The Governor’s speech


The Governor of the Bank grabbed the headlines on Thursday night for hinting that official interest rates may go up earlier than  markets expect. As markets expect a rate rise by the second quarter of 2015, that could bring it forward to later this year.

The Governor’s speech was more balanced and careful than the headlines suggested. It is true he said rates may go up “sooner” than  anticipated. He also said “there remains scope for spare capacity to be used up before policy is tightened”. He went out of his way to remind us the Bank wants to see a good recovery and does not wish to take action which is too early or too tough which could damage the progress being made.

He drew attention to fast rises in house prices. He said the Financial Policy Committee of the Bank and the banking regulators would seek to prevent a mortgage inspired house price bubble. New rules have already come in making it more difficult for people to obtain a mortgage, and further  action is planned to prevent banks being too expansionary in the mortgage market and to prevent people borrowing too much money to buy a property. He does not think the interest rate weapon is the right one to tackle this issue.

The Governor’s speech also drew attention to two longer term weaknesses of the UK economy. He pointed to the large balance of payments deficit, and to the need for more business investment spurring productivity growth. He inclined to an optimistic view of how the UK will respond to these challenges. He thinks in due course as the rest of the advanced world recovery gathers pace there will be more opportunity for UK exports. He also hinted that the current strong pound may reverse at some stage if the current account does not correct naturally. Business investment is now picking up and may in due course raise productivity. As I have commented before, the decline in North Sea oil output and the movement  of high earning people in financial services to lower tax jurisdictions has of course hit the productivity figures.

He did not comment on one obvious reason for a poor balance of  payments performance – high energy prices and shortage of domestic energy. The UK is importing increasing quantities of high energy using products, and is importing more electricity from France and other energy from abroad. Cement, for example, is often now imported despite the high transport costs because UK production is so expensive given energy prices here.

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  1. Lifelogic
    Posted June 15, 2014 at 5:45 am | Permalink

    As you say we need to get cheap energy and get rid of Cameron’ s greencrap subsidies for Wind, PV, and electric & even Tesla cars are clearly hugely damaging. Not to mention the absurd toy windmills in non windy Notting Hill drivel.

    We need to open up the mortgage market, the current regulations are a pain with plenty of sensible mortgages being refused for idiotic reasons. Slow and poor mortgages decisions are now a huge problem. Another huge problem is bank advertising rates that they hardly even give, and credit reference agencies seem to get away with rather a lot of activities that are can restrict people shopping around. There activities surely need looking at.

    Rates clearly should be rather higher already but the Government wants to keep them low until May 7th for electoral reasons, hence these idiotic ill designed, delaying mortgage restriction and ill thought out slotting system for bank capital rules, Often resulting in pointless and expensive revaluations having to be carried for no good reason at all.

    Lack of banking competition still means we get large bank margins on much lending and a general lack of lending flexibility.

    Cut out the middle man rip off banks seems to be the best advice.

    • Bazman
      Posted June 15, 2014 at 8:19 am | Permalink

      Maybe you should have look at the costs and subsidies given to the fossil fuel industry. How many KW do you think it takes to make a gallon of petrol for example or the Swanson effect in solar panels. Harrumphing and deluded ranting without facts is not scientific. Take a look at more serious green sites such as Treehuger for facts that you will sometime like and others you will not as they do not fit yours and others deluded and simplistic world view.

      • Jerry
        Posted June 15, 2014 at 12:25 pm | Permalink

        @Bazman: “Maybe [Lifelogic] should have look at the costs and subsidies given to the fossil fuel industry. [..//..] Take a look at more serious green sites such as Treehuger for facts”

        I think his point is about reliability and availability. As for your comment about ‘scientific facts’, the only people who are deluded are those who think that PV generates electricity during the hours of darkness (of which there are many more hours than daylight during a British winter) or that wind-turbines work when the wind is not blowing or when it is blowing to strongly. Yes energy can be stored but that cuts into the efficiency of a technology used and as yet there is no cheap or efficient means to store electricity at the pre-distribution voltage/amps needed.

        Ever wondered why so many pro-renewable websites cite summer efficiency readings for Wind and PV when attempting to prove that peak demand can be obtained?!…

        Of course people need to take note of the raw principles of physics, but not the hyperbolic spin from either side so often found on websites with a predefined agenda – go dig out your old school text-books, the laws of physics have not changed, just technoligy.

      • Mark
        Posted June 15, 2014 at 1:32 pm | Permalink

        Perhaps you could identify a subsidy given to the fossil fuel industry: all I see is endless taxes. Otherwise, the industry is allowed to offset its costs of production against revenues to get to taxable profits – which for oil and gas are taxed at higher rates than any other form of production.

        • A different Simon
          Posted June 15, 2014 at 9:35 pm | Permalink

          Some of the publicly listed oil and gas majors which are household names in the UK are slashing R&D and exploration in order to maintain dividends to investors .

          They are either losing money or making so little that nowhere near enough is being reinvested in the business .

          Fund manager Neil Woodford recently drew attention to this .

          There might be a glut over the next decade or two but the cutting back on investment now will probably trigger a shock somewhere down the line .

          Alex Salmonde and the shadow chancellor talk as if the upstream oil and gas industry was a cash cow yet overall it is barely profitable at $100/bbl .

      • Lifelogic
        Posted June 15, 2014 at 2:15 pm | Permalink

        Bazman you mean how many Kilo Watt Hours (a measurement of energy) not how may Kilo Watts as the latter is a unit of power not energy and so would be totally meaningless in the context you put it.
        This is a common BBC reporter mistake as they are all arts grads.

        Fossel fuels are taxed not subsidised, almost without exception. So called renewable energy is nearly always subsidised or no one sensible would do it, other than in a few unusual environments.

      • Edward2
        Posted June 15, 2014 at 4:11 pm | Permalink

        Well heres some facts Baz
        Over 80% of energy used in Europe comes from fossil fuels, ie oil gas petrol.
        All your windmills pv panels etc are just a useful but heavily subsidised bit players.
        Tell us just what these “costs and subsidies” are that the fossil fuel industry enjoys whilst your lights and computer still has power.

