David Clark

PERHAPS it is because I am getting older, but I find myself hurling ever more abuse at the television when I hear politicians, public servants (such as the Governor of the Bank of England), regulator,s or the talking heads that TV stations seem to have an endless supply of, pontificating about the state of the economy and what they would do to fix things.

If only they were in power. Obviously, if they actually are in power it’s not their fault anyway because lots of countries are in the same boat. And if the UK is demonstrably and consistently underperforming its peers then that is neither a pertinent observation nor a particularly helpful one – and I should really think about moving the debate on.

As I live and work in Scotland, I have to keep abreast of the economic policies of the SNP. That’s pretty easy as they don’t seem to have any. They hope that the magic money tree will keep on giving, business will get squeezed until it bursts, and taxpayers will put up with economic incompetence of a scale that beggars belief.

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In fairness, they got the last point right as successive elections have shown. It’s important too to keep a watching brief on the Conservatives in Westminster, but things are little better there.

However, the latest piece of economic gobbledygook that has me yelling at the telly has come courtesy of the Liberal Democrats. This surprised me as I had forgotten about them, but it turns out that Ed Davey (he’s their leader, in case you are wondering) has suggested that in the face of rising interest rates, there should be some sort of bailout fund to help people with their mortgage payments.

A snip at only £3 billion, he suggests. Aye, right.

Leaving aside the fact that I don’t remember anyone offering to help me with my mortgage when interest rates were last at 10%, this is populist drivel of the highest order.

Interest rates are rising in an effort to curb inflation. Proposing an inflationary measure to help curb inflation is preposterous. It is also unfair on those who have spent the last 30 years or so through good times and bad to put food on the table, raise their children and pay off the mortgage. It is similarly unfair on those who rent their property to expect them to subsidise homeowners.

Rising interest rates exist to dampen demand in the economy and that is, at least partly, done by making mortgages more expensive. If that burden is removed, then inflation will not be brought under control and rates will have to rise even further than might otherwise have been the case.

As for how long it will take for interest rates to do their job, I’m afraid there is only limited guidance to be had from history. This is because there is a much greater proportion of households across the UK that have no mortgages than in previous times of interest rate hikes (boomers, retirees – demographics, basically). This means the Bank of England is likely to have to bash the monetary policy hammer much harder than previously if it wants to impact demand.

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Andrew Bailey, the Bank of England Governor, does at least recognise this. In fact, he is “Johnny come lately” to the realisation that inflation is sticky and not, as he so famously and patronisingly put it, “transient”. Better late than never, I suppose. He is now suggesting that we need to suck up the higher rates to fight the good inflationary fight, when last year it was all he could do to avoid telling us all to “calm down, dear”.

Some may see this as incompetence, others may be more charitable and point to extraneous factors such as Ukraine, energy prices, crop yields and other stuff. Whatever.

The Bank is charged with keeping inflation at or about 2% per annum. It has demonstrably failed to do so. In my view, this is as much a failure of forecasting as anything else, but no-one gives a toot what I think, and quite right too.

Negotiating the UK stock market in such times does have a rather sobering effect. The companies we are invested in and are considering investing in operate in the world as it is, not how they would like it to be. Their management and staff are dealing with real cash flow problems, rising bills, supply chain issues, changing patterns of consumer behaviour, demographics, increased competition for talented staff, punitive freight and transport costs, regulatory costs, Brexit-related red tape and a million other issues as they attempt to keep their own companies and, by extension, UK plc, afloat.

Inflation is not just a word often mentioned on the news or bandied about by some feckless politician who wouldn’t know his “cost push” from his “demand pull”. It is a real, tangible, insidious and serious thing that destroys savings and asset prices, and creates lasting hardship. It must be crushed, and it requires real and serious people to tackle it.

It has long been fashionable for politicians to have a flexible relationship with facts, especially inconvenient ones. But it simply will not do to tell citizens to ignore these facts and pay more attention to what you are being told.

The journalist and broadcaster Christopher Hitchens coined the dictum, “that which can be asserted without evidence, can be dismissed without evidence”.

However, it is better to have evidence and we should use it to call out politicians, regulators or people of power and influence, of every affiliation, when they speak false or with ignorance.

So, with apologies to my very patient wife, I shall continue to yell at the telly.

David Clark is investment director at Saracen Fund Managers in Edinburgh