Will real incomes get badly squeezed?

It is now conventional wisdom amongst economic forecasters, pundits and many journalists that 2017 will see substantial price rises thanks to the fall in the pound, leading to a squeeze of real incomes. The recession many of them foresaw for this winter has in their minds just been delayed – and maybe moderated – into 2017 as they await the bad news they confidently forecast.

These gloomsters underestimate several trends. The first is they fail to acknowledge that more of the fall in the pound occurred between June 2015 and April 2016 than has happened since the Brexit vote. They need to tell us why shop prices were still down at the end of 2016 compared to a year earlier, when over a year had already passed from a substantial fall in sterling. The second is they underestimate the very competitive conditions in world goods markets. China and others have been in large oversupply for many months, leading to weak prices for their goods.

The third is they have not caught up with the huge competition in UK retail stemming from big increases in floor space in recent years. The advent of whole new large shopping centres like Westfield in London have intensified the pressure to capture the consumer pounds and forced more price competition on shops. The fourth is the even more intense competition coming from internet retailing. The large retailers themselves are having to cut their own margins and prices on traditional sales in stores just to keep and grow their share of the digital pound.

Some of the prices being offered eighteen months after the pound began its fall and six months after the Brexit vote are very good, providing cheap products well below the prices of mid 2015. Overall last year shop prices fell again. Retail is about endless promotion, with continuous offers, discounts and email communications to long mailing lists of people who have once bought in the past from the retailer in question. Price is central to many of the offers, and retailers are afraid any increases in price will lose them valued market share.

Whilst it is certainly true that the RPI will rise this year, much of this will be due to the oil price and other commodities which have started rising sharply in recent months. The effect from lower sterling is likely to be more muted, as it has proved so far from a currency devaluation that started eighteen months ago. With jobs up, overtime up, bonuses up and wages up I expect real incomes to end 2017 higher than they began despite the rise in petrol and diesel prices.

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  1. Q
    Posted January 4, 2017 at 5:52 am | Permalink

    The UK’s ambassador to the European Union:Sir Ivan Rogers’ letter to staff in full.
    Every boss I have survived. But only through personal strength and work-ethic. They never gave evidence to the fact that they were intelligent enough to realise that if you have say 500 employees and you send them each an email which they are duty-bound to read and that reading takes five minutes each then
    500 x 5= 2500 minutes= 41.66666666666667 hours lost working time, compounded to even more time lost in that telephones during reading were not answered promptly, resulting in sister companies having to re-phone; customers being lost or having to re-phone and the company’s truck drivers missing that vital opening in traffic, due to clerical staff otherwise engaged…. awaiting further orders resulting in on-journey domino-effect-delays of maybe two hours or more apiece…with subsequent time lost from their interactions as a result.

    So, a letter in reply to our Ambassador:

  2. Mick
    Posted January 4, 2017 at 6:20 am | Permalink

    Sir Ivan Rogers attacks ‘muddled thinking’ in resignation letter as Theresa May expected to appoint new EU ambassador who ‘believes in Brexit’
    There’s only one person for this post and that’s Mr Farage, you know it makes sense he wouldn’t let the eu walked all over him, Mrs May as to put the country first and what a man to spearhead it, after all it was him and UKIP that scared the government into giving us the referendum

    • HamBassiCod
      Posted January 4, 2017 at 9:54 am | Permalink

      One would need to know what a UK Ambassador actually does. Also, whether the UK needs one.
      As a nation we share diplomatic buildings and Consular services in the world with Canada for one. The Ambassador of Canada to the European Union is Mr Daniel J. Costello. He is remarkably skilled and experienced. We should ask Canada for his temporary services. Also if there are clerical/office costs which could be saved as the Remoaners say we’re short of a bob or two.
      Why were not his services requested before? Are there no business minded people in the Cabinet? I believe it was The Rt Hon William Hague who started the sharing of Canada/ UK Embassy facilities. Ask him to rejoin the Cabinet. He has a brain. When the Cabinet find out what it’s for, he could be useful.

      • Mitchel
        Posted January 4, 2017 at 2:20 pm | Permalink

        Members of the burgeoning liberal/technocratic elite are exempt from austerity measures and financial strictures generally.Surely you remember the bonfire of the quangos?

      • Hope
        Posted January 4, 2017 at 4:16 pm | Permalink

        Three good economic news stories yesterday, highlighted by Guido today, hidden by the ball and chain dragging Rogers. Presumably the good economic news is because of Brexit! I doubt the BBC will want to broadcast it. Sky becoming a strong competitor of the BBC for lefty liberal thinking with no bearing on public opinion.

        Still media seeking the views of Clegg that normal people dismissed at the last election by giving the liberal the short sharp shrift Clegg deserved, the EU elections and the EU debate with Farage. Why are the media behind the curve of public opinion?

    • Anonymous
      Posted January 4, 2017 at 10:27 am | Permalink

      Had Mr Rogers been a good dealer we would not have voted to leave the EU.

      • Richard1
        Posted January 4, 2017 at 3:14 pm | Permalink

        Indeed. No one seems yet to have pointed out that Sir Ivan’s supposed expertise was found to be gravely lacking in supporting Mr Cameron’s renegotiation, in which he reportedly encouraged Mr C to water down his demands, in order to accommodate the EU for which we hear Sir Ivan has such a good feel. Had we had a renegotiation outcome along the lines of Mr C’s 2013 Bloomberg speech, the likes of Michael Gove and Boris Johnson, perhaps even JR, would not have backed leave and the referendum would have been different. Had Sir Ivan been in the private sector, or had he been eg a hired adviser, he would not any longer be in his post in any event.

      • rose
        Posted January 4, 2017 at 3:48 pm | Permalink

        And had he been a good ambassador, the EU would have had some idea of what we were thinking. It isn’t just one-way communication that ambassadors are supposed to do.

      • Lifelogic
        Posted January 4, 2017 at 3:50 pm | Permalink

        Indeed perhaps we should be grateful to Cameron and the ex-ambassador for negotiating such a patently valueless deal, later presented by Cameron as being valuable, but no one sensible was taken in.

      • Original Richard
        Posted January 4, 2017 at 9:36 pm | Permalink

        Mr. Rogers was the EU’s ambassador to the UK rather than the UK’s ambassador to the EU and as such was totally unsuitable to lead the UK’s negotiations with the EU.

        It would be like he was negotiating with himself and we know the result which as the pathetic “deal” he got for Mr. Cameron prior to the referendum.

        His mistake was to be so wrapped up in the EU bubble that he thought that the UK voting to leave to be impossible and consequently made no concessions to Mr. Cameron/the UK.

        And, to be fair, he was right to expect the UK to vote to remain given that remain was ahead in the polls and most of the wealthy, influential, elite and powerful people and institutions were in support of the UK remaining in the EU.