        • APL
          Posted June 16, 2014 at 6:56 am | Permalink

          Edward2: “Tell us just what these “costs and subsidies” are that the fossil fuel industry enjoys whilst your lights and computer still has power.”

          Ten to one he means tax breaks, rather than subsidies! The economic illiteracy of the left is a marvel to behold.

          • Edward2
            Posted June 16, 2014 at 11:33 am | Permalink

            I expect you are right apl.
            These are the same tax breaks which are available to all companies in all industries.
            The oil exploration, refining and sales industries are one of many wealth creating, risk taking, big employing and huge taxation paying sectors of our economy the left and the greens hate with a passion.

          • Bazman
            Posted June 17, 2014 at 6:05 pm | Permalink

            They are no the same tax breaks by any means and in fact are massive subsidies and add to that the cost of pollution, global warming, massive defence costs and many more. As I have said you are deluded if you believe oil is not subsidised more than any other industry. Frightened to Google ‘oil subsidy ain’t we? Do tell us why? Will it effect your delusion?

          • Edward2
            Posted June 17, 2014 at 6:48 pm | Permalink

            I presume baz that you feel equally indignant that the food industry is susidised as it pays no VAT.

          • Bazman
            Posted June 18, 2014 at 4:23 pm | Permalink

            The food industry pays no VAT? Next you will be telling us their is no VAT on food. Most foods are VAT rated. Yes they are. Maybe not the basic ingredients often not, but most prepared foods and takeaway restaurant foods are as well as chocolate, beer, snacks and so on. Get real.

          • Edward2
            Posted June 19, 2014 at 10:43 am | Permalink

            Pedantic nonsense there is no VAT on food
            So I assume you feel this is a subsidy.

          • Bazman
            Posted June 19, 2014 at 6:28 pm | Permalink

            Tell that to supermarket shoppers who buy any food that has somehow been processed or any takeaway eater. Including sandwiches How many millions do this every day and you are telling us this is not food? The pedantry lies with you. Check your facts you the the internet to do this.

      • Bazman
        Posted June 16, 2014 at 5:24 pm | Permalink

        If you all think the oil industry is in no way subsidised then you are all deluded and there is no point in going into this further. Take a look. Ignorance does not mean you can own the facts. As for lifelogic getting all pedantic about KW/h in which I forgot to add the ‘h’. Thsi idea that energy take no energy to produced is not answered by him and should be included in the true cost of fuel and in the carbon trail. The spin from Treehuger is that it promotes sustainable and renewable energy. Often taking down claims that some energy sources are this when they are not and often review their view when product or process improves. Ignorance and bias does not t trump this. With Google so easy to search there is no excuse for this. No subsidy to the oil industry? As if. Next you will be telling us all tax cuts pay for themselves.

        • Jerry
          Posted June 17, 2014 at 7:16 am | Permalink

          @Bazman: “If you all think the oil industry is in no way subsidised then you are all deluded and there is no point in going into this further.”

          In other words you can’t actually back up your assertions, not even defend them, am I correct?

          “Take a look. Ignorance does not mean you can own the facts.”

          Anyone have a clue what that is meant to mean?

          “As for lifelogic getting all pedantic about KW/h in which I forgot to add the ‘h’.”

          It was not being pedantic, your error completely changed what you were saying!

          “Thsi idea that energy take no energy to produced is not answered by him and should be included in the true cost of fuel and in the carbon trail.”

          Wow, a perfect example of the pot calling the kettle black, when ever has the true carbon train ever been acknowledged for renewable, or do all those windmills grow out of the ground, were the hell do you think all the silicon etc. comes from to manufacture PV panels.

          “With Google so easy to search there is no excuse for this.”

          Wrong, first you need at least an understanding in science, especially physics, without that how will you know that what you read after your Google search is correct and not spin or outright lies. Just because it’;s on the internet doesn’t mean it is correct, and sadly this now also applies to academic site, thanks to UEA.

          “Next you will be telling us all tax cuts pay for themselves.”

          They do, as was proved under both the Thatcher government here in the UK and Reagan in the USA.

        • Edward2
          Posted June 17, 2014 at 7:48 am | Permalink

          No facts about your subsidies claim not even one to support your opinion, just further posturing and vauge assertions.
          How sad Baz.

          • Bazman
            Posted June 19, 2014 at 6:29 pm | Permalink

            Have you looked at Google yet? Oh no! You will be ruined if you do!

    • Hope
      Posted June 15, 2014 at 8:21 am | Permalink

      Not sure about importing high energy, the useless Davey has been asking business to stop using electric and use their diesel powered generators at high cost to the tax payer while not saving CO2 emissions. Why close our perfectly good coal fired power stations? Wind is not reli able and it does not work. Is the government completely stupid? Interest rates will increase slightly before the elections as a boost for the coalition before they are booted out of office.

      I read Cameron making bold statements again, this is getting rather boring. He huffs and puffs and makes a U-turn or fails to act on why he says. What message does it send when most people realise the government is diluting our nation state to become a region of Europe? Does he think Islamic fundamentalists do not see this as well? Who banned wearing a cross in the work place and allows the burka, niqab to be worn. It has no place in our open society it should be banned.

      • rick hamilton
        Posted June 16, 2014 at 1:50 am | Permalink

        “Is the government completely stupid?”

        Not in terms of individual academic achievement or IQ but there is some sort of groupthink, or the madness of crowds, which drives them to adopt policies that seem to be specifically and perversely designed to be not in the best interests of the country. Perhaps it is called ‘ The EU ‘.

        • Lifelogic
          Posted June 16, 2014 at 6:42 am | Permalink

          Indeed the sort of mad “group think” that encouraged John Major as Chancellor to take us into the absurdly idiotic ERM and then keep us there with 17%+ mortgages until the inevitable collapse, costing thousands of jobs, loss of homes and lives destroyed.

          Still no apology I note from this dreadful man, now a common BBC “thinker” and “wise” on everything sage I note.

          Or made nearly all the MPs vote for the bonkers Climate Change Act.

