Ross Clark

The OECD has marked Britain down as the only G7 country (and the only major country bar Russia) expected to suffer a shrinking economy next year. But how accurate are its predictions? A year ago, it predicted that inflation in the UK would peak at 4.9 per cent in the first half of this year before falling back to 2 per cent by the end of next year. The economy was going to grow by 4.7 per cent this year followed by a further 2.1 per cent in 2023. The government would bite off any hand that offered that now. It can be excused for failing to predict the Russian invasion of Ukraine. But this is hardly the first time economic forecasting by the OECD and everyone else has proved somewhat wide of the mark.

A year ago Boris Johnson lost his place in his speech to the CBI annual conference. He started blathering on about Peppa Pig World, after having treated young Wilfred to a day out there the day before. It was excruciating, but at least it was fun. It is hard to say the same about Rishi Sunak’s address to the CBI this morning.  The CBI ought to be a natural habitat for Sunak, yet he didn’t seem entirely comfortable. His voice seemed a tone higher than normal, so his usual enthusiasm sounded something more like a desperate appeal. He wanted us to know that innovation is a good thing which improves productivity and creates wealth. But doesn’t everyone think that (except perhaps the Green party)?

Britain appears to be enjoying a surge of entrepreneurialism, with more than 200,000 start-ups registered at Companies House between April and June this year alone. However, while many of these are genuine cases of people taking the plunge and embarking on their dream of opening a tea shop, launching a webinar app or whatever, an awful lot are not going to be contributing any cherries to our national pie – and some might well be pilfering a few. Among those unlikely to be contributing are the 36 companies registered last year to a single address in Bristol – not a business park but a small semi-detached house. Or the 95 registered, apparently by Romanian nationals, at 65 different houses in the same Herefordshire street since January last year.

We have now been primed for so many tax rises that Thursday’s autumn statement will inevitably come as some form of relief. Whatever Jeremy Hunt announces is sure to be milder than the possibilities fed to us over the past few weeks. But there is one suggested tax rise which is far too mild, and far too reasonable. Local authorities, it has been floated, may be allowed to put up their council tax bills by up to 5 per cent without having to put it to the public in a referendum (a referendum which, needless to say, would swallow up a good slice of any extra revenue gained). If the government wants to continue to fund social care from council tax it should look at introducing extra council tax bands Five per cent would amount to a sharp rise in council tax compared with recent years.

Like Liz Truss, Sam Bankman-Fried will be the stuff of pub quizzes: who lost his entire $16 billion fortune in days? A quick trawl of the internet suggest his only real challenger in losing so much money so quickly was Masayoshi Son, the founder of Softbank, who was estimated to have made a paper loss of $70 billion in the dotcom crash. But he wasn’t completely wiped out, and retained considerable wealth as Softbank rose again. Bankman-Fried, on the other hand, is believed now to be worth pretty much zero following last week’s collapse of the crypto exchange he founded, FTX. At its peak, Bankman-Fried’s stake is estimated to have been worth $26 billion, and it was still worth many billions in the days before its sudden collapse. All this by the age of 30.

Is the inflationary spike past its peak? That is the obvious reaction to the news that US inflation fell to 7.7 per cent in October, down from 8.2 per cent in September and significantly lower than the 8.0 per cent that markets had been expecting. Clearly, inflation remains high, but US inflation is now lower than at any stage since January. A further couple of months of falls would seem to indicate that, for now, inflation has been tamed. It ought to come as no surprise. The US Federal Reserve has been fighting inflation aggressively all year with interest rates. It is some way ahead of the curve being followed by the Bank of England and the European Central Bank. Moreover, a slowing economy ought to bring down prices as consumers draw in their horns.

We can be grateful for small mercies. 4 November 2022 will go down as the day when a presenter on the Today programme finally challenged a dodgy statistic trying to blame economic collapse on Brexit. The statistic in question was put forward by former Bank of England governor Mark Carney in an interview with the Financial Times last month in which he said: 'Put it this way, in 2016 the British economy was 90 per cent the size of Germany’s. Now it is less than 70 per cent.'     Was Carney’s ultra-loose monetary policy not part of the cause of today's inflationary environment? Mishal Husain, to her credit, put this to Carney this morning, pointing out that economists had challenged this figure.

So much for those ‘stranded assets’ which former Bank of England governor Mark Carney and many others tried to warn us about. It wasn’t long ago that climate activists were urging the world to dump shares in oil companies, not just because we should want to punish them for climate change but because, they said, oil companies’ fortunes were on a downward trajectory as the world turned green. ‘The exposure of UK investors, including insurance companies, to these shifts is potentially huge,’ Carney said in 2015. ‘Once climate change becomes a defining issue for financial stability, it may already be too late.’ But that’s not how it looked in BP’s boardroom this morning as it announced profits of £7.1 billion ($8.2 billion) in the third quarter.

Britain’s economic problems can, of course, be laid at the door of Brexit. We know this because it was asserted on a BBC podcast which went viral over the weekend – and no one would question the BBC’s objectivity. But maybe there ought just to be a scintilla of doubt in the heads of the staunchest remainers given this morning’s news that eurozone inflation has reached 10.7 per cent – even higher than Britain’s latest CPI figure of 10.1 per cent. Markets had been expecting Eurozone inflation to stay a little below the 10 per cent mark. Far from Britain parting off from the rest of Europe and entering a death spiral, it is remarkable how Britain and the EU are converging in their respective economic crises. As for inflation, so for economic growth.

Rishi Sunak deserves one of those ‘climate champion’ badges they hand out at primary schools. Why? Because he is not going to fly to the COP27 summit in Egypt – thereby saving 1.65 tonnes of carbon emissions, according to the World Land Trust’s carbon calculator. So what if Ed Miliband thinks it is a failure of leadership? There is no point in any UK Prime Minister travelling to any more of these summits when the world’s largest carbon emitters have made it perfectly plain that they have no intention of copying Britain’s example. They will not be putting themselves under legal commitment to eliminate net carbon emissions by 2050 or any other hard date. Xi Jinping, whose country is responsible for a third of the world’s emissions, won’t be going.

Given the swift defenestration of his predecessor after her mini-Budget panicked the markets, it is not surprising that Rishi Sunak has delayed the Treasury’s autumn statement until 17 November. No set of fiscal plans will satisfy everyone, but markets and public opinion do seem to be especially sensitive to changes in fiscal policy at present. And there’s this: left-leaning thinktank the Resolution Foundation this morning said delaying the statement for just two weeks will reduce the apparent black hole in the public finances as the cost of government borrowing comes down. The two-week delay could create the illusion of an extra £15 billion in the government’s coffers (or rather £15 billion less borrowing), mitigating the need for spending cuts and tax rises.

Inflation, asserted Rishi Sunak in his first PMQs, makes us all poorer. That is not entirely true – people relying entirely on the state pension, for example, will be fully compensated for this year’s high inflation, and no doubt some of Sunak’s former colleagues in the hedge fund industry have found a way to profit, too. But generally, he is right. Working people have on the whole suffered a large drop in their real wages. In the year to April, median weekly pay rose by 5 per cent from £610 to £640. In many years that would be a substantial rise, but when adjusted for inflation it comes out as a fall of 2.6 per cent.