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July 28, 2015

Programme revealed for star-studded Lincoln Magna Carta Festival 800

The Lincolnite, Tuesday 28th July 2015.
Click here to read the article as it originally appeared.

With just one month to go until a Magna Carta festival featuring a host of celebrities, international artists and human rights activists kicks off in Lincoln, a full programme has been revealed.

Festival 800 runs from August 28 until September 6, demonstrating how Magna Carta’s focus on liberty, justice and freedom of speech have shaped today’s society.

The festival will be launched with the unveiling of a giant Magna Carta inspired sand sculpture by artists Remy and Paul Hoggard at Lincoln Castle.

A packed programme of events features a range of world-rennowned artists including Billy Bragg, David Starkey, the Levellers, Shappi Khorsandi, YouTube sensation Alfie Deyes, musician James Rhodes and Poet Laureate Dame Carol Ann Duffy, DBE, FRSL.

Information on the full lineup is now available on the Festival 800 website and in a special booklet from venues and shops across the region.

Set to be held in venues across Lincoln, including Lincoln Castle, The Collection, Lincoln Drill Hall and LPAC, events are set to be exciting, personal and fit for all the family.

People will have the chance to hear inspirational stories of personal strength and courage.

The family of Rosa Parks is making the trip from Detroit to talk about their ‘Auntie Rosa’ who is seen as the ‘mother’ of the US civil rights movement.

Eva Clarke, one of the youngest survivors of the Holocaust will also be sharing her amazing story of survival.

Also ‘Listen to the Banned’ will bring together musicians from across the world who have faced censorship to share their stories and music freely.

One of the hottest acts on the bill, Youtube sensation Alfie Deyes’ book signing at the Drill Hall.

Tickets are now on sale and are expected to sell out fast. Alfie’s Pointless Blog is followed 4 million people.

As well as its main programme of events, Festival 800 will also be partnering with the annual Steam Punk Festival, the Children’s Festival of History and Hartsholme Country Park Magna Carta Trail, all of which take place at the end of August and beginning of September.

Festival 800 has been organised by cultural solutions UK on behalf of Lincolnshire County Council and supported by the National Lottery through Arts Council England.

David Lambert, festival director, said: “Festival 800 will examine, celebrate and at times challenge freedom of speech and expression within a 21st century context.

“The diverse programme is a true credit to everyone that has been working hard behind the scenes and there is something for everyone to enjoy on the programme and we can’t wait to see what public reaction will be now that all the events have been announced.”

Executive Member for Culture and Heritage at Lincolnshire County Council, Councillor Nick Worth added: “Thousands of people have already taken part in this year’s Magna Carta 800 celebrations, creating a real buzz around the city.

“Festival 800 is another chance to join in, and, with such an eclectic line-up, there’s something for all tastes. Make sure you’re a part of this historic moment.”

July 23, 2015

Mark Carney: Magna Carta and the Bank of England

16 July, ‘From Lincoln to Lothbury: Magna Carta and the Bank of England’, Lincoln Cathedral. Mark Carney, Governor of the Bank of England, Speaker.

The lecture below was part of the Lincoln Magna Carta Lecture Series:
Click here to read the lecture at the

A burst of inflation. A crisis in the public finances. Public sector bailouts. Infighting in Europe. Not eight years ago, but eight hundred. That was the economic context for the striking of Magna Carta.

To many today, Magna Carta is a document of profound, almost mythical, significance. It is seen as the cornerstone of the United Kingdom’s constitutional arrangements and as a blueprint for the constitutions of many other nations, including the United States. It is credited with establishing the foundations of parliamentary democracy, creating a framework for the rule of law, protecting individual liberty, defending the rights of the innocent, and limiting the role of the State.

It is undoubtedly true that Magna Carta – or more correctly the idea of Magna Carta – has played a central role in British political development over the centuries, not least as a banner under which those seeking liberty from oppression have rallied. But many modern scholars argue that its significance, in and of itself, has been overstated. They characterise Magna Carta as a pragmatic political document that was a product of its time, including the difficult economic circumstances that then prevailed.

As usual with historical arguments, the answer lies somewhere in between. In what follows, I will spend a few moments on the pragmatic element not only because it plays to my comparative advantage as an economist but also because it ultimately underscores the foundational character of the document itself. The enduring legacy of Magna Carta is how its strictures on unconstrained power are reflected in our systems of political and economic governance.

I will conclude that both the constitutional and pragmatic perspectives are relevant to modern central banking and the current conduct of monetary policy. Specifically, the costs of inflation were among the key economic catalysts of Magna Carta, and its core constitutional legacy – namely the importance of delegated authority, with clear lines of public accountability – is at the heart of the Bank of England’s institutional arrangements. In the spirit of Magna Carta, the Bank of England has been given a great responsibility: to deliver monetary stability for the good of the people of the United Kingdom. Our goal, the 2 per cent inflation target, is set by the Government, and we operate under constrained discretion in its pursuit.