  2. Lifelogic
    Posted June 15, 2014 at 6:05 am | Permalink

    You say “He did not comment on one obvious reason for a poor balance of payments performance – high energy prices and shortage of domestic energy.” and this is by actual government design with the bonkers Climate Change act and Ed Davey religion types all over the place.

    The other reasons are taxes being far too high, too complex and with GAAR almost random, the state sector being twice the size it should be and very inefficient too (as we see at the passport office, the NHS and everywhere else almost), the lack of competitive banking, the restrictive planning, bonkers employment rules, bat and other such laws, a poor expensive and uncertain multi level legal system, a total lack of vision and working compass from the top and Miliband shortly to boot.

    • Bazman
      Posted June 15, 2014 at 8:24 am | Permalink

      Cutting the state sector in half? Who would fill the gap? The private sector or would we just have to be a in regressive state for your deluded dogmatic views? As you live in a secret tax haven with perfect weather and government maybe we should model our country on this.

      • Lifelogic
        Posted June 15, 2014 at 2:19 pm | Permalink

        Well half of them do little of any use, many do positive harm and many are mainly concerned with propagating propaganda , so few would notice much difference. Also they are paid with pensions 150% of the private sector so you could cut 1/3 off there.

        • Bazman
          Posted June 16, 2014 at 5:25 pm | Permalink

          Deluded non factual nonsense made up by yourself to sell as black propaganda. Like most of what you write.

      • Edward2
        Posted June 15, 2014 at 4:29 pm | Permalink

        Baz likes the words “deluded” and “denier” and uses them as insults.

        They have of course, very sinister historical connections to evil socialist regimes that terrorised their citizens by accusing them of being mentally ill if their views were incompatible with the stated politically correct views of their ruling elite.
        The idea is to close down discussion and debate and shut up those who dared to oppose them.
        Only one view is allowed, only one view is to be tolerated, so off with you on the cattle trucks, to the re-education facilities.

        • Bazman
          Posted June 16, 2014 at 5:31 pm | Permalink

          Maybe you should look at modern conservatism and why the right embraces ignorance as a virtue. Boris Johnson close to home and many on the right in America who believe that science is just silly and they alone own the facts. The thing is, shameless lying and ignorance works surprisingly well as a debate tactic. It’s hard to argue with someone who not only has signaled that he doesn’t care what the truth is but is downright proud of how little he actually knows. Such a person is not amenable to being educated. Once the pretense of really caring one way or another about what is right and what is wrong has been abandoned, all avenue of discourse is shut down. Right wing middle aged men are very prone to this and will tell you that you are to young to know anything or you are an old git. Or that anything is an opinion. Even the fact that the sun will rise tomorrow was once claim to be “Only my opinion” By a guy in a pub. LOL! I met a fool.

          • Edward2
            Posted June 17, 2014 at 7:52 am | Permalink

            Whats Boris got to do with it?!
            More ranting nonsense.

          • Bazman
            Posted June 17, 2014 at 6:15 pm | Permalink

            Boris Johnstone is a harrumphing anti factual and anti intellectual figure who plays the buffoonery card at any opportunity as career move. Interesting to see how far this would get him in a real debate in parliament. Ripped to shreds for sure, but I’m sure the deluded right would love him anyway as they believe they own the facts.

          • Edward2
            Posted June 18, 2014 at 2:12 pm | Permalink

            Same as some deluded ranting hard left politicians I could mention, who get more than their fair share of the media spotlight without any real cross examination of their views.

      • waramess
        Posted June 15, 2014 at 5:16 pm | Permalink

        Deluded dogmatic views Bazman? Well you would know quite a lot about those, wouldn’t you?

        Were the State to increase its expenditure to 100 percent and everything was free at the point of consumption would that make you happy?

        More particularly would the State be unable to reduce it’s spending because of the fear that the by now non-existent private sector would not be able to take up the slack?

        Lifelogic is absolutely right. Government spends our money in the most inefficient way and thereby contributes to poverty.

        But then I suppose you still think government manufactured tractors are the way forward

        • Bazman
          Posted June 17, 2014 at 6:18 pm | Permalink

          The state sector would never be able to take up the slack in any modern society. Cherry picking the most easy and lucrative contracts to be guaranteed profits from the state is not the free market except in your dream world. You think that we should just except this massive hole and be happy? Third world economics. Move to Russia if this is what you want. You would not last a week.

  3. Mike Stallard
    Posted June 15, 2014 at 6:29 am | Permalink

    If the government is in debt to the amount of twice its tax intake, how can interest rates go up?
    Answers please!

    • Lifelogic
      Posted June 15, 2014 at 7:00 am | Permalink

      The government are already paying 2.74% for ten year money and 3.47% for thirty.

    • acorn
      Posted June 15, 2014 at 5:02 pm | Permalink

      Because there is little direct connection between Treasury debt and BoE interest rates.

      • petermartin2001
        Posted June 16, 2014 at 12:34 am | Permalink

        Yes, The so-called independent BoE can set base rates, via the overnight rate, at whatever it likes. Longer term interest rates are set by the price of longer term gilts set at auction.

        The problem with raising interest rates right now is not so much the level of interest that the Government needs pay. It can pay whatever interest it needs to pay with no problem at all. The problem is that it will likely set off a new recession just like happened in the early 90’s when rising interest rates triggered the end of the Lawson boom.

        That probably will happen but politically it needs to be after the election and not before.

    • APL
      Posted June 15, 2014 at 8:10 pm | Permalink

      “If the government is in debt to the amount of twice its tax intake, how can interest rates go up?”

      Interests rates can go up. It’s just that the government ability to pay the bill can only decrease.

      As the government isn’t making any attempt to reduce the deficit, the deficit mind you, not the debt. It’s simply a matter of time before we join Greece and Spain in European Union.

  4. petermartin2001
    Posted June 15, 2014 at 6:33 am | Permalink

    Dr Redwwod,

    Governor Carney and other have mentioned what you refer to as a ” a poor balance of payments performance ”

    In other words, the country imports more than it exports. There hasn’t been a trade surplus since 1986. At one time trade figures were regular features of the financial news. No-one seems to care much now.

