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Time for interest rates to rise?

Andrew Neil | 10:49 UK time, Thursday, 31 March 2011

The fall in living standards is now moving centre stage in our politics and economics. I suspect it’s about to over take "the cuts" in political and economic significance.

Real disposable income fell almost 1% in 2010 -- the first "national pay cut" in over decades. Rising inflation and taxes (Vat up, NI about to go up) coupled with slow growth in wages (just over 2% annually when inflation is over 5%) mean it is almost certain to fall again in 2011.

The decline in living standards is already affecting consumer spending, which in turn is undermining retail sales, which are weak. Indeed the retail boom is well and truly over.

The country's high streets and supermarkets are already awash with discounts and two-for-one special offers. Around 40% of supermarket shelves now boast "special offers", an all-time record. Dixons has just issued a profits warning.

A new survey out today will show that consumer confidence has collapsed back to where it was at the height of the financial meltdown.

Rampant inflation has serious consequences for economic policy. When prices (and taxes) are rising much faster than wages -- as they are now -- then people feel the squeeze. They are forced to tighten their belts. They reduce their spending.

But consumer spending accounts for almost 70% of GDP. So when it slows, so does the economy. Hence the downgrading of growth forecasts in last week's Budget.

The normal response to rising inflation is a rise in interest rates. Many voices -- including that of the Bank of England Governor -- have resisted, on the grounds that it would slow the recovery. That is indeed a risk.

But rising inflation -- because of its squeeze on living standards -- is also slowing the recovery (as well as increasing government borrowing). So doing nothing is not with its risks to growth too -- and inaction now could mean much steeper rises in interest rates later.

It all depends on whether you think the current rise in inflation is a temporary blip -- or something that will be with us for a while. If the former, you might want to delay raising rates (though some rise is coming later this year whatever happens).

If the latter, then the sooner you start raising rates the better.

Comments

  • Comment number 1.

    We need more unemployment and far more poverty. Otherwise the deficit will not be eliminated. Interest rates should be raised massively to quash inflation and to eliminate jobs.

  • Comment number 2.

    How will raising interest rates help, if -- as we are often told -- most of the inflation is imported through increased commodity prices (oil, food)?

  • Comment number 3.

    Good morning each & Andrew.

    "But consumer spending accounts for almost 70% of GDP. So when it slows, so does the economy...."

    Deary, deary me. If this is true (and who can doubt it?) we are in deep trouble right enough.
    How can anybody hope to shop their way out of their financial troubles? That previous governments tried this very trick is said to be the reason why we are in such dire straits at present. Is it not?
    Fool that I am I have used the link above to reacquaint myself with the 'wonders' of the budget.
    I conclude that after a short period of higher and higher interest rates will come the devaluation of Sterling.

    The only thing for it is for each and all of us to contemplate, if not demand, a General Election. To take place no later than August.

  • Comment number 4.

    The problem is the low interest rates are protecting the borrowers, while savers and pension funds are being asset stripped to prop up the borrowers. The Bank of England even admitted it was their intention to steal all the money from savers to keep the feckless borrowers in "their" homes (not their home until the last penny is paid off of a mortgage).

    The deliberate smashing of the UK Pound by Gordon Brown and the BoE has further exaserbated the situation, exports are cheaper, but we don't export much, import costs have shot up for everything were don't produce, from food to increasingly oil and gas.

    And then there's the record amount of borrowing and spending on the public sector - some of which hidden with the FPI scam, even bailing out some banks that SHOULD have been forced to fold (in a true Capitalist system they would have folded).

    Labour allowed a record number of companies to be brought by foreigners (ie Cadbury's), by scrapping the law that stops purchases of UK companies on the grounds of "national importance" (or whatever the exact clause is). Labour's Peter Mandelson was quite happy about it at the time for "encouraging inward investment". The reality is all profits flow abroad, nothing stays in the UK.

    The falling living standards are a direct result of Labour party policies over the past 13 years, and any effects of the deficit can be laid at Labour's door, not the coalition, or any party that might have come in instead of the coalition (except Labour).