1. The economic and political context: Where did Magna Carta come from?
The political background is one of nearly constant conflict both within the dysfunctional ‘English’ monarchical family, as well as with France over control of Normandy and the rest of Henry II’s continental empire.

The England of the 1200s was far from a unitary state. Most matters were administered by local barons, with the King acting as an arbiter in the event of a dispute. The relationship between local (baronial) and central (monarchical) authority was much less deferential, and much more arms-length, than it is today. Indeed, the early Plantagenet Kings of England spent most of their time living at home in Normandy or Anjou, allowing the English barons a considerable degree of autonomy. It was only after King John lost Normandy to the French in 1204 that the King resided full-time in England, breathing down the necks of the barons, who did not much like the closer observation of their activities, and the eyeing of their stockpiles of silver that this proximity entailed.

The relationship between the barons and King John broke down in part because of unsustainable public finances, with John imposing an intolerably heavy and arbitrary tax burden in order to pay for royal extravagance, infighting, and wars with the French. The royal judicial system, whose tendrils extended ever deeper into the barons’ lives, was used to extort cash and as an instrument of royal control, rather than to ensure ‘justice’. What lay behind such unsustainable public finances?

First, and most obviously, the need to pay for constant military protection for the Normandy estates created what modern-day macroeconomists would think of as an enormous structural deficit. If John had let his expulsion from the continent be the end of the matter this financial burden would have extinguished itself. But he did not. His folly was a series of vain attempts to re-conquer Normandy, efforts which finally ended on the eve of Magna Carta.

Second, the monarchic finances had taken a colossal hit in 1193 because of the need to fund a gigantic public sector bailout. Richard I had managed to get himself caught in Germany on his way back from the Holy Land and was held to ransom for £66,000 in silver. Being ‘Too Big To Jail’, the equivalent of two to three times annual crown income was needed to bail him out. In comparison, the government’s peak cash support to UK banks in 2007-2010 amounted to a trifling one-quarter of annual UK government revenues.

For an excellent summary, see Vincent, N (2012), Magna Carta: a very short introduction, Oxford University Press. His allies were finally defeated in 1214 at the Battle of Bouvines, which ended the 1202-1214 Anglo-French War. This would have been bad enough on its own. What was even worse was that it had come only five years after the collection of the ‘Saladin Tithe’, a windfall tax of a similar amount, in order to pay for a campaign to wrestle Jerusalem out of the hands of Salahuddin Ayubi, who had captured it in 1187. That cost the barons one-tenth of all their revenues and movable property.

Third, the need to raise additional cash for the public finances was made much more problematic by the strain of inflation, which accelerated in the early years of the 13th century. The problem was that a large proportion of regular crown income came in the form of ‘farms’, which were fixed rental payments for leases to use the King’s land for agriculture. These farms were fixed by custom in nominal terms, whereas the King’s expenditures were not. The King’s finances were unhedged.

In fairness to the monarchy, there was not an enormous amount that could be done about this. There was obviously no CPI(H) to which the leasehold rents could be indexed. The UK’s statistical challenges have a long history. The preferred way of hedging the risk was to kick the leaseholders off the land, and bring it into direct demesne management. This is what the barons themselves had been doing with their own land holdings. By taking it into demesne control, instead of receiving a fixed nominal rent, the lord of the manor could take receipt of the real output of the land, which could be consumed, traded, or sold for silver at the going spot
price. The consequence was that the richer the baron, the more land he had to exploit, and the greater his potential profits.

The effect was to create a massively wealthy elite of oligarchs, now breaking free both of the middling ranks of the gentry at one end, and of the hard-pressed King (or public sector) at the other. In all of this, the option of demesne management was infeasible for the King, likely because it would have involved destabilising relations with the administrative class of ‘sheriffs’ and other royal officials upon whom the King’s political stability depended.

Causes of the inflation
Forget royal infighting, wars or the whiff of revolution, it is inflation that really sets the pulses of central bankers racing. And for good reason because closer inspection suggests that inflation may have been a significant catalyst to Magna Carta.

Latimer (2001) suggests that the inflation was concentrated in the first six years or so of the thirteenth century. See Latimer, P (2001), “The English inflation of 1180-1220 reconsidered”, Past and Present, No. 171, pages 3-29. Harvey, P. D. A., (1973), “The English inflation of 1180-1220”, Past and Present, No. 61, pages 3-30.

Given the countless other abuses of authority that were going on at the time, one wonders why it was so problematic for the rents
simply to be ‘renegotiated’ periodically. In part, custom dictated that this was not the done thing. In part, the problem lay with the ‘sheriffs’ in each of England’s counties. They were responsible for collecting the fixed farms from the King’s assets. In normal years, they made an enormous profit, paying only a small fixed farm to the King, yet raking in a great deal more in terms of the real income of the counties. They were accustomed to keeping this surplus. Any attempt to reform this system, by reducing the imbalance between real income and fixed farm threatened to destabilise relations between the King and the vitally significant administrative class of sheriffs and other royal officials upon whom the King’s political stability depended. As a result, the Kings’ preference was to find other ways of raising the cash.

