Cable calls on chancellor to write to BoE governor

With inflation now standing at a 6 year high of 3.1%, Vince Cable has called on the chancellor to write to the governor of the Bank of England with an explanation.

This would be a reversal of the usual mechanism where the Bank of England has a duty to explain to the government why its Monetary Policy Committee has not prevented high inflation with appropriate movement of the base rate.

The increase in inflation was diplomatically described on Radio 4 this morning as being an after effect of last year’s drop in the value of the pound. (Anybody remember how that happened? June, wasn’t it?) Clearly the Brexites have since been on the phone complaining because there is no reference to last year or the pound in the online article linked above.


It should be the Chancellor writing to the Governor of the Bank of England to explain why inflation has shot up beyond its target.

Philip Hammond knows why inflation has risen so sharply, it is because the government is pursuing the most extreme Brexit to take us out of the single market and customs union which has continued to suppress the value of the pound and pushed up prices.

The Chancellor should explain to a no-doubt deeply frustrated Governor of the Bank of England why the government is pursuing a policy that even the Chancellor acknowledges is extremely damaging to the UK economy.

The price of Christmas has gone up for millions of families – and that is the fault of the government.

It is due to decisions made in Downing Street that flights and fuel have gone up, making it more expensive to visit relatives, and the price of video games has also risen, making it harder for parents to give their children a decent Christmas.

If I had my way every supermarket and petrol station receipt would show a breakdown of how much you were paying for what you had just bought, and how much extra for Brexit. We’d find ourselves back in the EU within weeks.

* Joe Otten was the candidate for Sheffield Heeley in June 2017 and Doncaster North in December 2019 and is a councillor in Sheffield.

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  • Peter Martin 12th Dec '17 - 2:23pm

    @ Joe,

    You have omitted to say that the target (note: it is a target and not an upper limit) for inflation is 2%. Up until recently it has been slightly lower that the target. Just recently it has been slightly above.

    You should be discussing whether this all make any economic sense and not about who should be writing to who with letters of supposed explanation.

    One problem with the target is that it doesn’t take into account movements of the pound. The BoE very likely nudged the pound down when they had the political opportunity the day after Brexit. They’d been under some pressure to increase inflation and this was jus about the only way they could. So they’ve slightly overshot? Is that a big problem? It’s on target over a two year, or more period.

    In any case we need a better measure of inflation. If UK prices are stable, we have, under the present system, inflation if the pound falls and deflation if it rises. The whole point of having a floating currency is to let it float. Black Wednesday shows what happens if the pound is artificially fixed at too high a level. Neither the Govt nor the BoE should try to interfere with the pound’s value. Except perhaps to try to smooth out any short term fluctuations in the exchange rate.

  • Lorenzo Cherin 12th Dec '17 - 4:10pm

    David as in chum pal Raw

    You should have commented on my article on Saturday, on the calls from some for ever more EU, we have similar views on the over interest in stopping or worrying about Brexit!

    We have the people and polices there for the developing , but Sir Vince is not ware of it enough.

    My own field is a good example, one I am trying to do something about , to harness talent and interest.

    I find it lonely and hard work.

  • David Raw,

    this issue of the sustainability of care homes is very important. You are quite right to raise it. There really hasn’t been any solutions developed since the Southern Cross fiasco.
    Care homes that are reliant on local authority placements are folding all over the country as the council fee payments are too low to provide an acceptable level of care and make a return on investment. We are heading for a situation where only wealthier pensioners that can afford significantly higher fees will be catered for in privately run care homes. Those without assets or income will be cared for in Local authority run homes with wholly inadequate resources to manage an effective and safe operation.

    As you say, Local authorities need to have the powers and be able to raise the finance to provide secure care home accomodation. The obvious source of finance is Land Value Capture in the form of Land Value Taxation, so that those increasing numbers without property wealth to fall back on can be provided for in their old age.
    i wholly agree that these kind of bread and butter social matters must be prioritised and addressed with radical social iberal policies. This is the whole raison d’etre for the party’s existence.

