Sunday, October 05, 2008
Cut rates immediately, says shadow MPC
Posted by David Smith at 08:59 AM
Category: Independently-submitted research

In its latest monthly E-mail poll (carried out in conjunction with the Sunday Times) the Shadow Monetary Policy Committee (SMPC) voted by seven votes to two that UK Bank Rate should be reduced on Thursday 9th October.

Four members of the shadow committee were in favour of cutting Bank Rate by ½% in October while three favoured a more cautious ¼% reduction. This would deliver a ¼% reduction according to the voting procedures employed by the Monetary Policy Committee (MPC).

The two dissenters both favoured holding Bank Rate at 5% in October although one of the pair had a bias to ease in November. All but one of the rate cutters – who preferred to wait and see how the official takeover of Bradford and Bingley was financed – also had a bias to ease further in subsequent months and no one had a tightening bias.

There was a widespread view that the major financial failures of recent weeks, and some easing in the price of oil, had significantly altered the output inflation trade off facing the authorities but also that the traditional instruments of monetary policy were less effective under these circumstances. One member suggested that changes in the official discount rate were now of as much use as a peashooter in a major tank battle.

Comment by Tim Congdon
(Financial Markets Group, London School of Economics)
Vote: Cut by ¼%
Bias: To ease

The year since August 2007 saw banks reappraise balance-sheet management radically. The closure of the inter-bank market made holdings of cash and liquid assets relevant to management decisions in a way that had not been true for decades, while the fall in the market value of available-for-sale securities – along with more meaningful losses in parts of the so-called ‘banking industry’ (i.e., in the investment banks) – made the capital constraint on growth more serious than for some years. In these circumstances the decision framework for ‘monetary policy’ is broader than usual. Short-term interest rates are not the whole story. Base rates were 5% in late 2006 and early 2007, when credit and money growth were very high, and demand was growing at an above-trend rate; base rates are 5% today, credit and money growth have stopped, and the economy is about to enter a recession.

The intensity of the current crisis may be being exaggerated in the media. Nevertheless, both bank credit to and the bank deposits held by genuine non-banks are no longer growing, while corporate sector money has declined in the last year. If these trends continue, and output and employment start falling, I am in favour of

1. a temporary suspension, as well as a more long-term official review, of the Basle rules and International Accounting Standards Board (IASB) accounting rules which are (in my view) causing banks to ‘see ghosts’ in their balance sheets, and leading to an unnecessary crisis of supposed capital inadequacy, and

2. official readiness for the state sector (i.e., the government as well as the central bank) to purchase assets, ideally government paper, from both the banks (which would add to banks’ cash in the first instance) and non-banks (which would boost broad money directly), as well as

3. lower interest rates.

Note that the US government is in the midst of a major move (the US$700 billion bailout) similar to the second of these. But – instead of buying back government debt (i.e., debt management/funding policy) with cash – they are going to purchase some of the triple-A paper, largely held by commercial banks (including UK commercial banks), issued in the recent boom in structured finance, and replace this paper with government securities. I am normally in favour of action via government debt (as that has far less political significance), but in these circumstances the US Government’s actions will boost the prices of the triple-A securities and so help with the (supposed or actual) capital problem in the banks. (I take it the focus of the bailout will be mostly in triple-A paper, which – according to most serious commentators – is now under-priced relative to default risks. I doubt the Fed will buy the triple B stuff, etc.)

Lots to say. I’m in favour of a ¼% cut before the end of the year and further moves to lower rates in 2009, but a central objective of monetary policy now must be to stop the quantity of money (i.e., bank deposits held by individuals companies and genuinely non-bank financial institutions) from falling.

Comment by John Greenwood
(Invesco Asset Management)
Vote: Cut by ¼%
Bias: To ease

The credit crunch has now clearly shown up in the UK monetary data as a sharp slowdown of bank lending to the non-financial private sector (which has slowed to 5.6% at a quarterly annualised rate) from double-digit rates in the recent past. Mortgage approvals have plunged to less than one third of their level a year ago. Money held by non-financial corporations has declined over the past year. The high spreads of inter-bank lending rates over Bank Rate imply even lower money and credit growth in the weeks ahead.

