ALEX BRUMMER: Slaying the inflation dragon would pave the way for future tax cuts

At long last, a better outcome for inflation. The sharper-than-expected fall in headline prices to 4.6 per cent in October from 6.7 per cent means that the cost of living crisis is dissipating fast.

Critics point out that this doesn’t make life much easier for homeowners facing higher mortgage payments. 

It also is noted that the consumer prices index is running at more than twice the Bank of England’s target. They increasingly are on thin ice.

Real incomes are now robust with the most recent data showing average wages climbing at 7.7 per cent which should boost consumer spending power.

Most of the drop in prices is due to the impact of a sea change in the energy market. But encouragingly, the cost of food baskets and service sector prices also are tracking down.

Inflation slows: The sharper-than-expected fall in headline prices to 4.6% in October from 6.7% means that the cost of living crisis is dissipating fast

Most of the improvement is due to the deep drop in global power prices and the Government’s refusal to kowtow to the trade unions on overwrought wage demands, seeking recompense going back to 2010. 

Several disputes including those with junior doctors and consultants linger. But given simmering public disappointment with the NHS, sympathy rightly is draining away.

Monetary conditions remain tight with interest rates at 5.25 per cent and the Bank cutting its holdings of bonds in a reversal of quantitative easing. 

So it is time for the Chancellor Jeremy Hunt to step up to the plate and ease fiscal policy. Hunt has firmly resisted the idea that next week’s Autumn Statement is going to be a tax cutting opportunity. 

Even so the possibility of extending the ‘full expensing’ of business investment is a real runner.

A true vote winner for the Tories would be to call an early halt to the freeze on tax allowances, ending the iniquity of forcing ordinary working people and pensioners into ever-higher tax brackets. Such a measure would fuel confidence, output and enterprise.

Green angst

The next Cop summit scheduled for the United Arab Emirates in a fortnight will again focus attention on the green agenda.

UK climate economist Nicholas Stern argues there is an enormous shortfall in the developed world of both public and private investment in low carbon projects.

At present some $200billion (£165billion) is being spent against the $1trillion (£826bn) need if carbon reduction goals are to be met.

Green is not proving easy for the private sector in spite of President Biden’s Inflation Reduction Act with its generous subsidies. 

The biggest energy and commodities players believe that fossil fuels still offer the best returns for investors with Exxon and Chevron doubling down on oil and gas, Shell underlining that it is returns that count and Glencore busy agglomerating coal assets.

The difficulties of fulfilling green promises are illustrated by the trials of Siemens Energy. It has reported a full year loss of £4billion and is staying afloat with a bail-out from Berlin. Deep-seated problems at its wind turbine offshoot mean that it will not return to profitability until 2026.

Wind farms are proving difficult. BP suffered a £434million loss in New York and Scandinavian investors in East Anglia offshore wind have put plans on hold.

Germany, worried about security of power supplies, is providing £10.5billion of loan guarantees to get Siemens Energy back on track. 

Such sums put the UK’s funding help for electric arc furnaces and Jaguar-Land Rover’s mega-battery plant in the shade.

Britain’s SSE is holding the line. It is lifting its capital investment spend on net zero to £20.5billion from £18billion amid rising confidence in earnings prospects. 

There is progress on its large scale offshore wind project at Dogger Bank and power will be landing soon.

Being early to the zero carbon challenge looks as if it could work for SSE investors.

Foreign bodies

Labour’s plan to seek ‘higher quality trade deals’ is political waffle. Its trade secretary Jonathan Reynolds is right, however, to question the Government’s policy of less screening for overseas deals.

Many aspects of our lives from airport charges to sewage are worse because of foreign control. 

The UK has lost ground in tech with satellite, software and semi-conductor intellectual property sold overseas. 

It is not just China that is to be feared. The US and erstwhile partners in the EU can pose a danger. Beware of international vultures.

This post first appeared on Dailymail.co.uk