is a leading commentator on the economy and modern politics, a former industrialist, founder of an investment management company and a distinguished fellow of All Souls College Oxford

The UK inflation rate is now 55 per cent above target. The Bank of England last week revised its forecast up, expecting the rate to be double the target early next year. This is the same Bank that forecast 2 per cent inflation for 2022-23, only to see the rate hit a totally unacceptable 11 per cent .

The politicians talk endlessly about a cost of living crisis, picking up elector disapproval of rising prices and squeezed household budgets. They tell us that the Bank is independent, refuse to criticise its poor performance and lose elections if they are in government as the public holds them responsible.

The exchange of letters last week between Bank and Chancellor was pathetic, missing many of the main points and seeking a common excuse for their joint failure. The Bank has to publish a letter when things go wrong. The Governor signed one that decided to blame the inflation on world energy prices. There was no explanation of why their previous forecast had not factored in Middle East turmoil. The conflict between Iran and her proxies with Israel, the US and others is not new. There was a statement that inflation was going to get worse. The Bank pointed to lower private sector wage settlements and squeezes on companies as giving hope of lower inflation whilst forecasting the opposite.

There was no mention of the big surge in public sector wages, no reference to the continuing poor public sector productivity, to the huge costs and losses of HS2, British Steel and the railways. There was no comment on the huge council tax rises where grants have been reduced, nor of the average council tax rise well above inflation.

Worse still, when the one sided analysis gave way to conclusions about what the Bank should do, the author clearly needed to break off from the home computer and end in a hurry. I assume that, as the Governor is paid £500,000 a year, he has people to write his letters for him. We are simply told keeping the interest rate where it is will bring inflation back down to 2 per cent sometime after it has hit 4 per cent. How? Why?

There was no mention of the MPC ‘s momentous decisions to loosen monetary policy by selling fewer bonds in the market. The Inflation letter tells us the monetary stance will, in due course get inflation down, keeping the base rate at 3.75 per cent. Why was there no mention of getting the 30 year rate down a bit by cancelling long bond sales? How does that fit in? I happen to agree with that policy, whereas the Bank since 2022 until now has helped force long bond interest rates up a lot, without seeing that as part of its counter inflation policy.

The Chancellor’s reply was pathetic. He offered no constructive criticism to help get inflation back down. He decided to cower in the Bank’s shelter, claiming alongside them that inflation was the fault of an unruly and unpredictable Middle Eastern oil market. He thanked the Bank for its work, did not condemn the further forecast rise in prices and accepted current policy would come right eventually. Had he noticed inflation might not be back down to  the 2 per cent target by the next election? Did he know Labour took over in 2024 when inflation had got back to target?

He assured the Bank – as if they were the bosses – that he will avoid excessive borrowing. Did he know he plans to borrow over £300bn next year to cover extra spending and debt repayment? He said the UK will help re-open the Straits of Hormuz. When and how? Will he borrow some warships to do that?

His absurd contribution to the price surge was to remind the Governor of £1 off some bus fares and the temporary VAT removal from electricity. The bills still go up, of course. No mention of the excessive expense of renewables, the cost of keeping stand by gas and the carbon taxes which lumber us with the dearest electricity of the G7. No mention of the way government is pushing up public sector costs, charges and taxes.

Both the Bank and the Treasury have a poor track record on inflation this decade. The government is fuelling it with its lax approach to public sector costs, its tax rises and its high borrowing. A mayoral tourist tax will see more rises in holiday costs. The Bank has lurched from an excessively easy monetary policy to a much tighter one. The Monetary Policy Committee offers little or no commentary on the rate of growth in money and credit and lacks interest in the role of money in inflation.

The recent exchange of letters does not instil confidence in their policies and show no understanding of the role domestic policies have played in driving prices higher. Once again they leave us well above the target they are meant to hit. Policy meanwhile drifts and the Chancellor fails to take action to rein in the cost of living pressures on a large enough scale to have a useful impact.