IF SIR Mervyn King was hoping to see out the rest of his term as governor of the Bank of England with inflation finally settling at its 2 per cent target he will not want to see the official figures published today.
The gradual fall in prices in recent months to a three-year low is likely to show a reversal, with October’s figure rising to 2.5 per cent from 2.2 per cent in September.
The problem is likely to become more worrying tomorrow when the Bank of England publishes its quarterly inflation report and will admit that it is heading upwards and almost certainly beyond 3 per cent, possibly to 3.5 per cent by the time King steps down next June.
If that is the case it looks as though he will have to dig out his pen and paper and write a few more letters to the Chancellor explaining why inflation is more than 1 per cent above target.
The trend is being driven by higher food prices and university tuition fees and will be exacerbated in the figures for this month and next by rising fuel bills.
It gives us another explanation as to why the Bank’s monetary policy committee last week chose to sit on its hands rather than add to the £375 billion of quantitative easing which remained an option in spite of the improved third quarter GDP figures.
The overwhelming evidence points more to a weakening rather than a strengthening of economic performance which will be confirmed in unemployment and retail data showing that the uplift in September was probably a post-Olympics blip.
Cridland should ask a different question
SHOULD the government give the banks a break and put a time limit on compensating victims of payment protection insurance?
John Cridland, director general of the employers’ lobby group, the CBI, wants a statute of limitations for all PPI claims in order to remove what he calls a millstone around the necks of the banks.
He has a point in as much as the claims bandwagon has become something of a feeding frenzy for the vultures who thrive in the compensation culture. It is said that banks that have lost customers’ records are paying out automatically, suggesting that they are happy for the claims to be settled rather than let this debacle rumble on.
Having already hit £11 billion and forecast to reach as much as £15bn, the bill now represents one of the biggest mis-selling scandals ever faced by the financial services industry.
Cridland’s concern is that this money is eating into funds available to lend to businesses. But that looks like putting his members’ interests ahead of those of ordinary bank customers. Anyone who has been mis-sold a policy is entitled to compensation, whether they are at the front or back of the queue.
Perhaps the CBI boss ought to be asking if the banks are being totally transparent on this issue. Until we know just how much more there is to come it would be wrong to deny the customer his or her due.
Taxing question for international law
IT SEEMS the bigger the company the greater are the opportunities to avoid a big tax bill. But Amazon, Google and Starbucks, accused of paying little tax in the UK, are operating within the law. Until there is international agreement they will inevitably gravitate to the jurisdictions that offer the best deal.