UK economy in a jam?

According to Lewis Carroll, it’s jam every other day but it’s always jam yesterday and jam tomorrow, never jam today. In the latest recession it’s jam for Germany, jam for France and jam for the United States but never jam for Britain.

While the shrinkage in the UK economy in the third quarter was a shock for the wrong reasons, the 0.9% growth in the US over the same three months was surprisingly strong. Eyes are now on Italy, the slowest of the seven most advanced nations in the world to put its figures together. If it, too, reports third quarter growth as expected, then the UK is truly being left behind.

In fact, there was more bad news on the UK economy this week. M4, the broadest measure of money, shrank by 0.9% in September. Oh, for the days when we all worried about the rapid expansion of money fuelling inflation.

It is quite clear that quantitative easing is not working. However, I believe it is becoming increasingly likely that the programme will be stepped up rather than wound down. Having argued for the programme and then for expanding it, Bank of England Governor Mervyn King will not want to admit that it has failed.

Rather he will argue that we obviously need an extra dose. In any case, the government needs the bank to mop up the enormous amount of debt it is issuing. Quantitative easing is about funding the Budget deficit rather than helping the economy.

Whatever the problems in the UK, it is reasonable to hope that the rest of the world will start to pull us out. I am now very confident that the UK economy will lurch upwards, possibly quite sharply, in the final quarter of 2009. Investors are taking this kind of view and Wednesday’s 2% fall on the FTSE 100 index on fears over the US economy has been largely recovered.

The correction I expected in October has not occurred, unless you count the two-day fall at the start of the month and the one-day fall at the end, so one should be cautious as we enter November. Nonetheless the mood is to shrug off bad news and while that atmosphere prevails the only way is up.

Play your cards right
It is hard to feel any sympathy for the credit card companies who have done so much to foist their products onto people who cannot pay their debts and now they are kicking up because the government wants to stop them from some of the more insidious practices.

The two most important and desperately needed proposals are: to ban special introductory offers that suck people in, encourage them to run up debts and are then withdrawn, leaving the borrower suddenly facing vastly increased charges; and to stop payments being credited against the cheapest category of debt first, leaving outstanding debt that incurs high interest charges.

Credit card companies are weeping crocodile tears over the lower income applicants who, they say, will be denied cards. Yet these are the people suffering most from the current regime. I know it is easy for those of us who have cards that we pay off in full every month to pontificate but it cannot be in anyone’s interests to persuade people to become burdened with excessive debt.

Tax doesn't have to be taxing
Thanks to those readers who responded to my comments a couple of weeks ago about the problem of persuading the taxman to say how much tax would be imposed on motorcycle body parts imported from China. It seems that my friend is not the only one to find it impossible to extract an import tax figure from HMRC.

Having tried and failed to calculate the cost from the HMRC website, I used the email facility. Nine days later I received a lengthy reply telling me that tax would be due (I had already established that from the website) but studiously avoiding saying how much. Giving me the one small piece of information I wanted would have been rather less time consuming but presumably that is not how the tax office works.

A telephone number was included but my friend had already rung it and failed to get any joy.

All this has confirmed my original suspicion that the tax officer waving in the goods simply imposes any figure he plucks out of the air and the recipient of the package either pays up or loses his goods. If you do not know the tax in advance, you cannot challenge the arbitrary figure that is ultimately imposed.

My friend has decided to take his chances and has ordered the goods. I will report in due course on what happens.

One correspondent told me I was lucky not to be dealing with Defra, the government agriculture ministry. His wife, a small farmer, had died and Defra required seven forms to register her death. What is more, the forms had to be submitted in a fixed order. Send one out of place and it is rejected with a snotty letter.