Mr McCafferty, who joined the MCP in September, said in his first speech on Friday that confidence on the asset purchases tool, otherwise called quantitative easing, was at its strongest when it was first introduced.
However, he added, the novelty of the instrument and the MPC's readiness to act quickly to loosen policy further at a time of ultra-low interest rates no doubt acted to lift "animal spirits", while the effect has become weaker as QE has become part of the policy landscape.
So far, the Bank has bought £375bn of Government bonds but Mr McCafferty has voted with the majority on the Committee to leave this amount unchanged since he joined.
Despite his views on the weakening of the effectiveness of QE, McCafferty said that there are other avenues for the Bank to take in a bid to stimulate the economy.
He said that policies targeted at specific bottlenecks in the economy, such as small business-lending, may be needed, while targeting growth, as measured in gross domestic product without adjusting for changes in prices, or nominal GDP, could also be considered.
In this opinion, he concurs with incoming BOE Governor Mark Carney, who takes over from Sir Mervyn King in July. Mr McCafferty added that there are significant shortcomings to nominal GDP-targeting and that pursuing such a policy should be a temporary measure only.
Mr McCafferty went on to say that he expects the annual rate of inflation to return to the Bank's target of 2 per cent slowly over the next two years, with its decline frustrated by wage pressures and high commodity prices.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 542 )According to the Office for National Statistics, retail sales fell at a seasonally adjusted 0.1 per cent in December from the month before, while compared with the same month in 2011, the quantity of goods sold rose a worse than expected 0.3 per cent.
The poor growth was the worst since 1998, with the exception of 2010 when sales were hit by heavy snow. This means, the ONS has said, that although there was some growth, it has lost its momentum. Surprisingly, given the time of year, the sale of food was down, as was clothing, although online retailers did well.
In fact, in real terms, retail sales have stagnated since mid-2007, as December's figure was only 2.4 per cent higher than the volume of sales in December 2007. However, the gradual price rise experienced by shoppers has come to an end.
The figures were surprising, as many retailers had reported a last minute rush before Christmas and then excellent sales on Boxing Day, but these could not make up for the poor sales for the first three weeks of the month.
However, one bright spot was online sales, which continued to increase their share of the retail business. Although online sales fell 0.1 per cent in December from November, it was a much slighter fall than usual for the time of year and the whole month figures for online sales were up to 10.6 per cent of total sales from 9.4 per cent in December 2011.
Meanwhile, Experian has produced figures showing that the number of visits to online retail site rose 86 per cent on Christmas Eve, 71 per cent on Christmas Day and 17 per on Boxing Day compared with the year before.
In addition, Experian say that total online sales were up 15.5 per cent, which was mainly caused by a 36 per cent surge in online shopping at department stores. The rise in online sales however had a knock-on effect on sales of petrol and diesel sold in December, which fell 6.6 per cent from the same time a year ago.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 626 )HM Revenue & Customs have announced that it is about to begin the recruitment of 100 individual inspectors to join the Affluent Compliance Team, which was set up to investigate the tax affairs of wealthy individuals.
Once these inspectors are recruited, in addition to taxpayers with an annual income of more than £150,000 and wealth of between £2.5m and £20m, the unit will also cover those with wealth in the range £1m to £2.5m and the department estimates that it will pertain to around 300,000 people in the UK.
Described as the team that is 'dedicated to ensuring the better off play by the rules, the Affluent Compliance Team had already brought in an extra £75m in tax by the end of December and has a target of £586m by the end of 2015.
There are currently 200 members of staff on the unit in six locations across the UK and Exchequer Secretary David Gauke said of the team that is was set up from some of the £917m the department raised in 2011.
According to the Director of the Affluent Teams, Roger Atkinson, new team members will be recruited both from within the department and externally and it is expected that the new team will be fully operational by April.
Although there is a vast difference between net worth of £2.5m and £20m, according to HMRC there are common characteristics between the department's targets.
These people are likely to regularly use tax avoidance schemes, have property portfolios both at home and abroad and will fail to file their self-assessment returns on time.
In addition, the department says, their wealthy targets often have bank accounts in Switzerland, appear to understate their tax liability and avoid or evade Stamp Duty on property purchases and have a low effective Rate of Tax across their total income.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3 / 548 )UK inflation as measured on the consumer prices index (CPI) held at 2.7 per cent for the third consecutive month in December, while producer prices dipped below forecasts, as the predicted utility bills hike was offset by lower fuel costs.
Air fares pushed inflation down, as flight prices rose at half the rate seen a year earlier, while petrol prices fell by 2.8p per litre between November and December 2012, compared with a fall of only 1.1p a litre in 2011.
The cost of food was another upwards pressure on overall prices, with prices up 1.2 per cent against November. Clothing and footwear dropped by 1.5 per cent, but that was less than the larger fall of 2.8 per cent the year before.
The latest figures from the Office for National Statistics (ONS) also showed that the retail prices index (RPI), which include housing costs and is seen by many as a better indication of the cost of living, rose slightly in December to 3.1 per cent from 3 per cent in November.
While the figure is still well above the Bank of England's target rate of 2 per cent, it is still unclear whether the figure will rise before it falls again or whether it will fall at all in the near future.
In fact, the central bank's latest quarterly forecasts, released in November, showed inflation peaking in the third quarter of 2013, falling below the target only in 2014.
However, what is clear is that stubborn inflation is likely to have been a key argument against more quantitative easing at the Bank's monthly policy meeting last week.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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( 3.1 / 584 )According to the Government’s Trade Minister, former chairman of HSBC, Lord Green, the UK’s largest banks admit that they are not lending to small businesses and are in a “downward spiral” of poor lending decisions.
However, Lord Green also said that the banks’ chief executives are all aware of the problem, although the situation cannot be rectified overnight. Indeed, statistics show that the stock of bank lending to business has contracted by more than £150bn since the end of 2008.
Meanwhile, new figures released by the Bank of England have shown that there is a demand for finance from small firms and that there are only a few newer banking entrants to the market who are fulfilling these needs.
The Bank of England recently released figures for the Funding for Lending Scheme (FLS), which highlight that new "challenger" banks, are all lending more as a result of the FLS.
However, echoing Lord Green’s remarks, it is evident that many very creditworthy small and medium-sized enterprises (SMEs) are still being unnecessarily and unfairly turned down for loans because the bank to which they have applied has made a strategic decision to shrink its lending book.
Worried by the lack of lending to SMEs, the British Bankers Association (BBA) has called for the establishment of an independent body to “uphold ethical and professional standards” in UK banks.
The BBA has suggested that a new Banking Standards Review Council (BSRC) be set up to oversee ethical standards in banking and that it should be run by non-bankers, given the public’s distrust of the industry.
In its written submission to the Parliamentary Commission on Banking Standards, the BBA proposed strengthening the existing regulation of banks by expanding the Approved Persons Regime and suggested that the new BSRC it was proposing should have the power to strike off bankers who breached the regime’s principles.
For more information, please contact Glazers, Chartered Accountants London or visit www.glazers.co.uk
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