    • Lifelogic
      Posted January 4, 2017 at 10:38 am | Permalink

      We have had 41 years of muddled thinking for the pro EU, pro ERM, pro EURO, pro Greencrap, pro an every bigger state and pro endless red tape state sector bureaucrats like this. Also from the vast majority of politicians form all parties under Ted Heath all the way through to Theresa May.

      Can we please now have a real sense of direction for a change, a direction that actually works. It should not involve gender pay reporting, central pay controls, sugar taxes, HS2, Welsh “lagoons”, Hinkley, absurd bio-fuels and any other similar insanities.

    • Lifelogic
      Posted January 4, 2017 at 10:41 am | Permalink

      I understand that the US ambassador is just as pro EU too. After 40 odd years of a pro EU agenda the state sector needs a huge clear out.

      • BOF
        Posted January 4, 2017 at 1:15 pm | Permalink

        LL In other words ‘drain the swamp’

        • Lifelogic
          Posted January 4, 2017 at 9:17 pm | Permalink


    • Hope
      Posted January 4, 2017 at 11:17 am | Permalink

      JR, the does seem to be a very well thought through point in your blog. Welfare, MPs, Civil servants, overseas aid and the feckless (particularly the feckless Govt wasting our taxes) all doing very well thank you. Child benefit to children who have not set foot in the country can only think Christmas arrives every month.

      Of course the incomes for the savers,strivers, pensioners and the prudent for the last 6 years. The Tory govt continues to punish severely with no end in sight, except 2020. Hundreds of tax rises including another hike in community charge, against the alleged manifesto pledge.

      Sir Ivan Rogers worked for Ken Clarke and Blaire, what did Cameron think he was going to achieve for him? He negotiated virtually nothing for Cameron and should have been sacked not allowed to resign or relocate. His resignation letter appeared subversive to me telling other civil servants to challenge the govt, i.e. implementing the will of the people for voting for Brexit. Perhaps he took the Ken Clarke view to ignore what we voted for and what the govt asked him to do. It would appear he was a man of little vision or passion to achieve the aims given to him, putting his own opinion first, second and last.

      This does epitomise the civil servant think, Sir Humphrey syndrome. I would move or sack those he promoted in position because they are likely to mirror his opinion, presumably the purpose behind his email to them?

      • Henry Rogers
        Posted January 4, 2017 at 2:19 pm | Permalink

        Hardly an original thought, but ‘Yes Minister’ wasn’t just about laughs. Whether it was a training manual for would-be mandarins, or an ‘awful warning’ to the rest of us, matters not!

    • alan jutson
      Posted January 4, 2017 at 11:23 am | Permalink

      Well at least we have now have one of the obstacles to a sensible clean Brexit removed.

      With the departure of the honoured Sir Ivan, it leaves room for someone who is rather more positive and forward thinking to be appointed.

      From looking at past broadcast news video’s, Sir Ivan looked like he wanted to put as much distance between himself and our new Prime Minister as possible, just look to see him appearing to sulk and disappear into the background in almost every shot.

      Mrs May needs to get her thinking cap on and appoint a real life patriot, who will put Britain first.

      • a-tracy
        Posted January 4, 2017 at 3:03 pm | Permalink

        Daniel Hannan

      • Mitchel
        Posted January 4, 2017 at 4:42 pm | Permalink

        Mrs May doesn’t seem very good at establishing power relationships generally-the Telegraph is today reporting on the “alarm bells” over her “practically non-existent relationship” with Merkel-to go with her practically non-existent relationship with Mr Trump,Mr Putin and,it would seem,almost everyone else!

      • hefner
        Posted January 4, 2017 at 6:48 pm | Permalink

        Don’t you ever feel a bit ridiculous to base your judgement of a public servant on a few video clips. Can’t you even think that the guy might have better things to do than to have his picture taken with the PM. Some of the comments here are delirious, or what?

        • alan jutson
          Posted January 4, 2017 at 8:38 pm | Permalink


          “…video clips….”

          Body language I am afraid speaks volumes, and can be far more reliable than the words uttered by many.

          Perhaps you have never noticed !

          • hefner
            Posted January 5, 2017 at 7:22 pm | Permalink

            Following such a powerful argument, in that case I can only say that I am all for Sir Tim Barrow as the new EU ambassador/representative/whatever. He has got such a nice beard!

    • Leslie Singleton
      Posted January 4, 2017 at 9:05 pm | Permalink

      Dear Mick–Agree totally about Farage and what a load of baloney we have had to suffer about the immaculate Civil Service and how one of their number can do no wrong blah blah. It is simply unarguable that, assuming we need somebody in the role in the first place (Cannot see it myself–the EU is not a country after all), it has to be someone gung-ho in favour of, and believing in, our escape ASAP from the ghastly EU. The fact that Cameron apparently thought well of Rogers (either that or knighthoods given out ad lib these days) is a big clue.

  3. Roy Grainger
    Posted January 4, 2017 at 6:55 am | Permalink

    Yes it will be interesting to see what happens in 2017, the economists have gone out on a limb with their sharply lower GDP forecast. Of course if they are wrong there will be no consequences for them and they will just say “Well we haven’t actually left the EU yet, just wait …”.

    • Mitchel
      Posted January 4, 2017 at 10:00 am | Permalink

      They’ll use the Keynes get-out clause “when the facts change…..” and carry on drawing their salaries.

    • Lifelogic
      Posted January 4, 2017 at 10:01 am | Permalink

      It could and would be sharply higher if May and Hammond were real Tories. Tories who wanted lower taxes, smaller government, cheaper energy, no greencrap and a bonfire of red tape. But they are just Cameron & Osborne the sequel.

    • Kenneth
      Posted January 4, 2017 at 11:22 am | Permalink

      Not just the economists. The BBC got many of its forecasts wrong too. Listen to “Correspondents Look Ahead” Radio 4 2/1/2016 which is still available. Getting predictions wrong can happen to anyone. However, the BBC went one better with most predictions being the opposite of what happened. While it failed to predict Brexit or Trump it did predict major catastrophes and loss of life in 2016 due to global warming.

      Another clanger was when the BBC made this political statement on Christmas Eve:

      “The economic revolution that both the US and the UK went through in the 1980s did make both countries richer, in the sense that aggregate wealth grew.
      It wasn’t supposed to matter that that new wealth would be unevenly shared, that inequality would also grow, because wealth at the top would trickle down.”

      Source: http://www.bbc.co.uk/news/world-38384680

      Sorry BBC, but unless you can provide some proof or source that the Thatcher government planned for inequality to grow you are making this up and putting out propaganda.

      BBC Fake News!

      • Edward2
        Posted January 4, 2017 at 1:06 pm | Permalink

        I saw a BBC report yesterday on TV where a BBC reporter was stopping people in the street and asking people to vote by putting plastic balls in one of two bins.
        His questions was do you want access to the single market or less immigration.
        A totally loaded question and incorrect too.

