Mark Carney’s been agonising about raising interest rates for a year now. Does the Governor of the Bank of England believe Labour’s got a point when it refers to the cost of living crisis? Does Mr Carney fear that any increase in mortgage rates will be too much for the fragile position of consumers who’ve not had a decent pay rise for years? If Carney believes Ed Miliband is on to something then maybe voters will ask themselves that crucial question next May: Do I feel better off?


I still think David Cameron will be returned as leader of the largest party because this week’s figures show we are now on a sustained path of growth but the honeymoon is over for Mark Carney. He’s beginning to gain a reputation as a ditherer, sending out contradictory messages on when he will raise interest rates.


A year ago Carney’s “forward guidance” was that 7% unemployment was to be the trigger for interest rates to rise. This week unemployment fell to 6.4% down 437,000 in the last year. That’s the biggest fall in unemployment in 25 years. The fall is across the board with the number of long term and young people out of work falling too, yet there is no prospect of an interest rate rise this year. There are fears that if the 0.5% rate is held too long and inflation kicks off, the rise might have to be sharp and damaging to the economy.


It looks as if the failure of wage growth is really worrying the Bank of England. Labour hammers out its message that the average household is £1600 worse off than in 2010. Ronald Reagan defeated Jimmy Carter in 1980 by asking people that simple question about whether they were better off under President Carter. The question is now associated with an almost mythical potency to win elections.


Labour points to inflation running at 1.9% with pay increases at 0.6%, the lowest since 2001 when records began. How then has consumer spending recovered if people are being squeezed between paltry pay rises and continuing, if modest, inflation?


Some experts point to the growth in house prices which is now beginning to filter through to the north from London. The government’s help to buy scheme may be indirectly driving consumer spending. What happens when the bubble bursts?


So as we take our August holidays we have to make an assessment of who’s message is getting across. Labour’s cost of living crisis or the government’s view. That is that they have turned round the economy and protected the worst off by raising the income tax threshold, frozen fuel prices and acted on council tax and energy bills.




With inflation heading for 3%, the Governor of the Bank of England wants £25bn more quantitative easing. What are we to make of Sir Mervyn King’s views revealed by the publication of the latest Monetary Policy Committee (MPC) minutes?


He may have been influenced by Mark Carney’s indication last week that inflation targeting may be eased when he becomes Governor in July, or he may have run out of ideas to help our flat lining economy. In any event he was overruled by a majority of the members of the MPC.


Having been cheered up midweek by a speech by Sir Howard Bernstein, Chief Executive of Manchester Council at a Downtown event full of ideas about the city’s drive for foreign investment; reading the MPC deliberations was a reminder that we are in a dark forest economically with few chinks of light.


The Budget is less than a month away but there are low expectations that the Chancellor can pull any new rabbits out of the hat. The headwear is empty. Quantitative Easing, low interest rates and infrastructure spend have all been tried but the headwinds blow strongly.


There are indications that the mortgage market is easing and the infrastructure investment has long lead times but the recession continues to take its toll with Axminster carpets following HMV, Jessops and Blockbuster off our high streets. George Osborne was also a billion short on what he expected from the 4G sale.


Last December the Office for Budgetary Responsibility had factored in £3.5bn from the sale. It was an important factor in the Chancellor being able to claim that the deficit was falling. Some economists now claim the government overshoot this financial year will be £10bn.


Internationally there is talk of currency wars breaking out as countries try to boost exports. Japan has certainly embarked on this course. The pound is weak which partly explains the 10p hike in a litre of petrol since Christmas. By the way a friend of mine was asking the other day where are the fuel protests that we saw in 2000? A good question I thought.



Against this background local councils across the North are fixing their budgets for the forthcoming year. In our urban areas most people will face a rise in council tax. The politicians will argue they have no choice considering the cuts in government grant. Cynics will point to the fact that the metropolitan councils from Leeds to Liverpool have no elections this year. The Environment Secretary Eric Pickles is threatening to penalise councils like Manchester who have found a way round the need for a referendum if council tax rises by more than 2%.



Meanwhile the voters of Eastleigh have to choose between the two parties of government as they go to the polls next week. We can judge the seriousness of Labour’s challenge by the refusal of their candidate John O’Farrell to live in the constituency if he was elected.


So it’s between the incumbent Liberal Democrats who have a dull but worthy candidate and an off message Tory. I don’t expect the “Chris Huhne” effect to be too damaging and I’d bet on the Lib Dems getting some good news at last.