Bank of england

New roads in Britain are badly-needed, but who should bear the costs? Motorists, says David Cameron — and his speech today is a move in the right direction. No tolls would be slapped on existing roads, so motorists are free to drive as freely as they do now. But if they want a shortcut, they'll have to pay for it. What I'm uneasy about is Cameron trying to raid our pension funds to help subsidise this. There are many ways to raid pension funds — QE is one. The National Association of Pension Funds estimates that a scandalous £130 billion has been wiped from the value of our collective pensions because Sir Mervyn's Magic Money Machine is artificially lowering interest rates.

The best of all possible worlds for the pension industry is a buoyant economy. Workers have enough money to save, share prices rise and dividend growth is robust. Interest rates are positive in real terms so annuities are good value. The economy ground to a halt in 2008. The overwhelming priority for everyone is to get growth going again. Without growth the services that pensioners depend on — such as the NHS — will struggle. Traditionally, governments cut interest rates and raise spending to get the economy moving. The Bank of England has cut interest rates as much as possible and the government deficit remains very high. We have exhausted conventional policies, and yet the economy is not growing.

Can you trust someone like Alex Salmond to save Scotland from future crashes? The First Minister appeared on BBC1’s Sunday Politics earlier, where he was challenged about how he sees it. And it seems he may just be a graduate of the Gordon Brown school of Scottish financial mismanagement. In a Times debate on Friday,  SNP deputy leader Nicola Sturgeon said they’d use sterling — whether the Bank of England liked it or not — and would not need the Bank to be a lender of last resort because Scotland would be so sensible it wouldn’t need it. An interesting suggestion, given that the 1707 Union between Scotland and England is the result of a bailout.

Fire up the printing presses, once again. The Bank of England has just announced another £50 billion of Quantitative Easing, bringing the total monetary expansion up to £325 billion. And it probably won't end there: Citi, among other analysts, forecast that it could go as high as £600 billion next year.  So what are we getting for all this free money? The Bank would tell you that its supporting the economy: keeping interest rates down and encouraging investors to flush money into growth-inducing schemes and mechanisms. And there's obviously truth in that. But we, and the suits of Threadneedle St, shouldn't pretend that QE doesn't create victims too — and it is those victims that we highlight in the latest issue of The Spectator.

Are today’s inflation figures cause for celebration? The Consumer Price Index rose a mere 4.2 per cent in the year to December, down from 4.8 per cent in November. So, yes, a sharp drop — but only a statistical boffin could describe this as good news. Sure, a similar drop can be expected when the VAT rise drops out of the comparison figures next month. But the prices confronting British shoppers are still rising at twice the supposed inflation target, and will keep rising above this target for months to come. The following graph shows the trajectory we can expect for CPI and RPI over the next few years: The misery that inflation inflicts on the public is, of course, mitigated by pay rises.

After months of delay, and much hounding by The Spectator's Select Committee Chairman of the Year, Andrew Tyrie, the Financial Services Authority has finally released its report into the wheezing collapse of RBS in 2008. At 452 pages it is a behemoth of a document, and too much for me to have fully digested yet. But a few points stand out at first glance: 1) Don't blame us, blame Gordon. The Tories are making much of the fact that only three politicians are mentioned in the report: Tony Blair, Gordon Brown and, most relevantly, Ed Balls. And they're not mentioned in a particularly flattering context, either. All three are quoted to partially justify the FSA's regulatory approach in the run-up to the RBS debacle.

Thanks to the tremors along Westminster's grapevine, we already knew that today's OECD Economic Outlook would make for pretty dreary reading. But now that the report is actually out, we can see the organisation's numbers for ourselves. The headline point appears to be that the eurozone is in, or is facing, ‘mild recession’. Or to put it in graphic form: And the current situation isn't look particularly encouraging for the UK either. The first heading in the section on us reads ‘The economy is weakening sharply’. And a subsequent pair of graphs predicts, first, that we'll experience a mild recession of our own across the next two quarters, and then that unemployment will keep on rising to a peak in 2013.