Historians estimate that prices were rising sharply in the early 1200s. The prices of agricultural goods, including wheat and oxen, probably doubled in that period. Evidence suggests that prices of linen, wax, lead and even palfreys – the Toyota Prius of medieval horses – were also rising rapidly. Wages were rising as well – and to a greater extent than could have just been the consequence of medieval real-wage resistance. King John was paying his knights almost three times as much as Henry II (even though they weren’t as productive on the battlefield). The daily rate for foot-soldiers had doubled. And limited evidence suggests the wages of skilled labourers on the crown estates probably increased by a similar proportion.

With pay growth approaching 20% a year, wages really were fizzing! The underlying causes of this inflation are debated among historians, but the most convincing argument is that the inflation was a monetary one, albeit with a twist. Not surprisingly, the quantitative information on the thirteenth century money supply is of very poor quality, imputed, as it has been, from archaeological finds of cash hoards.11

Latimer notes that “…between the middle of the twelfth century and the middle of the thirteenth century there was an enormous increase in the quantity of silver coins in England.” As well as the possibility of a general increase in the European silver supply (especially with the opening up of the Harz silver mines in eastern Germany), it is likely that silver inflows to England in particular were boosted as the counterpart to a sizeable private trade surplus – probably resulting, especially, from the success of the wool trade with Flanders. Over several decades, these silver inflows were likely to have much more than offset the ‘public sector deficit’ as silver leaked out to pay for the protection of Normandy as well as the occasional trip to the Holy Land. As a result, the balance of payments was probably in surplus for years, with the consequent increase in the silver money supply going unsterilised. Even to a thirteenth century Englishman, global monetary conditions mattered. Would Britain’s constitutional history have been different had King John lamented: A Central Bank! A Central Bank! My Kingdom for a Central Bank!?

He needed one because other factors reinforced monetary developments, including the usual suspect – financial innovation. Specifically, developments in the common law made land an increasingly liquid asset, and therefore one capable for the first time of being used as a store of wealth. This set a medieval financial accelerator in train (about 750 years before Ben Bernanke coined the term) by providing an alternative to storing one’s wealth in silver coin (prone to being whisked away by the King). This led to a reduction in the demand for silver money balances. An increase in money velocity would have followed and with it, all else being equal, price inflation until the transactions demand for silver had risen sufficiently to equal its supply. At the very least, the existence of an alternative store of wealth provided an environment in which money velocity could take off, were it to be nudged in that direction. One possible nudge was the anticipation of the re-coinage of 1204.14 Re-coinages were good for the King
because he benefitted from the seigniorage of the re-minting fee. They were bad for cash holders both because of the re-minting fee and because they had to exchange their clipped coins for what they were actually worth, rather than their face value (a medieval haircut – some of which were appalling). Consequently, there was a strong incentive not to be the one holding the old-issue coins when the music stopped.

So to sum up: a fiscal squeeze exacerbated by accelerating inflation, combined with monarchical ambition and incompetence to stretch and then break relations with the barons.

2. Constitutional significance
In that context, Magna Carta was a desperate (and probably disingenuous) attempt at a peace treaty that failed almost immediately.
Brokered by the Church, and issued by King John in June 1215, the Charter sought to placate the disgruntled barons. It is doubtful that John ever intended to uphold his side of the bargain, with all the constraints on his authority that this implied. Indeed, within a few months of its agreement, by the end of August 1215, John had convinced Pope Innocent III to annul the Charter on the grounds that it had been issued under duress.16 The 1215 Magna Carta was never enacted, and England slipped into the First
Barons’ War.

Charters of this type were not uncommon at that time. It had been fairly routine, in fact, for English kings to attempt to curry favour with the nobles upon whom the stability of their realm depended by rubbishing the reputations of their predecessors and issuing ‘coronation charters’ that demonstrated how virtuous and peace-loving they were by comparison. It was also fairly routine for kings to renege on the promises in those charters, creating fertile ground to begin the cycle anew. What was novel about Magna Carta was that: (a) it was longer and more detailed than its predecessors; and (b) it was issued not at John’s coronation, but under compulsion from a true political opposition, sixteen years into his reign and evidentially too late to serve its purpose. This brings a second observation. Obnoxious and tyrannical as he might have been, King John was not solely to blame for the aristocratic discontent that led to Magna Carta. His predecessors had reneged on their promises, mismanaged the realm and imperilled its finances. John’s administrative and military incompetence were merely the straws that broke the camel’s back.