      • Lifelogic
        Posted January 4, 2017 at 2:19 pm | Permalink

        “it did predict major catastrophes and loss of life in 2016 due to global warming” well not really.

        There are always major catastrophes and loss of life due to weather, be it warmer or colder, drier or wetter or just very windy. The man made run away global warming predictions (pushed by the BBC) have largely proved to be wrong or at least huge exaggerations.

      • hefner
        Posted January 4, 2017 at 6:51 pm | Permalink

        Ever heard of “trickle down economics” by David Stockman (President Reagan’s advisor)?

        • Kenneth
          Posted January 4, 2017 at 9:28 pm | Permalink

          I believe “trickle-down” is a phrase used by critics of right-wing philosophy. For example Stockman used the phrase to criticise the Reagan administration after he had left it.

          I often hear the BBC use the phrase too.

          It seems the phrase is exclusively used by the Left and was invented by the Left.

  4. A divided person
    Posted January 4, 2017 at 6:57 am | Permalink

    The media came off holiday yesterday with the same pre-Christmas script of doom. MPs are back in Parliament 9th January with doom speeches and sad soundbites.

    Here is a taste of the gloom via BBC Newsnight. I was happy to listen to Ted Mallock on the panel. All of them were introduced as being “experts”..why? Some of their opinions were based on total ignorance about Donald. I was surprised JR by your ex-colleague Matthew Parris with his comment of Donald and former US Presidents being “idiots”. I guess Mr Parris is a journalist now and oddly referring to very wealthy, highly successful, and extremely well educated people at the top of American society gets you a brownie point with some British newspaper readers. We should stop being so mardy, envious and jealous of highly successful well-positioned people in America.

  5. Lifelogic
    Posted January 4, 2017 at 7:07 am | Permalink

    Well they do not have to rise, but this May government seems very keen to ensure they do this with their:-

    Large increases in commercial rates and council taxes which will bite very hard.
    Large rail fair increases that can now take 18% of commuters income (without even any tax relief unless you are an MP that is (or can claim two places of work) where deduction is allowed.

    Osborne’s tax raid on landlords mean higher rents.
    Continued pissing money down the drain on vanity projects like HS2, Hinkley and the green crap grants will all have to be paid for.
    Failing to give notice on June 24th is costing millions every day.

    This could all easily be mitigated by cutting the state sector in size, cutting the waste, getting rid of the common tariff, cutting the endless red tape, simplifying and reducing tax rates, relaxing planning and OTT building regulations, firing the large parts of the state sector that do nothing useful often worse, scrapping the climate change act and the Paris agreement cutting all the unreliable energy subsidies, starting fracking, introducing easy hire and fire.

    But May’s government is seems does not want to.

  6. Anonymous
    Posted January 4, 2017 at 7:12 am | Permalink

    I have a sense of foreboding about Brexit (always have) but would vote for it again. The events since June 23rd are certainly nothing like as catastrophic as they were warning us it would be (I am aware that Brexit has not yet happened.)

    • Mitchel
      Posted January 4, 2017 at 10:03 am | Permalink

      I,too,have a sense of foreboding,but it is not due to Brexit it is due to the state of moral and financial disrepair in the western world,particularly Europe.When the (possibly)inevitable happens,being free will ,I believe,allow us to bounce back more quickly.

    • Hope
      Posted January 4, 2017 at 11:21 am | Permalink

      Savers, strivers, pensioners hit hard for six years and set to continue while the govt throws away our taxes on overseas aid. Towns being built to accommodate the govt’s insane mass immigration policy. Bankers still doing very well, after all the chit chat no substantive change and many banks failed the stressed tests after 8 years!

      • hefner
        Posted January 4, 2017 at 10:13 pm | Permalink

        … with top bankers making on 4 January (two days worth of work) the median annual UK salary.

        • Edward2
          Posted January 5, 2017 at 8:23 am | Permalink

          Well apply to be a top banker then hefner
          Nobody has passed laws stopping you.

          • hefner
            Posted January 5, 2017 at 6:25 pm | Permalink

            Thanks for the advice. However I might not be suitable as I would not find correct to see my salary (and perks) increased when my organization loses some of its market share, and when my shareholders see both my bank’s share value and associated dividends falling down.
            Isn’t it tough to have some kind of principles?

    • oldtimer
      Posted January 4, 2017 at 11:44 am | Permalink

      There are far bigger issues in the wider world than the Brexit negotiations. Not least among these is how China manages its debt mountain and FX reserves and the impact this has on world trade.

      So far as Brexit is concerned, it seems to me that it is better that Sir Ivan Rogers has resigned. He was not committed to the Brexit outcome. According to Tim Shipman’s account of Cameron’s “negotiations” with the EU, in his book “All Out War”, Rogers was the principal advisor who argued for the thin pickings for which Mr Cameron ultimately settled and ludicrously argued in the HoC amounted to “fundamental reform”. No doubt this contributed to Mr Cameron’s defeat in the referendum. vote.

    • Ed Mahony
      Posted January 4, 2017 at 5:00 pm | Permalink

      I didn’t vote Brexit and would probably vote Remain again, and I don’t have a sense of foreboding in the sense we can make Brexit work! But it’s going to need a lot of hard work, good will, and prayer (to be frank, Brexit is so complicated that there’s no human being on Earth whose got the brainpower to work it out from beginning to end over a 10+ year time period, with all the little complicated, unforeseen issues in between – nor the energy and more – which means for all those who believe in God – like me – then we have to pray, and pray hard – and things will work out well).
      (And we need to pray that the EU doesn’t go belly-up either, whether we’re completely in or out of the EU, because if it does go belly-up, we’ll get pulled down with it as well).

      • Hope
        Posted January 4, 2017 at 8:46 pm | Permalink

        Nothing complicated. Leave and negotiate trade every country outside the EU does it!

        • Ed Mahony
          Posted January 5, 2017 at 9:32 am | Permalink

          If only theory (/ideas/plans) and practise were one and the same thing …

      • rose
        Posted January 4, 2017 at 11:35 pm | Permalink

        Getting out isn’t complicated at all. We just need to say we are becoming an independent country again, outside the EU. That means leaving the Internal Market, leaving the Customs Union, and taking back our fishing waters and control of our borders, with no more money going as tribute. And it means no longer submitting ourselves to a foreign court. When we are out, we can negotiate anything else that comes up as we used to.

        • Ed Mahony
          Posted January 5, 2017 at 9:30 am | Permalink

          Setting up a business can be very easy on paper. But can be incredibly complicated in terms of the finer details and the unknowns that business / life throws up. Brexit is many, many times more complicated and challenging than setting up a business.

          Challenge is good – but we must be fully prepared for it, including divine help! (So much of the problems of the world are down to the fact that we think we can do it alone – we can’t – as i said before, just look at the history books to see how often we cock things up).