  • Comment number 5.

    I suppose the notions that:

    a) Inflation is being driven by rising fuel and food costs from abroad, meaning that raising the cost of domestic borrowing will have zero impact on it
    b) These costs are predicted to drop over the next 12 months, which is the only way inflation can be brought down (cant we just accept that our financial policy makers have very little control over inflation?)
    and
    c) Raising interest rates will mean that families hit by rising inflation will be even harder hit by rising mortgage costs

    all have no bearing on this strange move to call for interest rates to rise, which seem to be borne out of desperation rather than any evidence that they might help

  • Comment number 6.

    But if the inflation is international in dimension, caused by commodity prices in particular, but UK domestic inflation is low and stagnant, then increasing interest rates will surely merely offset international inflation with domestic deflation?

    Also the global inflation will squeeze real domestic disposable income in a similar way that an interest rate rise would, so you could argue that the equivalent of a base rate rise is already happening and so there is no need to compound the squeeze by raising the base rate?

  • Comment number 7.

    I almost forgot, the Labour party and Bank of England policy of Quantitative Easing (money printing) has greatly affected inflation as well, inflating asset prices far above where they should be, fiddling the market, keeping some people very rich off the back of it.

    Meanwhile, there are calls from some in the BoE for more QE. Do people learn nothing from the past, or does the UK need to be like Argentina before it learnt it's QE lesson - the HARD way?

  • Comment number 8.

    American blue-collar real wages have fallen 30% in ten years, but the decision to renege on State-employee pensions is causing far more brou-haha over there.

    Most of all the Americans have begun to refocus on how the banks embezzled their mortgage relief. Barofsky yesterday in the NY Times made the accusation very public. Something must be done and now, the Slog at wordpress has this and so do many US sites.

    The issue remains the same: not cuts, not falling wages, but the brutal takeover of our culture by the mad folks in the casino.

  • Comment number 9.

    "2. At 11:52am on 31st Mar 2011, peezedtee wrote:
    How will raising interest rates help, if -- as we are often told -- most of the inflation is imported through increased commodity prices (oil, food)?"

    Interest rates rise --> Sterling appreciates --> Buys more dollars --> cost of oil goes down

  • Comment number 10.

    Today's inflation is caused by rising food, fuel and energy prices against a weak pound and not by rising wages. Few are getting rises and few that do have rises matching inflation. Putting up interest rates will further decrease consumer demand. As long as government are happy with decreased consumer demand then interest rises are the way forward.

  • Comment number 11.

    Obviously increasing interest rates will help those that depend on their savings but I am at loss to see what it will do to help the economy. Suppressing demand further will not help with inflation as this is not the primary source of inflation. In this instance the perceived wisdom does not suit the problem.

  • Comment number 12.

    Good Afternoon Andrew,

    what people are continuing to ignore is the demographic time bomb. I have said before and I will repeat, I was born in 1949, at the end of the first post war baby boom. I would be close to retiring now if I hadn't retired years ago. Now one of the reasons why I believe there was such an expansion in the public sector work force was becasue it was anticipated that there would be a bulge in people retiring. Accordingly it was necessasry for new employees to be taken on, so that they could get trained, and ready to take over from all those soon to retire.

    Of course there must be a reduction in the public sector employment, as there will be in all other employee sectors, because they are being retired and not replaced, the new kids on the block are already in situ, they will just have to work harder. As for the other side of the equation so comes the massive fall in wages, as people are just so prepared for retirement.

    Now here is another problem, the retirees do not want to retire, so they take the lower paid jobs, to supllement their small pensions, but in doing this they deprive young people opportunities, they cannot to live on the wages offered, but because of pensions the older people subsidize the employers, they will work for less, but their total take home pay will compare to what they earnt before retirement.

    As for inflation, the depreciating pound, the oil crisis, the wars which cannot be afforded, well I have said that the economy is still like the supertanker analogy, it takes miles to turn it around, and for the economy it is time. Merv the swerve should have raised interest rates as soon the goivernment of national unity came into being. They must be 2%, and they will even rise from that low point. The economy is so doomed, it is only a question of time. Almost without realising it we have all become agents in a pathetic farce, too many levers to pull, nobody knows which one any more.