Elsewhere in the economy the downturn is intensifying rapidly. Jobless claims surged by 32,500 in August. The discomfort of consumers was increased by the jump in the headline CPI to 4.7% in August, and the continuing fall in house prices. The Nationwide and Halifax house price indices declined by 1.9% and 1.8% respectively for the month of August, and by over 10% year-on-year. In 2008 Q2, real gross domestic product (GDP) stalled, showing a zero increase on the first quarter. Forward-looking indicators such as the Distributive Trades Survey carried out by the Confederation of British Industry (CBI) suggest further significant weakening in the months ahead. It is therefore entirely possible that real GDP will see actual declines in the third and fourth quarters.

What are the authorities to do?

The UK Treasury, having presided over increases in government expenditure as a share of national income from 37% in 2000 to 45% in 2008, is now hamstrung by its own rules on borrowing and on the size of its debt. These rules should now be ditched, and the Treasury should be preparing contingency plans for a comprehensive stabilisation of the financial system. Over the past decade the Financial Services Authority (FSA) has passively allowed British banks and non-bank financial institutions to become excessively leveraged, the most visible counterpart being the massive borrowing ratios of UK households - higher even than US households. Yet, despite successive problems with Northern Rock, HBOS, and Bradford & Bingley, the Treasury and the FSA seem likely to pursue piecemeal nationalisation until a systemic breakdown threatens.

This leaves the ball firmly in the court of the Monetary Policy Committee (MPC) at the Bank of England. There is now no excuse for keeping rates at 5%. The commodity price bubble is over, and is unlikely to exert much further upward pressure on the consumer price index (CPI) in this cycle. Basically commodities are following the path taken by housing, commercial real estate, and equities. Each in turn was inflated by the credit bubble, but once they had reached unsustainable levels and/or credit had tightened appreciably, they lost value.

Yet the surge in commodity prices has made the MPC acutely nervous of a repeat of the 1970s style of cost-push inflation. However, such an extrapolation of recent events is likely to prove wide of the mark. First, monetary conditions in the 1970s were far more accommodative than they were even in the lead-up to the current episode of CPI inflation. Second, labour markets are now much less unionised. Third, the recent commodity price increases were simply the final stage of the transmission of earlier expansionary monetary policy through a series of asset markets starting with the credit and capital markets, then equities, and real estate to commodities. There could be some further impact on CPI measures (e.g. due to electricity price hikes), but these are residual effects, not the early stages of a new episode of inflation. In any case they are likely to be offset by falls in other prices as demand weakens.

With the sharp downturn in the growth of money and credit (in the bank and shadow banking system taken together), the abrupt slowdown in the economy, and the imminent slowdown in inflation, the Bank of England needs to take action to prevent economic prospects becoming even worse. Spillover effects from the broader, global economy are mounting -- from housing, from the credit crunch, from wealth effects, and from the reverse multiplier effects of financial sector de-leveraging. It is time for the MPC to cut rates.

Comment by Ruth Lea
(Arbuthnot Banking Group)
Vote: Cut by ½%
Bias: To ease

The recent events in the financial markets defy hyperbole. The collapse in confidence and the freezing-up of the credit market call for radical policy responses. And US Treasury Secretary Paulson has been right to vigorously promote his proposed $700bn bail-out for the US banking system, whatever its shortcomings. Piecemeal fire-fighting is no longer an option and, quite simply, the banking system has a uniquely important function in an economy and cannot be allowed to collapse.

The rapid increase in inter-bank lending rates (and associated rise in the cost and availability of credit to business and households) since the onset of the financial crisis on 15th September has more than reversed the recent easing in the UK. And access to credit for some household (including funding for mortgages) and corporate borrowers has become more restricted and expensive. Unless there is a rapid return to financial ‘normality’, which seems highly unlikely, this strikes me as essential.

Of course, CPI inflation is still rising, not least of all because of the increases in gas and electricity prices in our chronically vulnerable energy sector, and the weakness of the pound adds to inflationary pressures. But commodity prices, especially oil prices, have now fallen and there is no sign that a “wage-price” spiral is emerging.

Unemployment is now rising quite significantly. CPI inflation should peak over the next two to three months and then fall quite rapidly in 2009. Moreover, Mervyn King has made it abundantly clear that the “MPC is aiming to return inflation to the 2% target within its normal forecast horizon of around two years”. The MPC has time to achieve their target without losing credibility.

The threat to the economy is now recession, not rip-roaring inflation. And this has been exacerbated by the current exceptional events in the financial markets. Whilst I would normally be reluctant to cut rates when CPI inflation is rising, I now favour a ½% cut, and have a bias to further easing.