    • Ed Mahony
      Posted January 4, 2017 at 5:04 pm | Permalink

      Nothing’s written on the wall regarding remaining or not remaining in the EU. We can make both scenarios work. But whichever we choose, we have to pray. If more people prayed in the past, the history of Britain and the world would be very, very different indeed (and i don’t just say that from the POV of theology, but above all, from history – just read a few history books if you don’t believe how often and how easy it is for us human beings to cock things up – the history books are full of it).

  7. Leslie Singleton
    Posted January 4, 2017 at 7:16 am | Permalink

    Dear John–You were good on the box yesterday but did not go nearly far enough–to say that Rogers’ heart wasn’t in it did not go nearly far enough–On a scale of nought to 10 we want people at 11. “Heart not in” implies he is at nought whereas in fact he is nearer minus 10. He has clearly gone completely native and I agree with Nigel Farage that we want him and his like meaning the whole Foreign Office out of it. A pox on “EU experience”–That is precisely what we do not need–We don’t need an Ambassador to tell us that the 27 or most of them resent our leaving but it is their own fault plus his because it is not difficult to see why Cameron’s so-called negotiations were in between a non-event and a disaster. We absolutely must have people totally committed to getting out ASAP. Rogers and his “10 years”–why not 100 years?–was ridiculous. How could the Conservative Party have ended up with two Remainers in charge? It is as if we are fighting with one arm tied behind our back. Despite the drama, Rogers is not exactly going to get out–Unfortunately he will be found another lucrative sinecure of a place where he can continue to spout. There is no room for sentimentality on something so important and he should have been thrown out.

    • turboterrier
      Posted January 4, 2017 at 10:33 am | Permalink

      @ Leslie Singleton

      Great post Leslie.

      Lets hope the “decision makers” are reading this too.

    • Hope
      Posted January 4, 2017 at 11:25 am | Permalink

      Who would let Ed Lewellin stay as French Ambassador? Again, we need a strong person to negotiate with the French to leave the EU. We need someone who will not stand by and smirk, like Cameron did, while Hollande made threats to our country.

    • David Price
      Posted January 4, 2017 at 2:17 pm | Permalink

      Good points Leslie. This is a once in a lifetime chance for people to shine and we need the best and brightest to be fighting for our best interests, not their own.

    • BOF
      Posted January 4, 2017 at 2:55 pm | Permalink

      Excellant post Leslie Singleton.

      Agree, he should have been fired, as would have happened in the private sector. Who Mrs May chooses as a replacement will be a massive indicator of the direction that Brexit will take!

  8. Lifelogic
    Posted January 4, 2017 at 7:19 am | Permalink

    More drivel from radio 4, on the (essentially non existent) gender pay gap this morning. Of course women tend to earn less from about 30. When they have children many tend to choose part time jobs or jobs that fit in with their lifestyle. Women without children already earn more than men.

    It is simply the work life balance choices some women sensibly make. It makes little sense for most to do otherwise, or to commute long distances. Many just want to spend more time with their children anyway.

    Why does the BBC take the wrong line on nearly every issue, a bit like Theresa May so far.

    • Lifelogic
      Posted January 4, 2017 at 9:58 am | Permalink

      What percentage of the population think that Theresa May’s government is making a good job of Brexit, only 18% apparently.

      Not doing anything very sensible on energy, the greencrap, the endless red tape (just adding to it), the bonkers tax regime or the white elephant (piss down the drain vanity projects) either so far.

      When do we finally get the legal judgement? Why are we waiting until March to give the notice anyway what is to be gained by this pointless dithering?

    • Know-dice
      Posted January 4, 2017 at 10:12 am | Permalink

      Well actually on BBC Breakfast show, the presenter asked the woman from whatever foundation it was “are you comparing salaries for like for like jobs?”. And she said “No, we are looking at total life earning..etc. etc”.

      What do you expect from an employee that is not willing to make an on-going commitment to a company. It’s a personal choice whether a woman/couple wish to have children and whether it’s the man or the women that returns to work after maternity leave.

      And in either case the person that stays at home will sacrifice all or some of an ongoing career…

      • Edward2
        Posted January 4, 2017 at 1:12 pm | Permalink

        This morning on the radio a TUC person said it was about equal pay where females do jobs of a comparable nature…
        So not the same job.
        In Birmingham Council they face a back pay bill of hundreds of millions after a tribunal ruled that female office and care home cleaners should get the same as refuse collectors out in all weathers doing a tough physical job.

    • Anonymous
      Posted January 4, 2017 at 10:31 am | Permalink

      For example: previously they compare male university lecturers with female ones and find a disparity in pay. Only later do we discover that the male lecturers are teaching STEM subjects (for which there is a commercial market) whereas the females are teaching Arts and Social ‘Sciences’ (for which there is no commercial market.)

      • Lifelogic
        Posted January 4, 2017 at 8:26 pm | Permalink

        Indeed if you look at Further Maths, Physics and Computer studies A levels the intake has a hugely male take up. Circa 4:1

    • Ex-expat Colin
      Posted January 4, 2017 at 11:16 am | Permalink

      Its all Feminista BBC production heads…Farage has suffered the on air outrage putting observational points. It shows up in very poor programming material and one sided interviews.

  9. Lifelogic
    Posted January 4, 2017 at 7:24 am | Permalink

    I see the new London Mayor wants to cancel most of the Boris buses. They are hugely expensive and not a patch on the original. They have closing doors so you cannot jump on and off, which was the main advantage of the old ones. Doubtless OTT health and safety and the compensation lawyers yet again.

    Yet more money down the drain by our inept state sector.

    • Hope
      Posted January 4, 2017 at 11:27 am | Permalink

      LL, Not sure about this. I think it is more about making computers reliant on rail and giving power to the unions. Buses are essential especially when strikes occur. it will give railway unions a much stringer hand. The govt needs to intervene and stop Khan’s plan dead.

      • Lifelogic
        Posted January 4, 2017 at 8:28 pm | Permalink

        I am not against buses, they clearly have their role. Just that the Boris Bus is far too expensive and far too inefficient.

  10. Iain Gill
    Posted January 4, 2017 at 7:30 am | Permalink

    Of course government inflation numbers fail to include cost of housing so are completely misleading. We have lived through a recent period of mega inflation if you include housing costs.

    • Caterpillar
      Posted January 4, 2017 at 9:59 am | Permalink

      Iain Gill,

      I agree that there has been vast price increases in speculative assets due to the money creation mechanism and low central rates. Institutions and policies need to change. Nonetheless I would guess that those with existing mortgages have felt their outgoings dramatically decrease during the ongoing period of ZIRP. (I don’t think this is a good thing, it is a distortion, but some sections of society have felt changes to be more beneficial than other sections of society.)