  • Comment number 13.

    I wrote this on my Notayesmanseconomics blog on the 14th of December 2009.

    "I believe that Keynes’ concept of a liquidity trap was and is true but is operating in a slightly different way to that which he envisioned. There are considerable problems with reversing the Bank of England’s Quantitative Easing Programme and anyway it is still continuing. Accordingly I remain of the view that raising interest rates to 1.5% will be a beginning in us negotiating our way out of our current difficulties."

    If we had done that then I believe that we would be in better shape now. Accordingly the real question might be to the Bank of England why they did not. Rather intriguingly Spencer Dale the Bank's Chief Economist answered this question in a recent speech when if you read between the lines they chose a boost to the economy then.

    The whole debate has had plenty of people telling us that there are no signs of inflation,which was proven wrong, and now they claim a rise in interest-rates will do no good either which in my opinion is also wrong. Perhaps the real question is why they are saying that?

    In contrast after the inflation figures produced today it looks even more likely that the European Central Bank will act by raisng interest-rates when inflation is 2.6%. So they think it can help at an inflation rate some 1.8% below ours!

  • Comment number 14.

    Andrew,

    more trouble at the mill I'm afraid. It should be noted the number of people now defaulting on their mortgages. Now interest rates will have to rise, and the financial institutions should not have lent money to people who could not repay as it must be known that interest rates will have to rise from these historically low levels.

    The government is going to have to get a grip, it cannot go on like this. We are just so bust, and still the banks squeel, especially since some have been protected in Ireland. What must be understood is the amount of illicit money which left Ireland when they went into the Euro, where money was spent in places like Liverpool with its historic connection to the other place.

  • Comment number 15.

    Andrew,

    basically the Governor of the Bank of England must know that the policy which he is following has not worked, and will not work. Accordingly he should accept his failure, and allow somebody to take over the running of the Bank of England. It is time for Mevyn King, otherwise known as Merv the Swerve, to resign, to be replaced by somebody like his predessor, the late great Steady Eddie.

  • Comment number 16.

    Replying to Catch22's comment...

    The post WW2 "baby boomers" have been conned. For a long time their pension savings were doing well enough, encouraged more so by the Thatcher government for the private sector to "provide for themselves", and many took out pensions in the 1980's.

    Then along came Gordon Brown, who decided to raid their pensions in 1997, within days of getting into government. The press said nothing because they were in love with their new government, people who know what Gordon did and what it meant were drowned out.

    Today we find that the UK who had one of best provisioned systems has one of the worst. The still running Equitable Life scandal, caused in large part by Gordon Brown's failed FSA regulator, continues to hurt confidence in the entire sector.

    People have seen that it is VERY easy for the government to come along and confiscate your savings, and many pension companies running casino practices, both combined to strip huge chunks off of retirement funds. I myself know many who in various places lost 70% of their pensions.

    There are also those that had the pension scheme wound up because the firm they were working for folded.... they ended up with 0% pension, all savings confiscated.

    And there's still the scandal of married women who took a career break, and were wrongly told to pay a different type of NI stamp. Now close to retirement they get a statement from the NI department that they get ridiculous state pension of £24p a week (I know people who have that as a pension).... [When will the Daily Politics investigate that matter Mr.Neil?]

    Now baring in mind all this theft from savers, who will want to put their money into anything that could be called a pension?

    But if you are a lazy bum on cradle to grave benefits, you have everything provided for you by the sucker taxpayers, even a pension - even though they never saved for anything.

    Then there's the care costs, forced to sell your house if you were stupid enough to pay all your taxes and subsidise the lazy bums AND have to make sacrifices to keep paying the mortgage to own the home you want. And better not die, because the tax man wants 40% from your house price to keep the lazy bums in benefits (you have to find the money first, not even allowed to sell the house first to find this supposed pot of money people have).