So the Bank of England has pulled the lever on a second round of Quantitative Easing. Apparently sluggish economic growth, plus more ominous signs from the eurozone, have persuaded the central bank it can’t wait any longer to print more money. But given the evidence from QE1 - only a small boost to GDP accompanied by extra inflation - it's a big gamble. Mervyn King & the rest of the Monetary Policy Committee clearly believe that more money in the system is what’s needed to kick-start growth. But even they admit that QE1 didn’t live up to expectations, so why should QE2?

Get ready for more Quantitative Easing. This week, Reuters found that economists think there's a 40 per cent chance the Bank of England's Monetary Policy Committee (MPC) will announce another round when they meet on Thursday. And even if they hold off now, it's unlikely to be for long. Weak growth and the worsening outlook for the economy seem to have changed minds. The Treasury has surveyed growth predictions from independent forecasters. Back in January, the average prediction was for 2 per cent growth in 2011. It has since fallen steadily to just 1.2 per cent. Similarly, expectations for 2012 have also been downgraded, from the 2.1 per cent growth expected in June to 1.8 per cent now.

Be careful what you wish for, arch Eurosceptics. UK banks are exposed in the Eurozone to an eye-watering £1 trillion. The taxpayers' fiscal union with the banks in 2008 has exposed the UK to the Eurozone's indebted periphery, just as if we had joined the Euro. The Bank of England's cross-border lending data shows the scale of the problem. This isn't simply government bonds; it's total bank lending, including Barclays' retail expansion in Spain and Lloyds' corporate lending in Ireland.   The EU/IMF bailouts are as much a bailout of Britain as they are the debt-ridden countries of the Eurozone.

Today's inflation figures remind us of the trouble the Bank of England will have if – as most analysts suspect – it embarks on another phase of Quantitative Easing. CPI inflation was 4.5 per cent in the year to August, and RPI at 5.2 per cent, both up a touch from July.  CPI inflation has now overshot the Bank of England's 2 per cent target for 60 of the past 75 months. It has been at more than 3 per cent since the start of 2010. As a result of last month's figure, Governor Mervyn King wrote his now-standard letter to George Osborne to "explain" why inflation is above the target.

It's time to warm up the printing presses. When growth evaporates and governments feel politically unable to cut spending or raise taxes, there's only one tool left: printing more money. We can expect more of it soon. As James says today, Osborne believes he has created the conditions where the Bank of England can do some more Quantitative Easing and it could start as early as next month; an unusual move, given how high inflation is. But the Bank is (as ever) forecasting a return to the 2 per cent target soon – and may now claim that economic weakness makes an undershoot likely. And so (the logic will run) it’s time for more QE so as to keep inflation to target. The other arguments for QE are harder to make.

Tieless, Alistair Darling appeared on Marr this morning to discuss his memoir. As with so many of these New Labour autobiographies, there was the strong whiff of a therapy session. At one point, Darling said "if Gordon is listening to this" before remarking that he still felt a huge amount of "residual loyalty" to him. It is not news that the Brown government was dysfunctional. But it was striking that Darling did not dissent when Marr suggested that under Brown, Labour had – collectively – not been fit to govern.

"Inflation destroys nations and societies as surely as invading nations do. Inflation is the parent of unemployment. It is the unseen robber of those who have saved. No policy which puts at risk the defeat of inflation - however great the short-term attraction - can be justified". That was Margaret Thatcher, speaking in 1980 when inflation was much higher but British politicians actually cared about it. You won't even hear the Governor of the Bank of England denounce today's figures: CPI at 4.4 per cent and the traditional measure of inflation, RPI, at 5.0 per cent. It is seen as just another statistic. The government has also chosen to announce that rail fares will be rising by 8 per cent. George Osborne is in charge of getting inflation right.