News Column

Financial Mail on Sunday, London, Jon Rees column

August 10, 2014

By Jon Rees, Financial Mail on Sunday, London



Aug. 10--No surprise that the Bank of England decided to keep interest rates at their historic low of 0.5 per cent -- just because we've finally overtaken our pre-recession economic output there's no reason to get carried away, Governor Mark Carney believes.

He is right to be cautious -- we took six long years to recover from recession, longer than the US and longer even than that supposed economic basket-case, France.

But while many of the key economic indicators, jobs and output, are heading the right way, there is one that isn't: wages. Pay rises including bonuses are at their lowest since 2009 while excluding bonuses they are at their lowest since 2001, in each case a fraction of 1 per cent -- far short of inflation, running at 1.9 per cent.

Carney and his colleagues are now thought to be putting more emphasis on wage trends when it comes to setting rates and that, say economists, means rates are likely to stay at their five-year low for a little longer yet.

EVERY eight-year-old knows what makes a country, mocked Alistair Darling in his debate with Alex Salmond: a flag, a capital city and a currency; so what currency would an independent Scotland have?

Salmond's insistence that it is Scotland's pound, too, has taken on a note of increasing desperation. For Darling, leading the Better Together campaign, it was a vindication of his insistence on telling voters hard financial truths. Controlling your own currency is a prerequisite for true independence. The Bank of England will increase interest rates at some point and if an independent Scotland keeps the pound there's nothing Scots can do about it. If they don't keep the pound then Scots have a right to know now what currency they'll get their wages and pensions in.

As Darling said, Scotland has spent more than it has collected in tax every year of the past 22, bar one, so beginning its new future by losing control of its currency would not be a good start.

BORIS Johnson as Business Secretary? That's what's tipped, should the Mayor of London become an MP and the Tories win the next election. The City would love him: no more digs about 'spivs' from Vince Cable, no more threats to lock up errant bankers.

But what about outside the Square Mile? How about the Tories' pledge to rebalance the economy away from over-dependence on the City? How would Boris, who had to apologise to a very different city, Liverpool, for causing offence, and who called his pounds sterling 250,000 journalistic salary 'chickenfeed', be regarded by the broader business community? They might be a little less charmed, perhaps.

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(c)2014 Daily Mail (London, )

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Source: Daily Mail (London, England)


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