Will Labour's nerve hold on public sector pay?

Even Labour’s traditional allies are circling, looking to take advantage of the wounded animal staggering along below. Today it’s the turn of the country’s biggest public sector union to have a go. Unison has refused to accept the 2.45% pay deal offered to public sector workers and is to ballot 900,000 people on whether to strike.

Not only does this utterly confuse the maxim ‘keep your friends close but your enemies closer’ (just where do you keep friends who also have turned out to be enemies?) but it raises a couple...

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Inflation Targeting

Well, yes:

The Bank of England will "crucify" consumers unless the Treasury lets it abandon its inflation target, one of Britain's leading economic authorities has warned.

The Government must consider re-writing the Monetary Policy Committee's remit or leave the UK to face an unnecessarily deep and painful economic slump, according to Peter Spencer, chief economist of Ernst & Young Item Club.

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Losing the War on Drugs

Not that this all that much of a surprise:

The agency leading Britain’s fight against organised crime is struggling to cope with the soaring scale of heroin trafficking, it admitted yesterday.

The Serious Organised Crime Agency (Soca) claimed it was making headway in tackling fraud, gun-running and the cocaine trade but that success in tackling heroin smuggling was “more elusive”.

Soca stated in its annual report: “While interdictions of both heroin and opium base surpassed those of the previous year and good leads to money flows were secured, there remained much to do, in the light of increased...

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Stick with the inflation target, says Wolf

With inflation being the worry du jour, many have called for the Government to alter the inflation target - perhaps to raise it, or change the index of domestic costs it focuses on.  Today, in the FT, Martin Wolf outlines why he thinks this is the wrong approach.  His entire article is worth reading, but here's the conclusion:

"The lesson of the 1970s was simple: letting inflation rip, to avoid pain in the short run, greatly increased pain in the long run. The UK must not repeat that error. Today, the combination of a devaluation with tight monetary policy gives it the best chance of escaping from its predicament. It enjoys this option because it decided, rightly, not to join the eurozone. But the country must have the will to make that option work. There is no sane alternative."