If Magna Carta was such a product of its time, how did it become to be so venerated? And once we cut through the legend, what is its significance for economic governance today? The revisionist interpretation of Magna Carta as a timeless statement of natural rights and liberties became imprinted onto the minds of the English-speaking world only in the 17th century. In large part, this was due to
the work of Edward Coke. As well as being an enormously influential jurist, Coke was also the author of popular English legal textbooks that exported his views around the world. Coke resurrected the long-forgotten Magna Carta from 400 years of obscurity by appealing to its spirit in order to resist the absolutist tendencies of the Stuart Kings James I and his son Charles I – themselves inspired by the continental European model of monarchic divine-right. The Charter, Coke argued, could trace its lineage from an ancient constitution that harked back not just to the time of pre-Norman King Edward the Confessor, but to King Arthur himself (!): an ancient constitution that was now being imperilled – and with it the Englishman’s rightful way of life – by the tyrannical behaviour of the Stuarts. Despite the efforts of Coke and others, Charles I’s rejection of all enterprise to constrain his authority led to the English Civil War and to the king’s beheading in 1649. Meanwhile, Coke’s unstoppable Magna Carta redux had been set in motion. In contradiction to their behaviour at home, James and Charles had been busily granting royal charters promising the liberties of Englishmen to the American colonists. Coke himself had been involved in the drafting of the first charter of the Virginia Company in 1606, and similar English liberties were extended in the charters of Massachusetts, Maryland, Connecticut, Rhode Island and Carolina over the next sixty years. Some have argued that references to Magna Carta, however irrelevant its provisions might by then have been, were used as a way of ‘drumming up’ New World settlers. To this day, 25 US States have extracts from Magna Carta on their statute books; a further 17 have the full text. Goodness knows how the latter intend to enforce the removal of “[a]ll fish-weirs … from the Thames, the Medway, and throughout the whole of England, except on the sea coast” (Clause 33). Of course, sometimes American extraterritoriality literally knows no bounds.

Coke’s romantic resurrection of Magna Carta transformed it into part of the backdrop to the American Revolution, with his influence clearly evident in the drafting of the US Constitution.


We have seen how the economic forces and political developments of the time played a crucial part in the mounting hostilities between King John and the barons that led to Magna Carta and First Barons’ War. Given that background, it is not as shocking as it first seems that Magna Carta is very largely taken up with the parochial interests of the rich. It is dominated by three basic themes: taxes; abuses of the ‘judicial system’ with the aim of raising revenue; and the protection of the barons’ mercantile interests. Given how irrelevant those specific concerns now seem, it is hardly surprising that almost all of the Charter’s
clauses that survived the 1225 re-issue (and therefore made it into the law in the first place) have since been repealed. In fact, only four clauses of the original 66 remain. These stand out as different in character from the others. They are much more general, universal and timeless. They are:

– Clause 1: Freedom for the Church.
– Clause 13: Protection for the ‘ancient liberties’ of the City of London.
– Clause 39: No wrongful imprisonment. Perhaps the most famous clause. “No free man shall be seized
or imprisoned, or stripped of his rights or possessions, or outlawed or exiled, or deprived of his standing
in any way, nor will we proceed with force against him, or send others to do so, except by the lawful
judgment of his equals or by the law of the land.”
– Clause 40: Justice is not for sale.

Added to that, the spirit of Clause 12 of the 1215 Magna Carta (dropped from all later reissues), that “no ‘scutage’ or ‘aid’ may be levied in our kingdom without its general consent…”, is clearly what would later become ‘no taxation without representation’: to establish a council (the embryonic embodiment of what would later become Parliament) to agree whatever new taxes the King might demand.

Whatever their purpose at the time, the more universal clauses that remain on the statute book certainly resonate today. They in effect encompass the idea of the rule of law and of due process as a means to ensure justice. It is tempting, therefore, to think of these clauses as being the enduring legacy of Magna Carta, while at the same time allowing ourselves to patronise the juxtaposition of these apparently fundamental principles alongside so much antiquated gibberish about fish-weirs, the obligation to construct
bridges, and the theft of wood for building castles.

This would, I think, be a mistake. The specificity of the clauses animates the general principles. It is because they are detailed and targeted at the concerns of the time that they are a genuine attempt to place a boundary on the authority of the King, rather than relying on vague platitudes. Magna Carta was nowhere near the first attempt to encapsulate ideas of justice and good government, nor was it the last. Indeed, it was a spectacularly unsuccessful attempt – and it was anyway concerned only with
the interests of a very small segment of society. But, largely because King John’s heirs were forced into a tight corner and therefore obliged to reissue the charter again and again after 1215 (in 1216, 1217, 1225, 1234, 1253, 1265, 1297 and 1300, to cite only the more famous reissues), it is Magna Carta that has become the icon of the principle that the exercise of authority requires permission from those subject to that authority – and that, once granted, this permission can just as easily be withdrawn. At its most idealised, Magna Carta makes clear that power derives from the people and constrains the authority of the state. The state can in turn devolve power – to regions – and to independent bodies. But these bodies can never forget from where their power came or to whom they are responsible. Their authority is constrained to that necessary to pursue specific objectives and they are accountable to the people for their performance.

3. Monetary policy outlook
The Bank’s current Monetary Policy framework embodies these principles. It wasn’t always the case. The Bank of England was brought into public ownership in 1946. As former Governor Eddie George remarked, for the half century that followed “the Bank operated under legislation which, remarkably, did not attempt to define our objectives or functions.” They were, instead, “assumed to carry over from [the Bank’s] earlier long history.” In that regard, the Bank’s ‘constitution’ resembled that of the United Kingdom more broadly, comprising a rich history of law, principle and convention.