  • “i wholly agree that these kind of bread and butter social matters must be prioritised and addressed with radical social liberal policies. This is the whole raison d’etre for the party’s existence”.

    Well it certainly ought to be – but I don’t see much sign of it. Time the party woke up !!!!

    We can’t wait for a Land Value Tax to be set up, Joe. We (and they) will all be dead by then. It’s time to restore and fund local government again – I don’t care whether it’s called municipal socialism or not – it needs to be done. We can’t leave our old people to the mercies of globalised hedge funds. It’s shameful.

  • paul holmes 12th Dec '17 - 9:01pm

    David is absolutely right. We always used to be ‘the Party of Local Government’ but sold the pass during the Coalition when we supported 40% cuts in Council funding. Our Spokespeople defended this under the cloak of devolution but all we were devolving was the power to manage massive decline and massive cuts.

    Grandiose statements of Liberal principle are fine but everyday life for most people is preoccupied with priorities such as jobs, NHS, Education, Housing and Care Homes. Until we become relevant again on these we will continue to flat line on 7% as we have for the last 7 years,

  • Arnold Kiel 12th Dec '17 - 9:35pm

    In case you haven’t noticed: the UK is broke. Households are again overindebted, and the Government runs a 40 Billion deficit. Insufficient public budgets and senseless privatizations are the consequence. Social dignity is unaffordable and Brexit will accelerate these trends towards a collapse of public services. If Brexit isn’t stopped, there is no point in lamenting about adult social care. Your civil society will be gone, just like in the US. At this moment, an exit from Brexit is the only meaningful LibDem policy on social matters.

  • David Raw,

    for private equiy funds these private care homes are speculative property investments. It is the value of the property that secures the debt and the interest payments absorb a large part of the nursing home fees revenue generated.
    Capturing the economic rents generated from interest payments on debt secured on land and the large increases in land Value on these retirement home sites is how the funds that local authorities need to provide these services can be raised.

  • Little Jackie Paper 12th Dec '17 - 10:02pm

    Arnold Kiel – Good grief, some people are determined not to get it aren’t they. Just look at your own list. Government spending deficit, Insufficient public budgets and senseless privatizations. All of that was happening well prior to the referendum.

    Look, I get that you wake up in the morning, belt out Ode to Joy and kiss an icon of Juncker – good for you. But until you and other REMAINers see that the EU is ABSOLUTELY a part of the system and not some special, heroic thing then you are just going to pound the keyboard to little effect. If you are not thinking about the EU as a part of the system, as a part of the governance that has brought us to where we are then you are not thinking nearly hard enough.

    The problem, to my mind, was that a lot of people in the UK, including I suspect a good number of REMAIN voters, have very simply had a gutful of what might be termed the Open Agenda. That agenda has been strongly (some might say zealously) pursued by successive governments AND the EU. The stark reality is that open really has not done a lot of people a lot of favours. Until you and others engage with that basic point you can lob out all the talkboard vitriol you want to, you’ll get nowhere.

    You may very well want to tell me that there has been poor UK policy. I’d agree. You might want to blame the voters. There is a debate to be had there. But until someone looks at the EU and its dogma about the open agenda then REMAINers are wilfully missing the full picture.

    Anyway, I’ll sit back and let you tell me how thick and worthless I am now.

  • Little Jackie Paper 12th Dec '17 - 10:13pm

    David Raw – ‘It should be noted, since the Brexit vote, 96% fewer nurses have arrived from the EU forcing Four Seasons to use agency workers who cost up to three times as much.’

    With respect though, ever getting into that position at all is not a good thing. Look, if it were down to me care worker would probably be the sort of job on the ‘shortage’ list. But what interest is possibly being served by the sort of situation you describe? There are a whole raft of issues here. Indeed one could argue that all the open agenda is doing is passing problems around – 90% of newly-qualified Bulgarian doctors leave Bulgaria for example.