Comment by Kent Matthews
(Cardiff Business School, Cardiff University)
Vote: Cut by ¼%
Bias: To ease

‘If you wanted to get to Dublin I wouldn’t start from here’ is the type of advice currently being given by those who believe that interest rates have to stay on hold further (or even rise) to restore the Bank’s credibility. The financial system is on the edge of a precipice and if confidence is not restored rapidly it is only a matter of time that the apparent slowdown in the real economy develops into a painful recession. The economy is slowing, sales have flattened out and output has declined on a three-month basis.

Forward rates do not suggest a loss of inflation control in the medium term and indeed medium-term inflation expectations derived from gilt yields have fallen since the previous month. The only other forward indicator of inflation is sterling which admittedly has depreciated 15% over the past twelve months but this could also be explained by real factors that require a rebalancing of the economy away from domestic demand. Spreads in the interbank market have widened despite the concerted efforts of the Bank to inject liquidity and are unlikely to come down while commercial banks conserve cash. It is still not too late for the Bank to be ahead of the curve by signalling a willingness to manage a smooth slowdown. My recommendation is to cut by ¼% in October with a bias to further cut before the end of the year.

Comment by Patrick Minford
(Cardiff Business School, Cardiff University)
Vote: Cut by ½%
Bias: To ease

Forget all the hand-wringing, cries of ‘greed’ and other point-scoring. This is just another of the many historical episodes of capitalist bust. The bust happens to be in the financial sector; but then so was for example the collapse of the US thrifts (aka home mortgage companies of that time) that resulted in the 1989 Resolution Trust Corporation (RTC). Even the numbers are not dissimilar; the US put some 5% of GDP into the RTC, today Paulson’s proposed sum of $700 billion is about the same percentage of GDP. As it happens, the US government made no serious loss on the RTC which managed to dispose of its assets advantageously over calmer times. The same could occur again. Underpinning the attitude of the Fed and the US government lies their predecessors’ experience of another great financial bust: the crash of 1929 and its sequel in the collapse of one third of the US banking system and the Great Depression. Just as Walter Bagehot concluded from 19th century experience that lender of last resort action by the central bank was necessary, so today’s US authorities have concluded that the financial system cannot be allowed to collapse. The fact that that system has extended so widely to embrace a host of new financial intermediaries has merely extended the scope of today’s lender of last resort requirements.

This tells us that finance and banking are too important to the rest of the economy to be allowed to collapse like any other sector - be it dotcoms, telecoms, railways, or bits of manufacturing. Partly this is due to modern politics: ordinary people’s deposits, savings and yes houses must somehow be kept safe by the politicians. The implicit political compact of democratic capitalism is that markets can be free, the high rollers of the market economy free too to make and lose large amounts, but in return the ordinary voter must have some basic guarantees, among them that their finances will be protected. Partly it is due to the key role of finance in the capitalist machine. As we see currently in the UK housing market, if finance withdraws from a market more or less totally (apart from existing contracts), the market freezes up; if this went on for very long, the market would have to reorganise itself on a quite different model, with only large players or wealthy people holding housing and the rest renting. This is very far from the ideal model of ‘complete contracts’ in which people can smooth consumption across contingencies.

One could imagine a world of free financial markets without any implicit public guarantees; it would be one in which there was a restoration of massive caution with financial firms selling themselves on safety to a preeminent degree. However there is not much point in thinking long about it since it is not on offer. Given then that we have had this financial crash and that modern political economy mandates governmental involvement, then as Macbeth puts it, ‘If ‘twere done, ‘twere best done quickly.’

Whatever the detailed faults of the Paulson plan, and no doubt there are many such, it has the merit of speed and totality. It offers the hope that the financial system, its currently blighted assets removed, can get back to normal business fairly soon. That business is lending and taking calculated risks, approximating to a competitive market with a lot of players. Because many of the competitors have fallen recently by the wayside, that approach will require government to twist the arms of those who have been helped to survive to simulate competition until competition arrives again over a matter of years.

In the UK the authorities have a weak record over this crisis. There need now at last to be cuts in interest rates. Furthermore, the remaining financial firms need to be bullied into behaving as if there was competition. Lloyds TSB has now swallowed HBOS, against competition advice from the past - the crisis impelled it. But it cannot be allowed to sit back, raise its margins and curb lending business. The Bank of England’s liquidity scheme has been extended; it may need to be widened and taken over by the Treasury on the US model.

