Mark Carney has been the luckiest of unlucky Bank governors

 
Allister Heath

BORROWERS, relax; savers, tear your hair out. The Bank of England’s base rates will remain on hold; Mark Carney doesn’t “see an immediate need to change monetary policy.”

Carney has been extraordinarily lucky in his misfortune. His flagship policy is in tatters and yet the economy’s strong growth, rising employment and lower inflation means that the Bank is in a strong position. Sure, the messaging is confused and many of us are worried about mounting imbalances, but none of this really matters for now.

The governor’s big bet – that he wouldn’t consider hiking rates, barring a crisis, until the economy was out of spare capacity, approximated by seven per cent unemployment – has gone very badly wrong. It took a mere six months for the rate to collapse to 7.1 per cent; the threshold should have been much lower. The Bank believes that the economy isn’t over-heating, which means that it won’t hike rates if and when unemployment continues to slide over the next few months. I suspect that rates will only go up when it looks as if wages are recovering, or if inflation starts to rise. So the seven per cent will be quietly forgotten and is unlikely to be replaced by anything as formal; the Bank will still claim to be engaged in forward guidance but the original policy will be buried.

In one way, Carney’s timing was disastrous – his policy was announced just before it became clear how strongly the economy was recovering. But the governor’s timing was also fantastically brilliant: he took over just at the right time and can now take all of the credit for the recovery. Lord (Mervyn) King must be so jealous.

BETTER SCHOOLS
YESTERDAY saw the publication of the A-level and GCSE league tables, and they make for fascinating reading. Here are a few points worth taking away. Michael Gove’s policies are having a positive impact, though of course change takes years, and additional structural reforms will be necessary to make a real breakthrough. Many more children are studying traditional subjects and the share of pupils achieving what is deemed to be good GCSE grades has increased by 1.7 percentage points. Given that Gove has eradicated grade inflation, this is a good sign. Far fewer children are now stuck in failing schools, even though that definition too has been toughened significantly.

London schools continue to improve more quickly than those in the rest of the country: that is one of the reasons for the capital’s economic and cultural renaissance, and why fewer parents are fleeing in search of better schools (many are still escaping crazed property prices, however).

Last but not least, and as spotted in an excellent note by Sam Freedman of Teach First, children whose native language isn’t English now get almost identical results (as defined by five good GCSEs including English and Maths) as native speakers: 60.1 per cent versus 60.9 per cent. In inner London, non-native speakers do 3.3 points better than native speakers; in Tower Hamlets, they do an astonishing 11.5 points better. Immigration isn’t bad for school results. UK education remains in a poor way. But much genuine progress is finally being made. Let us hope the next government doesn’t wantonly vandalise Gove’s achievements.

IRAN’S BLUFF
MANY people have been taken in by the Iranian government’s dovish nonsense. Hassan Rouhani, the Iranian president who addressed Davos yesterday, excels at wooing the West and presenting a moderate, pro-business reformist face. Some are even predicting further falls in oil prices as a result. But the fact that the world is sick and tired of the Middle East’s problems, and would love them to go away, cannot be a substitute for cold-headed, dispassionate analysis. I hope I’m wrong, but I doubt the current optimism will last.

allister.heath@cityam.com
Follow me on Twitter: @allisterheath

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