    What to do about all this is another matter. And, of course, pointing the finger rarely helps anyone. But let’s not pretend that ending up reliant on cheap, transient foreign labour is some sort of policy and workforce management triumph – it’s not.

    I read the other day that in 1997 net immigration was 48,000. Just a thought.

  • Little Jackie Paper 12th Dec '17 - 10:17pm

    JoeB – LVT for social care does have advantages. Notably the land that the care home is on isn’t going to up and move to some tax-haven. But would that money suffice? It sound unlikely on the face of it – advantageous though LVT might be.

    At the election it just felt like everyone was trying their best to defer the conversation about house price ‘wealth’ as a funding source. LVT is a good thing to my mind, but I don’t think it should be something that has as a de facto outcome the effect of being inheritance insurance.

  • When we leave the EU in March 2019 (which I voted against in 1975 and 20016) life will go on, the world will not come to an end.

    Meanwhile any Party which has built its entire existence around opposing Brexit (a decision we lost in 2016 and June 2017) would be somewhat irrelevant to the real world, as perceived by the electorate. Which (the electorate) is quite important in a democracy.

  • When we leave the EU in March 2019 (which I voted against in 1975 and 2016) life will go on, the world will not come to an end.

    Meanwhile any Party which has built its entire existence around opposing Brexit (a decision we lost in 2016 and June 2017) would be somewhat irrelevant to the real world, as perceived by the electorate. Which (the electorate) is quite important in a democracy.

  • @ Paul Holmes, Thanks Paul. Agree with everything you say. I did manage to lever up the budget somewhat when I was Convener for Social Work in the Borders, but it was like squeezing a dry cloth for water. I wish you were still in Westminster calling a few shots.

    @ JoeB I’m more than fully aware of what you say in your first paragraph, Joe – but it’s too urgent to wait for the bureaucracy necessary to set up a Land Tax however valuable it might be in the long term – as LLG found many years ago.

    @Arnold Kiel If we could do Beveridge in 1948 (when my Dad was helping fly supplies in to Berlin – and the Americans were propping Germany up with the Marshall plan) we could do it now if we so chose to have the political will.

    I voted remain – but I’m afraid what appears to be your version of neoliberalism is why so many people voted to leave. Incidentally Germany only spends 1.26% of GDP on defence compared with the UK’s 1.98%, so if we accept the 2% target (I don’t) then Germany is not exactly pulling it’s weight in NATO..

    If the party doesn’t tackle the issue then it can forget any claim to be called radical. A number of us with (in my case, fifty six years membership) may decide that enough’s enough. Not much point to an empty echo chamber.

  • Little Jackie Paper,

    The “system” is simple: make things at a cost at which others want to buy it. Open helps few people if few are involved in competitive sectors. The EU provides a broad platform to those who know how to use it. The UK does brilliantly in e.g. financial services, but not enough else (indeed, nothing new here). The entire UK re-industrialization since 1970 was foreign-funded, -managed, and common market driven. The only places that have successfully “escaped that system” that come to mind are North Korea, Cuba, and Venezuela.

    What you call system, or governance, or agenda (implying something politically driven), I call industrial competence, driven by entrepreneurial capital.

    David Raw,

    Much is possible with massive pent-up demand, capital-stock recreation from scrap and the resulting high growth. Political will means nothing if consumer- and investor-confidence have disappeared.

  • Peter Martin 12th Dec '17 - 11:27pm

    @ Arnold Kiel,

    You claim: ” In case you haven’t noticed: the UK is broke.”

    We haven’t. The rate of interest on 5 yr Government bonds (gilts) is less than 1%. Would you lend money to anyone who was “broke” at such a low rate of interest?

    The Bundesbank buys a lot of these gilts. They balance up the books after Germany sells us twice the amount they buy from us.