The point really is that the UK government too needs to be more proactive in this crisis. The costs to the taxpayer and the economy will ironically only be the greater if it sits on its hands, moaning about ‘moral hazard’. That way lies the continued freezing up of the housing market, of small firm participation in the economy and of innovative activity generally. One only needs to look at Japan since 1990 to see a model of this sort, not on any account to be followed.

The outlook in the UK is now dominated by the freezing-up of the credit market. If this is allowed to drift on for some time, a serious recession is unavoidable. With cuts in interest rates and pressure on the remaining banks to lend more normally, together with a government package enabling the banks to do so, recession would be quite avoidable.

My basic forecast assumes that something approximating this occurs. However, the reactions so far from the Bank of England and the UK Treasury suggest that policy may well not move along this trajectory. Instead we may have a prolonged credit freeze, with market rates remaining high and large numbers of borrowers with out physical collateral simply denied credit altogether. I have accordingly done an an alternative forecast on these assumptions. This shows a sharp recession in 2009. At this stage the main forecast is still the most probable - just, say 40% against 60% for the main one. In the next few weeks it will become much clearer which way the dice will fall.

Finally, some repeat of previous comments on inflation. First, the general world slowdown and the tightening of monetary policy in emerging market countries are reversing the commodity price explosion and bringing world inflation at last under some control. Secondly, wage growth remains muted as I have argued it would - both because of embedded expectations about monetary policy and because external terms of trade shocks cannot be offset by wage increases. Hence my forecast for inflation is that it will fall in 2009 back towards 2% rather fast. My proposal for interest rates is: a ½% cut, with a bias to cut further.

Comment by Gordon Pepper
(Lombard Street Research and Cass Business School)
Vote: Cut by ½%
Bias: Wait and see how the nationalisation of Bradford & Bingley is financed.

British monetarists have traditionally argued that it is money and not credit that matters. When someone borrows to purchase an asset two transactions take place. First they borrow to obtain the finance. Second they use the money so obtained to purchase the asset. When they spend the money it is not destroyed but merely passes to the seller of the asset. Money is like the hot potato of the children’s game - one person can pass it to another but the group as a whole cannot get rid of it. The result of the credit boom prior to 2007 was excessive growth of the money supply, which led to asset-price inflation and a financial bubble. Since mid-2007 the whole process has gone into reverse. Worse still, a downswing is not symmetrical with the previous upswing. The process becomes asymmetrical when the value of asset prices falls to a level at which the value of collateral in general is no longer sufficient to cover the bank loans being secured. The result is called debt-deflation.

There are various weapons the authorities can deploy but there are two ‘liquidity traps’. First the MPC can cut interest rates but they cannot be reduced below zero. Second the Bank of England can make sure that banks have abundant reserves but banks may not have the confidence to use them even if capital requirements are eased. The third weapon is for the government to underfund, that is, sell less debt than is needed to cover the budget deficit, which boosts the money supply directly. The weapon of last resort is for the government to purchase assets and not issue gilt-edged stock to pay for the purchases (see: ‘Money, Bubbles and Crashes: Should a Central Bank Target Asset Prices’, Gordon T Pepper and Michael J Oliver, Chapter 10 of ‘Issues in Monetary Policy’, eds. Matthews K. and Booth P., Wiley, 2006.)

Currently monetary growth after allowing for distortions has collapsed during the last three months. The growth in nominal terms has been virtually zero In real terms, that is, after allowing for inflation, the money supply is now falling. If this continues the outlook for the UK economy will be dreadful. The time has come to take urgent action.

If interest rates were the only weapon being deployed I would be arguing for an immediate cut of 1% combined with a pre-announced series of two ½% reductions, unless evidence to the contrary occurred. Bradford and Bingley is however being nationalised. At the time of writing we do not know how the nationalisation will be financed. In the old days a gilt-edged stock was issued to finance each industry being nationalised. Currently the weapon of last resort would be being deployed if the government does not issue gilt-edged stock to pay for the nationalisation of Bradford and Bingley. It would then be printing money to offset banks’ failure to supply credit. My conclusion therefore is to argue for an immediate ½% cut in interest rates and then waiting and seeing until we know how the Bradford and Bingley takeover is financed.

Comment by Peter Spencer
(University of York)
Vote: Hold
Bias: To ease

With the banking sector in crisis and market rates now 120 basis points above Bank Rate the market has further tightened monetary policy. There is a good argument for cutting the base rate to offset this tightening and ease the pressure on the profitability of mortgage lenders and other money market borrowers. Yet with CPI inflation well above the target range and rising, this could still give the wrong signal, indicating that the Bank was relaxing its grip on inflation. I am also concerned that the core inflation rate has increased to 2% and is following the headline rate up. This suggests that, despite the sharp slowdown in the economy, many firms are still finding it possible to pass on cost increases.

