Since inflation started, the Bank of England has downplayed it. Not only did the Bank deflect blame, but it was a consequence of assorted special...

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So now we are told we have a ‘mortgage crisis’ to go with the ‘cost of living crisis’. And indeed we do. In response to the Bank of England’s rate rises, mortgage lenders have increased interest rates three-fold over the last two years. Households on variable-rate loans will suffer the most immediate pain. But there are also 2.5 million homeowners refinancing their fixed-rate mortgage deals by the end of next year, and they are expected to be forced to pay, on average, £3,900 a year more in interest.


This crisis is very much the responsibility of the Bank of England. Sure enough, the origin of the recent rise in prices is in part a consequence of factors beyond the Bank’s control. But their attempt to blame inflation entirely on those factors, whether foreign wars, firms' pricing strategies, or whatever else, is certainly not to the Bank’s credit. They should have accepted long ago that monetary policy – and the increase in the quantity of money which the Bank orchestrated – is a very significant contributor.


But there is another factor to consider. Since inflation started, the Bank of England has downplayed it. Not only did the Bank deflect blame, but it was a consequence of assorted special circumstances and idiosyncratic characteristics of particular markets, and not really inflation at all; or it was real inflation but would soon be gone. In July 2021, for example, Governor Andrew Bailey said that inflation would be “transient”. Even now, despite a slight air of panic in the most recent interest rate decision, we are told to expect a speedy restoration of price stability.


One can only wonder how many of those with new mortgages that they can no longer afford took them on in the last couple of years because the Bank has used all its authority to convince them is was safe. Those people, sadly, are personal victims of the Bank of England’s policy failures.

Dr James Forder

IEA Academic and Research Director
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** Piquing our interest
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On Thursday, the Bank of England’s Monetary Policy Committee (MPC) voted to raise interest rates by 50 basis points to five per cent after figures earlier this week showed inflation remaining stubbornly high at 8.7 per cent.

IEA Economics Fellow Julian Jessop responded to the news:
* Headline inflation should still drop sharply over the rest of the year as food and energy prices fall back.
* But the problem now is that core inflation, excluding food and energy, is no longer just ‘sticky’. Instead, it is actually heading in the wrong direction.
* Unfortunately, confidence in the Bank is low after a series of policy mistakes, forecast errors and communication blunders. This MPC was forced to raise rates by an unexpected half a point to demonstrate that it is serious about getting inflation back down — along with signalling that further rate rises could be on the way.
* It is uncertain that rates will have to go up again. The bigger increase today may have bought the MPC a little more time.
* Clearer evidence that underlying price pressures are fading should mean that the peak in UK interest rates will be nearer the current level of 5 per cent than the 6 per cent or more that many fear.
* The government should avoid kneejerk and counterproductive policies like mortgage subsidies or price controls. But they have a role in tax and regulatory reform, including fixing our broken planning system, to ease constraints on the supply side and to boost the economy’s productive potential.

Sending the right message… Julian criticised proposals ([link removed]) to subsidise mortgages on BBC Radio 2 and said that any new costs imposed on banks would be passed onto consumers.
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Those meddling kids… Senior Research Fellow Jamie Whyte wrote in CapX ([link removed]) criticising proposals for a mortgage bailout as interest rates rise.

Compounding interest… Julian was quoted in the Financial Times on Thursday (p. 2 ([link removed]) ) and Friday (p. 3 ([link removed]) ) — along with The Independent ([link removed]) , The Times ([link removed]) , The Daily Express ([link removed]) , and The Daily Mail ([link removed]) among others.
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Mortgage pain… Matthew Lesh interviews Joseph C. Sternberg, Editorial Board at The Wall Street Journal, who blames the “morons” behind the UK’s economic policy for skyrocketing interest rates, on the IEA Podcast this week.
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IEA Latest.
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** Major change to supermarket offers delayed again after onslaught of criticism
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Head of Lifestyle Economics Christopher Snowdon, The Sun ([link removed])

Nanny state to BOGOF… The government has confirmed that the costly ban on buy-one-get-one-free will be delayed, following a new round of criticism led by the IEA’s Head of Lifestyle Economics Christopher Snowdon.