Even the ‘fish weirs’ clause (33) can be read, in hindsight, as a protection both of the public good (in Roman law terms, res publica) and of the freedom of navigation: the same principle for the which the English entered into the Seven Years War of 1756-63, whose costs, in turn, brought about the American Revolution of 1776.

All changed with the passing of the Bank of England Act in 1998, which made specific “provision about the constitution, regulation, financial arrangements and functions of the Bank.” The Act brought great clarity to the Bank’s responsibilities and granted independence to the Bank for the operation of monetary policy. In delegating authority to an independent body in this way, the Act ensured the Bank would operate under what Mervyn King described as ‘constrained’ rather than ‘unfettered’ discretion. The Bank would be accountable to Parliament for operating the instruments of monetary policy to achieve the objectives of monetary policy,
which would be determined by the Government.

The operational independence of the Bank of England is an example of power flowing from the people via Parliament within carefully circumscribed limits. Independence in turn demands accountability in order that the Bank commands the legitimacy it needs to fulfil its mission. By publishing its analysis, giving testimony, and delivering speeches, the Bank explains how it is exercising its powers to achieve its clearly defined policy Remits.

To illustrate these points, I will conclude with some reflections on monetary policy. Our objective, given to us by Parliament, is to maintain price stability and, subject to that, to support the economic policy of Her Majesty’s Government, including its objectives for growth and employment. Our Remit builds in important accountability and transparency mechanisms. One of which is the requirement for the Governor to write an open letter to the Chancellor if inflation moves away from its 2 per cent target by more than one percentage point.

Inflation developments
I am in the middle of a likely sequence of such open letters – I have another one due next month – on account of the record low inflation the UK is experiencing this year, currently at zero per cent. Such letters must explain, among other things, why inflation has deviated from target and what policy actions the Monetary Policy Committee (MPC) is taking in response.

The ‘why’ is straightforward. The bulk of the shortfall of inflation below target can be explained by the sharp fall in the prices of commodities and other imported goods since last year. Of these, the single most important factor has been the steep drop in energy prices globally. The rise in the value of sterling has also played an important role in lowering non-energy import prices, which have fallen over the past twelve months. The sum total of these effects has been to drag inflation below target by around
1½ percentage points. This temporary period of below-target inflation has provided a welcome boost to real household income.

Inflation looking ahead
The MPC’s intention is to return inflation to target in a sustainable manner within two years. That means setting Bank Rate to eliminate the remaining slack in the economy, bringing about the sustained increase in costs necessary to achieve overall inflation of 2%.

I expect that this will involve raising Bank Rate over the next three years from its current all-time low of ½ per cent. The need for Bank Rate to rise reflects the momentum in the economy and a gradual firming of underlying inflationary pressures – a firming that will become more apparent as the effects of past commodity price falls drop out of the annual inflation rate around the end of the year. It also reflects the lags in monetary policy, given that the peak impact on inflation of a given adjustment in interest rates is likely to materialise around 18-24 months after the change.

As the economy evolves, different factors will become worthy of particular attention in informing the timing, pace and degree of likely Bank Rate increases. At the current juncture, three stand out. First are the prospects that sustained momentum in economic activity will wring out any remaining slack. This will require sustained growth above its past average of around 0.6 per cent per quarter.
Even though the current recovery has been the slowest since the Great Depression, taking around 1½ years longer to regain lost ground than it did following the recession of the 1930s, the signs are encouraging. Looking through the blip in the first quarter, the economy has now been growing above trend for a year and unemployment has fallen sharply over the past two. Consumer confidence is around its highest level for over a decade. Businesses investment intentions are solid. Momentum in the housing market is showing
signs of returning. Survey data point to continued momentum in real activity over the remainder of this year.

To be sure, the international risks to the growth outlook remain. The situation in Greece is fluid, and the on-going slowdown in China could prove more significant. But on balance we can expect the global economy to proceed at a solid, not spectacular, pace.
Second, domestic costs need to continue to firm. After a period of particularly weak wage growth, which reflected a marked expansion in labour supply that is now largely absorbed, wage growth is picking up.

Based on average quarterly GDP growth since 1993. The impact of Buy to Let changes will be examined in August Inflation Report. In our May projections, the MPC expected PPP-weighted worth growth of 3 ¼ per cent in 2015 and 3 ¾ per cent in 2016 and 2017, just shy of the pre-crisis average of around 4 per cent.

I discussed labour supply developments in the UK in detail last autumn. (See Carney, M (2014), Speech to the Trades Union Congress
Annual Conference, 9th September 2014.)

The recent growth in wages has been stronger than we had expected in May, though most of the upside news was in bonuses, which are a less reliable guide to firms’ future labour costs. At a minimum, when taken together with survey indicators that continue to point to solid pay growth for new recruits, recent data give welcome reassurance that the risks associated with a deflationary mindset in the labour market have likely fallen significantly.