    This crisis is, as per usual, engineered by stupid policies of government, specifically the current crisis was engineered by Labour over 13 years, and is why the UK is in the dire position it is in.

    Excuse those in the private sector for not trusting the government after they got their backsides well and truly kicked.

  • Comment number 17.

    The internet should have been invented for people like moaner!

  • Comment number 18.

    #16

    I have to disagree that the 'baby boomers' have been conned. They have not, because they were the inadvertent beneficiaries who had laid down their lives in earlier wars. It was only because of the peace which the previous generation handed us, paid for with their blood. We had no right to the prosperity, to the excessive largess. Now all the chickens are coming home to roost, and we have squandered the peace, it was always going to end in disaster. Just look at what is happening across the water in Ireland, a foretaste of what we, and many other countries will have to face. We have learnt nothing from the hyper-inflation of immediate post Great War Germany.

  • Comment number 19.

    Yes, Andrew Neil, I think your assessment of the country's economy is, for once, correct. Wouldn't it be great if all those companies and individuals paid all the tax they owe us. Then, in four years we would have no deficit and we could all go back to the way things were three or four years ago.

    This country is being led into mass unemployment, bankruptcies, and financial misery by a bunch of one-ulcer men in two-ulcer jobs, albeit with a charming, boyish enthusiasm.

    You gave Gordon Brown a lot of stick before the last election, Andrew Neil, but he was doing a far better job of getting us out of trouble than these boys!


  • Comment number 20.

    Well Moaner, it must have been good to get that lot of ultra-biased stuff off your chest! How do you feel about companies and individuals who evade and avoid paying their proper taxes? The estimated cost is around £42 billion per annum. A concerted effort in recouping this money could wipe off the deficit in four years.

  • Comment number 21.

    Andrew,

    have been listening to the Radio 4 five o'clock news. If anybody can do so listen to the piece around 5:20 on the Audit Commission, so much for the bonfire of the Quangoes, a revolving door if ever there was one. A classic brilliant bit of reporting, especially now that at last the powers that be are taking a serious look at the accountants and auditors who watched whilst the system collapsed. By the way do not get me started on the Actuaries who apparently never saw the increase in the numbers living to an old age coming.

  • Comment number 22.

    Reply to Catch 22 #18...

    The current generation gambled on property prices, lost, then got the government and Bank of England to steal from savers to keep the ponzi house price scam going. The current problems have been created by the current generation, which in itself was created by dumb 13 years of government by Labour (New/Old).

    Normally each generation expects to be an improvement in some way over the previous. Labour squandered that, the fact that Ed Miliband tries to blame the coalition for the current problems is shocking, and shows a lack of economic literacy and numeracy - even if he did get a PPE (like most of current Labour, they must have been asleep when they studied the E part of PPE).

    Maybe you should re-watch Andre Neil's excellent show a few months back on how ALL the parties are "toffs", not that Labour like to admit it.

  • Comment number 23.

    #20...

    £42billion x 4 = £168billion

    Public sector deficit is £4Trillion.

    Good luck with that!

    Perhaps the deficit would be run down faster if taxes on the private sector were cut, then there's more incentive to generate wealth. As it stands today, companies like Dyson and Hornby ran away to China. Those that are left are doing whatever it takes (legally) to stop the tax man taking their money, including appealing the tax demands. They are sick of "the state". It will not improve until "the state" get's lost.

  • Comment number 24.

    Moaner wrote: Public sector deficit is £4Trillion.

    Hi Moaner, I think £4trillion is a shade high. I've never heard it expressed in trillions before! I couldn't imagine the Tories going into Libya, or bailing out Ireland, with that sort of deficit hanging over them.

    But I disgress - I pay my taxes in full according to the law, and I expect companies, banks and individuals to do the same.

  • Comment number 25.

    The 2008 Financial meltdown was caused, at least in part, due to the mountain of debt that had accumulated, fuelling hugely inflated property prices etc which even today makes it very difficult for first-time buyers.

    Yet the solution seemed to be to lower interest rates and encourage even more borrowing.

    That was completely the wrong solution if you ask me.