    If we are “broke”, and such a bad risk, why would they do this?

  • Peter,

    You keep going on about the Germans buying our bonds as if we are reliant on them. Yet the entirety of bonds held by foreign investors is 27% the Bank of England hold 23%, 50% is held by the UK private sector.

    I fear your problem is you think there are economic laws, but to be blunt the majority of the economy is based on what people think something is worth (just look at bitcoin). Economic is not a science it’s irrationality rite large. If it wasn’t flint arrow heads would still have value.


    Yes we where in a hole, but given how the Euro zone and the world is powering ahead perhaps if we hadn’t voted to dig deeper perhaps we would have been able to start dragging ourselves out of it. You voted for something else but had no idea what the something else would be, the very definition of a Nihilism.

  • Little Jackie Paper,

    Social care, domicilliary and residential, needs to be integrated with the NHS to resolve problems like bed blocking and preventative care.
    The Reform research trust argue that using housing wealth can offer sustainability for social care finances
    The report notes estimates the UK needs an extra £10 billion for social care costs and the amount of unmet care need and lack of private insurance options, mean that the Government will have to commit more resources to care.
    The alternative resource to increasing income taxes or borrowing is the housing wealth of the older population.
    With a 40 per cent inheritance tax, it is hard to convince the older population that more taxes on their estate would improve their welfare. The current threshold on inheritance tax, however, means that 60 per cent of over 65s are exempt. A simple calculation based on the English Longitudinal Study of Ageing (ELSA) suggests that the housing stock of those exempts is worth £566 billion.
    Tapping into this resource could deliver the funding that social care needs without putting a significant strain on the economy. Reform has suggested deferred payment agreements as a way to liquidate housing equity and use it to pay for care. Alternative models, however, such as lowering the inheritance tax threshold to £100,000 and earmarking the proceeds for care could be the step forward that government has been so reluctant to take.
    Using the housing equity of older people may give authorities the needed fiscal space in order to pass a more radical, long-term reform such as a pre-funded model. In brief, the system would work by requiring the working-age population to save in a pooled fund for the future care needs (in Japan workers pay increased social security contributions once they reach 40). While these savings mature, taxing housing wealth will provide for the care of the current old. Reform has argued that such a model provides more intergenerational fairness, as well as value for money.
    LVT solves both of these problems. Inter-generational fairness and progressiveness is maintained as the tax is assessed on the owners of land i.e. primarily the older generation and Landlords, large and small. LVT is collected annually and can be deferred where the cash flow of older landowners is insufficient.

  • Katharine Pindar 13th Dec '17 - 12:31am

    I have observed that you often breeze in, make some scathing comment, and then invite us to criticise you, LJP, in a confident sort of way. Well, it seems to me that you don’t tend to read what others have written, for instance the quite extensive coverage lately on what the EU has to offer. Perhaps you haven’t time to read thoroughly, but then it’s difficult to be convincingly dogmatic. I have no idea myself of what you meant by ‘the EU’s Open Agenda’, which you say a lot of people have had a gutful of.

  • Peter Martin 13th Dec '17 - 7:58am

    @ Frankie,

    No we aren’t reliant on Germany or anyone else buying our bonds (gilts), because, as you imply in your statistics, the BoE can always buy them up if the government, sorry, the totally independent BoE thinks that’s a good idea.

    Germany runs a large trade imbalance with the UK so lots of ££ end up in their banking system. What to do with them? Swap them on the forex markets for some other currency? That’s what I’d do. But that would mean the pound would fall and we couldn’t afford to buy so many of their exports.

    The choice then is for the Bundesbank to keep its ££ in gilts where it does at least get a little bit of interest. Or in pounds, in a BoE reserve account where it likely doesn’t get any interest at all. Do we care which one? Not really!