      • miami.mode
        Posted January 4, 2017 at 12:38 pm | Permalink


        Sounds a bit like the old “trickle down” theory. Those with the most get most, those a little down get a little less and so on until you get to the bottom where they get nowt!

        • Edward2
          Posted January 5, 2017 at 8:26 am | Permalink

          Odd how standards of living for all have increased greatly over the last 50 years.

          • miami.mode
            Posted January 5, 2017 at 8:55 pm | Permalink


            Don’t disagree about that at all, but our host is referring to the forthcoming year and both Iain Gill and Caterpillar are referring to fairly recent government financial activity.

  11. Lifelogic
    Posted January 4, 2017 at 7:36 am | Permalink

    Still at least Sir Ivan Rogers has gone. What about Carney and all the very many others, at the top of the state sector, who think in this muddled Ivan Rogers way. I see he is an Oxford Modern History chap just like the dire George Osborne.

    World War II only lasted six years yet negotiation of a deal with the EU takes 10+ years. If the EU is that incompetent and dysfunctional it is certain is good to be leaving.

    If we are actually leaving under the dithering T May.

    • Know-dice
      Posted January 4, 2017 at 10:15 am | Permalink

      Some Labour shadow chappie, was saying this morning “when you go in to negotiation you need to know where the other party is coming from” …

      Nooo… you need to know what you want, what your starting position is and when to walk away.

  12. Mark B
    Posted January 4, 2017 at 7:39 am | Permalink

    Good morning.

    Even the deepest hole has a bottom. And it is a question of not if, but when, does one reach it ?

    All past history data can do is indicate a trend, it does not indicate an absolute outcome as their are many other variables and influencing factors too numerous to quantify. Hence why a some, if not many, predictions can sometimes be so wide of the mark.

    I would like to remind our host of an old maxim that is worth repeating.

    “One man’s wage increase is another man’s price increase.”

    And whilst it is true that the cost of some goods due to oversupply may have been reduced, when you take into consideration that the costs of local, national and supranational governments’ always rise, and that these costs also have to be taken into consideration, then you can see that in the long term there will be a slowing down. The question is, at what rate will this slow down occur ?

  13. The Prangwizard
    Posted January 4, 2017 at 8:12 am | Permalink

    Local TV news ran a piece yesterday based in Oxford on exactly this, forecasting price rises later in the year, so ‘get your bargains now while you can’. They attempted to provide an alternative view, but not that this may not happen – instead they had a brief interview with a businessman who made cheese who said he was planning to export and open an outlet in ‘Singapore of all places’.

    Why he should have said ‘of all places’ I don’t know. Sounds insulting to me. It may demonstrate an attitude problem among some business towards selling overseas and thinking internationally. Many people imagine that we are the centre of the world, fools that they are.

    • Know-dice
      Posted January 4, 2017 at 10:16 am | Permalink

      Apparently the Chinese don’t like cheese

      • Robert Christopher
        Posted January 4, 2017 at 3:17 pm | Permalink

        A country without cheese: what a marketing opportunity!

        They can’t have tried any British cheeses, can they?

        We have plenty of TV chefs that we can spare to spread the word there.

        • Lifelogic
          Posted January 4, 2017 at 8:33 pm | Permalink

          I have just receive four delicious English Cheeses this morning in the post, including a Shropshire Blue, Kirkham’s Lancashire and a Single Gloucester.

          I will have to delay my diet for a week or two, but one has to make sacrifices I suppose.

      • rose
        Posted January 4, 2017 at 3:57 pm | Permalink

        And when you go to Japan you are advised not to eat cheese for three weeks beforehand.

        • Lifelogic
          Posted January 4, 2017 at 8:34 pm | Permalink


          • Mitchel
            Posted January 5, 2017 at 10:16 am | Permalink

            As I understand it when the non-dairy eating Japanese first encountered Europeans they detected a distinct (and to them unpleasant) body odour which is due to consumption of dairy products and apparently only discernible to longtime non-dairy eaters.

          • stred
            Posted January 5, 2017 at 12:24 pm | Permalink

            Orientals don’t digest cheese well and notice that Westerners smell of it, rather like the British used to notice the French stink of garlic, when we rarely ate it.

  14. Mick
    Posted January 4, 2017 at 8:12 am | Permalink

    I think it’s about time we had a tv channel solely for Brexit because I don’t think its just me but I’m getting pretty cheesed off with the Brexit bashing by the BBC/Sky and other tv channels and eu loving rags, all we are being bombarded with at the moment is about the guy leaving the negotiating, enough is enough we are leaving, if there was a petition to stop the BBC licence fee I would sign it,

    • backofanenvelope
      Posted January 4, 2017 at 9:48 am | Permalink

      Try RT.

    • Jane Moorhouse
      Posted January 4, 2017 at 10:04 am | Permalink

      I think a lot of people would sign it. I certainly would.

    • turboterrier
      Posted January 4, 2017 at 10:38 am | Permalink

      @ Mick

      petition to stop the BBC licence fee I would sign it,

      Do not waste your ink mate, just close the whole lot down and start again in its present format it is well past its sell by date. Totally out of touch with the people and the cost to us for preaching such dross.

      • getahead
        Posted January 4, 2017 at 7:54 pm | Permalink

        Sounds like that EU Ambassador who just fled his post.

  15. Ian Wragg
    Posted January 4, 2017 at 8:22 am | Permalink

    In todays Telegraph there is an article……Another bad year for Economists.
    These are experts like the pollsters who are invariably wrong.
    A few years ago I got €1.07 for a £1
    In October I got €1.18 so whats Brexit got to do with anything.
    We learn from our experiences unlike so called experts.
    Good to see Rogers has gone. Another pillar of the Europhile establishment picked off.
    No doubt on a humongous pension.

  16. Richard1
    Posted January 4, 2017 at 8:56 am | Permalink

    Off topic but I have just read Sir Ivan Rogers’s resignation email. I can’t understand why this is a story. All he says is he was due to leave anyway and it makes sense to do so now so there isn’t another change in permanent representative during negotiations, he thanks his colleagues for their support, and he urges them to continue to do their jobs and attack any muddled thinking. He points out there will be new opportunities post Brexit. I can’t see anything in it which I disagree with or that anyone should get upset about. Where’s the story?

    • Denis Cooper
      Posted January 4, 2017 at 12:45 pm | Permalink

      I suppose the real story here is that one of the UK’s most senior diplomats is so lacking in loyalty to the UK that he has used resources furnished by UK taxpayers to circulate an email potentially undermining the UK government’s position just before it embarks on difficult international negotiations, knowing very well that its contents would inevitably be leaked to mass media outlets which are hostile to those negotiations even taking place.

