Last week the Monetary Policy Committee of the Bank of England increased the base interest rate to 0.75%, only the second increase in the past 10 years.
One respected commentator said “It takes some considerable stupidity to see a crisis coming and decide to make it worse. But that’s exactly what the Bank of England has just done by raising interest rates to 0.75%. The motto seems to be ‘if we’re going to make a mess of things let’s make it a really good mess’.”
There was no reason to increase rates this week. The most sensible move would have been a cut in rates. (The only reason for the increase was the out-of-touch bankers who caused the 2008 crash wanting to justify their predictions that rates would have to increase.)
We now have politicians (of both parties incidentally) who control fiscal policy and central bankers (who control monetary policy) who are completely out of touch with the reality of what is happening in the country.
Real wages are declining, personal insolvencies are increasing and Foodbanks are having to open early to provide breakfast for children who won’t be fed at school during the holidays.
As universal credit starts to bite, more people are slipping below the poverty line.
What does this have to do with your entrepreneurial business?
Well perhaps directly not a lot. I won’t say it’s a mistake of epic proportions: 0.25% interest rate changes cannot be so described.
But it’s symbolic. Does anyone in charge have any real idea what they are doing? On the evidence the answer is no. And that is going to have an impact on the nation’s entrepreneurial businesses.
You’ve heard me say that whatever happens in your business is all your fault. Which it is. But most of our businesses serve their local market. Relatively few are national and even fewer global. If communities weaken so do our businesses. And we all have a responsibility to protect the weakest in our communities.
The need for a proper fiscal strategy based on an understanding of money, tax, inflation and their role in the economy is ever more pressing. Small businesses are poorly enough served by policy makers in good times. It’s time for caring business owners to be heard; it’s no longer good enough to just take care of business whilst others suffer.