    Interest rates should have been held stable or even increased a little whilst the crisis ran its natural course. That would have encouraged less borrowing and more saving, the latter of which would help re-finance the banks.

    If it is OK to let institutions like Woolworths go to the wall, all sorts of other businesses and individuals which/who had over-borrowed should have gone to the wall too. Its the risk you take when you borrow money. The economy would have emerged from the crisis stronger if we'd accepted the pain of having that purge on the irresponsible gamblers...

    In my opinion interest rates have been at their historic (and ridiculous) low-level for far too long and an increase is long overdue...

  • Comment number 26.

    #22

    I too have an Hons (PPE) and we are in such an awful mess. Take the proposals to increase pensions, I have heard a figure of £155 per week. Now if this is going to be brought in, then it must be from 6th April 2014. Why that date? Because the NHS came into being on 5th July 1948, so that anybody born with effect from 6th April 1949, the new tax year, and nine months after the establishment of the NHS, could be a 'child of the revolution'. Exactly 65 years later would be 6th April 2014, unless my maths is as shot as the rest of me. So to be fair the new pension level should be from 6th April 2014. If the government has any idea of fairness then the new pension must come in for all pensioners from 6th April 2014. By the way I was born on 7th April 1949, my parents really knew how to celebrate the estalishment of the new NHS!

  • Comment number 27.

    I know this is slightly off subject but I have to share it. I was watching a BBC2 programme on satistics. They were talking about the correlation between smoking cigarettes and lung cancer. I watched as the cigarette was lit using a match, and the fumes rising from the burning fag. Now, what if it is not the cigarette smoke causing the cancer, what if it was the chemicals in the match, has anybody tested the chemicals, and elements contained in matches, and the causes of cancer. Many people now use lighters rather than matches, is the fall in lung cancer due to the reduction in the use of matches.

    How does it relate to the present economic crash, this new Great Depression. Well is it possible to actually really seriously statistically prove anything, because where are the statistics to show that we are cutting too deep and too fast. There is no evidence, we can never extrapolate into the future, life is not like that. We do not know what would have happened on Saturday if we had not bombed early. As you wake in the morning and read this will the Sun have risen in the East, will there be enough air to breath, statistically it can be presumed that it will, and there will be enough, but are we cutting too fast and too deep, should interest rates rise, of course they should, but what the effect will be, who knows, nobody, least of all the experts who never saw the crash coming, I did but then every morning I awoke, there will be an economic crash, it would be right one day, and one day is enough. Nitey nite everybody,smoke on that.

  • Comment number 28.

    As I've not posted here before Andrew, just as brief introduction. I'm a big fan of the This Week show, partly because I find the ordinary daily television news so depressing, I watch This Week and one or two other review type shows instead to keep up with what's going on in the world. As it's usually witty and entertaining, it makes the typically awful news somewhat more palatable.

    (apologies this reply is so long – but as what I’m saying is probably so controversial and unfamiliar, I have to expand upon it at length to make my case)

    Part I:

    As to the current topic, though I've studied economics academically myself to some degree, I found it mostly a mystical science somewhat on a par with astrology.

    Yes, there are identifiable processes of cause and effect, but the trouble is, like some complex chess game, there tend to be consequences several moves down the line that even a grand master doesn't always anticipate.

    The economy, actually even in terminology - such as "depression" - has more in common with the weather, than with the wholly rational concrete sciences like mathematics or physics, which is largely proven by the failure of forecasting in both cases.

    Not many people can predict recessions or depressions until they are suddenly upon us, because there are no many bits of the economic macro and micro systems that could trigger some kind of unexpected effect, it's probably not possible for anybody to really be aware of and monitoring them all even with the most sophisticated computer models or simulations.

    Central to the point you are making for example is the assumption that every economy should be thinking in terms of growth.

    Why is this?

    Why don't we run our economy like Mr Micawber with his famous "income slightly greater than spending - result happiness; income slightly lower than spending - result misery"?

    Economists might imagine that to have a stable sustainable economy which only grew in proportion to say increased population demands, would require it to be a command economy, with little or no free enterprise, like the communist ideal.