    According to the rules of conventional economics any country running a deficit will issue more of its own currency into international markets than international buyers will need to buy to fund its purchases of products from the UK. So the value of the currency falls and equilibrium is restored as sales in and out of the country are equalised.

    So why doesn’t this happen now? The simple answer is that the Government sells government bonds to foreigners. When the sale of the bonds is included everything does balance, as it must.

    So I would just ask Dr Redwood, if the Government genuinely wants a reduced external deficit, why doesn’t it sell fewer bonds?

    A reduced external deficit will also stop the draining of money from the economy which will mean the government does not need to put so much in itself. ie It will be able to get closer to a balanced budget.

    • acorn
      Posted June 15, 2014 at 4:28 pm | Permalink

      There is a confusion with words here. There is no such thing as a “large balance of payments (BoP) deficit”, the BoP balances by definition. There is a BoP Current Account deficit which is balanced out by the BoP Capital Account. The positive Capital Account is because the rest of the world runs a positive financial balance against our, mainly, net importing of goods and services which causes the negative BoP Current Account.

      The system has to balance. For instance Q4 of last year, the UK private sector was saving 2% of the government’s deficit. The rest of the world was saving 4% of the government’s deficit. Hence the government’s deficit was 6% of GDP. The rest of the world flogged us boat loads of 60 inch TVs; I pads; Gas Turbines and spare parts for washing machines etc etc. They end up with a load of Pounds Stirling sat in a UK Bank. So they either buy another mansion in Chelsea; or, they convert it to their own domestic currency to pay the wages back home. If they start selling loads of Pounds, the price of Pounds drops and we cut back on buying those 60 inch plasmas cos the price in Pounds is going up. Balance again.

      The strange bit is that the Governor of the BoE, appears to be taking over “fiscal policy” – from Osborne – as well as doing his day job for “monetary policy”. For instance, setting rules for a mortgage loan to value, is normally done in legislation by the Chancellor via parliament. “He does not think the interest rate weapon is the right one to tackle this issue”. Funny, next door’s dog knew that. Osborne’s austerity master plan has been blown out of the water. It is looking like the Governor has been asked to do a snow job on “austerity”

      • petermartin2001
        Posted June 15, 2014 at 9:07 pm | Permalink

        the UK private sector was saving 2% of the government’s deficit. The rest of the world was saving 4% of the government’s deficit. Hence the government’s deficit was 6% of GDP

        Yes that’s exactly right!

        I suppose it is arguable whether the cause of the 4% external deficit is the 6% government deficit , or vice versa, but it makes no sense to consider that the 6% deficit can be fixed (if indeed it can be considered to be such a problem) solely by taxation and spending adjustments. That’s the mistake the EZ countries are making and needllessly running down their economies in the process.

        The external deficit also needs to considered. The only way to fix that is to lower the exchange rate. If that is what the Government wants it should say so, but I’d prefer it as it is even though it means running a 6% budget deficit. Or even higher if people start to increase their savings!

      • Mark
        Posted June 16, 2014 at 10:35 am | Permalink

        What was happening prior to the financial crash was that the deficit was being financed by higher bank loans from abroad, which were in turn inflating property prices. At the peak, according the the World Bank/IMF JEDH data, the UK’s gross external debt reached $12 trillion. It then contracted sharply as these loans were not rolled over, being replaced by emergency domestic lending from the BoE (QE, Special Liquidity Scheme etc.), and also by a general contraction in lending globally, matched by asset writedowns. At the end of 2013 it remained at $9.4 trillion, a level of comparative stability over the life of this government, but still rather more than double the $4.6 trillion at the start of 2003 (the earliest data point in the JEDH data), and a frightening multiple of GDP on which interest is being paid abroad.

        • petermartin2001
          Posted June 16, 2014 at 1:50 pm | Permalink


          Are you referring to the private sector debt or public sector debt? They are generally inversely related. For example if you were to receive a £100 tax rebate the public debt would increase by that amount and your debt, which is part of the total private debt would decrease by the same amount. But having said that the non-government sector overall are well in credit. In fact, to the exact amount, to the penny, that the government are in debt!

          If you were to receive a £100 tax bill then of course it is the other way around.

          If you do mean the public sector deficit there is no need for Government to borrow money from anywhere. All Pounds, unless they are counterfeit, originate under Government control in the UK. No-one else is allowed to create ££. If you do mean the private sector’s debts then these are generated largely through the process of bank lending. All banks do is edit customers accounts upwards when they lend money. They don’t need to borrow money from anyone to do that. Just google the phrase “banks create money from thin air” for some discussion on this point. Not all of it is quite right though!

          • acorn
            Posted June 17, 2014 at 7:08 am | Permalink

            Plus, it is only the external debt denominated in foreign currency that matters because of adverse exchange rates. The NET external debt is quite small we have a similar amount of external assets.

            Any debt denominated in Pounds Stirling is always repayable; the UK can’t go broke in Pounds Stirling because we are the people who issue (spend) it into existence. It doesn’t matter who or where Stirling debt is being held, foreigners or not.

  5. Denis Cooper
    Posted June 15, 2014 at 7:22 am | Permalink

    The problem we have with house prices springs from the ingrained attitude of our political establishment. Whatever they may sometimes say to the contrary they relish rapidly rising house prices as creating an illusion of prosperity, and similarly the mass media are far more inclined to treat the rising cost of putting a roof over your head as A Good Thing while the rising cost of food or fuel or transport is obviously A Bad Thing, in fact all those may even contribute to A Cost Of Living Crisis.

    Nor is this restricted to the Tory party, I recall Brown boasting about how much house prices had risen under the Labour government, and of course he changed the inflation target from one expressed in terms of our RPI-X to one expressed in terms of the EU’s CPI which is much less affected by the costs of housing.

    Until politicians decide that house prices should on average rise no faster than general inflation plus a small margin, and devise the tools to achieve that, we will continue to have an unbalanced economy where investing in houses is generally a more attractive proposition than investing in productive assets.

