Money

Andrew Bailey is floundering in the face of soaring inflation

Prices are rising at the fastest pace for 40 years. Real wages are falling rapidly. The cost of servicing the government’s vast debts is escalating, and companies are struggling to keep up with the rising price of raw materials. Still, not to worry. Fortunately, a quarter of a century ago Gordon Brown wisely decided to hand over management of inflation to a supremely competent group of expert technocrats, so that we could have stable prices and steady growth forever – or indeed an ‘end to boom’n’bust’ as Brown would have inevitably put it. Oh, but hold on. It turns out it is not quite going to plan. In fact, while

Robert Peston

The unspoken argument behind a windfall tax

The Financial Times story on Rishi Sunak looking at a possible windfall tax on energy firms captures how difficult such a tax is for any government, especially a Tory one. Because it begs questions why, when electricity suppliers suffered unsustainable losses in autumn and winter, when under the price cap they suffered huge and unsustainable losses – what you might call a reverse windfall – they were allowed to go bust. If you believe in capitalism and competition, you believe in swings and roundabouts: windfall profits in good times are the obverse of extreme losses in the bad. Kwasi Kwarteng repeated that mantra as failing electricity suppliers would not be

There’s never been a better time to ditch the net zero agenda

The cost of living crisis is confronting Westminster elites with the stark reality of some of the dubious policy choices they’ve recently made. Last week, the government was forced to postpone its ban on buy one get one free deals on ‘junk food’. The foolishness of outlawing cheap food – a policy Boris Johnson adopted after his spell in intensive care – has been laid bare now that inflation has risen to a 40-year high. Soaring energy bills ought to give proponents of eco-austerity similar pause for thought. Dozens of retail energy companies have gone bust in recent months. We are shipping fracked gas from the US while banning the

Gabriel Gavin

Life in an age of hyperinflation

Istanbul, Turkey On Saturday mornings, Istanbul’s markets and greengrocers are packed with housewives in search of a bargain. Anxious women compare cabbages while chefs haggle over bunches of parsley, passing across thick wads of ten Lira notes – equivalent to about £5 a decade ago, now worth just 50 pence. The rising cost of food has become a national obsession in Turkey. Menemen, a staple breakfast dish of scrambled eggs with tomato, onion and fried green peppers, has seen the cost of its basic ingredients shoot up by 132 per cent in a year. Some shops in the big cities have invested in digital price tags – those little grey electronic

Kate Andrews

Mervyn King: Needless money-printing fuelled inflation

Some £500 billion was printed by the Bank of England during the pandemic – a staggering sum that caused very little public debate. Those sceptical about so-called ‘quantitative easing’ argue that it causes inflation – and with today’s news that inflation rose 9 per cent on the year in April, is anyone linking the two? Step forward Mervyn King, former governor of the Bank of England, who was surprisingly critical when speaking to Andrew Marr on LBC last night. One of the major problems, Lord King said, was that the Bank went too hard and too fast with its money printing. ‘Governments stepped in and put in a lot of

Sunak, not Bailey, is to blame for inflation

Inflation has hit a 40-year high. The cost of household utilities rose by an average of £700 last month. We are now facing inflation of 9 per cent and the figure is still careering upwards. In response, politicians and ministers have attacked the Bank of England. Some commentators have even started to call for Governor Andrew Bailey to resign. The Governor himself and Chancellor Rishi Sunak say there is nothing that can be done about prices rising. They’re both wrong. First, let’s understand why it is unfair to attack the Bank of England. Under our system, the Bank is not independent, as some like to claim. Rather, it has what is called ‘operational independence’.

The protocol is hurting Northern Ireland

With every sausage war or fish fight over the past 18 months, the chances of survival for the Northern Ireland protocol have narrowed. But the fallout from the NI Assembly elections, which saw Sinn Féin become the largest single party, has made it increasingly likely that the UK will take unilateral action to override parts of the Brexit deal. The protocol has few supporters. Arguably its only redeeming feature was that it allowed Boris Johnson to break the deadlock and conclude the withdrawal agreement. Because a porous land border between the UK and the Republic would have threatened the single market – and a hard border between Northern Ireland and the Republic

Kate Andrews

Andrew Bailey’s inflation excuses have been exposed

This afternoon the Bank of England’s governor Andrew Bailey appeared, as he has done many times before, in front of the Treasury Select Committee to answer questions about its recent decision-making. Yet the tone of the Committee was radically different to other sessions. Its chair Mel Stride opened by asking Bailey if he and the Monetary Policy Committee – made up of nine members who vote to set interest rates – had been ‘asleep at the wheel’ as prices soared throughout the country. It was arguably one of the easier questions put to him during today’s session: from then on, Bailey and the MPC members who joined him were pit

Kate Andrews

Tinkering with the energy price cap won’t fix it

In principle, the UK’s energy price cap is supposed to provide a buffer for consumers who might otherwise see their energy bills go through the roof. But governments can’t control international energy prices: a lesson that has been learned the hard way over the past six months, as dozens of energy companies have gone bust, unable to raise prices for customers to reflect increasing wholesale costs. Meanwhile the cap has not stopped bills from skyrocketing: Ofgem’s last price cap went up by 54 per cent, taking the total cost for an average household to just under £2,000 per year. Still, if there were any silver lining to this distortive policy

Are sanctions on Russia failing?

