Terry Murden: These days printing a mere £25bn signals calm

Published on Thursday 5 November 2009 20:34

INJECTING £25 billion into the economy at any other time would seem extraordinary. The fact that some forecasters saw it as only half the expected amount tells us how fearful we have become about economic prospects.

If the Bank of England has got it right, the fretful among us should calm down. The Bank's monetary policy committee clearly believes the economy needs more help, but only enough to nudge along the recovery and lift us out of recession.

Deputy governor Paul Tucker's comments to The Scotsman last month that more money would be pumped into the economy if it was deemed necessary was a heavily dropped hint of what to expect. After watching the MPC spend 175bn, the City was split on whether the Bank would go to 200bn or 225bn.

A full 50bn extra would have signalled a much different interpretation of the short-term outlook. In the event, the MPC's decision tells us that it is easing its monetary stimulus.

Even so, these are colossal sums and no-one can be certain that the quantitative easing (QE) programme is working. The consensus view in the City is that it has helped restore confidence, provided funds for mainly bigger firms and generally underpinned the economy, which at one stage looked to be in freefall.

Sceptics say it is not possible to know whether it is having any effect, and question why, after spending so much, the government has not been able to persuade the banks to lend in sufficient quantities to smaller firms.

Then there is the experimental nature of it. QE has not been tried before on this scale. So no-one knows what to expect. Some argue that the record low interest rate is having a more obvious impact on the economic climate by giving those in relatively secure jobs the confidence to spend the extra pounds in their pockets.

With no immediate fears about inflation, interest rates will stay low, possibly at the current rate for the whole of 2010.

That is at least one trend that markets and businesses can factor in to their plans.

As for QE, the next big test will come in February when fourth-quarter GDP figures reveal whether we are finally out of recession.

Minimum alcohol prices

MINIMUM pricing of alcohol is now absorbing Scottish parliamentary time as the government pursues a policy that is looking increasingly flimsy.

Few would disagree with the need to crack down on the binge-drinking culture, the drink-fuelled yob behaviour that is a blight on the nation. But a policy that penalises every consumer for the misdeeds of the few is not the answer.

More than that, it is dangerously misguided as it will cause irreparable damage to one of Scotland's biggest industries.

The Scotch Whisky Association has warned that foreign countries would use minimum prices in Scotland as an excuse to ramp up their own taxes, costing the industry 600 million a year in lost export sales.

If the SWA's figures are unproven, and possibly scaremongering, then sceptics should take note of a warning from SABMiller, the world's second-largest brewer, that "minimum pricing is based on many flawed assumptions, one of which is that people who buy less expensive alcohol do so for the purpose of abusing it".

For those who want to get wrecked, price doesn't really come in to it. The sensible route to controlling excessive drinking is to allow the pubs to sell it more cheaply than the supermarkets. A pub provides a controlled, regulated environment that street corners do not. Drink is served in specific measures, not straight from the bottle.

If we control the drinking environment, we control the problem. And we may also stop the pubs from closing.

Channel4

LORD Burns, the former M&S chairman, has been named chairman of Channel 4 and he'll be charged with coming up with fresh ideas for boosting the top line.

Burns has no direct media experience, though he has a CV littered with top boardroom positions and advisory roles – it was Burns who recommended the top-slicing of the BBC licence fee, which Labour is now adopting to pay for ITV regional news and children's programmes.

Burns is not afraid to take on tough tasks. The only tougher job would have been trying to turn around ITV.