MARK Carney is mortal. The dashing Canadian who heads up the Bank of England may be admired for his cool demeanour and nice line in suits, but it seems he is not infallible.
Yesterday he admitted that interest rates could fall further if he has to act against prolonged low inflation or deflation, rather than rise as he had previously predicted. In fact, he believes we may soon enter a period of deflation – although this, he predicts, will be a blip and not prolonged.
It is good that Mr Carney can admit when he has got it wrong on the economy. The credibility of the Bank’s forward guidance relies on the Governor’s willingness to change his mind when circumstances change. There are many who wish George Osborne was possessed of a similar gift.
As for deflation, this is bad news for savers, whose chances of seeing their nest eggs grow have been dealt a new blow. They have waited a long time for good news and talk of deflation will be a big disappointment.
Should they, however, be encouraged by Mr Carney’s assertion that any deflation would be just a blip? Or, given the Governor’s track record on predictions, should they take what he says with a pinch of salt?
SCOTSMAN TABLET AND MOBILE APPS
They might be better instead posing questions to the Chancellor. Because the suggestion we may be heading into a period of deflation is an unflattering judgment on his time at the Treasury.
A blip may be bad enough, but an extended period of deflation would amount to definitive proof that Mr Osborne’s strategy for recovery has failed.
As Nicola Sturgeon pointed out in a well-received speech in London this week, if the government’s austerity programme was right for Britain, then five years after it began – and after all the suffering it has caused – why has it not achieved its purpose?
The programme of quantitative easing, while welcome, shows no sign of having the desired effect of encouraging new investment. And the Treasury’s assumptions on productivity, on which its entire plan for recovery relies, look unrealistically ambitious.
Ms Sturgeon’s verdict is that a belated admission of failure on the Chancellor’s part would be better than flogging a dead horse. Her recipe for recovery involves an old-school Keynesian injection of £180 billion into the UK economy, which she said would represent a modest 0.5 per cent increase in public spending.
Ms Sturgeon couched this as a precondition for talks after the election on SNP terms for supporting a Labour administration.
Whatever its intention, it is hard to argue with her conclusion. Balancing the books and living within our means makes sense. But the only way the country is going to get back on its feet is if the economy sees some growth. And if that is not going to happen the Osborne way, the Sturgeon way may well have merit.
Miliband has abused privilege
PARLIAMENTARY privilege exists for a very specific reason. It is designed to allow MPs to speak their minds freely on any subject that requires open discussion, without fear of any legal challenge that might constrain debate.
It is not designed to allow politicians to issue personal slurs, for political purposes, in the knowledge that they are safe from being sued for slander or, here in Scotland, for defamation.
And yet that seems to be exactly how it has been used by none other than the leader of the opposition, Ed Miliband.
In the Commons this week the Labour leader talked about “dodgy donors” who gave money to the Conservative party.
And he named Conservative peer and party donor Lord Fink as one of the HSBC customers who had used a controversial tax avoidance scheme in Switzerland.
Labour plans a crackdown on tax avoidance if it wins the general election in May, and Mr Miliband was keen to make a political point.
Lord Fink had challenged Mr Miliband to repeat the accusation outside parliament, something the Labour leader did not quite do yesterday, saying only that he “stood by” what had been said on the floor of the House.
Mr Miliband did say, however, that he was not referring specifically to Lord Fink’s tax affairs.
Mr Miliband last night accused the peer of an “extraordinary U-turn” after Lord Fink said he would not pursue any legal action against the Labour leader.
By Lord Fink’s apparent decision to back off should not be regarded as a victory for Mr Miliband, who has come out of this saga with his reputation somewhat tarnished.