ALEX BRUMMER: The bank must avoid a recession

Bank of England watchers are convinced that the Monetary Policy Committee will sit idly by next week when it sets interest rates for the last time this year.

If, as Governor Andrew Bailey says, the Bank is data-driven, it has no choice but to surprise markets and cut rates by at least a quarter of a percentage point.

The boost to the economy heading into the summer has been wasted. Production fell 0.1 percent in October for the second consecutive month. The latest data shows that construction, consumer services and manufacturing are heading in the wrong direction.

We do not want to be too harsh on Rachel Reeves and the Labor Government. October’s growth figures come before the £40bn budget tax rise, which has stunned business leaders who support Labour.

Prospects have been undermined by withering attacks on the Conservative heritage. Reeves’ claim about the worst economic legacy since the Second World War was as curiously misleading as his CV. Starmer couldn’t resist joining the doomsday forecasts, standing in the Downing Street rose garden in the summer, declaring that things would get worse before they get better, and warning of a tough Budget.

This was a self-fulfilling prophecy. By the time Labor delivered its misery forecast, growth was well established and inflation under control. Laying the groundwork for a tax-raising budget may have seemed smart, accepting criticism of his predecessors. The difficulty is that it scared the horses.

Business and consumer confidence was shaken, new orders dried up and the labor market tightened. Deputy Prime Minister Angela Rayner’s planning reforms are likely to spark the promised infrastructure and housing revolution. But even some ministers (Health Secretary Wes Streeting comes to mind) seem unsure that the target of 1.5 million new homes can be met in this Parliament.

The Budget may have eased the uncertainties created by the rhetoric, but it will have done nothing to make business feel better. The only thing that has been heard since the Budget is that the increase in Social Security has been calamitous.

Reeves argued before the CBI that there was no alternative.

There were several. It would not have been popular with motorists, but it would have rung with green rhetoric, if fuel taxes had not been frozen. I say this as someone with a gas guzzling car!

The Bank’s minutes invariably remind us that its duty is to meet the 2 percent inflation target. We know that in the post-Covid era this was forgotten and the Bank paid the price in terms of reputation. Substantial tightening of fiscal policy requires a monetary response if an unnecessary recession is to be avoided and the housing market is not to be derailed by high borrowing costs.

Waiting will cost jobs and prosperity.

mail crash

How sad that, for the second year in a row, Royal Mail has been fined by regulator Ofcom for failing to meet delivery targets. The results of the last financial year were appalling: only 74.7 per cent of first-class letters were delivered the next day. The second class fared better: 92.7 percent arrived within three days, compared to the target of 98.5 percent.

The results are shameful and speak of poor management, lack of efficiency and terrible labor relations. Mailing is on a slippery downward slope, which should make it easier to meet goals. Volumes have decreased from 20 billion letters a year to 7 billion and are heading for 4 billion.

None of this makes the prospect of owning ‘Czech Sphinx’ Daniel Kretinsky attractive. Loading the company with debt and striking uneconomic union deals can only lead to worse performance and lower investment. Consumers deserve better. But foreign ownership will not deliver results.

bitter pill

Octogenarian Stefano Pessina was once considered the genius of pharmacy. In 2019, it explored the possibility of taking Walgreens Boots Alliance private at a valuation of $90bn (£72bn). Five years on, the group risks being buried under $36bn (£29bn) in debt, lease obligations and legal claims over opioid prescriptions. A rescue bid of around $9bn (£7.1bn) from buyout group Sycamore is at stake.

Easy Come Easy Go.