Why can’t the BBC tell us what’s really happening?

By Neil Patrick
The Bank of England:
 Remembered where the UP button was yesterday

In my opinion, yesterday was the best news day in the UK since I started this blog. Yet anyone watching or reading the UK mainstream news could be forgiven for assuming quite the opposite.

I'm referring to the news that the Bank of England is raising interest rates for the first time in over 10 years.

The simple and obvious impact of this is that if you are a saver, this is minor good news. If you are a borrower, it’s not. Yet reality is seldom this binary and most people both save and borrow albeit in varying proportions.

So the BBC TV News thought it would be appropriate to ask two types of people what they thought. One who was struggling with a low income, a mortgage and the costs of a young family. The other a retired bloke who relied on his savings income. Naturally enough, they gave totally predictable answers. The saver that it would make little difference to his income and the borrower that any extra costs would be hard for them to bear.

I guess this is the result of the BBC striving to be inclusive; less London centric and eliteist. But it turned much better news than any sports victory, royal wedding or Oscar win, into the overall message that whether you’re a borrower or a saver, there's little to celebrate.

The Guardian’s headline followed a similar vein – More costly mortgages in wake of rates rise’. Buried in this piece was the fact that this amounts to a £22 a month increase on average for homeowners with mortgages. It didn’t mention that those on the lowest incomes will have smaller mortgages and so their increase will typically be much less.

I’m not saying that this isn’t tough for those on the lowest incomes. But this news is a minor revelation. It represents a tentative first step back towards normality from which all will ultimately benefit. This is the real story, but it’s just not reported that way.

The increase was just 25 basis points (0.25%), taking the base rate from its all-time low of 0.25% to 0.5%. This isn’t a hike, it’s a tiny increase. I am old enough to remember when base rates reached 17% and a 1.00% move in either direction barely merited a mention. Yet the BBC described this news as ‘interest rates will be doubled’. Technically correct, but also completely misleading to anyone who doesn’t watch these things closely.

Mark Carney, the Canadian Governor of the Bank of England has proven to be a shrewd judge of when to intervene with rate changes. With inflation at around 3%, high levels of employment (despite poor wage growth) and growing consumer debt, a rate increase has been on the cards for months now.

As central bankers repeat ad nauseum, base rates are a blunt instrument, but they are also an immediate way to cool things down, especially inflation. Carney described it as ‘easing off the gas a little’. In other words, moving further away from the quantitative easing panic button which was pressed repeatedly in 2008 to retain liquidity in the wake of the collapse.

It is also an experiment to see how things react. The FTSE 100 surged:

The pound fell a couple of cents against the US dollar. This is not a catastrophe – it’s a fairly normal adjustment. And it’s part of why a free-floating domestic currency is so helpful in keeping an economy under control. The Greeks would chop off a finger I reckon to have that option.

I predict further small rises leading up to the Article 50 deadline on 29 March 2019, unless there is some drastic reaction which persuades against this path. Carney wants to ensure that whatever form Brexit finally assumes, when it happens, he has the scope to move rates accordingly to keep the UK ship stable.

Forget what the Westminster monkeys on both sides are saying about Brexit. The Bank of England is doing a fine job of preparing us for any scenario. And bear in mind that the BBC and the mainstream press have long forgotten how to tell us the things we really need to know.