Ross Clark

As far as the economy goes, Sir Keir Starmer has enjoyed something of a golden honeymoon. True, he has had riots to deal with, but economic growth has been stronger than many anticipated, while a small uptick in the Consumer Prices Index (CPI) allowed the Bank of England to reduce interest rates earlier this month. Everything appeared to be going in the right direction – until this morning, that is. Ofgem have announced that the energy price cap will rise in October by 9 per cent, adding an average of £149 to annual bills. While a rise was expected, this is a substantial rise at a time when inflation seemed to be back under control. A 9 per cent jump will not take energy bills to anywhere like where they were in late 2022 and early 2023.

Just how much longer will the government be able to sustain its assertion that the Conservatives left behind a £22 billion hole in the public finances? Confirmation that ministers are continuing to blame their predecessors for out-of-control public finances – and for expected tax rises in October’s budget – was provided this morning by Chief Secretary to the Treasury Darren Jones, who reacted to July’s grim borrowing figures by stating:  ‘Today’s figures are yet more proof of the dire inheritance left to us by the previous government.

What a joke the government’s promise to concentrate on ‘growth, growth, growth’ is becoming. Since the Prime Minister uttered those words on entering Downing Street, we have had road schemes cancelled and money withdrawn from a supercomputer project at Edinburgh university, that could have given Britain’s AI industry a leg-up. We have had fat pay rises for public sector workers without any requirement for them to adopt more efficient working practices. And we have businesses about to be lumbered with the requirement to offer employees flexible working hours from day one of their employment. Now there is another productivity-destroying proposal on the table.

Is this the first sign of a bounce in the housing market? Property website Rightmove is reporting this morning that enquiries to estate agents so far this month are 19 per cent on August last year. This follows a quarter-point cut in interest rates by the Bank of England (BoE).  Rightmove’s data is forward-looking, in that it represents the first step in the house-buying process: contacting an estate agent for information, or for a viewing. Then again, enquiries are only enquiries – it is a big step from there to securing a mortgage and making an offer, and an even bigger step actually to completing a purchase. The government’s data for completed sales tells a rather different story.

So, we were all so impressed with the swashbuckling performance of Gareth Southgate’s team that we all rushed out and bought replica England shirts and packs of lager – to the point that retail sales in July were 0.5 per cent higher than in June. No, I don’t buy that either – even though it has been widely reported today in reaction to the latest statistical release from the Office for National Statistics (ONS). As I have written here before, I don’t really trust the month-on-month figures for retail sales. They are too volatile to be meaningful. Moreover, they depend somewhat on how many weekends fell in the month: some have four weekends, some five, and some four and a half.

Today’s labour market figures ought to bring good news: they show that growth on earnings has moderated to 5.4 per cent, the lowest level in two years. That should ease fears of inflation – it is growth in pay which has most concerned the Bank of England in recent months – and pave the way for further cuts in interest rates. The trouble is, though, that the Chancellor, Rachel Reeves, has undermined this by granting pay rises of 5.5 per cent to several million public sector workers – threatening to reignite wage growth again. The public sector has become an inflationary engine chugging away in one corner of the economy Indeed, there is little in today’s figures to show that public sector workers were getting a raw deal – a narrative spun by public sector unions.

Ed Miliband, along with those who support his ambition to decarbonise the electricity grid by 2030, has long had a favourite argument with which to try to put down people who say it can’t be done: why, if it is going to be so difficult to achieve, is the National Grid ESO – the company which manages the electricity network – not more worried? It is true the company has not been protesting openly about government policy, yet it transpires that in private it is another story. ESO executives, the Telegraph reports this morning, have warned that the South East could be facing blackouts by 2028 as a result of the switch towards intermittent and less predictable wind and solar.

For a while it looked as if Keir Starmer and Rachel Reeves were going to be lucky: they had walked into an economic recovery. The anaemic growth and market turmoil of the past few years – which Labour liked to blame entirely on ‘Tory chaos’ and absolutely nothing to do with the pandemic or energy crisis which followed the invasion of Ukraine – were going to be replaced by a period of stability and prosperity. Some governments are fortunate in their timing: Tony Blair walked into a decade of non-inflationary growth thanks to globalisation and the emergence of China as a major economy. But Starmer, it now looks, will not be so lucky.

Today’s stock market plunge is interesting for two main reasons. First, for those of us who have never traded on the Japanese stock exchange, comes the revelation that the colours used to denote changes in stock prices are the inverse of those used on western markets: red means a share has gone up, green means it has gone down. The same, apparently, is true in China. Fortunately, for the sake of foreign drivers neither country inverts the colour of its traffic lights, although ‘go’ in Japan is denoted by something closer to blue than green… Second, UK markets seem to have been dragged down in sympathy with others even though the economic news here might suggests they should be rising.