Sanctions are the West’s key weapon in the fight against Putin, but there are signs that Russia’s economy and financial system is weathering the storm better than expected. The rouble has already bounced back and Russia has been able to continue to service its debts, with only minor hiccups. A closer look however reveals that sanctions are biting hard – and that Russia is losing the economic as well as military war. Take the rouble’s resurgence, which is not what it seems. The ability of Russia’s currency to bounce back reflects the fact that Russian imports have fallen by more than the country’s exports, as local consumers and businesses have cut spending. This means there

The nihilistic rise of ‘loss porn’

It’s been a terrible few weeks for that guy you know. Bitcoin dropped to a ten-month low (apparently thanks to something called ‘stablecoins’), while $1 trillion has been wiped off the largest tech companies on the stock markets. ‘Retail investors’ – non-professionals with little more than an internet connection – are struggling. You might expect many of them to put their heads in their hands and log off. But that would be to misunderstand the nihilism of online culture. Losing is the same as winning, only better. The thing to do is to post evidence of your catastrophic losses. It’s called ‘loss porn’ and if you look at the ‘WallStreetBets’ page on

Rishi Sunak’s net zero u-turn

How time flies when there’s a real crisis. Just six months ago at the Glasgow climate conference, the Chancellor Rishi Sunak was pledging to rewire the entire global financial system for Net Zero. Sunak boasted that he was going to make London the world’s first ‘Net Zero Aligned Financial Centre’. It would mean forcing firms to publish plans showing how they will decarbonise and meet net-zero targets to be overseen by a transition taskforce. There was little fanfare when the transition plan taskforce was launched last week. Even though the taskforce is co-chaired by John Glen, the economic secretary to the treasury minister alongside the chief executive of Aviva, you won’t

Kate Andrews

Are we heading for recession?

Fears that Britain could soon be in recession are growing, as the economy appears to have even less power behind it than previously thought. Today’s update from the Office for National Statistics shows Britain’s economy grew by 0.8 per cent in the first quarter of the year (consensus was 1 per cent) – and actually fell by 0.1 per cent in March when zero growth was predicted). February’s growth was downgraded as well, from a minimal 0.1 per cent growth to being completely stagnant. Had it not been for increased construction output in March (up 1.7 per cent), the fall would have been bigger: the services industry fell by 0.2 per

The tech bloodbath won’t last forever

To paraphrase the American senator famously talking about government spending, a trillion dollars here or there and very soon you are talking about serious money. Over the last week, a massive $1 trillion has been wiped off the value of the major American technology companies, and, if measured since the start of the year, the carnage is far worse. But is it all as bad as it seems? Sure, some of the excesses of lockdown are being trimmed, and rising interest rates are starting to hurt some wildly over-valued companies. But nevertheless, tech is still where the growth is. And in reality the bloodbath will soon be over. It would

Ross Clark

Is the bond bubble about to burst?

First, the good news: US inflation is down. Now the bad news: US inflation isn’t down by as much as a lot of people were expecting. Cue quite a lot of confusion on the markets. First, the S&P 500 plunged by 0.5 per cent, then it rose by 1 per cent, then it was more or less back to where it started the day. The FTSE100 has performed a similar gyration: first erasing its daily gain and then regaining it, to finish nearly 1.5 per cent up on the day. So, is it positive or negative news that US consumer inflation has fallen from 8.5 per cent in March to

When will Boris face up to the real challenges facing Britain?

It’s rarely a good sign when, moments after a major set piece event such as yesterday’s Queen’s Speech, the government’s PR machine kicks into overdrive to defend it. Though Labour’s claims that Boris Johnson isn’t doing enough to support squeezed households were wearyingly predictable, the Tory narrative about turbocharging the economy and slashing EU red tape has quickly fizzled out. And Michael Gove’s surreal media performance this morning won’t do much to allay concerns that Boris’s government is up a creek without a paddle. Brits are currently facing rising energy bills, inflation is forecast to hit ten per cent and wages are failing to keep up with the increase in prices.

Ross Clark

BlackRock is right to abandon eco-activism

Is this the end of climate activism from pension providers and other institutional investors? BlackRock, which manages $10 trillion in assets, has toned down its enthusiasm for blocking company boards that are not sufficiently committed to a carbon-free future. In January 2020, BlackRock’s CEO Larry Fink shook up the world of investment by writing an annual letter to the CEOs of companies in which he invests, warning them that in future BlackRock would take a more critical view of their climate change policies. He wrote on that occasion: Last September, when millions of people took to the streets to demand action on climate change, many of them emphasised the significant

In defence of Liz Truss’s retro economics

One of the many curious things about Foreign Secretary Liz Truss is that she has the capacity to drive some people around the twist. There are the Trussites, hovering over her Instagram posts in political adoration, and then there are others who consider her a menace who is about to be made Prime Minister in a sinister conspiracy by Brexiteers. At least she is willing to challenge the groupthink of the Bank of England and the Treasury, both of which are full of clever people who have manifestly failed to manage the inflationary shock currently knocking us all off our perches. At the weekend, it was reported that Ms Truss

Sam Ashworth-Hayes

What reason is there for young people like me to vote Tory?

With a sense of reluctance, I went into a voting booth this week and ticked the boxes corresponding to my local Labour candidates. My rationalisation was simple: I wasn’t voting for Labour, but against the Conservatives.  There is a tangible stench of decay surrounding the Tory party at present. At best, it is incapable of maintaining moral standards. Barely a month passes without some MP’s embroilment in a grubby scandal involving sex, money, or both. The party has no vision for the country, no agenda beyond targeting the young to pay for the old. And if you judge them on results, well, there’s even fewer reasons to vote Tory. The Conservatives