This situation is extremely difficult, but I am inclined against a rate cut this month, on the view that the authorities should first try to resolve the crisis in the banking markets by other means, for example by allowing the stronger banks to take over the weaker ones. Nationalisation is another option as is an extension of the Special Liquidity Scheme (SLS). A base rate cut should only be used as a last resort at this juncture. However, the economy is slowing rapidly and inflation is likely to peak over the next month or two, allowing Bank Rate to be eased back safely in November.

Comment by David B Smith
(University of Derby and Beacon Economic Forecasting)
Vote: Hold
Bias: Neutral

The collapse of several financial institutions on both sides of the Atlantic since last month, some modest further easing in the price of oil, and the apparent stabilization of the external value of sterling – albeit at a level some 10½% lower than a year earlier – suggest that the balance of risks has changed radically from one where constraining inflation should be the overriding priority to one where fire fighting the problems in the financial markets has to take precedence. However, it is well known that the efforts of firefighters to tackle a blaze often do more collateral damage than the fire itself.

The long-term economic (and, arguably, constitutional) consequences of giving untrammeled powers to politicians and bureaucrats in the US and Britain as a response to the immediate financial crisis need to be borne in mind. Politicians (and even clergymen) are now arguing that the global financial meltdown is the result of unregulated financial capitalism. However, what makes current market events so frightening is that no-one knows the true value of the underlying assets involved because of the packaging of numerous small loans into marketed securities. This happened because the Basle agreement provided perverse incentives to push lending off balance sheet to evade its capital requirements.

The original 1988 Basle agreement was partly responsible for the global recession of the early 1990s - because it made it less profitable for the world’s banks to lend money to the private sector and induced a global credit crunch. Thus, it is arguable that both the previous and the looming global downturn were caused by misguided regulation as much as they were by the excesses of financial markets. One must also wonder why central banks did not tighten policy two or three years ago - when confronted with accelerating money and credit growth and other symptoms of an excess supply of money - and also why they did not consider devices such as the imposition of mandatory liquidity ratio requirements on deposit taking institutions.

This is all water under the bridge. Even so, while just about any measures might be justified in the short-term to stabilise the financial situation, it is important to consider whether internationally co-ordinated regulatory initiatives do more harm than good. The other lesson is that changes in the official discount rate have proved to be about as much use as a pea shooter in a major tank battle. The US Federal Reserve’s decision to hold Federal Funds rate unaltered at 2% on 16th September, while the US Treasury was simultaneously putting together the huge bail out package announced on the 18th implied that the Federal Funds rate was now of little practical relevance. It also suggested a decisive shift in power from the US Federal Reserve to the US Treasury.

Likewise, the nationalisation of Bradford and Bingley (announced on 27th September) together with the earlier takeover of Northern Rock suggests that senior politicians and HM Treasury are now the dominant players in UK monetary policy and that the MPC’s decisions have almost become a sideshow.

Under these circumstances, Bank Rate has become a dignified part of Britain’s monetary constitution as distinct from an efficient one. Its main purpose seems to be to signal the relative importance that the authorities attach to stabilising the financial markets compared with fighting inflation. If the former is the main priority, then there seems little point in making trimming adjustments and a ½% or even a 1% cut in Bank Rate on 9th October would appear to be the most sensible course.

However, UK inflation has consistently exceeded market expectations in recent months with the result that annual CPI inflation is now more than twice the 2.2% consensus forecast for 2008 Q4 made at the start of this year. Furthermore, Britain was one of the few countries that saw its CPI inflation rate accelerate in August (from 4.4% in July to 4.7% in August) while elsewhere there were modest decelerations – from 4% to 3.8% in the case of the Euro-zone and 5.6% to 5.4% in the US, for example. This may be partly because of timing effects, particularly where energy costs are concerned. But it may also reflect the fact that domestic inflation is accelerating away from that in the rest of the world because of the weak pound.

Lower house prices meant that ‘headline’ inflation eased from 5.3% in July to 5.2% in August, while the annual increase in RPIX fell from 5.0% to 4.8%. However, ‘double-core’ retail price inflation, which excludes both mortgage interest payments and house prices, was unchanged at 5.5% in August. On balance, I would rather hold Bank Rate than reduce it until there is more evidence that Britain’s inflation rate has lost the capacity to spring nasty surprises. Longer-term, the uncertainties are such that ‘wait and see’ appears the only viable policy and there seems little point in having an explicit bias. Events are now in command, not the monetary authorities.

