OPINION - The Standard View: Higher interest rates, spending cuts and tax rises leave the economy on the brink

 (Christian Adams)
(Christian Adams)

When it rains, it pours. Estate agent Savills predicts that the mainstream London housing market will suffer the most acute fall in prices out of all regions in 2023. That’s despite properties in the city enjoying the more modest end of price growth since the pandemic.

This is largely due to the impact of higher interest rates on mortgages. London and the South-East contain the biggest gap between incomes and house prices of any part of the country. Indeed, mortgage affordability is already a stretch (or out of reach) for millions. And with the Bank of England raising rates again today, it is only set to get tougher, as homeowners on a typical £300,000 tracker mortgage face paying over £400 a month more than a year ago.

These higher monthly repayments will feed into the economy. And in tandem with rising food prices, energy bills and transport costs, they threaten to bring on and worsen a recession. This is the backdrop to the Autumn Statement on November 17, when the Chancellor is expected to announce tax rises and spending cuts.

Bringing inflation down — the Bank has a target of two per cent — is critical. High inflation eats away at savings, earnings and — if stuck in the system — can feed on itself, leading to high prices. But tighter monetary policy, at the same time as fiscal austerity, makes for a painful combination.

Liz Truss’s chaotic administration imploded within weeks, but the question of where economic growth comes from and how to prudently facilitate it has never been more relevant. The alternative is ever-higher taxes and weaker public services.

Asylum claim misery

Two incidents bring to light the human cost of the Government’s incompetence when it comes to managing asylum claims. The first was a group of 11 migrants left stranded — with no food, money or accommodation — in Victoria station on Tuesday. The second, a young girl being held at the Manston processing site in Kent, who threw a bottle containing a letter over the perimeter fence which claimed there were pregnant women and sick detainees being treated poorly.

The Home Office said it worked “at pace to find accommodation for the individuals” as soon as it was notified of the situation. But these separate cases bring to life, should it be necessary, that there are real people suffering as a direct result of basic mistakes by the Government.

Ministers must urgently accelerate processing times, both in Manston itself and the unacceptably long waits — an average of 480 days — to make a decision on asylum claims. In that way, legitimate asylum seekers can begin their new life in the UK, while those whose case has been rejected can be safely returned to their country of origin.

Cruelty, even if inadvertent, can never be our policy.

Chocs away

There’s always somebody not invited to the party. So pity the Bounty, banished from certain packs of Celebrations due to its divisive taste. Sympathy must also be expressed to that small but useful minority who claim to enjoy the coconutty filling enrobed in chocolate. T

he question now is, which is the new candidate for least-favoured mini bar? It’s not looking good for the humble Milky Way.