Andrew Bailey must stop sitting on his hands and make a decision on interest rates, says ALEX BRUMMER

Bank of England governor Andrew Bailey has suffered slings and arrows for sitting on his hands as energy prices climbed.

Since the outbreak of conflict in the Gulf in February, Brent crude prices have gone up by 65 per cent, UK wholesale gas prices by 150 per cent and diesel by 40.5 per cent.

The remarkable thing is that the Bank of England has looked through the supply shock and held rates at 3.75 per cent.

In a breakfast session with bankers at the Institute of International Finance in Bangkok, Bailey didn’t sound as if he was aching to put up rates. 

There had been very little ‘pass through’ of costs by businesses. Rates effectively had hardened because the markets had expected two cuts in 2026 and they hadn’t happened.

Pertinently, he noted that the cost of two- and five-year fixed-rate mortgages is up sharply in line with bond rates and is among the highest in the G7.

This puts home ownership ever more in the distance for young people seeking to climb the housing ladder. 

The governor recognises that with consumer price inflation (CPI) of 3.1 per cent (new data is due next week) it is well ahead of the Government’s target of 2 per cent. Entrenched headline CPI poses a danger if it feeds inflationary expectations and boosts private sector pay deals.

Chancellor John Healey, if bold, could contribute to dampening expectations by freezing public sector pay in an austere budget. Don’t hold your breath.

Doing nothing on Bank rates should no longer be an option.

Hard landing

It is hard to know what to read into Healey’s words. Speaking in Bangkok before his return to London, the Chancellor made the case for a third runway at Heathrow, arguing that it is a big part of the growth and jobs agenda.

Despite strong backing for the project from his predecessor Rachel Reeves, Prime Minister Andy Burnham is less enthused and has kicked the issue back to the Department for Transport for review.

Adding to runway capacity at Heathrow is a long unfulfilled ambition. The first incarnation was way back in 1946. 

It was revived by the Blair-Brown government in the Noughties, recommended by Howard Davies’s Airports Commission in 2015, cancelled by then-prime minister David Cameron and later resuscitated by Reeves.

The main argument since then has centred on cost, with the gold-plated £49bn scheme backed by the Starmer government seen as too expensive.

A shorter, cheaper £23billion runway is proposed by Heathrow hotelier and developer Surinder Arora, who heads an independent consortium. 

As a great advocate of the regions, Burnham seems to regard another large scale South-East infrastructure project as a diversion from his core effort to bring prosperity to every postcode.

He had better be careful what he wishes for. The return of a higher bank surcharge is a direct attack on the City, as the falls in bank stocks in the latest trading session show. Failure to get behind Heathrow expansion will place London at an even bigger disadvantage compared with Frankfurt, Paris and Amsterdam.

It would be another betrayal of Britain’s robust financial services economy.

Repeat that

‘Resilience’ is the word offered by the IMF to explain the world’s retreat from disaster after the energy price shock.

It was liberally used by the Chancellor here when describing the surprising rise in UK output in August and in the two previous quarters. 

Andrew Bailey joined the club, noting the resilience of investment by British firms. Overuse could quickly make the word redundant.