  • Arnold Kiel 13th Dec '17 - 8:14am

    If both, the private and the public sector run sizeable deficits for purely consumptive purposes (including adult social care), I call that broke. This does not mean it cannot continue for a while, at least in the public sector, but there is a limit (see Greece). And no, Peter, devaluation and money-printing will not help: interest rates would have to shoot up to keep investors in GBP.

    Liquidating housing wealth can be done if there is a majority of (turning out) voters who neither own nor aspire to own property, which means never. Don’t forget that house-equity is the only source of wealth-creation of the 98% of Britons with low- to average incomes. If you want to skim-off house equity through a lower inheritance-tax threshold it would be logical to also introduce capital-gains taxation for first homes. This would deflate the entire sector, including new development activity, in itself a major sector of the UK economy. Add to that the supply-side problems (materials and labor) created by Brexit…

    Coming back to Joe’s initial point, politicians all over the world are offloading too many of their own failings at the doorsteps of their cental banks. This has already reached scary dimensions: negative real (in some cases nominal) interest rates, outright state financing through balance sheet-expansion, and the devaluation-race. I don’t know how long this can go on, but if we exceed the limits of this, the 2008 GFC could be dwarfed by what will come.

  • Peter Martin 13th Dec '17 - 8:46am

    @ Arnold Kiel,

    You can “call it broke”, if you like, but that’s because you don’t understand macro-economics. The economies of the UK and the USA are quite similar in that both run trade deficits and budget deficits on a consistent basis. That’s not a co-incidence. Both types of deficit are interrelated. If money leaves the USA and UK economies to pay for imports it has to be replenished by govt deficit spending.

    In the USA too, we see similar concerns expressed over their $20 trillion or so National Debt which is the accumulation of years of budget deficits. The economic sky is thought, by many Chicken Littles to be about to fall in, as the bailiffs come knocking on the door demanding the repayment of their loans.

    We’ve heard all this stuff for years and, yet, the sky doesn’t fall in and life goes on as normal. It will keep on as normal too. There is really no fundamental problem with either economy, except that some politicians thinks there is an illness which needs to be cured with economic austerity which in medical terms corresponds to old-fashioned blood letting.

    Neither the UK nor the US are like Greece. We have our own floating currencies. If we need more dollars and pounds we can create as many as we like. That’s fine providing we don’t overdo it and cause inflation. The Greeks can’t create euros. They have to go cap-in-hand to Germany or the IMF to try to borrow some more.

    The complaint then is that the US and UK are “money printing”. Like the euro isn’t a printed currency too? That’s where money comes from. And if Germany doesn’t want to send us those nice BMWs and Audis in exchange for this so-called “funny money” they don’t have to. They can sell them somewhere else in the world instead.

    It has to be their call.

  • Arnold Kiel 13th Dec '17 - 2:59pm

    Peter Martin,

    I am an economist, fyi, but never mind (I admit to being more of a micro-guy). Considering the US- and UK-economies similar explains your Brexit-complacency. You should know that of the big western economies, the US is the closest, and the UK the most open (, not to speak of the quite different appetites of the world for USD vs. GBP. As you constantly point out, trade deficits must be compensated by capital imports, i.e. attractiveness for FDI. What else do you suggest the UK could sell to foreign investors at a rate of GBP 60 B p.a.? A lot of public infrastructure, industry, prime residential and commercial property (including care homes) are already foreign owned. The FTSE 100 is worth just 4 times Apple alone.

    What justifies, in your opinion, the continued confidence of the global captal arkets in the UK? Growth? Demographics? Productivity? Quality of Government? Sustainability of public services? Competitiveness? Innovation? Attractive returns? Industrial srategy? You don’t seem to see how suddenly your country’s downward trend could spiral out of control.

    Don’t worry, beemers and Audis will always be available to anybody – for euros (plus, as some of you seem to wish, the WTO-tariff). As a Brexit-BoE will print longer than the ECB or the FED, it will have to be 1-series or A1s for the same amount of GBP that used to buy you a 3-series or an A4.