Further positive wage developments should be supported by a continued tightening in the labour market. Job-to-job flows remain around post-crisis highs and the ratio of vacancies to unemployment is now back to its pre-crisis average. However, what matters for inflation is not wage growth in isolation but wage growth relative to productivity. Put simply, firms are less likely to raise their prices if higher wages reflect more output per hour worked. Along with faster wage growth, there have been signs of faster productivity growth since the turn of the year. This may well mean firms’ unit labour costs have not picked up quite to the degree we had expected in our May Inflation Report. It’s too early to be definitive. Weighing past disappointments and recent indications of a pick-up, it is prudent to recognise that two-sided risks to productivity growth remain. What is clear is that to return inflation to target, growth in labour costs must pick up further from their current rate of less than one per cent. The extent needed depends on what is happening to other costs. In the decade prior to the crisis, labour costs grew by around 2½ per cent each year on average, with wages and salaries growing at around 4¾ per cent and productivity at 2¼ per cent. Inflation averaged 2 per cent, however, in part because import prices rose only by around ¼ per cent each year at the same time. The possibility that history might repeat itself points to a third important consideration: the need to monitor developments in firms’ costs other than labour. The sum of these is evident in so-called ‘core’ inflation, which are measures of prices that strip out the most volatile determinants of inflation, like energy prices, revealing more persistent trends. In an open economy like the United Kingdom’s, those factors include import prices, which are affected by movements in the value of sterling, and which, on past experience, cantake a considerable time to pass through to core inflation.

Unlike regular pay, bonuses are closer in spirit to dividend payments, being state-contingent disbursements of profits. That
observation may imply bonus payments are a useful cyclical indicator, although interpreting the data is potentially complicated by
changes in taxes that shift the incentive to pay bonuses over time. Accounting for the mis-measurement of clothing and footwear prices, which existed until 2010 and biased measured annual CPI inflation downwards by around 0.4 percentage points. See Bank of England (2011), Inflation Report, February, box on page 39. 28 One way to illustrate the impact of import prices is to consider measures of core inflation adjusted for import intensity. These measures suggest that the current rate of core inflation is being dragged down by import prices by around 1 percentage point. That is a sizeable effect, and reflects, in part, changes in the value of sterling. The core measure referred to here is CPI inflation excluding food, energy, education, alcohol, tobacco and VAT, and the measure adjusted for import prices weights each component of the core index by the inverse of its import intensity.

Not only are the effects sizeable, but, on past experience, they are potentially protracted. The impact of sterling’s 25% depreciation following the onset of the financial crisis on import prices was one factor that contributed to high inflation throughout 2008-12. The potential for these effects to be persistent highlights their relevance at the policy horizon.

Over the past few years, core inflation has been particularly subdued, and it remains less than one per cent. We need to see increases in core inflation to have a reasonable expectation that, in the absence of further shocks, overall CPI inflation will return to 2 per cent within the MPC’s stated objective of two years.

Policy strategy
Delivering the growth in activity, the rise in domestic costs and the firming in core inflation measures necessary to return inflation to target requires monetary policy to be set appropriately both now and prospectively. In this regard, one concern has been the constraint imposed on monetary policy by the effective lower bound on policy rates.

In my view, with the healing of the financial sector and the lessening of some of the headwinds facing the economy, that concern has become less pressing with the passage of time. As I made clear in my first open letter in February, were downside risks to inflation to materialise the MPC could decide either to expand the Asset Purchase Facility or to cut Bank Rate further towards zero from its current level of ½ per cent.29 In the current circumstances there is no need to wait to raise rates because of a risk management approach and run the risk of inflation overshooting target.

At the same time, the timing and pace of prospective interest rate increases need to be put into perspective. Headwinds to growth and inflation remain. Growth in the parts of the global economy that matter most to the UK is running ¾ percentage points below its historic average. Sterling has appreciated around 18 per cent over the past two years and around 7 per cent since the turn of the year. This will exert a drag on inflation both through lowering import costs and by lowering world demand for UK goods. UK fiscal policy is about to tighten significantly. The average annual reduction in the cyclically-adjusted budget deficit is projected by the
OBR to increase from around ½ per cent of GDP over the past two years to around 1 per cent of GDP over the next two – and the IMF expects the UK to undergo the largest fiscal adjustment of any major advanced economy over the next five years.

Taken together, these factors suggest that the ‘equilibrium’ real rate of interest – the rate needed to keep the economy operating at potential and inflation on target – which was sharply negative during the crisis, will continue to be lower than on average in the past. It also seems likely that the equilibrium interest rate will move only slowly back up towards historically more ‘normal’ levels. Everything else equal, that suggests a prospective tightening cycle that, once it starts, will be longer and shallower than those of the past. In other words, we expect Bank Rate increases to be gradual, and limited to a level below past averages.
What does that actually mean?