    • lifelogic
      Posted June 15, 2014 at 8:49 am | Permalink

      It is not up to politician to decide the price of houses not can they. The market, supply and demand does that, just as it does with the price old masters, sugar or antique furniture. Just cut the population or build more flats and houses. There seems to be no shortage of land for free range pigs, chickens, subsidised sugar beet, horses, cows and countless other things. What have we got against housing for people?

      We can go up or even down. Gardens can be far more environmental, useful and pretty than fields of sugar beet, pigs, polly tunnels, potatoes, rape seed, industrial farming or the latest absurdity fields of government inspired expensive & totally pointless PV cells.

      Sort out planning, relax the daft OTT greencrap building regulations or cut the population. Mortgage tinkering is not really the answer.

      • Max Dunbar
        Posted June 15, 2014 at 12:58 pm | Permalink

        Cutting the population is obvious but of course the opposite is promoted in the name of insane economics.

      • Jerry
        Posted June 15, 2014 at 1:05 pm | Permalink

        @Lifelogic: “It is not up to politician to decide the price of houses not can they. The market, supply and demand does that”

        Are you seriously suggesting that if a government were to flood the market by announce a 1950s style express program to build 50m new homes (for rent or sale) in all areas of the country that it would not impact on the general housing market!

    • libertarian
      Posted June 15, 2014 at 9:33 am | Permalink

      Denis Cooper

      I didn’t have you down as a socialist Dennis. The Government setting the price? What about the market setting the price. The amount of utter chuff talked by otherwise highly intelligent people about the housing market is unbelievable. Doesn’t any one live in the real world anymore ?

      • Denis Cooper
        Posted June 15, 2014 at 11:25 am | Permalink

        Not a socialist, but that doesn’t mean I’m always against any government intervention in markets as a matter of principle. And in this case there are already very extensive government interventions in the market, not least through its policy of allowing and encouraging mass immigration.

        • libertarian
          Posted June 15, 2014 at 9:35 pm | Permalink


          Exactly, so rather than even more deluded government interference in markets, what say we just get the govt out of the way altogether ?

      • Jerry
        Posted June 15, 2014 at 1:22 pm | Permalink

        @libertarian: “Doesn’t any one live in the real world anymore”

        Apparently not, judging by the amount of utter chuff talked by otherwise highly intelligent people about the housing market, anyone would think that having a roof over ones head was a privilege and not a basic requirement of a functioning society (the need to have a fixed address and all that..). Houses are first and foremost a place to live, not a part of ones portfolio of investments towards a comfy retirement…

        • libertarian
          Posted June 15, 2014 at 9:39 pm | Permalink


          Not sure what point you’re trying to make. However agree totally about housing being a necessity so therefore without investments in property portfolios where would the private rental market come from? That aside there is not a real shortage of affordable housing in the UK as one search of Right Move, Zoopla and Prime Location will show you. The problem is only a major problem in London and South East and one or 2 other highly desirable areas. Its called supply and demand. Its ALWAYS been that way and always will be

          • Jerry
            Posted June 16, 2014 at 8:18 am | Permalink

            @libertarian: “therefore without investments in property portfolios where would the private rental market come from”

            That assumes that there has to be a vast private rental market, the BTL market in the last 20 years has go totally out of hand in my opinion and is now causing its own problems.

      • A different Simon
        Posted June 15, 2014 at 3:22 pm | Permalink

        The Govt sets interest rates , restricts supply and pays housing benefit .

        QED the Govt already sets the price of housing .

        Countries like Malaysia restrict ownership of property below a certain value to Malaysian citizens .

        British citizens need the same protection , especially if they are to have restrictions placed on their borrowing that foreign buyers don’t .

        • A different Simon
          Posted June 15, 2014 at 3:24 pm | Permalink

          PS the Govt promotes mass immigration and directs public money into mortgage guarantee schemes too .

          Also refuses to move the burden of taxation from work and industry onto land .

      • Anonymous
        Posted June 15, 2014 at 7:15 pm | Permalink

        Libertarian – The housing market is affected by:

        – welfare-to-landlord buy-to-let setting high house values in areas of low wages
        – mass immigration
        – foreign speculators free from paying capital gains tax
        – the instruction to bailed out banks not to foreclose on distressed buyers (please correct if wrong)
        – record low interest rates

        Are you sure that government has no influence in house pricing ?

        • libertarian
          Posted June 16, 2014 at 12:05 pm | Permalink

          Dear Anonymous,

          No I’m absolutely sure the government interferes with the housing market which is why the solution ISN’T more government interference.

          • Bazman
            Posted June 19, 2014 at 6:32 pm | Permalink

            It interferers by not building and relying on the private sector which historically has never been able to meet demand. The solution being to pay landlord massive rents and the rest can suffer.

    • Bob
      Posted June 15, 2014 at 7:02 pm | Permalink

      @Denis Cooper

      With an open door to 485 million people and an obligation to provide free housing for all comers, demand for housing will continue to increase.

      It’s not rocket science.

  6. Denis Cooper
    Posted June 15, 2014 at 8:02 am | Permalink

    Off-topic but topical:

    Magna Carta Day, and there was a weird item on the TV news about Cameron planning to use the 800th anniversary next year to tell immigrants to be more British.

    The correspondingly weird thought ran through my mind: is this something else that his LibDem coalition partners won’t allow him to do now, so he has to make another “jam tomorrow” promise that if we vote Tory at the next general election and he continues as Prime Minister then he will do it next year?

    Incidentally, JR, are you aware of what your colleague Daniel Hannan is saying:

    In which case, if the referendum would be on the existing EU membership terms without any significant changes having been achieved through the proposed renegotiation, could Cameron not have promised that back in November 2009 rather than just caving in over the Lisbon Treaty as he did, and as a consequence probably have won an overall majority in May 2010, and then held that referendum later in 2010?

    Reply Mr Cameron has not dropped the idea of renegotiating our relationship. The position remains as before – the vote for In/Out will be on whatever emerges. If little emerges as some forecast then more people are likely to vote for Out.