This came as IEA analysis published in the Sunday Telegraph ([link removed]) highlighted that net zero and nanny state regulations were set to cost cost each household an extra £1,035 each year on average.
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** Covid inquiry limits outside voices on whether lockdown was too draconian ([link removed])
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Director of Public Policy and Communications Matthew Lesh, The Telegraph ([link removed])

An echo chamber…? The Covid inquiry is failing consider outside voices on the effects of lockdowns. The Telegraph reports that IEA research - Did lockdowns work? The verdict on Covid restrictions ([link removed]) - is yet to even be accepted for consideration.
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** Should libertarians side with the Left? ([link removed])
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Communications Officer Harrison Griffiths, YouTube ([link removed])

The right way forward… This week, the IEA launched its new YouTube show Moral Sentiments, which explores the common ground between classical liberalism and social justice. In the first episode, Communications Officer Harrison Griffiths interviews Re-Imagining Liberty podcast host Aaron Ross Powell ([link removed]) about whether liberals should ditch the political right.

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** The UK still needs fossil fuels, whether activists like it or not ([link removed])
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Energy Analyst Andy Mayer, The Spectator ([link removed])

Judgement day... Activists are using the courts to try to block all new domestic fossil fuel developments. But this would endanger the UK’s energy security, push up bills, and mean dirtier imported gas and oil.
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** The ([link removed]) re is a way the Tories can avoid oblivion - but they wont like it
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Head of Political Economy Kristian Niemietz, The Telegraph ([link removed])

Build build build... Tory leaders have long promised housing reform. However, without a powerful YIMBY voter bloc, they have been able to pay lip service to fix the housing crisis while continuing to appease their NIMBY voter base.

Kristian also appeared on the ConsEUmer podcast ([link removed]) (from 11.18) this week to discuss his recent blog ([link removed]) on the shifting the Overton Window on the NHS.
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** The vape scare down under ([link removed])
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Head of Lifestyle Economics Christopher Snowdon,

The Critic ([link removed])

If it ain’t broke… Health Secretary Stephen Barclay suggested this week that the UK could learn from Australia’s draconian approach to vaping. But, as the Nanny State Index ‘23 ([link removed]) revealed, vaping is the one lifestyle policy area where the UK adopts the evidence-based policy.
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** Why are lockdown sceptics loyal to Boris Johnson? ([link removed])
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Communications Officer Harrison Griffiths, Politics.co.uk ([link removed]) .

More than just cake… Despite having broken the draconian lockdown rules he chose to implement, Boris Johnson still commands loyalty among many anti-lockdown conservatives.

IEA Insider.


** Parliamentary researchers gather at the Vinson Centre
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This week the IEA hosted the Parliamentary Researchers Workshop in conjunction with The Vinson Centre and the University of Buckingham.

This two-day conference introduced classical economic thinking to help support their research and speechwriting for Members of Parliament. They heard from Christopher Snowdon on evidence in policymaking, Dr Steve Davies on the challenge of economic growth, Dr Juan Castañeda on inflation, and more.


** The Hong Konger screening and panel discussion
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Co-hosted by the IEA and Catholic Social Thought Project, St Mary’s University

Date: Tuesday, 6 July

Time: 18:00 – 21:00

Location: 2 Lord North Street, SW1P 3LB

RSVP: There are limited spaces available for this event, please email [email protected] to apply (mailto:[email protected]?subject=null&body=null) .

The film is a moving documentary about Jimmy Lai, the entrepreneur, newspaper publisher, Nobel Peace Prize nominee and Catholic convert and who, having escaped to Hong Kong as a child, has been imprisoned by the Chinese government for his pro-democracy activism.

The panel will include:
* Lord Kamall (Chair), Professor at St. Mary’s University & IEA Academic Fellow
* Benedict Rogers, human rights activist
* Fr. Robert Sirico, President emeritus of the Acton Institute and alumnus of St. Mary’s University

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