      But we don’t yet have the proper end of the story, which seems to go no further than his resignation from his present post and does not continue to the correct conclusion, which would be his summary dismissal from the civil service as a whole with the minimum severance package allowed by law, and the removal of the knighthood he was awarded in the 2016 New Year Honours list.

      • Richard1
        Posted January 4, 2017 at 11:29 pm | Permalink

        That would clearly be an absurd over reaction. The man is entitled to his views, not can I see that he has engaged in drastic criticism of the govt in the way the BBC alleges. The other point is he can’t be any great loss as his last attempt at advising and assisting on a negotiation with the EU was a complete failure.

        • Denis Cooper
          Posted January 5, 2017 at 8:27 am | Permalink

          He is a paid civil servant and should not be making public statements to undermine the government and the country, and if he is allowed to get away with his disloyalty without consequences then others may be encouraged to do the same when they disagree with the policy of the elected government.

        • Edward2
          Posted January 5, 2017 at 8:30 am | Permalink

          If you worked in industry or commerce and sent negative emails about your employer which were then printed on the front pages of national newspapers and became top story on TV news channels then you would be sacked.

    • Know-dice
      Posted January 4, 2017 at 12:58 pm | Permalink

      The story is the “spin” that good old Auntie is putting on it at every opportunity…

  17. oldtimer
    Posted January 4, 2017 at 8:57 am | Permalink

    It seems that oil prices will remain volatile because it is not certain that the recent OPEC agreement to restrict output will hold. Iran, Iraq and now Libya are all keen to raise output by amounts that threaten to undermine the agreement. Furthermore recent oil price rises will encourage the US fracking industry to resume production in fields that had been shut down.

    Reply – Yes. the Libya Sahara field is a large resource coming back on stream outside the OPEC quota limits

    • Ex-expat Colin
      Posted January 4, 2017 at 11:19 am | Permalink

      Russia agreed which surprised me until I read later that they were holding back until ready. Smart?

  18. Richard1
    Posted January 4, 2017 at 8:57 am | Permalink

    I am pleased to see that Friends of the Earth have been obliged by the ASA to stop peddling fake news over fracking.

    • fedupsoutherner
      Posted January 4, 2017 at 11:09 am | Permalink


      That’s the best news I’ve heard in a long time. Judging by some figures quoted in a letter in the Scottish Herald today regarding biomass more should be done to stop the misleading information being put out by the renewables industry.

      During the last quarter of 2016 over 2.4 million tonnes of woody biomass
      was imported from North America in the main. This tonnage will double in
      two years’ time and will double again every two years after that, so the UK
      will need to import more than 9.6 million tonnes during the final quarter
      of 2020, totalling 110.3 million tonnes in the last eight years. There will
      need to be 266 freighter movements in that quarter, with a total of 47
      ships per day at sea shuttling back and forth across the Atlantic to keep
      all of our biomass boilers going in the UK.

      However, our creaking UK infrastructure will collapse long before then,
      because we do not have enough biomass handing facilities at our ports or
      lorries to clear the quays with these huge volumes. We will also need to
      train more than 72,000 extra lorry drivers to keep these lorries moving
      24/7 to cope with ships arriving every eight hours disgorging thousands of
      tonnes of biomass pellets.

      Can someone tell me how this is sustainable?? Here in our local area there are thousands of trees being cut down for biomass and the subsidies given out for it. You couldn’t make it up.

      • CdB
        Posted January 4, 2017 at 12:13 pm | Permalink

        Well for a start most if not all the biomass that needs to be transported from a ship to a power station will be moved by rail, not truck. I wonder how much of the other ‘facts’ you state are equally as suspect.

        However on a broader point I do wonder if the overall impact of shipping wood pellets across the Atlantic and by train from Liverpool to Drax for example as already happens is really taken into account vs the alternatives. I suspect it is, but it should be made more visible.

        • fedupsoutherner
          Posted January 5, 2017 at 10:23 am | Permalink


          It doesn’t matter which way you want to cut the mustard the whole industry is based on a subsidy which is making energy so very expensive. The mass deforestation going on in Scotland alone is devastating and cannot be good for wildlife which is what we are ‘supposed to be protecting’. It takes at least 30 years to replace those trees. That is not what I call sustainable. Let’s not forget trains need electricity. What happens if we get the grid failure wipeout that is being talked about by the engineers?

      • Richard1
        Posted January 4, 2017 at 3:18 pm | Permalink

        I agree. I came across this industry – chopping down trees in the south of the US, turning the wood to pellets and shipping it to be burnt in Europe under huge subsidy – a few years ago. I could hardly believe it existed but there it is. Much ‘fake news’ comes from the left, especially the forces of environmental hysteria.

      • acorn
        Posted January 4, 2017 at 6:10 pm | Permalink

        In the EU, wood pellets are considered “carbon neutral”. That is, the carbon released when you burn the stuff, is re-absorbed by the existing bio-mass and more trees being planted to compensate.

        In the US, wood pellets are not considered “carbon neutral”, because the bio-mass carbon balance point, is not achieved for at least eighty years.

        I think Drax power station is getting circa £105 per MWh for burning wood pellets and also I think its CEO, is still Chair of the government committee on bio-mass energy use.

        • stred
          Posted January 5, 2017 at 12:49 pm | Permalink

          The late Prof Sir David MacKay worked out the true carbon content of wood pellet burning, taking into account land use, transport, drying, processing and the lower calorific content than coal. More has to be burned for the same kWh. He said that when he told Sir Ed Davey, his reply was ‘SH1T’.

          Unless only the tree trimmings are used, the result is as much or more CO2 and other pollutants are emitted. Many Americans, who do not wish to see their natural forests cut down, have observed whole trees being used. Drax claims to have monitors to ensure that this is not the case, but the area is huge and cannot be watched all the time. Money talks and no-one in government will admit that even if MacKay was wrong, it will take a lifetime to recoup the carbon from the atmosphere. To expand wood pellet burning must be another mistake by this dim government.

  19. am
    Posted January 4, 2017 at 9:01 am | Permalink

    Inflation in Germany rose from 0.8 in November to 1.7 in December. UK latest figure was 1.2.

  20. Bert Young
    Posted January 4, 2017 at 9:04 am | Permalink

    The profit margin retailers have enjoyed in the past gives them plenty of room to still stay competitive ; shoppers ought not to suffer from this front . I agree with John that the RPI is far more susceptible to oil and other communication factors .

    From yesterday’s announcement and the news today of the resignation of the Ambassador to the EU , is heartening . I know from quite a few years of exposure to the bureaucrats and their system in Brussels that it does warp one’s judgement ; it is far better for a new broom to be there keeping the Government in touch with the thinking and goings on . Brussels is a small place crowded with civil servants who enjoy a high standard of life ; obviously they will protect their futures .

  21. Shopper
    Posted January 4, 2017 at 9:19 am | Permalink

    Official income and retail stats have always been a mystery to me.