  • Peter Martin 13th Dec '17 - 3:45pm

    Dear Arnold,

    As you’re an economist maybe you could give me some advice. For years I have been trading with a German family who have been living next door. The got into bad ways years ago, and I won’t go into that here, but they seem to have turned things around and are determined to be upright citizens now. They are all quite capable and produce very nice wines and beers. They are good at cars and all kinds of machinery.

    The problem is that they always want to give me much more than they take from me. I’m good at financial services and I did explain to them how they could use my IOUs on their balance sheet to, er, well make things balance. They loved it. They started to call it their trading surplus. They said that in German the word for debt means the same as sin and guilt and they’ve had just about enough of that, thank you very much! So they give me lots of things and I give them some things back. Not to anywhere near the same value but they happily take my IOUs to make up the difference.

    A few years ago Wolfgang and Angela asked me to call around and they showed me their safe. It was jam packed full of my IOUs. They wanted to know what I was going to do about it. I swallowed hard, I thought I had been rumbled! But they they gave me a glass of their nice beer and I suggested that we computerise the system. They were happier than ever. So now I just type out my IOUs onto a spreadsheet and there is no paperwork involved at all!

  • Peter Martin 13th Dec '17 - 3:46pm

    Dear Arnold (continued),

    I’m a bit worried about all this though. They are nice to me and the American guy who lives down the road and they’ll take his IOUs happily enough too. But on the other side is a Greek family headed by a guy called Alexis, and at one time another guy called Yanis was involved. They don’t seem to have any time for the Greeks at all. When Yanis asked for some more time to pay his debts they went ballistic! Angela and Wolfgang complained they had broken all the rules of the trading club they were in. I suggested that they should just write out some IOUs like the American guy and I do but Angela gave me a funny look so I decided not to press on with that suggestion.

    The German family seem very nice and they tell me that they are hoping to increase their trading surplus to 8, 9 or even 10% of their total income. So they will need ever more of my IOUs to be able to do this. I do feel bad though. Every so often, I try to persuade them that we need to balance things up but they get really upset. They just love their trading surplus. So what shall I do?

  • Arnold Kiel 13th Dec '17 - 5:27pm

    It is your responsibility to just buy what you can afford. It is not the seller who decides the amounts shipped. Your seller always requires payment in full. Your IOUs (to whomever) are still good (for now), and so are Jack’s (probably forever), but not Alexis’.

  • Joe,

    while the sterling depreciation is no doubt a significant factor – the effects on the annual inflation rate should have started to decline somewhat by now – 18 months on from the referendum; and be bringing the inflation rate down compared to the same winter months last year.

    The worrying aspect of this inflation report is the high rise in prices of basic staples – food prices up by 4.1% on a year ago, with transport costs rising by 4.5% and clothing and footwear up by 3%. With oil now at $65 a barrel there may be yet more inflationary pressure in the pipeline.

    Let’s hope that Mark Carney is right that inflation will come back towards its target during 2018 as the impact of the weaker pound fades. If not, then interest rate rises and the pressure that brings on mortgage costs and squuezed living standards is inevitable.

  • Peter Martin 13th Dec '17 - 7:32pm

    @Joe Otten,

    We might disagree on some things but surely we can’t disagree on arithmetic. We can all play games by cherrypicking peaks and troughs to suit our argument but in the month before the 2016 referendum the pound varied between 1.31 and 1.26 euros. An average of 1.28 . It is now 1.13 euros. A decline of 12%.

    We all like a high pound when we go to Europe on holiday. But if we’ve just lost our jobs because the pound is too high and whatever we make isn’t competitive in international markets, we probably don’t get to go on holiday in any case.

    We have to get away from the idea of the higher the better. If the pound is too high it is detrimental to the prospects of many.