    But actually, that's not necessarily the case.

    Because my own theory, is that it's not actually some economic mishandling which causes inflation (with a consequent effect on interest rates), but an attitude.

    That attitude is - undue greed.

    I'll give an example of why I believe inflation rose so fast (apart from VAT) in the New Year.

    Though Xmas spending may have been a bit down on previous years, in fact it should have been down a lot more based on the reduced income of the public and thus spending power.

    It can therefore have only been sustained to the level it was artificially, i.e. by credit purchases, thus running up more debt.

    Even though threatened with the recession and possibly future job losses or pay cuts, most people still refused to significantly cut their Xmas spending, even if it meant getting into more debt.

    So then having overspent on Xmas, and faced with increased interest repayment, those in business decided to put their prices up, and/or to try to sell more (all the 2 for the price of ones everywhere you look), and employees probably overworked also in order to pay off their debts.

    So it was the unwillingness of the public to economise which has led to inflation, it was the attitude of greed instead of Micawber like economy.

    Likewise with the banks. The banks that were collapsing should have been allowed to collapse. The government should have perhaps raised taxes in an aid to compensate those who lost their money, and that would have led to the very serious banking reform we needed, but obviously haven't had, which would have been prompted and demanded by the absolute fury from those ruined or part ruined, and the petrified fear of those who worried the same might happen to them.

    If those banks had collapsed, the fat cats would have gone with them, and so couldn't have been still here paying themselves fat bonuses.

    We imagine we can run the economy by financial manipulation such as by interest rate manoeuvres as you suggest. But crashes, slumps, recessions and depressions have proved time and time again we can't.

    We can only run a proper stable economy when people have better values, and aren't driven to excess of greed all the time.

    e.g. takes this infamous BOGOF policy that's everywhere you look. It's not only punitive of single people and pensioners, it's utterly wasteful of natural resources, trying to make people buy two all the time of what they only want or need one of.

    (part 2 follows)

  • Comment number 29.

    Part II:

    Greed is not good, as Gordon Gekko said in Wall Street, it actually destabilizes the whole economic system. And the proof positive of that, is the way the unscrupulous greed of the bankers handing out all those wrongly approved loans to make a quick commission, nearly brought the whole financial system to total collapse.

    We have to operate everything within certain safe limits, or the system collapses.

    The same is true of the trading in the currency markets, which can also bring down our whole system, and needs to be tightly regulated or even as soon as possible outmoded by having a single world currency.

    The human body is the same - 2 glasses of Blue Nun at night a few times a week won't harm us much, but 2 bottles a night will.

    Even global warming is a relevant analogy, as it can upset the weather and ecosystem, cause more hurricanes, flooding, etc.

    The same is true of crime. We try to tackle it with this initiative and that, but nothing ever seems to work. Because we can only deal with it as a whole, systemically, by changing the public attitude from excess greed, excess materialism once again.

    We have to think not just of these matters - the economy, crime, the environment, etc, - as separate and isolated, but all as systems, and identify what it is that puts any system out of balance.

    So I'll answer your question. Should interest rates rise? No. Freeze them.

    If businesses fail, and growth slows, that's OK, because we don't need growth, we need better redistribution of wealth via the tax system, so people who lose their jobs need not fear they'll stave because they can be paid benefits.

    Job loss shouldn't be seen as a disaster, but a sign that not as many workers are actually needed in that particular area, including bankers no doubt.

    The economy as it stands can't last, because it doesn't reflect or is properly connected to reality.

    There will never be a stable economy, until people cease spending what they don't have, and buying what they don't need.

    Until then, we're living in an economic intellectual Harry Houdini land, and your analysis is discussing its "magic tricks". Except we know these "tricks" are not reliable, because despite all manoeuvring by the powers on high in finance and government, sooner or later we always get a (usually unforeseen) crash or slump.

    I'd draw your attention also to the apparently maligned and neglected Phillips Curve.

