Money

The Bank of England is right to hike interest rates

The Omicron variant of Covid-19 is rampant. Bars and restaurants are in crisis as thousands of bookings are cancelled. And travel restrictions are back in place, with a full lockdown looming. To make matters worse, so far there is little sign of the Chancellor Rishi Sunak stepping in with any support.  Most businesses probably imagined that the very last thing they would have to cope with right now was a rise in interest rates. As a result, there will be plenty of business owners complaining that the Bank of England’s decision to up rates to 0.25 per cent will be the final blow that will push the economy back into recession. But hold on.

Kate Andrews

Has Boris made you better off?

Despite the political misery for Boris Johnson as he ends the year, he has a big hope: that salaries will boom in 2022. At Conservative party conference in October, he told fellow Tories what to expect. Yes, the country has gone through a phase of economic chaos — and as a result some supermarket shelves have been empty and truck drivers have been hard to find — but this was actually good news, he claimed, because it marked the start of a new, high-pay economic model. ‘We are not going back to the same old broken model with low wages, low growth, low skills and low productivity,’ he boasted. Change

Kate Andrews

Can the Bank of England get a grip on soaring inflation?

Yet again, inflation has surged past expectations – this time hitting 5.1 per cent in November, a ten-year high, up from 4.2 per cent in October. This threatens a political crisis as well as tough economic times: unless inflation is quelled, next year will be one of declining living standards for most people. Anyone whose pay is not rising by at least five per cent will, in effect, feel like they’ve experienced a pay cut. It was assumed that five per cent would be about as high as inflation would go but all this is proving hard to predict. This has gone past the Bank of England’s peak forecast, which

John Ferry

Sturgeon’s war on business is strangling Scotland’s economy

There was one minor and one big surprise in the Scottish government’s latest budget, which was set out by Kate Forbes, the finance secretary, last week. The minor surprise was the Sturgeon administration’s decision to provide less business rates relief, in comparison with England, to the retail, hospitality and leisure sectors during the next financial year. Businesses in Scotland will be eligible for 50 per cent relief, capped at £27,500 per rate payer, but only for the first three months of the 2022-23 financial year. In England, the same businesses will be eligible for 50 per cent relief for the whole financial year. A winding down of rates relief was

Ross Clark

Are a growing number of Brits choosing not to work?

It wasn’t long ago that we were fearing the end of the furlough scheme might be accompanied by a significant rise in unemployment. According to the latest labour market figures released by the Office of National Statistics (ONS) this morning, that doesn’t appear to have happened. What they do show, however, is that the pandemic has led to growth in a section of the population which generally receives little comment: adults of working age who are economically inactive – i.e. not in work and not seeking work either. Moreover, those who are in work are working fewer hours than they did before the pandemic. The figures cover the period August

How many will disobey another lockdown?

Ministers may claim that ever-tightening Covid rules are proportionate and reasonable, but if enough members of the public disagree, then the government could have a real problem on its hands. Non-compliance to another lockdown wouldn’t need to be rampant: if even 10 per cent decide not to adhere it could blow a hole in lockdown’s effectiveness. Last month, Professor Chris Whitty expressed concern over ‘behavioural fatigue’. At the weekend, senior behavioural experts questioned the government’s prospects of successfully imposing new measures after ‘party-gate’. One told The Observer that ‘trust has been eroded to a very significant level… If you don’t trust the government, why would you do what [it] asked you

Joe Biden is running out of other people’s money

Abba have reformed. Nato is working out how to deal with an aggressive Russian president. And there are shortages of everything. There were already plenty of clues, but now it is surely official: the 1970s are back. The United States has recorded its highest inflation rate for 32 years, with a 6.8 per cent rate that far surpassed anything even the most pessimistic forecasters expected. In truth, Joe Biden is about to turn into the new Jimmy Carter, a lame duck Democratic president presiding over a failing economy – and the crisis is entirely of his own making. We already knew the US was witnessing a bout of inflation. Even

Kate Andrews

The economy was stagnant even before Plan B

The economy is tantalisingly close to returning to pre-pandemic levels, now just 0.5 per cent off recovery. But this last hurdle may be the most difficult to overcome. The economy was more or less at a standstill in October, with GDP climbing by a measly 0.1 per cent. Services output grew by 0.4 per cent, mostly thanks to an uptick in GPs heading back to their surgeries for face-to-face appointments. While services recovered to pre-pandemic levels in October, the underlying figures don’t look so rosy: production output fell 0.6 per cent, while construction took its biggest hit since the first lockdown, falling by almost 2 per cent. These are disappointing

Islamonomics: how Erdogan crashed the Turkish economy

The Turkish lira sank to an all-time low against the dollar last week. The lira shed 30 per cent of its value in November alone, having lost nearly half its value since the start of the year. Inflation in the country is out of control — reaching over 21 per cent last month. Traditional economics tells you to raise interest rates to counter inflation. Higher rates make borrowing more expensive and saving more attractive — in theory reducing the amount of spending on goods and services. Indeed the Bank of England, facing inflation at just over 4 per cent, is hinting that it will raise them in the new year.

Punishing the unvaccinated threatens everyone’s liberty

How should we treat the unvaccinated? Should we stop them from participating in normal life? Castigate them in the media? Mandate they get vaccinated or block them from accessing NHS services? It’s a creeping question across developed countries — asked on Good Morning Britain’s Twitter page yesterday, and then subsequently deleted. Germany has barred the unvaccinated from most aspects of public life, including shops and restaurants. Greece is charging the over-60s Є100 for every month they remain unvaccinated, with money going to top up the health services. In Singapore, the unvaccinated will no longer have their Covid care paid for by the state. A letter in the Times this week suggested

Has Christine Lagarde just let slip the truth about the euro?