    • Old Albion
      Posted June 15, 2014 at 12:20 pm | Permalink

      Quote … Magna Carta Day, and there was a weird item on the TV news about Cameron planning to use the 800th anniversary next year to tell immigrants to be more British.

      Never mind ‘Britishness’ it’s about time Cameron spoke of ‘Englishness’
      The ‘Magna Carta’ was and is English.

    • Timaction
      Posted June 15, 2014 at 12:38 pm | Permalink

      This argument about renegotiation has become tiresome to the point of ridiculous. In order to renegotiate the other 27 have to agree Treaty change. There is no wish on their part to do so. They want a United States of Europe. Our President Barosso and our Chancellor Merkel have also ruled it out. Therefore there cannot be a renegotiation without treaty change and agreement and it certainly cannot be done in the timeframe. It is a complete red herring to fool the people as always with the legacy parties to kick the problem down the road whilst more power is ceded to our EU Government.
      Lots of stories of late how the mass migration project of the last 50 years by the legacy parties benefits the British people, particularly the English. NOT. It was always going to end in tears.
      A Prime Minister who has allowed the EU arrest warrant to supersede Habeas Corpus and introduced Gay marriage after millennia of stability with no mandate?
      The legacy parties have to be removed to restore sovereignty and democracy to these shores. Then we can control the quantity and quality of those who come here and lock out and remove those who cause us problems.

      • APL
        Posted June 16, 2014 at 7:03 am | Permalink

        Timeaction: “Therefore there cannot be a renegotiation without treaty change ”

        Even when there is a treaty change that would reasonably be thought to trigger the conditions to require renegotiation, Cameron and his ‘Tory’ Quisling party call it something else and play down the nature of the change the EU wants to implement.

        Timeaction: “A Prime Minister who has allowed the EU arrest warrant to supersede Habeas Corpus”

        Is acting ‘ultra vires’, illegally and unconstitutionally. Conveniently for John Redwood, who supports the unlawful actions of his Leader, John claims there is no English constitution and thus our ‘Parliament’ can do whatever it likes.

        Reply I oppose giving away the Criminal justice powers! Of course Parliament can do so if it wishes, and courts here and abroad would upho0ld such a sacrifice of power.

        • APL
          Posted June 16, 2014 at 8:36 am | Permalink

          JR: “Of course Parliament can do so if it wishes, and courts here and abroad would upho0ld such a sacrifice of power. ”

          1. So John Redwood admits he thinks there is no restraint on the actions of the executive in Parliament.

          2. The ‘courts’, I presume you mean the ‘supreme’ court or the ECJ, the former can have its decisions overturned by the ECJ, so supreme doesn’t actually mean Supreme. The latter is an organisation sitting in judgement on its own interest – to further its own power and influence.

          As such it is biased and prejudiced, therefore not an impartial ‘court of law’.

          But still, John Redwood seems to agree, there is no Constitutional restraint on Parliament.

          Ergo, Parliament is nothing more than a platform for the autocracy, where he who carries the biggest stick gets his own way.

    • Brian Tomkinson
      Posted June 15, 2014 at 1:17 pm | Permalink

      Reply to reply,
      I note that you disagree with your MEP colleague. Cameron will be pleased that you are sticking rigidly to the party line, because if Hannan is correct there is no reason for having to wait until 2017 for a referendum.

      Reply I am not sticking to the party line, I am trying to tell you the truth as I see it. Mr Cameron can and will do nothing prior to the election because he does not have a majority. He remains pledged to renegotiate and will do so. What comes of that remains to be seen,and anyway leads directly to a referendum.

      • Jerry
        Posted June 15, 2014 at 9:51 pm | Permalink

        @JR reply:

        So does that mean. post the 2015 election, if Cameron starts the renegotiating process and it become very obvious that he is getting nowhere because a majority of the EU member states are digging their heals in would he (be willing) to bring forward the referendum or is 2017 a line in concrete that can’t be moved?

        Reply He could bring it forward

        • Leslie Singleton
          Posted June 16, 2014 at 8:34 am | Permalink

          Reply to Reply–Dear John, This is another of them meaningless truths. Of course he COULD, but you know full well that the chances of his doing that are a joke–FAR FAR more likely that he will say more time is needed and the argument is slowly moving his way (Remember “Subsidiarity”?) and all the rest so best to move the crunch another few years out. I’d put money on precisely that happening.

          • Jerry
            Posted June 16, 2014 at 1:37 pm | Permalink

            @Leslie Singleton: Oh for pity sake, give the bloke a chance, indeed anything could happen, until we know what will or has happened all you are doing posting hyperbole opinion!

            Not only that but you still seem to be smarting about not getting a vote on Lisbon even though by the time Cameron could have legislated for a referendum ratification was a done deal – at no time did he, at that time, promise an In/Out referendum, which is all a vote that that time could have been considering de-ratification of the Lisbon Treaty would have resulted in exit from the EU.

          • Denis Cooper
            Posted June 17, 2014 at 9:12 am | Permalink

            Jerry, the bloke has already had many chances.

          • Jerry
            Posted June 17, 2014 at 3:17 pm | Permalink

            Denis, no he has not, you seem to be forgetting that Cameron is the PM of a coalition and that the other member is very pro the EU, so unless your idea is to use a general election as a In/Out vote…

          • Denis Cooper
            Posted June 19, 2014 at 12:26 pm | Permalink

            Jerry, yes he has, you seem to be forgetting that Cameron blagged his way into becoming leader of the Tory party in December 2005 and had plenty of chances before May 2010 when he could start to use the LibDems as an excuse.

    • matthu
      Posted June 15, 2014 at 8:34 pm | Permalink

      The realo problem though is that Cameron, Milliband, Clegg, BBC and all the mainstream newspapers will be clamouring to stay IN the EU at any price.

      The truth will get twisted, just as it was last time around and the real issues will get subverted so we end up talking about almost anything BUT our loss of freedom, democracy and competitiveness.