    Whatever current economic opinion says, The Phillips Curve shows a factual historical relationship between inflation and unemployment/employment.

    It says that if we have full employment, we always get high inflation, so we can only have stable prices if a lot of people are not working, which I believe means on low income, i.e. if our "underclass" is big enough or there are enough low paid part time workers.

    But where too many people have too much spending power, demand increases and thus prices rise, and hence inflation, as has been so obvious for so many years in the property market.

    Given our present system and values, I don't actually think it's possible to predict the economy any more than it is possible to predict the weather, and less possible in either case to control it by human will or design.

    We've made an uncontrollable monster out of our undue greed, by catering too much to dreams of extravagant opulence instead of to a more moderate standard of living all round.

    We don't need Rolls Royces, but reliable, comfortable cars that get us from A to B.

    And that doesn't as I've said necessitate a command economy, it necessitates people choosing to produce in the public interest, and not attempting to glut the market with too may similar products, with planned obsolescence and so on.

    I know this sounds moral, and it is, and without the need to bring any religious ideas into it, but I think we'll realise sooner or later that moral ideas (such as moderation of greed) are not just religious ideas, but ones that enable our economic, social and environmental life to be stable and fit for purpose.

    When we run our economy on moral (of if you prefer "ethical" standards) we'll find it will work without the current problems we have, but nobody will be able to figure out why.

    Because as I've said, like the weather, or the environment, or crime, or the ecosystem and food chain, it can only be addressed from the systemic point of view, and never fully understood in terms of all the intricate chains of cause and effect individually, as we are currently trying to do, and history has shown, repeatedly failing to do.

  • Comment number 30.

    Inflation rising, taxes rising, interest rates rising...

    To cheer myself up, I have been looking for the inevitable April Fool's joke on the BBC. I think I just found it:

    http://www.bbc.co.uk/news/uk-12928485

    English taxpayers subsidise Scotland yet again... this is a joke, isn't it?

  • Comment number 31.

    "I pay my taxes in full according to the law, and I expect companies, banks and individuals to do the same."

    And they do. Dont blame them, they didnt write the tax rules, they merely comply with them. If they didnt, they'd be lined up in court, one after another.

    You need to ask a certain former Scottish chancellor & prime minister about why the tax code is the way it is....

  • Comment number 32.

    '24. At 18:36pm on 31st Mar 2011, MikeS
    Hi Moaner, I think £4trillion is a shade high.'


    Where might you peg it, shade-wise, as I suspect the actual number may still be quite important in the grand scheme of things whatever it may be, much as some seem keen and active in avoiding it. Especially with quite a few making quite a fuss about spending like our kids have no tomorrow.

    He says, hoping to sneak in before the next closing.

  • Comment number 33.

    If I was on the MPC, I think I'd vote for a small rise. Not quite sure why, but I would.

  • Comment number 34.

    How does increasing interest rates reduce inflation? I thought it was to give people less money to spend therefore making it more difficult for retailers to increase prices. That must be wrong though because we have less to spend anyway due to inflation caused by the price of oil and the extra costs on goods related to transportation costs. As well as increased VAT. I really don't understand this economic tinkering and not sure that many of the people involved actually know what they're doing. As mrpain might say, I'm economically illiterate. as well as just plain.. Andrew Neil might say.

  • Comment number 35.

    BBC-account holder

    Thank you - I expressed this opinion along time ago on a now (yesterday) Radio 4 MB. A new moral attitude must be the starting point - not much sign of it though - everybody blames everything or everybody else whilst lining their own pockets, borrowing beyond their own means for things they never did need and providing an impossible idea of their 'rights' to live on benefits( provided by others) which they too will never be entitled to - morally, that is. Charity - another load of rubbish - amazing how we can all find cash to fling at these 'institutions' (for that is what they have become with all the attendant corruption and mismanagement) whilst accepting the numbers of so called "poor familes/children" stated, by the same insitutions, to exist and actually icrease over the years! This WAS a rich country with money to spare - where did it go over the last 13 years? Certainly not my way - as a "sensible" pensioner I made due provision which has now eroded to the position where I may have to ask for 'Pensioner Credit' I got to see a doctor or dentist quicker as a child ( born 1930 ) than now - in fact have had to go private for dentistry! Those who seek to make excuses for the last labour Government can only be the result of the lousy education system they have been exposed to during that administration. No-one over seventy (apart from the remaining few who vote 'because their Dad did' ) would do so and - for all the talk of 'care for the elderly' - the vast majority of us are basically far healthier than most of the population now simply because we did not over indulge to the same extent. My and my late husbands problems were as a direct result of this wonderful NHS - we actually lasted until our mid seventies until being disabled - too late to get any 'mobility' or living allowances, of course.
    Wake up out there YOU are the cause of your own problems - mostly anyway!