Ursula von der Leyen dispensing vaccines, with a halo over her head perhaps? Emmanuel Macron riding a tank to symbolise the continent’s strategic autonomy? Or various commissioners whose names no one can quite remember setting carbon targets, fining Google and Apple, and dishing out grants for roads, bridges and tunnels?  It remains to be seen just what the European Central Bank comes up with for its planned re-design of the euro banknotes. One point is perfectly clear, however: the makeover will reveal the currency’s true colours as a vehicle for European integration rather than an effective instrument of economic policy. In fact, if the ECB really wanted to redesign the

Ross Clark

Will someone wake up the Bank of England?

It is called managing expectations: the steady drip of forecasts and scenarios designed to prepare us for bad news, so that when that news does finally arrive it doesn’t seem nearly as bad as it would otherwise have done. So is that what the Bank of England is up to with its deputy governor, Ben Broadbent, telling us that inflation next April could ‘comfortably exceed’ 5 per cent? It is reminiscent of the moment in July when the Bank’s departing chief economist, Andy Haldane, dropped in the suggestion that inflation by the end of 2021 could be closer to four percent than three percent. The MPC is behaving like a Chancellor

Football’s dangerous love affair with crypto

The value of cryptocurrencies like Bitcoin, and digital assets more generally, is a controversial topic at the moment. Some dismiss decentralised finance as nothing more than a fad and a bubble, while for others we are on the cusp of a ‘monetary revolution’. For what it’s worth, my own view of crypto is somewhere down the middle. The blockchain technology which underpins crypto could be potentially transformative if used properly. But often this innovation is tarnished by the many dodgy cryptocurrencies that have emerged which have no real usefulness or value. Often issued by shady cryptoexchanges with questionable business practices, these are nothing more than high-risk speculative assets – if

Katy Balls

Money through the generations: addressing the taboos

29 min listen

Money is not generally discussed at the dinner table, and inheritance even less so. So, do parents do enough to pass down responsible personal finance habits to the next generation? And if not, how can those conversations be had? On this live recording of The Spectator’s Women With Balls podcast, deputy political editor Katy Balls will be joined by Charlotte Ransom and Dame Helena Morrissey to discuss breaking the taboo around money and offering practical tips on investing across the generations.

Ross Clark

When will the Tories do something about house prices?

Anyone who doubts that the fiscal response to the pandemic has stoked inflation needs to look at the latest figures from the Nationwide on the housing market. Yet again they confirm that the deepest recession in modern history has been accompanied by a boom in house prices. Moreover, the inflation does not seem to have been reined-in by the ending of the stamp duty holiday. The price of the average home, according to the building society, rose by a further 0.9 per cent in November to reach £252,687. This is ten per cent up on last November and 15 per cent up on March 2020, at the beginning of the pandemic. How can

The economic impact of the latest Covid restrictions

We don’t yet know whether the Omicron variant will drastically accelerate the spread of coronavirus, or whether it will circumvent parts of the immune system. Nor can we be sure that the ‘light’ coronavirus restrictions announced at the weekend will be enough to combat the new strain. We can be certain, however, that these measures will come with an economic cost that politicians are, at least publicly, understating. Face masks are once again compulsory in shops and on public transport in England, and UK arrivals will need to take PCR tests within two days of landing, isolating until they get their result. But the major economic threat stems from the

Ross Clark

Boris could pay a heavy price for his tax hikes

Given the enthusiasm for tax cuts usually shown by Conservative MPs it is remarkable how few of them have, in public, raised objections to the government’s loose fiscal policy. True, the Prime Minister’s announcement of a hike in National Insurance ostensibly to pay for social care, elicited squeals from the back benches, yet last month’s Budget drew only muted objections. This was in spite of claims by the Resolution Foundation that the Budget will cost an average household £3000 a year – if you take into account the effect of higher prices as businesses seek to pass on their higher tax bills to consumers. Today, however, Mel Stride, former Treasury

Steerpike

Fact check: are the Tories cutting taxes?

Ping! No, not the dreaded Covid app but rather another beseeching email from CCHQ, begging money for Tory funds. Reading through the party-politicking, Mr S was curious to see that among the party’s list of achievements was the claim that ‘we’re delivering what the British people voted for’ by ‘cutting taxes for hardworking people.’  An intriguing boast, given that Rishi Sunak is hiking National Insurance, which applies to all employees including those on minimum wage, by an effective 2.5 per cent – despite the Conservative Party’s pledge in 2019 that ‘we will not raise the rate of income tax, VAT or National Insurance.’ Corporation tax has been raised to 25 per cent from

What Bitcoin’s crypto critics get wrong

What’s the truth about Bitcoin? Critics couldn’t be clearer: it’s a fad that can’t decide whether it’s a currency or a speculative investment. ‘You’re betting, essentially, on being the last person holding the bomb before it goes off,’ wrote Sam Leith on Coffee House. Many others agree. But Bitcoin’s critics are wrong: there’s nothing faddish about it. Bitcoin is a monetary revolution and is here to stay. Perhaps it’s no surprise that Bitcoin has attracted its sceptics. Understanding what it’s about isn’t easy. In short, Bitcoin is a monetary network, an incorruptible ledger, with the money supply fixed by code (there will only ever be 21 million Bitcoin). It allows

The confusion at the heart of social care

Boris Johnson’s majority plunged to just 26 last night, following a rebellion over controversial changes to social care plans. Means-tested, state-funded payments will no longer count towards the £86,000 limit on the amount people will have to pay for their care. Those with initial assets worth less than £186,000, and who have received such help, could be worse off as a consequence. Critics have pointed out that this is likely to disproportionately affect residents in the North or the Midlands because of differential house prices. Johnson’s government isn’t the first to tie itself in knots over the issue of social care funding. Successive administrations have failed to bring about reform