Q. How do you attract the attention of a Missouri mule? A. Hit it briskly over the head with a length of 4×2 planking. Last week saw the simultaneous publication of two indices of inflation, pointing in opposite directions. The second question might be: which measure do you think the Bank of England’s Monetary Policy Committee prefers?

The Consumer Prices Index is up by a barely-discernible 1.5 per cent in a year, while the Central Statistical Office’s measure of house prices is 9.9 per cent higher. The divergence is not new, but it’s horribly large and persistent. Other house price measures tell much the same story: if you live in the south east and own a house, you’ll be feeling clever and slightly smug. Own one in London, and you’ll be insufferable (up 18.7 per cent).

The Governor of the Bank of England could  impose a 21st century version of hire purchase controls, to limit the numbers of high loan-to-value mortgages  that a bank can offer, but it’s likely to be even less effective than they were. Moreover, in his brief tenure he’s proved anew that forecasting is always difficult, especially for the future. After indicating unchanged interest rates for years to come, he ignored rapidly falling unemployment when it didn’t fit his projections. Now, belatedly, he’s suggesting that rates may rise in the autumn.

To which the only response is: get on with it. Today’s near-zero Bank Rate was set five years ago when we seemed to be on the brink of the economic abyss. Now we’re in an old-fashioned asset boom for shares, art, collectables and, of course, property. The CPI may indeed stay stuck for a year or two, especially if there’s a full-blown price war in the supermarkets, but cheap food hardly helps when buying a home anywhere near the jobs is beyond so many people.

As last week’s contrasting figures show, the MPC is not paying attention. The boss may be from Alberta rather than Missouri, but he still appears to need the application of the equivalent of a 4×2 plank.

Free the 90 per cent

Over 700 militant free-marketeers occupied Guildhall last Wednesday, to boost the Thatcher-inspired Centre for Policy Studies’ attempt to free the workers (sic). Its chairman, Maurice Saatchi, had a simple message (he specialises in simple messages): abolish corporation tax for small companies, and capital gains tax for their shareholders.

As any fule know, this is shockingly expensive, costing £10.5bn next year, according to the CPS. Ah, but the jolt such radicalism would give the economy means that by 2018/19, the liberated labourers in soaraway small companies would have paid so much more tax that the exchequer is actually better off.

The timescale may be heroic, but releasing small companies (90 per cent of the total, defined in the Companies Act as those with fewer than 50 employees) from corporation tax would undoubtably boost their expansion. A CPS survey found that big companies are almost as unpopular as big government, and the measure would have the agreeable side-effect of allowing the taxman to focus on avoidance at the multi-nationals. Release the very smallest companies from the quagmire of employment legislation as well, and this could be a winner.

Crowded out

When both buyers and sellers think they’re getting a rotten deal, it’s a sure sign of a deeper malaise. So it is in banking, where depositors get little or nothing, and business borrowers are either refused or charged ruinous rates.

Banks are supposed to match those with cash to those wanting it, but reserve requirements, high fixed costs and an inability to judge the borrowers’ credit are combining to produce this market failure. Into the gap is, increasingly, stepping peer-to-peer lending and last week Santander, one of those big banks, clinched a partnership with Funding Circle, a P2P website.

Zopa, which claims to be Britain’s biggest, has now lent over £500m, while newcomer Archover is a “crowdlender” which believes it can survive on a gross margin of just 1 per cent. The banks never really liked lending to small businesses because it was too much trouble to understand them. If this trend continues, they won’t have to.

This is my FT column from Saturday

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