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Britain is "navigating through turbulent waters", says Mervyn King

The Bank of England governor warns of a "storm heading our way" from Europe, as CPI inflation remain

The consumer prices index (CPI) inflation was 3.5 per cent in March, down from a peak of 5.2 per cent in September 2011, according to the Bank of England's May Inflation Report.

Global growth remained uneven. Output in the eurozone contracted in the fourth quarter of last year; business surveys indicate a further fall in first quarter of 2012.

The Bank warns that inflation is likely to remain above the 2 per cent target for the next year or so.

In a speech accompanying the report, the Bank’s governor, Mervyn King, said:

Weak growth and high inflation have been the unavoidable consequences of the financial crisis, developments in global commodity prices, and the need to rebalance our economy. The biggest risk to the recovery stems from the difficulties facing the euro area, our main trading partner.

At 3.5 per cent in March, CPI inflation remains well above the 2 per cent target. That largely reflects past increases in energy and import prices. In contrast, low rates of wage increases have ensured that domestic cost pressures are subdued.

The choice facing the MPC continues to be a difficult one. And the task is made harder by the degree of uncertainty about the paths that output and inflation will follow. But the big picture is clear and hasn’t changed since February. We are navigating through turbulent waters, with the risk of a storm heading our way from the continent.

Since February's inflation report, the Bank’s Monetary Policy Committee (MPC) has maintained bank rate at 0.5 per cent and the size of its asset-purchase programme at £325bn.

The Office for National Statistics (ONS) estimates that the UK’s economy shrank a little in both the first quarter of 2012 and the final quarter of 2011. Over the past year or so, two factors have hampered the recovery and rebalancing. First, higher-than-expected world commodity and energy prices have squeezed real take-home pay, dampening consumption growth. Second, credit conditions, far from easing, have in some cases become tighter.

The direct and indirect exposure of UK banks to the eurozone's periphery have affected funding costs as the challenges of tackling the indebtedness and lack of competitiveness in those countries have intensified.

Photo: Getty Images/Richard Stonehouse
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Here's how Jeremy Corbyn can win back the Midlands

The Midlands is where elections are decided - and where Jeremy Corbyn can win. 

The Midlands: this “formless” place is where much of Labour’s fate lies. The party witnessed some of its most disappointing 2015 results here. In those early, depressing hours of 8 May, Nuneaton was the result that rang the death knell of Labour’s election chances. Burton, Cannock Chase, Halesowen & Rowley Regis, Redditch and Telford weren’t far behind. To win here Labour need to build a grassroots movement that engages swing voters.

Luckily, this is also a place with which Labour’s new leader has a natural affinity. The bellwether seat of Nuneaton is where Jeremy Corbyn chose to hold his last regional rally of the leadership contest; just a couple of counties over you’ll find the home Corbyn moved to in Shropshire when he was seven. He cut his political teeth round the corner in marginal constituency The Wrekin; it was in this key seat he did his first stint of campaigning. Flanked by a deputy leader, Tom Watson, who represents Labour stronghold West Bromwich East, Corbyn has his eye on the Midlands.

As MP for Islington North since 1983, Labour’s leader has earned London-centric credentials that have long since overshadowed his upbringing. But Corbynism isn’t a phenomenon confined to the capital. The enthusiasm that spilled out of Corbyn’s summer leadership rallies across the country has continued into the autumn months; Labour’s membership is now over 370,000. It’s fast catching up with 1997 figures, which are the highest in the party’s recent history.

London is the biggest beneficiary of this new movement - with 20 per cent of Labour’s members and 19 per cent of new members who signed up the week before conference coming from the capital. But Corbynism is flourishing elsewhere. 11 per cent of all Labour party members now reside in the southeast. In that same pre-conference week 14 per cent of new members came from this mostly Tory blue area of the country. And since last year, membership in the southwest increased by 124 per cent. Not all, but a good deal of this, is down to Corbyn’s brand of anti-austerity politics.

A dramatic rise in membership, with a decent regional spread, is nothing to be sneered at; people are what you need to create an election-winning grassroots movement. But, as May proved, having more members than your opposition doesn’t guarantee victory. Corbyn has spoken to many who’d lost faith in the political system but more people need to be won over to his cause.  

This is clear in the Midlands, where the party’s challenges are big. Labour’s membership is swelling here too, but to a lesser degree than elsewhere. 32 per cent of party members now and 13 per cent of those who joined up in seven days preceding conference hail from this part of the country.

But not all potential Labour voters will become card-carrying members. Corbyn needs to speak to swing voters. These people have no party colours and over the summer they had mixed views on Corbynism. In Nuneaton, Newsnight found a former Labour turned Ukip voter who thought Corbyn would take Labour “backwards” and put the economy at risk. But a fellow Ukip voter said he saw Corbyn as “fresh blood”.

These are enduring splits countrywide. Voters in key London marginal Croydon Central gave a mixed verdict on Corbyn’s conference speech. They thought he was genuine but were worried about his economic credibility. While they have significant doubts, swing voters are still figuring out who Labour’s new leader is.

This is where the grassroots movement comes into play. Part of the challenge is to get out there and explain to these people exactly who the party is, what it’s going to offer them and how it’s going to empower them to make change. 

Labour have nascent plans to make this reality in the Midlands. Tom Watson advocated bringing back to life this former industrial heartland by making it a base for manufacturing once again – hopefully based on modern skills and technologies.  He’s also said the leadership team will make regular regional visits to key seats. Watson’s words chime with plans floated by shadow minister Jon Trickett: to engage people with citizens’ assemblies where they have a say over Labour politics.

But meetings alone don’t make grassroots movements. Alongside the economy, regional identity is a decisive issue in this – and other – area(s) of the country. With the influx in money brought in by new members, Labour should harness peoples’ desire for belonging, get into communities and fill the gaps the Government are leaving empty. While they’re doing this, they could spread the word of a proper plan for devolution, harking back to the days of municipal socialism, so people know they’ll have power over their own communities under Labour.

This has to start now, and there’s no reason why the Midlands can’t act as a model. Labour can engage with swing voters by getting down to a community level and start showing – and not just saying –  how the party can make a difference. 

Maya Goodfellow is a freelance journalist.