    My food shopping is cheaper and cheaper . I am a flirt with brands and I also do not have loyalty to particular retail outlets.Otherwise if one item rises unreasonably in all outlets I simply do not buy any at all. If I wished to test completely unknown brands, and/or had a bigger freezer, I could pay even less.

    The only item every single year I can rely upon to rise is Council Tax. I do not have the option to “shop elsewhere” …”lessen the product provided” . My Labour Council tells me first, Council wages are “severely reduced” , “virtually zero rises for years” because of “the Tories” and then tells me my Council Tax has increased due to wages and commodities bought..in a world where every single material reaches lower and lower levels in price, where distribution costs due to the low oil price are at the lowest ever. Coupled with “a technological revolution” in “the way we the Council organise, resulting in massive savings”
    The silly Osborne allowed local councils to put an extra charge on because the “care service” is at “danger level”.
    So, University courses in economics, council management, high levels of technology, low distribution and material costs, low wages, and mild winters “because of global warming” leading to less energy used in all health and care services mean MORE Council tax?????!!If I were King my Council from top to bottom would be reworking its books in a room with bars on the windows and doors until their mathematics improved. They kid no-one.

  22. acorn
    Posted January 4, 2017 at 9:35 am | Permalink

    Do you remember back in November 2007 when the Pound hit $2.11. The dived to $1.36 in January 2009. It crawled back to $1.71 by July 2014 and has been going downhill since then to $1.22 yesterday. The Brexit drop,as JR says, was only about a quarter of the post July 2014 drop.

    The reasons are complicated; but, having the largest UK BoP Current Account deficit since 1948 is a big part of it. Also, we are now in deficit with both EU and non-EU countries. See Fig 2 and 3 in https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/bulletins/balanceofpayments/julytosept2016

    The exchange value of the Pound will fall to reduce the current account deficit. That is cheapen UK exports and raise import prices; it says in the macroeconomics text books. Foreign central banks can manipulate currencies to support their own exporters and there are virtually no restrictions on speculative capital flows in and out of countries, unfortunately.

    • Mockbeggar
      Posted January 4, 2017 at 1:04 pm | Permalink

      I note that the BBC announced that exports in December rose much to their surprise. The announcement was quickly followed by the warning that the fall in the value of the pound would soon give rise to inflation and lead to a fall in the standard of living.
      No good news without bad news to dampen the hopes of the populace.

  23. margaret
    Posted January 4, 2017 at 9:54 am | Permalink

    We are also seeing the advent of new retailers who are not selling junk , but reasonable quality goods a lot more cheaply . B&M is spreading its inexpensive news .The supermarkets which become to expensive are abandoned by shoppers.
    Have we got 10 more years of arguing about this? A lot can happen within this time lapse .
    Whilst all this silly protraction continues , most will continue with their own lives and go with the ebb and flow of their natural lives.
    Trump is going in like a bull in a china shop … ah well! whatever.. sure , I don’t believe it, they have good imaginations, and all the rest of the people who live in denial and talk to their imaginary icons ……bonkers all of them !

  24. hefner
    Posted January 4, 2017 at 9:55 am | Permalink

    Return ticket Reading-London and similar ones, up on average by 2.3 percent.
    The average commuter also seems to spend 14 percent on daily transport.

  25. Mark Watson
    Posted January 4, 2017 at 10:02 am | Permalink

    These economists need to be careful, growth will still come in at 2-2.5% in 2017 and that’s going to leave them with nowhere to hide.

  26. Sherlock
    Posted January 4, 2017 at 11:03 am | Permalink

    When there is a squeeze on margins, the little guy gets edged out. In my locale one cannot see any evidence the corner shop, to mini-mini- supermarket is disappearing. Far from it. They do not make a miraculous living but they are doing ok. Oddly, it is the bigger guys who are saying they are under pressure.
    Could be pensions responsibilities and deals made with Local Authorities about employing more staff than they really require to blame and, perhaps, other kinds of payments…

    • CdB
      Posted January 4, 2017 at 12:19 pm | Permalink

      I suspect the prices you pay in your local corner shop is somewhat higher than the big supermarket down the road. However the local independent shop will neither have the overheads (pensions but also the central functions) of the large chain, they can pay themselves less and undoubtably have lower margin expectations (as do Lidl & Aldi) than the companies listed on the stock market. Etc…
      I think it’s rather disingenuous to attempt to pin it on things like ’employing more staff than they need to…’ Who does do that by the way?

  27. fedupsoutherner
    Posted January 4, 2017 at 11:16 am | Permalink

    With the resignation of Sir Ivan Rogers, which is long overdue, when is the government going to actually recognise the efforts of Farage? He would make a great ambassador for the UK in the EU. He is totally focused on Brexit and always stands up for the UK 100%. We need to get rid of all the anti-Brexit people if we are to achieve the best result for the UK. Mrs May has got to start making some sensible decisions or else I can see us getting a really bad deal just as we did under Cameron. We used to be a lion so when did we become a lamb? All these people have their history degrees so do they not realise that in the past we were never dictated to by Europe and we don’t want to be now.

    As for the cost of living and inflation, Brexit is being used as an excuse to put up prices in a lot of cases. Not everything gets purchased from foreign shores. Anyway, how long before the pounds rises again. It would do sooner if some sensible ideas were to be adopted and we stopped pussy footing around.

    Fuel at the pumps has already risen quite a bit and I don’t think it will stop there but that cannot be attributed totally to Brexit. Let’s wait and see if there is a viable EU to do any negotiating with this year.

    • David Ashton
      Posted January 4, 2017 at 2:48 pm | Permalink

      Another’s great post fedup. How on earth did someone like Rogers ever come to represent the UK in Brussels. he is a graduate of the Ecole Normale Superieure in Paris. He is virtually an Enarque, could never be trusted with UK’s interests.

      • Mitchel
        Posted January 5, 2017 at 10:19 am | Permalink

        That’s precisely why he was appointed in the first place.

  28. JJE
    Posted January 4, 2017 at 11:22 am | Permalink

    The retailers are certainly going to feel the squeeze. If Next is producing poor results like today’s then others will be going under. Retail rents and real estate values remain under a lot of pressure.
    I replaced my TV and dishwasher last month before the price increases kick in.

  29. Antisthenes
    Posted January 4, 2017 at 11:47 am | Permalink

    Forecasting has never been an exact science and these days even less so because of globalisation and the communications revolution the world has become a very complicated unfathomable place. Not that is was not always difficult but things were more simple in the past as there were less social and economic avenues that human behaviour could impact on so that trends could be measured with a fair degree of accuracy.

    What has further complicated forecasting is the theorises used to construct models to churn out predictions are predicated on how experts believe humans should behave and not on how they actually do. It has evolved that way because left wing economists and the like are working toward establishing societies that conform to us behaving with having social justice as our prime driving force. A misguided hope as self is and always will take first place in deciding our actions not social justice.