  • Peter Martin 13th Dec '17 - 7:40pm

    @ Arnold,

    “It is not the seller who decides the amounts shipped.”

    You need to think about this a bit more.

    It’s easy enough to hold the pound down on the forex markets. If we wanted to, we could peg the pound at 1 euro. That would mean we’d ship more exports. It would then be more attractive to sell goods and services overseas than in the UK.

    So we, as sellers, would be deciding how much of our output was shipped overseas.

  • “The worrying aspect of this inflation report is the high rise in prices of basic staples – food prices up by 4.1% on a year ago,”

    Thankfully when we leave the EU and it’s ever increasing protectionism we will be free to make our own trade deals with the rest of the world. Food Prices will come down putting real money back in the pockets of the consumer especially those at the lower income levels which then in turn can get spent in the local economies.

  • Peter Martin,

    Economic theory, suggests that a depreciation should improve the current account.

    However, the improvement has been limited by a number of factors

    – Demand for UK exports appears to be highly price inelastic (at least in short term). The fall in price has only caused a modest increase in demand.
    – Evidence suggests that UK firms have not been passing the full price effect of the depreciation onto export customers. (firms have preferred to have a bigger profit margin)
    – Low EU growth has led to very weak export demand from our main trading partners. Although UK exports are more price competitive, the demand isn’t there.
    – Import demand has remained strong despite economic weakness.

    There is a round-up of opinion in this FT article:

  • Peter Martin 13th Dec '17 - 8:29pm

    @ JoeB,

    Unfortunately your link is hidden behind a paywall. But this link makes some of the same points as yourself.

    But it does say, and I do fully agree: “The Pound is falling which boosts exports, but the low wage growth means the strongest effect is the decline in real wages which damages economic prospects.”

  • Arnold Kiel 13th Dec '17 - 8:30pm

    Peter Martin,

    if prices fall, demand increases, but it is still the buyer who decides, meaning in this context: remaining fully responsible for full payment.


    under the most favoured nations clause of the WTO, if you drop import tariffs, e.g. on food, it must apply to all importers (including the EU). This would, naturally, exclude an EU-trade-deal, as the EU would insist on a level agricultural playing field. It is questionable how much the British consumer would save (and enjoy) eating food that has spent weeks crossing oceans in containers. Besides, many of the “consumer especially those at the lower income levels”, you only seemingly care about, would rather prefer to keep their better-paid jobs in pan-European industrial supplychains. UK agricultural subsidies would have to increase accordingly, if you want to maintain some self-sufficiency.


    I might add that this depreciation also failed to stimulate foreign investment. Quite to the contrary: it is stalling in expectation of further depreciation and in response to deteriorating economic prospects.

  • @Arnold
    “under the most favoured nations clause of the WTO, if you drop import tariffs, e.g. on food, it must apply to all importers (including the EU)”
    And your point is? If the food is cheaper OUTSIDE of Europe then we would buy it from there, the EU would either have to lower their prices or lose out

    “It is questionable how much the British consumer would save (and enjoy) eating food that has spent weeks crossing oceans in containers.”
    Well with EU tariffs of 31% on sugar, 22% on Cereals and Christ knows how much on poultry and meat, I would suggest the savings will be considerable.
    Food has been crossing the oceans worldwide in containers for decades, what’s your point? You really think that Chicken you ate last week from an intensive farm in Poland made its way from the farm in Poland to the slaughter house to a factory on to a lorry, across Europe and the Chanel and into the supermarket within a couple of days, Ha, whose kidding who

    “besides, many of the “consumer especially those at the lower income levels”, you only seemingly care about”
    I care more about those on the lower income levels yes, because putting real money back in the pockets of these people in turns gets spent back into local economies, which is a win win situation.

    “UK agricultural subsidies would have to increase accordingly”
    I agree, we would get rid of the ludicrous and expensive CAP that pours money to wealthy landowners and subsidies inefficient and poorer European countries and in turn come up with a British Agricultural Policy that benefits our farmers Subsidies that focus on public benefits that warrant taxpayer support such as encouraging land management practices which reduce flood risk or improve water and air quality.