  • Comment number 36.

    33. At 12:06pm on 1st Apr 2011, sagamix wrote:

    If I was on the MPC, I think I'd vote for a small rise. Not quite sure why, but I would.
    --------------------------------------------------------------------------------

    Because someone else would be paying it rather than you?

  • Comment number 37.

    35#

    Interesting points Ynys. Particularly the one about charities... I've been struck recently how many are advertising several times a day on TV... given how expensive air time is, not to mention all the support apparatus that puts it together, maybe some of them arent suffering (and I use the term loosely) as much as what they make out... and a charity that relies on state funding isnt a charity. Its a quango.

  • Comment number 38.

    31. fubar.
    Yep thats it. All browns fault, all this tax evasion, avoidance. Infact, rumour has it that it is brown who is responsible for greed all over the world and even in a previous life going back thousands of years. Now youve cracked it fubar, im sure you will be onto a national with this amazing story....

  • Comment number 39.

    For Fubar_Saunders and JunkkMale

    I'm not an expert in economics, but I'm still sure our borrowing can be expressed in billions rather than trillions. I've lifted the following from the Office of National Statistics:

    "In the calendar year 2010 the UK recorded general government net borrowing of £148.9 billion, which was equivalent to 10.2 per cent of gross domestic product (GDP)."

    Does this help?

    Tax avoidance is about finding loopholes, whilst tax evasion is about illegally hiding money from the tax man, as with money laundering etc.

  • Comment number 40.

    It's the 1st of April, the day the cuts really start to bite it's also exactly 4 weeks until the Royal Wedding. Cynical "lefties"* might not think the timing is a coincidence. Never mind the awful butchers knife heading your way, look at this shiny thing. isn't it pretty!

  • Comment number 41.

  • Comment number 42.

    DHW@41

    Found myself chuckling at my desk watching that [minus sound unfortunately] - are they colour coded?

  • Comment number 43.

    The voice over makes it much funnier.

    Pib is the redish one and pog is the blueish one.

  • Comment number 44.

    oh yes!

  • Comment number 45.

    :-)

    I think it’s because I have a feeling that having interest rates at near zero (and ‘Quantitative Easing’ for that matter) is akin to drug taking ... of the exciting recreational kind, not lightweight stuff like aspirin. As such, it’s important we enjoy to the full but that we don’t get hooked. If we do – get hooked – then we’ll end up not being able to function properly without very low interest rates; cue long-term loss of fundamental equilibrium in our economy. (Exactly this happened in Japan for the best part of two decades following the bursting of their late 20th century bubble). So maybe time to take the first step in kicking the habit, in getting back to some sort of normality. 50 basis point rise seems about right for now. Plus there’s the point that it’s the availability of credit, rather than its price, which is perhaps the bigger issue at the moment. And the further point that I need a better return on my dough.

  • Comment number 46.

    Pib @45

    I guess it might send out a signal that rates can go up - not that anyone is borrowing big time.

    As for the last point, a serious consideration for the retired - and a point that may well draw some comments.

    Big match tonight the GOATs are scheduled for the early hours.

  • Comment number 47.

    46 Coats

    After that who cares? - Hold on a minute, I just got to watch it one more time!



  • Comment number 48.

    Mr N

    A metaphor for a day on these blogs and about as addictive.

    Bet they don't play bar billiards.

 

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