Sky News business editor Michael Wilson

Not often that the Mansion House Dinner makes it to the front pages – but last night’s uncharacteristically blunt warning from the Governor of the Bank of  England of the seriousness of the slowdown, and the perils of inflation struck a sonorous chord, I suspect, with most households. We are all going to be poorer.

At last one of the guardians of our little kingdom’s money matters has told us something we’ve all known for some time.

And Mervyn King’s warning on wages was timely, given the inflation-busting settlement won by the tanker drivers the day before. If that starts to spark a round of ‘me-too’ claims – and employers don’t have the courage to face them down, then we are back to the 1970’s, and believe me, you don’t want to go there.

But there will be real fights ahead. There’ll be resentment as wage increases fail to match inflation – and remember this is all in the week when inflation rose to its highest level in 15 years.

Here’s Dave Prentis, the general secretary of the public workers’ union Unison – ‘we reached a three year agreement in health (the NHS) at Easter when the Retail Prices Index was much lower than it is now. If prices continue to spiral, that health agreement will be opened and if the Government says we are not going to, then we will take industrial action.’

So we have a toxic mix. Price rises fuelled by basic food and oil costs over which no-one has control, prompting a militancy – and I use that in a non-political way – among the working population as everyone begins to fight their corner into self-destruction.

The most depressing thing about the doom ladled out at last night’s glittering banquet was a very old acquaintance, who’s been in the City for years, who said, after listening to Darling and King, ‘they’ll tell you it’s not like the 70’s, when inflation was well over 20% and so on. It isn’t. It’s worse – this time none of them has any control over the economy. That’s quite a thought, isn’t it?  Sovereign government out of control’.

I truly hope my old friend is very wrong.

Comments

[Jeremiah1974 20 Jun 2008 14:37:01]

What depresses me is that many people saw this coming for years. Either the
‘experts’ and people in control are stupid, reckless or greedy.

I don’t know which is worse.

[Michael Cornwall 19 Jun 2008 19:57:13]

I think your old friend is right, and I think that is what confuses and angers me.
I'll go back to Japan and tell you a story from 12 century, maybe your old friend was there.. Harada San had fallen off the saddle of his horse, he was tangled in reins and straps and being pulled very fast through the small town. One of his friends saw him being dragged along ' Where are you going ' the friend shouted 'Dont ask me ,ask the horse' Harada San replied.

[Michael Cornwall 19 Jun 2008 19:47:39]

I must say I find it very confusing. I keep remembering when I lived in Japan. I lived in a very remote part, no Western people. I was a reasonable attraction, someone hunted me out because he was concerned . He asked me if it was true that England had lost it's fighting spirit. This was relating to the 70s. It certainly was not in their thinking capacity to ask for a huge pay rise when the country was struggling. If the train drivers took a strike they had to have permission, and then it could last for 1 minute so as not to inconvenience people. We even ate food so I found out later when I got back to a larger town on the main island. that they had dicovered, It was a root that was ok to eat it did not harm you it tasted bland but they made it like a ballshape. BUT it was good for their balance of payments so as the country did not have to import it they and me ate it.But for a tough hard compliant nation. The government would have looked after them , explaining circumstances. Mr King is excellent at telling it as it is, but crap on compassion for society. Darling not good on the compassion side. Alienate a society it will not be for you.Unite it and we all work together. I have some more news from Cornwall tomorrow,from the Falmouth area.

[JackPT 19 Jun 2008 18:29:51]

What I find particularly worrying is the public reaction after a sustained period of relative financial stability. I don't think people are going to act or think rationally. No doubt politicians will act irrationally in response.

Given the commodities situation I hope there is a true (rather than lip-service) "strong dollar policy", because I think it will go some way to bringing down commodity prices. Although if there are more droughts in grain producing regions this year, next year could be worse for food prices. Before taking into account linear growth in China and potentially exponential growth from Vietnam.

There's the other elephant in the room: Government expenditure and debt. Both of which counted on prolonged stability.

Interesting times. But not in a good way.

[Elizabeth Davies Cape Town 19 Jun 2008 14:45:35]

Nice speech from the Chancellor, easy to talk about curbing payrises when you are the recipient of free board and lodge, a car and travel thrown in...very rich.
Real world out here Mr Darling if you care to take the bag off your head.
Mervyn King probably earns a "kings" ransom so he can also tell you to cut back, it won't effect his lifestyle.
These people occupy another planet from the ordinary chap in the street. Maybe we are all fools and horses at the same time!

[Khalid 19 Jun 2008 14:30:27]

(Hear Ye, Hear Ye, Hear Ye!)
Sir, Lord Mayor, Ladies & Gentlemen.
I hope the dressed crab amongst other dishes were to your delight and that you have left a little bit of room for the [Chocolate] which incidently [Aaron Sky]News channel 501.
As you may recall, public sector wages are paid for from the coffers of the public purse, a matter we all know to have been manipulated and abused by many a expense grabber, a practice we shall put an end to forthwith.
As far as the RPI and CPI, these remain volatile indexes fluctuating more times than you can say the number of second homes decorated for the sake of keeping them empty when the number of households living rough rises to levels unacceptable.
Today, as we converge upon the divine track known as Ascot (Oh Yes, Ascot) we will look into the small nitty gritty bits and see whether or not we can come to an agreement that the Private consortium must pay what it perceives to be the best value money can buy, notwithstanding business longetivity.
As you also may be aware, we have looked further into the council of taxes and found that despite the reduction in national house prices, council tax has not been reduced pursuant to Local Government Act 1972, a matter that shall be enforced forthwith, unless they come to their senses.
Our aim is to give you the very best of http://www.sky.com/broadband and in doing so keep you updated as to why it is in our national interest to remain a soverign nation without outside interference.
To that end, once again thank you for your valued contribution in helping to keep inflation sustained, however, if our leaders will go about ignoring legislature and fair practice, I No you would'nt want me to stand by and do nothing would you.
So, just to recap:
Bank Charges No more than £3.50
Council Tax 25% Reduction
FREE TV LICENCE
Oil $75 pbl (with oil in em!)
Gas & Electric 50% lower than what they are now
Water escapes the mind.
Wage Deals No more than 7%
FSA/FOS Disbanded as useless.
Other Ombudsman disbanded.
County Courts to decide upon legal merits of complaints for all.
And anything else we all decide to enact for the better of our divine nation.
God Bless The Queen
Three Cheers....Hip Hip.....
(Ok, lets go to Ascot Michael Sir)
Oh, nearly forgot Newcastle at the top of the Premier league. O When can we go to Ascot please, please, please.....