  • Peter Martin 13th Dec '17 - 9:40pm

    @ Arnold Kiel,

    You need to be clearer what you mean by “full payment”. If I buy a Japanese car I pay in pounds. As far as I’m concerned I’ve paid in full. If trade is balanced between Japan and the UK then the number of pounds and yen automatically also balances on the forex markets. But if one country wants to run a trade surplus, say its Japan, it manipulates its currency downwards. It ends up with more of the other countries IOUs than it spends.

    So I don’t know when I think I’ve paid in full just how that translates into Japanese accounts. Are they just taking UK IOUs, ie pounds, and doing nothing with them? I have no way of knowing that. A surplus is not like a profit..

  • Peter Martin 14th Dec '17 - 11:15am

    @ Arnold Kiel ,

    Another way to look at it is to ask if the buyer is doing the borrowing (which is the way you see it) or if the seller is doing the lending ie as we do when we deposit money in the bank. The bank isn’t asking directly for a loan but ends up being a borrower, all the same.

    This is what happens when the Bundesbank buys UK gilts. The BoE isn’t asking the BB to do that. The BB buys the bonds to maintain the value of the pound, so that UK customers can continue to buy German products. If Germany wanted to balance its trade it wouldn’t do this.

  • Katharine Pindar 14th Dec '17 - 10:10pm

    Where angels fear to tread is into dense economic debates, and I am no angel, so I won’t even dip a toe. But I do want David Raw’s points to be remembered, that there should be more Government financial support for social care, and ‘it’s time to restore and fund local government again’. We need better local authority homes, and social workers able to give decent time and attention to the sick, disabled and elderly stuck in their own homes. Our party needs to show commitment to the urgent necessity of such provision, as well as to ending the benefit freezes and committing to reducing child poverty again.

  • Peter Martin 15th Dec '17 - 9:32am


    I’ve probably said this kind of thing previously, but economics isn’t that difficult if you think about what’s really important rather than get bogged down in the details of monetary flows.

    If we have the people available to be teachers, doctors, social workers, nurses, builders etc then we can “afford” the kind of social programs you have in mind. If we haven’t then we can’t. That’s all there is to it.

    What doesn’t make any sense is having people unemployed, or in poorly paid low productivity jobs, and so are in receipt of benefits, when they could be working in a full time job. They would then be part of the solution rather than part of the problem.

  • Little Jackie Paper 15th Dec '17 - 10:03pm

    JoeB – ‘Evidence suggests that UK firms have not been passing the full price effect of the depreciation onto export customers. (firms have preferred to have a bigger profit margin)’

    I’ve seen that reported and I was a bit surprised. I assume that following a whacking great balance sheet recession firms are taking the opportunity to repair balance sheets? May or may not be a bad thing, but it is something I see as under-remarked upon.

  • Peter Martin 17th Dec '17 - 9:31am


    Firms are always trying to maximise their profits, just as individuals are trying to maximise their earnings. The GFC didn’t change that. “Repairing balance sheets” is a meaningless term that has crept into usage since the GFC.

    Firms and individuals suddenly, after about 2007/2008, became much more debt averse than they were previously. House prices dipped. Share values slumped. Consequently everyone was much more cautious, much less inclined to borrow, and much more inclined to save. The banks were much more cautious about lending, and so loans were much harder to come by in any case.

    It must follow that if everyone else is net saving, the government has, on the principle of the sectoral balances, to be net borrowing. And so it proved as the Govt’s deficit jumped to 11% of GDP. Precisely the wrong thing to do, under such circumstances, was raise taxes (like VAT to 20%) and cut spending in an attempt to reduce the deficit. That just pushes the economy into recession and exacerbates an already poor economic situation.

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