The main importance of Wednesday morning’s surprisingly positive inflation announcement is theatrical. That sounds odd – people think of economics as cold, dry and technical. In fact, it is uniquely susceptible to mood swings. It is ultimately just a mad jumble of millions of people making rational and irrational decisions.
Importantly, the reduction is broadly in line with the Bank of England’s forecasts, which indicates that it’ll soon cut interest rates, which will itself likely boost growth. It offers a tentative hint of hope for the future.
This is such a preposterous state of affairs. It’s as if we’re conducting current affairs through the medium of CBeebies: Overexcited, madcap, with no trust in the audience’s attention span. In fact, that does CBeebies a disservice. At least it is committed to educational goals. Our current affairs ecosystem seems intent on leaving the audience less informed than it was before.
The basic reality is that our economy is in a terrible state. We have low growth and low productivity. This has been the case, to some extent or other, since the financial crash in 2008. Those of us who started our careers around this period have never really known anything else our entire working lives.
When we’re in this kind of economic stasis, fluctuations in the bond market can create political havoc. The Chancellor has an economic rule that current spending must be matched by tax revenues. It’s a perfectly sensible and necessary rule, but it makes her vulnerable to these kinds of bond market movements. When they turn against her, it costs the Government more to borrow, which then takes her closer to her rule, threatening the nightmare scenario where she must either increase taxes or cut spending.
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Read MoreIt is patently obvious that the blame for the current situation cannot be laid at the door of Reeves. It’s embarrassingly opportunistic to claim otherwise. Bond yields rose for a short period after the Budget last October, but they soon fell back again and were at pre-Budget levels last month.
The truth is that we’re seeing long-term British economic under-performance being exacerbated by volatile international events. Only the most superficial possible assessment could conclude it’s all Reeves’ fault as an individual. And yet that, predictably, is precisely where we’ve ended up. For nearly a week we’ve been subjected to infantile headlines insisting she would soon lose her job. “Two Lame Ducks,” the Mail screamed on Tuesday, placing a picture of her alongside the former economic secretary to the Treasury, Tulip Siddiq. “Should we be popping out for another lettuce?” the Daily Star asked, putting Reeves in the same category as Truss.
Needless to say, the Tories obviously couldn’t resist it. They know it’s nonsense, but it is useful nonsense. Mel Stride, who is shaping up to be one of the least impactful shadow chancellors of our age, weighed in yesterday. “To go or not to go,” he told the Commons yesterday, in an attempt to murder the very concept of eloquence, “that is now a question.”
Anyone who really cares about the British economy is asking deep, searching questions about how to improve its core performance. Those who don’t are engaged in the dimwit Punch and Judy blame game. We should pray that Downing Street ignores them.
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