      • Jerry
        Posted June 15, 2014 at 10:04 pm | Permalink

        @matthu: “The truth will get twisted, just as it was last time around”

        Not so sure, unlike last time there is now a thing called the internet, the fact is people can now talk directly to interested voters without going through the MSM or official party channels. A political party can now not only survive and expand but campaign elections without ever getting any MSM exposure beyond the statutory minimum requirement under the election laws.

  7. Andyvan
    Posted June 15, 2014 at 8:03 am | Permalink

    Carney will not raise interest rates much if at all. The biggest reason is that his political masters have turned the government into the biggest debtor of all. If rates went up to 10% or even 5% the alleged recovery would be exposed as the sham it is and the nation’s finances would become a disaster zone for all to see.
    They would be forced to make real cuts in public spending not just talk up some minor accounting changes as George has done so well. The political fallout would be huge but in the long term it would be the best thing that could happen. Massive cuts in government, the end of political careers, a debt default and complete loss of faith in the economic mumbo jumbo that passes for informed debate today. Bring it on.

  8. Leslie Singleton
    Posted June 15, 2014 at 8:50 am | Permalink

    I think it ridiculous that rates have been held so ridiculously low for such a ridiculously long time; but then I think most things that get said about Economics are ridiculous. Seems to me obvious that the Government wants house prices to be going up nicely as the Election looms and to Hell with the obvious boom that has already obviously started. Getting ahead of the curve doesn’t get a look-in. I am sure I remember that (admittedly some time ago) the long term rate of Growth of the British Economy was 2.7% and if I read it correctly the recent projection (Yes I know, from a low base), from the ICAEW though that matters not, is for 3.4% yet all we hear about is protecting the poor darling fledgling recovery. Fuel on the fire more like. Instead of hints and innuendo rates should be raised say 2% forthwith. Nowhere is it written that the Economy should catch up lost ground and certainly not in a hurry.

  9. Colin
    Posted June 15, 2014 at 9:22 am | Permalink

    “New rules have already come in making it more difficult for people to obtain a mortgage, and further action is planned to prevent banks being too expansionary in the mortgage market and to prevent people borrowing too much money to buy a property.”

    Frankly, I despair of the halfwits who seem to be running this country now. The problem with rising house prices is that people can’t afford to buy a house. This problem is not going to be solved by making it even harder for people to buy a house. The solution is to build more houses, and that requires reform of our Communist planning laws.

    For the amount of money we’re paying this Carney person, you’d think we could expect at least a passing acquaintance with reality, but it seems that’s no longer a requirement for high and lucrative public office…

    • A different Simon
      Posted June 15, 2014 at 3:27 pm | Permalink

      Colin ,

      Wasn’t it the availability of credit which drove house prices up so high ?

      High house prices have certainly impoverished us .

      Agree completely with you that the largest part of the solution is surely to stop restricting the supply side .

      • Colin
        Posted June 19, 2014 at 12:00 pm | Permalink

        “Wasn’t it the availability of credit which drove house prices up so high?”

        No, that’s nonsensical. Prices go up because demand exceeds supply. They do not go up just because people could afford to pay more. Many people could afford to pay £5 for a loaf of bread, but a loaf of bread doesn’t cost £5, because there’s plenty of bread available and no one’s going to pay £5 a loaf when they can get one for £1.

        Likewise, if you can get a house for £100k, why would you pay £200k? The credit expansion was a response to rising prices, not a cause of them – banks were willing to lend at 100% LTV or more because they knew prices would keep going up, due to the lack of supply.

    • Mark
      Posted June 16, 2014 at 11:10 am | Permalink

      The solution is to reduce the house price to income ratio. It will take a long time to do it through higher incomes, so house prices need to come down in real terms. The chief determinant of house prices is in fact the amount lenders will grant in mortgage size for a given property. This should be obvious when you consider that house prices have tripled since 1997, and so has the stock of outstanding mortgage debt (now £1,281bn), while the average occupancy ratio has actually fallen slightly to 2.3 people per dwelling. There is even less correlation between house prices and the rate of building.

      • Colin
        Posted June 19, 2014 at 12:04 pm | Permalink

        No, the chief determinant of house prices is the restricted supply. The reason house prices don’t correlate with the rate of building is government interference to restrict building through planning laws.

        I know some people have a quasi-religious commitment to blame “the bankers” for all our ills, but they’re just trying to make a living like the rest of us. The fact is that the government constantly interferes in markets, so the government is responsible for the results.

  10. margaret brandreth-j
    Posted June 15, 2014 at 9:43 am | Permalink

    I am glad he can see a recovery. I just ‘googled’ imported cements and find that it has been imported for many years before energy became so expensive?

    Reply We are now importing more

    • Bazman
      Posted June 19, 2014 at 6:34 pm | Permalink

      Like we do food, but that is not seen as a problem. Cement manufactures are more important?

  11. Bert Young
    Posted June 15, 2014 at 10:00 am | Permalink

    Firstly – ” Happy Birthday ” . I wish you well today and sincerely hope you put your feet up and enjoy a glass of wine !
    I did not listen to all of the Governor’s speech ; the bit I did hear I thought was shrewd , careful and , to some extent , politically modified . He , like the rest of us , must be concerned that the gap between exports and imports is as wide as ever and consumerism continues to balloon ; personal debt has gone out of the window . Our manufacturing enterprise has to concentrate on ” higher added value technical innovation ” to redress the import/export balance and , our services sector must increasingly emphasise international matters . These features ought to be incentivised by whatever means possible and EU intervention entirely discarded . You have rightly mentioned the high cost of energy as one of our underlying weaknesses ; raising our standards is our target come what may.

  12. behindthefrogs
    Posted June 15, 2014 at 10:01 am | Permalink

    What is needed is a downward pressure on house prices at the top end of the market particularly in London. This could be achieved by:

    1) Revising stamp duty not only to have a progressive without the curent large steps but also to increase the return at the top end.

    2) To ensure that all residentialsales are subject to capital gains tax including sales by foriegners and companies.

    3) Increasing the cost of ownership of large houses by introducing new higher bands of council tax and also the tax on unoccupied properties.