To paraphrase one of my predecessors at the Bank of Canada, Gerry Bouey, we didn’t abandon the lower bound; the lower bound
abandoned us. (See Office for Budget Responsibility (2015), Economic and Fiscal Outlook, July; and IMF (2015), World Economic Outlook.)

The Bank of England is around half a millennium younger than Magna Carta. To put the limited and gradual expectation in historical context, short term interest rates have averaged around 4½ per cent since around the Bank’s inception three centuries ago, the same average as during the pre-crisis period when inflation was at target. The average pace of tightening since the adoption of inflation targeting in 1992 was around 50 basis points per quarter.

It would not seem unreasonable to me to expect that once normalisation begins, interest rate increases would proceed slowly and rise to a level in the medium term that is perhaps about half as high as historical averages. In my view, the decision as to when to start such a process of adjustment will likely come into sharper relief around the turn of this year.

That said, the path is much more important than the precise timing of the first rate increase. And I am conscious of several important considerations which mean the actual path almost certainly will not be mechanical, linear or pre-determined. First and foremost, shocks to the economy could easily adjust the timing and magnitude of interest rate increases. Second, the largest cumulative tightening in the UK since inflation targeting was adopted was 1 ½ percentage points, compared to an average cycle of 3 percentage points for the US Federal Reserve over the same period. This likely reflects in part the greater sensitivity of
UK household balances sheets in the medium term to floating interest rates, something that could be particularly relevant in our still heavily indebted post-crisis economy. Over a half of UK mortgagors would pay higher rates in a year’s time, and close to three-quarters of mortgagors in two years’ time, were interest rates to evolve according to current market rate expectations. That is in stark contrast to the US, where even over a two-year period, less than 10 per cent mortgages would be affected directly by a change in rates. We will learn more about the importance of these sensitivities as interest rates increase. Third, developments in
the exchange rate have been important for UK inflation and activity, and in particular we have experienced persistent exchange rate pass-through to headline inflation. This risk is particularly relevant at present when the monetary policy stance of our largest trading partner is diverging with ours. Most fundamentally, there are broader macroeconomic considerations, particularly the UK’s large external imbalances. With the largest current account deficit in the advanced world, the right policy mix leans towards
tighter fiscal, more accommodative monetary and tighter macroprudential policies.

Given these considerations, the MPC will have to feel its way as it goes, monitoring a wide range of indicators and adjusting the pace and degree of Bank Rate as it learns about the effects of higher interest rates on the economy. There is, in fact, a wide distribution of possible outcomes around any expected path for Bank Rate, reflecting the inevitability that the economy will be buffeted by shocks and that monetary policy will have to adjust accordingly.

After all, as the story of Magna Carta shows, history rarely proceeds in a straight line… why should monetary

May 1, 2015

Lincoln Castle triples visitor numbers after Magna Carta refurbishment

BBC News, 1st May 2015
Click here to read the article as it originally appeared on the BBC.

A castle that had a multi-million pound vault built to house a surviving copy of Magna Carta has almost tripled visitor numbers.

Lincoln Castle underwent a £22m renovation project ready for the document’s 800th anniversary.
Castle manager Rachel Thomas said about 34,000 people visited in April – up 21,000 on last year.
Last month, the castle was named as one of 12 sites in the county that could be outsourced to save the council money.

Since the 11th Century castle reopened at the beginning of April, 33,941 people have visited, compared with 12,503 last April.

Lincoln’s copy of Magna Carta, is one of only four surviving copies.

Ms Thomas said she had not expected so many visitors.

“Partly, no doubt, the coverage around Magna Carta and the raising in the public consciousness of Magna Carta has helped,” she said.

The renovation project included a new wall walk and the reopening of the Victorian prison to visitors.

The high-security underground vault houses the 1215 Magna Carta, alongside an original copy of the Charter of the Forest, which was signed two years later.

The work was funded by Lincolnshire County Council, Heritage Lottery money and private donations.
The authority said a final decision on whether to outsource 12 attractions including the castle, Gainsborough Old Hall and the Museum of Lincolnshire Life has not yet been made.

April 1, 2015

Lincoln Castle reopens after £22m refurbishment

The BBC, Wednesday 1st April.

Lincoln Castle has re-opened following a £22m renovation.

The work, which has taken four years, has seen a vault built to house one of the original copies of the Magna Carta, ready for its 800th anniversary in June.

A new wall walk has been installed and the Victorian prison will also reopen to visitors.
The work was funded by Lincolnshire County Council, Heritage Lottery money and private donations.

The high-security underground vault will house the 1215 Magna Carta, alongside an original copy of the Charter of the Forest, which was signed two years later.

Castle manager Rachael Thomas said the Lincoln Castle Revealed project has given the document “the home it deserves”.

“Not only is Magna Carta a cornerstone of our justice system, but it has served as an inspiration to other nations around the globe,” she said.

The county council, which runs the castle, said it hopes the vault will make the castle an attraction for international visitors.

Built by William the Conqueror in the 11th Century, it has been closed for the last three months while finishing touches were made to the refurbishment work.