Comment by Peter J Warburton
(Economic Perspectives Ltd)
Vote: Cut by ½%
Bias: To ease

In recent weeks, the global financial crisis has deepened and the approach of the end of the third quarter has set the scene for another spike in interbank interest rates. The Sterling three month London Inter-Bank Offered Rate (LIBOR) rose to 6.27% on 25th September, compared to 5.7% just prior to the collapse of Lehman Brothers earlier in the month. The recent merger of Lloyds TSB and HBOS is another stunning development in the UK banking system. However, respected banking analysts consider this new group to be significantly under-capitalised. The Chancellor of the Exchequer has revealed that the Special Liquidity Scheme has been used to a much larger degree than expected at its inception last April. The Governor of the Bank of England agrees that the scheme must be continued and has proposed a permanent liquidity insurance facility. Finally, at the time of writing, the US Treasury’s proposal that up to US$700bn be used to purchase troubled assets awaits approval by Congress. Leading UK banks would be eligible to participate in the Troubled Asset Relief Program (TARP) to the tune of US$175bn.

Despite the dramatic events that have unfolded during September, the main thrust of official responses to the crisis is the provision of temporary relief through the use of liquidity injections or the temporary nationalisation of troubled institutions. There is a wholesale reluctance to acknowledge that large swathes of the non-bank financial sector are either insolvent or likely to become insolvent in the near future. Almost every initiative to provide temporary support since the crisis became public in August of last year has been renewed and extended in size and scope. If this were primarily a crisis of liquidity and confidence, then these large infusions of funds would surely have stabilised the financial system by now. Instead, this pulsating credit crunch has undermined more and more contexts within the global financial system.

The most urgent remedy must surely be the recapitalisation of commercial banks and other strategic financial institutions. Specifically, the Bank of England should expand its balance sheet in order to inject capital into these institutions. While the quantitative dimension of monetary policy has become the more important, a lower Bank Rate should surely accompany such measures. In reducing the cost of retail funds to the banks, an important and obvious means of improving their profitability is achieved. As property and equity prices fall further, there is a clear expectation that banks and other financial institutions will need to write down the value of assets on their balance sheets for some quarters ahead. If the UK is not to suffer the freezing up of its retail and wholesale deposit systems, then this recapitalisation process must begin urgently.

UK monetary policy has been inadvertently and unintentionally restrictive for more than a year. Bizarrely, the minutes of recent MPC meetings present the inflationary and deflationary risks as finely balanced, even as the domestic credit system atrophies. The number of loans approved for house purchase fell to 33,000 in July from 114,000 a year ago. The scarcity of time deposits has bid up their interest rates from 5.12% last July to 6.32% this July. An immediate cut in Bank Rate of ½% is justified, with further cuts in the near future.

What is the SMPC?

The Shadow Monetary Policy Committee (SMPC) is a group of independent economists drawn from academia, the City and elsewhere, which meets physically for two hours once a quarter at the Institute for Economic Affairs (IEA) in Westminster, to discuss the state of the international and British economies, monitor the Bank of England’s interest rate decisions, and to make rate recommendations of its own. The inaugural meeting of the SMPC was held in July 1997, and the Committee has met regularly since then. The present note summarises the results of the latest monthly e-mail poll, conducted by the SMPC in conjunction with the Sunday Times newspaper.

SMPC membership

The Secretary of the SMPC is Kent Matthews of Cardiff Business School, Cardiff University, and its Chairman is David B Smith (University of Derby and Beacon Economic Forecasting). Other current members of the Committee include: Patrick Minford (Cardiff Business School, Cardiff University), Tim Congdon (Visiting Fellow, London School of Economics), Gordon Pepper (Lombard Street Research and Cass Business School), Anne Sibert (Birkbeck College), Peter Warburton (Economic Perspectives Ltd), Roger Bootle (Deloitte and Capital Economics Ltd), John Greenwood (Invesco Asset Management), Peter Spencer (University of York), Andrew Lilico (Europe Economics), Ruth Lea (Arbuthnot Banking Group), and Trevor Williams (Lloyds TSB Corporate Markets). Philip Booth (Cass Business School and IEA) is technically a non-voting IEA observer but is awarded a vote on occasion to ensure that nine votes are cast.