The Notebook: Neil Bennett on the Bank’s lost credibility, corporation tax, and Scotland the timid

The Notebook is a place where interesting people note interesting things. Today it’s our fortnightly columnist Neil Bennett, the global co-CEO of communications and strategic advisory group H/Advisors, on the Bank of England’s forecasting record, corporation tax plans, and a new must-see play

Cast your mind back to last November, when Huw Pill, Chief Economist at the Bank of England (and a man with a name that is a headline writer’s dream) produced a truly shocking forecast. We were in fact already in recession, they said, and would stay in recession for two years or more – the longest recession in a century. Unemployment would rise sharply and we would all feel intense financial pain.

Fast forward, although only by four months, and it is now clear that this prediction was in fact an utter work of horror fiction, rather than a serious piece of economic forecasting. The UK was not in recession last year and still isn’t and I increasingly suspect that it won’t be. Labour markets are still tight, and inflation is falling. Over the years, I have marvelled at the resilience of the dear old British economy and its extraordinary ability to shrug off repeated attempts by politicians, bureaucrats and regulators to crater it.

If this forecast had been the work of any old City economist, we could just have chortled at the lamentable wrongness of it all. But this was the Bank of England itself, telling us we were all doomed, when we weren’t. Real people make critical decisions based on Bank of England forecasts – businesses decided whether to invest or recruit, people decide whether to buy a house or retire. As a result, this forecast was worse than wrong, it was reckless. 

At the time I suspect the Bank of England was desperate to make a point – it felt it needed to scare Jeremy Hunt as the new Chancellor into reversing his predecessor’s fiscal liberality. But that was a political point, which should have had no place in a true economic forecast. Of course, now Andrew Bailey, the Bank of England Governor, is rowing back furiously and telling us that the recession will be far milder and shorter (and saying it in a way that suggests he expects some of the credit). Expect further revisions from Threadneedle Street very own rear-view mirror in the months ahead.

For all this recantation, I am not sure I will trust a Bank of England economic forecast ever again, and I doubt I am alone. And that is perhaps as shocking as the forecast itself.

Hunt the tax cut: a most unsatisfying game

Now some of these fictional economic clouds are lifting, it is high time for Jeremy Hunt to ease off on the ‘Mr Gloomy’ act he has perfected since he became Chancellor. More specifically time for him to cancel the pre-announced tax avalanche he plans to dump on the British economy when he delivers his Budget in two weeks’ time.

He faces many demands but for me the most urgent move is to scrap the impending increase in Corporation Tax from 19 to 24%. This would deal a vicious blow to our global competitiveness – we would end up with higher business taxes than even Sweden and even Denmark (which can hardly be described as tax havens). The move would be entirely counter-productive since it would merely stimulate tax efficiency and deter inward investment rather than raising revenue.

If Britain is ever to prosper in this post-Brexit environment, it will not do so as the sort of high tax, low investment, low productivity economy that The Treasury has in mind.

Can I quote you on that?

“Turnips are not a sexy vegetable. Most people don’t even know what to do with one.”

Richard Parry, Britain’s ‘turnip king’ denounces the Environment Secretary’s ill-advised foray into culinary matters amidst the nation’s tomato shortage. Apparently he has switched to carrots.

Scotland the Timid

At least we don’t live in Scotland, where the SNP has decreed in its wisdom that the way to prosperity is to tax people (and wealth creators in particular) even more than they are South of the border. As a result, more than a few of my Scots friends now declare that their main residence is in London.

One of the many depressing aspects of the current SNP leadership bid is how little the main candidates are talking about the Scottish economy. Kate Forbes has tried, but her contribution has largely been drowned out by the chorus of abuse about her social and political views.

When will the SNP learn that Scotland cannot become a Celtic tiger like Ireland, unless they start behaving like Ireland, and pursue a determined pro-business, pro-enterprise set of policies. They already have many of those levers at their disposal, independence or no independence.

Cummings back at centre stage

The stranger-than-fiction political shenanigans over the past few years have inevitably spawned more than a few plays, books, TV shows etc. Many of them are barely concealed agitprop, written by people who wanted to vent their rage against Brexit and its perpetrators. Dom – The Play is different in a number of respects. Firstly, much of it is based on verbatim texts from Dominic Cummings himself delivered by Chris Porter in the title role. Second, no playwright is credited, which has led to all sorts of conspiracy theories about who actually wrote it. Could this possibly be a dramatic autobiography? Any how it is well worth a visit if you can get a ticket, but be quick since it is only on for a frustratingly short run.

Neil Bennett is global co-CEO of H/Advisors, a communications and strategic advisory firm