    So bias, unreliable data and poor arithmetic are the bases of most forecasts these days plus mischievous manipulation to not forecast events but to shape them. Which points to our world being populated by a high portion of devious, self important and deceitful people or at least those that have no self awareness of their own turpitude.

  30. Mark Stockwell
    Posted January 4, 2017 at 12:18 pm | Permalink

    This is not intended to endorse the “gloomsters” or their view of the world, but it’s not clear to me that “more of the fall in the pound occurred between June 2015 and April 2016 than has happened since the Brexit vote”.
    If one takes the $:£ rate on 22 Jun 2015, it was 1.5829.
    On 20 Apr 2016 it was 1.4339 – down 15c or 9.4%.
    On 2 Jan 2017 it was 1.2261, down a further 20c / 14.5% from 20 Apr 2016 and down 35c / 22.5% from the 22 Jun 2015 number.
    It would seem from those figures that at least as much – indeed, rather more – of the fall over that period has been since the Brexit vote.

    Reply I was quoting the Euro rate which fell from 1.44 to 1.24 between July 2015 and April 2016, as it is the main rate affecting all our imports from the EU

  31. ian
    Posted January 4, 2017 at 1:24 pm | Permalink

    The reason why economic forecasters, pundits and journalists think that substantial price increases are coming, is because they have been sitting around listening in on people who work in company boardrooms who are talking about how they are going to double their incomes this year and buy a new garden gated village house so they do not have to come into contact with plebs.

  32. Little Englander
    Posted January 4, 2017 at 1:29 pm | Permalink

    I’ve missed the point as usual. Remind me why we would want to see Nigel Farage replace Rogers? On second thoughts don’t.
    We need John Redwood there as together with Liam Fox, David Davis, Boris (in the wings) and Govt Lawyer(s) (EU Law ) that would be a formidable Team. No frilly people – we need ”hardnosed sloggers” dedicated to putting across the Government’s terms. Many things are a forgone conclusion anyway and both sides understand that which is that the UK has its 4 Principals and the EU has theirs and neither meet the requirements of the other therefore the UK is leaving the Single Market . Financial terms in respect of our leaving therefore appear to be the most important and serious point for discussion and, in my opinion, that should led by John Redwood.

  33. a-tracy
    Posted January 4, 2017 at 4:09 pm | Permalink

    The living wages for over 25’s increased the NMW by 6.9% for over 25s and 3.5% for 21-24-year-olds, and is programmed to do so between 5%and 6% pa for the next few years to achieve the 2020 target of £9 ph pushing up pay differentials in the process, so if prices don’t increase with the large increases in Business Rates, the 3% extra national insurance pension contribution by the Employer, the ever increasing costs of sick pay plus sick holiday pay, maternity leave holiday pay etc. I’d be more amazed. As a poster said above “One man’s wage increase is another man’s price increase.”.

    John, I’m really fascinated by productivity figures, it is a key function of mine to keep productivity records and when I read we were 35% behind Germany as a country I’m wondering in which industries? How does our health service compare with the German Health sector and how is it compared? How does our housing association/housing rental sector compare? How does our Retail, Engineering, hold up against Germany in direct comparison? Is transport held back by poor road and rail infrastructure and our ever reducing speed limits? Are the figures a regional problem? How are the overall figures being compared, how does the government know what subcontractors a company uses and what output hours they have, or what hours are required to produce the turnover of the company or industry sector is it all just guestimates.

  34. Ken Moore
    Posted January 5, 2017 at 10:49 pm | Permalink

    That was a nice article – a bit like a comfy pair of old slippers and a cup of cocoa.
    But lets get real here – the British economy is based on the notion that ‘growth’ can be bought using borrowed money.

    Someone does not become more prosperous by increasing his or her overdraft and then spending it – he or she merely looks more prosperous to those who gauge prosperity by looking only at a lifestyle impression conveyed by consumption.

    British debt is £4.9 trillion, or 268% of GDP. But this excludes:
    – Financial sector debt (£3.3tn)
    – Private pension shortfalls (£975bn)
    – Unfunded public sector pension commitments (at least £1tn)
    – PFI and nuclear decommissioning

    Add this lot up and it exceeds £10tn, or 550% of GDP.

    Investors who bought sterling and/or sterling assets during 2015 are now sitting on FX losses of almost 20%.

    Will they one day decide that putting more money into Britain amounts to pouring good money after bad? The game is up if they do.

    Please note, Healey et al were turned down by commercial lenders before taking that strings-attached IMF loan. Adjusted for inflation, it was equivalent to perhaps £50bn in today’s money – in other words, peanuts compared to our problems today.

    Furthermore, the grand experiment in population increase is going to drive down per capita GDP and cap wage rises. In a world of scarce resources and plentiful labour John Redwood is predicting higher pay and standard of living? . Not in a million years when we are lumbered with another dripping wet liberal in No 10.

    Sorry for a lengthy post!

  35. Derek Henry
    Posted January 7, 2017 at 1:11 am | Permalink

    Of course not see Japan for details.

    The Yen dropped twice as far as the £ and their inflation hardly moved. Why ?

    Because importers to the UK will cut prices or jobs rather than lose market share. The who economic debate is based on the idea that we still use fixed exchange rates.

    Go to Oxbridge or Harvard and students are taught that we still are. They are also taught that we are still on the gold standard.

    We are on floating rates and floating rates adjust. Just read any central bank report or bank of international settlements report. Pass back inflation on a lower currency is minimal.

  36. Derek Henry
    Posted January 7, 2017 at 1:13 am | Permalink

    The Bank of Canada study also argues that:

    the expenditure-switching effect helps to redirect consumption and investment in a country with a trade deficit away from imports, as the exchange rate depreciates, making the country’s exports more attractive to foreigners … [thus] … The benefits of a flexible exchange rate may also be larger than they appear …

    A 2014 New Zealand central bank study – Exchange rate movements and consumer prices: some perspectives – found that:

    Petrol prices adjust substantially and quickly. But a significant share of New Zealand’s imports appear to be priced for the local market and, however they are priced, there is a large domestic distribution component for most tradable goods. That means prices for traded goods in New Zealand will adjust by a smaller percentage than any given percentage movement in the exchange rate, and may diverge from those in the rest of the world for protracted periods.

    A 2015 Bank of England paper – Much ado about something important: How do exchange rate movements affect inflation? – provided three broad conclusions:

    First, contrary to common belief, exchange rate movements don’t seem to consistently have larger effects on prices in sectors with a higher share of imported content. Second, exchange rates don’t seem to consistently have larger effects on prices in the most tradable and internationally-competitive sectors. Third, the effects of exchange rates on inflation – and even just on import prices – do not seem to be consistent across time. Most of what I learned in grad school on this topic no longer seems to apply.

  • 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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