  13. John Wrake
    Posted June 15, 2014 at 12:00 pm | Permalink

    Dr. Redwood,

    I note that in all the comment about the economy, no-one seems to question the current practise of providing our currency by borrowing from private sources like the Bank of England, for which we have to pay interest, thus adding to the increasing National Debt, rather than following the example of the Bradbury Pound which was issued by The Treasury one hundred years ago this year as credit against the assets of this nation.

    Why is it that Parliament is unwilling to discuss this, though approaches have been made to a number of Members to raise the matter.

    Are you willing to raise the question yourself?

    John Wrake.

  14. StevenL
    Posted June 15, 2014 at 12:11 pm | Permalink

    I thought that 2015 interest rate futures over-reacted to Mr Carney’s speech. So I put a little bit of money on short term rates not changing very much between now and March next year. I’ve got a tenner on England to beat Sri Lanka too. But the real puzzle is who is going to win the world cup? I have to say I fancy the Germans at 13/2.

  15. Brian Tomkinson
    Posted June 15, 2014 at 1:59 pm | Permalink

    Shortage of domestic energy? Don’t worry your coalition colleague, Davey, has it all in hand; he is going to use our money to pay businesses to stop using electricity at peak times or allow them to generate their own with their own on-site generators (he doesn’t care if they are green or not just so long as he isn’t embarrassed when the lights go out). We know from what you have written that you cannot possibly support the absurdity of taking out efficient electricity generation, to be replaced, at additional cost and unreliabilty, by ‘renewables’ and then when it is clear the lights will go out applying such measures, adding insult to injury, at our expense. However, you are equally culpable because you support the coalition government.

  16. Neil Craig
    Posted June 15, 2014 at 2:24 pm | Permalink

    ” and the movement of high earning people in financial services to lower tax jurisdictions”

    Which is why a sane Scottish Executive would use its income tax lowering powers. In reality the SNP are much more likely to raise it.

    Scotland’s best chance is a serious UKIP representation in Holyrood – fortunately since it works on PR that is a decent bet.

    • APL
      Posted June 16, 2014 at 7:11 am | Permalink

      Neil Craig: “Which is why a sane Scottish Executive would use its income tax lowering powers. ”

      It’s interesting, the Scottish Parliament has had the ability to vary the income tax rate by +-3% since devolution. I presume they have not used it as the block grant to Scotland would be reduced by Westminster. However, Alex Salmond seems to have missed a potentially very popular trick just before the Referendum.

      It is also interesting how many supposedly knowledgeable influential people don’t know the terms of Labours devolution settlement.

  17. waramess
    Posted June 15, 2014 at 5:05 pm | Permalink

    A rise of between 3 and 5 percent by Christmas does not sound very measured to me.

    After all the mortgage overheating can be reigned in by increasing the amount of capital banks are required to hold against mortgages and that in itself would reduce the capacity of people to spend given that the “income” is not coming from escalating wage rises.

    It sounds like a very panicked Governor who wishes to appear measured. Remember the Jim Callaghans “Crisis? What crisis?” comment?

    A rise of this magnitude over such a short period would impact heavily on existing houseowners, the stock exchange, interest paid on Gilts and on bank stability.

    Could the panick have something to do with the anticipated second quarter balance of payments? The last two quarters have together shown a deficit of £45 billion and last seen the reserves were down to a very unrobust £72 billion.

    Could it be that the learned gentlemen in the various seats of power have realised rather late in the day that a consumption led recovery is no less than another bubble waiting to burst? Another import led expansion.

    Slack in the economy they wish. Slow the mortgage market and everything else slows and the slack will be seen to be an illusion.

    The move has everything to do with concern that a run on the pound is inevitable with every quarter that passes and the only two options are to pay overseas investors more to accept the risk or a humble application to join the Euro (God forbid).

    They will learn eventually that consumption does not drive production and hopefully that a devaluation has never increased net foreign income from exports.

  18. Gary
    Posted June 15, 2014 at 5:05 pm | Permalink

    We now know for sure that the banks, which are controlled by the BoE, misold insurance, misold mortgages, rigged Libor, gold and forex. So why should we believe a word coming from anyone out of that sector?

  19. Anonymous
    Posted June 15, 2014 at 6:59 pm | Permalink

    “He does not think the interest rate weapon is the right one to tackle this issue.”

    Interest isn’t a ‘weapon’

    Are we now saying that 0.5% is the new normal ? That to increase from here is to declare war on the rising housing market ?

    • zorro
      Posted June 16, 2014 at 8:39 pm | Permalink

      Interest rates are not the right weapon for the government as it will gave to pay more on its debt, that us why they are using MMR to make it far harder to get a mortgage. I am trying to remortgage on a place we have lived in for the last 10 years and the checks/paperwork are ridiculous! As I said before, from liar loans to lala land loans!


  20. Lindsay McDougall
    Posted June 16, 2014 at 12:33 am | Permalink

    I’m told that the UK economy will grow by 4% over the next year. That’s not sustainable, so for how much longer will there be ‘spare capacity’, which is notoriously difficult both to define and to quantify.

    The Governor needs to start raising interest rates NOW.

  21. Iain Gill
    Posted June 16, 2014 at 5:32 am | Permalink

    There is already a housing bubble.

    Houses in the UK are massively over priced.

    To claim anything else is madness.

  22. Neil Craig
    Posted June 16, 2014 at 8:36 am | Permalink

    Free markets + Cheap Energy = Economic growth

    At bottom nobody disputes this. Neither do our traditional political parties try to provide them. The exact opposite with energy.

  23. L Tanner
    Posted June 17, 2014 at 5:17 pm | Permalink

    1. There is no sustained recovery, except in the self-congratulatory world of ivory towers in London.
    2. Most people have not had a significant (if at all) wage rise in years.
    3. Costs are still rising, even petrol may take a hike shortly due to renewed conflict in Iraq.
    4. Even a minimal rise in interest rates might be enough to make many default on their mortgages.
    5. Even a larger rise in interest rates would not be enough to deter the London property bubble – you know why.
    The end result? Misery for masses, as you were for the haves.

  • About John Redwood

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

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