules fleet would have lasted a few more years, plus stopping the Boat People and scrapping the insane Net Zeroā¦ā¦
July 10, 2023
How would a Conservative Chancellor manage to execute a conservative policy up against the Brownite Bank of England and the Brownite Treasury? Even without the Brownite OBR. (I see the latter have appointed yet another disciple of Brown’s.)
July 11, 2023
You first would have to get a Conservative Chancellor and a Conservative Prime Minister/First Lord of the Treasury who were prepared to dismantle Blair/Brown’s Socialist State.
We have neither and we’re not likely to ever get them from the Not-a-Conservative-Party.
July 10, 2023
One has to point the accusation finger at the right source . The BoE are not up to the job it is true but the position they take is entirely due to the Government . Sir John is right in his criticism but Sunak is to blame . Sunak believes that recession is a realistic way to curb inflation and the Bank Rate mechanism can be the way to achieve this . We cannot continue any longer with Sunak at the helm ; he has lost all support for his leadership and he must go ! .
July 10, 2023
Be aware , the Truss dismissal is only a symptom, the real agenda is a banking globalist drive to introduce digital currency and to remove cash. Designed to contain all financial control nationally and internationally within central banks. Unless Parliament wakes up it will be a major step to 1984. We all need to be Winston Smiths. Not one sentence of this agenda has been voted for.
July 13, 2023
GB News are running a Don’t Kill Cash petition, up to over 200,0000 signatures already. Pass the word around.
July 10, 2023
Your colleagues made a big mistake getting rid of Liz Truss. We are now spending Ā£49 billion on the Bank of England selling bonds at a loss to raise long-term interest rates. Instead, Truss’ more modest Ā£40 billion tax cuts achieved the same thing! But this would have happened six months earlier. In addition, her plan to cull 91,000 Civil Servants would have gone a long way to relieve inflationary pressures in the labour market. If they had supported her, inflation would now be under control.
July 10, 2023
Home Office data as at 9th July 2023
Illegal Immigrants – 269
Small Boats – 5
So what has Sunak done differently since he proclaimed that he would stop the boats ? Whats his plan ?
July 10, 2023
I think that at this moment MPs are preparing to sit up all night in the House to get the Illegal Immigration Bill through ( or amended or something that will get it through The Lords when resubmitted).
Last chance Saloon!
July 10, 2023
His plan is to fob you off with promises of action tomorrow until the Election. Then whoever wins will implement a blanket amnesty ‘to empty the hotels’. But they can’t wait until then, 10 000 more have been given an effective amnesty today. Coming soon to a smugglers’ TikTok video near you.
July 10, 2023
Indeed. Again you are shafting young people while old people, comfortably off with their mortgages paid off, book their cruises.
July 10, 2023
Interest rates are a blunt instrument to reduce inflation. At a high enough figure they will work but also do a lot of damage to ordinary people on modest incomes.
A better option is to reduce government spending so taxes can be reduced seriously, the economy will grow, debt can be repaid & ordinary people’s incomes will not be damaged. Lower personal taxes may also have a beneficial effect on people striking for more money.
But with a PM & Chancellor who are blind, deaf & dumb to what ordinary people;e think & feel, we have no chance of sensible, intelligent policy-making!
July 10, 2023
Were my original comments a tad hasty?
July 10, 2023
Well Sir John I am rarely gobsmacked by your assertions on here. Today I am.
You write ‘ The money (mortgage interest hiked) however does not disappear. Much of it is passed onto savers who have deposits in the banks that lend the money. They will have more income to spend. Some of the extra interest is extra bank profit, which leads to higher dividends so shareholders will have more money to spend.’
Get real…Very little is put back out there to savers (in miserly accounts).
Bank profit dividends will not be spent on heating/lighting/ food, transport,utility bills! Much more likely to go offshore or spent on taking advantage of falling house prices.
Go ahead explain to me why I am wrong!
19.25
July 10, 2023
I can only speak for myself. I am now getting 5% on my savings after years of getting almost literally nothing. Itās disposable income. I am spending it.
July 11, 2023
Mike
Indeed no point in hanging onto it with inflation at 10% as you would lose 5% of its value per year.
Just recently purchased another car, about to purchase a new freezer, and washer dryer, problem is they are all made abroad, because our own manufacturing industry has been decimated over the years.
Ironically you were better getting 1% when inflation was only 3%, as you were then only losing 2% per year.
July 11, 2023
that’s just fine but millions on retirement savings, or miniscule family budgets don’t want to spend whatever is still left after meeting the alarming bills over the last several years.
Speaking for myself I will not buy a car, having replaced fridge/freezer, gas boiler, water softener blah blah I intend to avoid spending, hoping this horror story of a government and economy will slow or halt draining my once only savings….I doubt anyone wants to hire me for any worthwhile income?
I remember being able to add to my savings after retiring, not a chance under the last governments.
July 12, 2023
Your position is of course correct – the BoE is responsible for all of this.
And their “solution” is to use the only policy lever they have – rates. However, bond sales at the same time is dense.
They should look deeper at the data – recent stats showed that only 30% of homeowners have a mortgage. Most of those have already cut spending back to the bone, so further rate rises only drives them into bankruptcy which helps no-one – it’s certainly not helping inflation.
Since the solution is to produce more goods onshore and they have no control over that, with politicians in power not being prepared to do anything about it (and in any case, any such policy shift now would take time to come through)… we can say that we are now saddled witha bunch of incompetents using the only tool they have in order to be seen to be doing something In the process they are trashing the economy and many people’s lives, especially those who cannot re-mortgage and who believed the BoE when it said that when rates rose, they would do so slowly and to “the new normal of around 3%”. As we now know, that is utter tosh.
A key lesson here is: Never believe a word that comes out of the BoE.
Another is that those running an economy need control over all the levers of policy, not just one. And by extrapolation, they must also have responsibility for all aspects of the economy being within their remit, not just one.
July 12, 2023
P.S. The same factors are at work as at the time of Truss.
The BoE signals bonds sales, leveraged funds struggle (those who were in real trouble emerged at the time of Truss, so she/Kwarteng were hit harder than Hunt is being villified now).
And meanwhile the BoE pension fund was 100% invested in one of those funds. Strange that they acted to save them?
And that a Sunak appointed governor should destabilise markets… and along comes Sunak for a coronation. All reasons he won’t get my vote, whatever he does. The Conervative Party is sleep-walking to electoral defeat with a vote loser as leader (and another as Chancellor).