Work was disrupted when a Saxon skeleton was found in 2013 and more recently when adaptations had to be found to accommodate bats on the site.

Cash for the improvements came from the council, Heritage Lottery Fund, European Regional Development Fund, David Ross Foundation, Garfield Weston Foundation and private donations.

Click here to read this article as it originally appeared in the BBC.

March 19, 2015

Magna Carta: Lincoln gets ready for its close-up

The Telegraph Travel, 19th March
Sophie Campbell

Having toured the world, Lincoln’s Magna Carta is finally coming to rest in a dramatic new setting which will open next month. Sophie Campbell visits ahead of the fanfare.

There are conditions attached; there always are with a superstar. In the case of Lincoln’s Magna Carta, these include temperature (maximum 22C), humidity (40 per cent) and its own personal bodyguard in the form of Chris Woods, the director of the National Conservation Service, who has to be there if it is handled. Like many celebrities, it lives in a vacuum (well almost) and hates light.

As we know, this year is a big one for the four surviving versions of the charter that resulted from King John’s fractious meeting with his barons at Runnymede in 1215. There are new exhibitions at Salisbury Cathedral, which owns one, and the British Library, which owns two. All four documents starred in a February “Unification” event for bigwigs, scholars and 1,250 lucky members of the public.

But Lincoln’s Magna Carta is to the others what Diana Ross is to the Supremes. Not so much for its quality, although it has finely justified calligraphy and holes for a diamond-shaped seal.

No, Lincoln is the only Magna Carta that tours like a diva. London, St Albans, America (twice), Australia. At the end of its triumphant 2014 tour of America, it flew back on an Airbus 380 with its own bed.

Faced with a star of this magnitude, what could Lincolnshire County Council do but build it a dedicated vault, within the walls of Lincoln’s Norman castle and under the gaze of its actual owner, next-door Lincoln Cathedral?

“We started talking about it 10 years ago,” said Mary Powell, who works in tourism for the council and has led on the project from the start. “And of course we thought ahead to 2015, but the castle was also in a terrible state of repair.”

Now here we were on the Wall Walk, high above the six-acre castle bailey. Sections were open before, but it’s now a full circuit and, along with the Vault, is part of the £22 million “Lincoln Castle Revealed” project opening on April 1.

This is the highest point of the Lincoln Edge, carefully chosen by the Norman invaders, and far below farmland stretched away into haze. To one side of us was the cathedral, golden in the light. On the other, within the bailey, a vertical cylinder of trendily rusted steel held a new lift shaft that opens up the wall to wheelchair users. While digging its foundations, workmen found 10 Saxon burials, including a male skeleton in a sarcophagus, and below that Roman remains, possibly from the fort that once ran from the hilltop all the way down to the River Witham.

Beyond this lay two former prisons, one Georgian, one Victorian, and between them the semi-circular roof of the Magna Carta Vault. To the west were the National Skills Centre, housing workshops for “dirty” skills such as masonry and “clean” skills such as textiles, and Lincoln Crown Court.

At ground level, the castle has been opened up so that Lincoln residents can walk through as they cross the city, visiting the café or shop. Paying visitors can access the Wall Walk and the restored prisons, as well as the Vault.

Everything smelled of paint that day. The shop was being stocked, the café – in the room that once housed Magna Carta – was yet to serve any food, and in the prison chapel council employees were experimenting with dummy heads.

I can’t get that image out of my mind. The Victorian prison briefly adopted the “separate system”, the idea being to isolate prisoners, one man per cell, and tall walls divided the exercise yard into cake slices of space, one man per slice. As they filed into head-height chapel pews, each closed a partition behind him, so he was standing in a coffin-shaped space, blind to everything but the preacher. The preacher looked out over a sea of disembodied heads; hence the dummies.

The rest was what you might call “Porridge Vernacular”, with metal walkways and an upper landing. Cells contained displays on prison life and the smaller female wing was partly dedicated to archaeological finds, including the Saxon sarcophagus. A glass floor revealed the basement, converted for use by school groups so that children can dress up and lock themselves (temporarily) in cells.

And so to the vault, which was crawling with busy men in hard hats and hi-vis vests. “Ten years and we’re still going right to the wire,” said Mary wryly, “but you know, all the guys working here are so, so proud of what they’ve done.”

I’m not surprised. The Vault and auditorium were of superb quality, with polished-concrete walls and stairs curving down around the lift shaft to a 210-degree floor-to-ceiling video installation, setting the document in context. A double-height wall showed the entire text of Magna Carta, translated from Latin into English, with the key clauses – the only ones, please note, to have survived in modern legislation – picked out in gold.

The vault itself was the size of a small truck. The first part was polished concrete and the second – the inner sanctum – womb-like terracotta. All was dim. All was quiet. Magna Carta was not there.

Of course it wasn’t. It was recovering from the rigours of the Unification Tour, relaxing in the Lincolnshire Archives, and will appear just in time for the opening. Meanwhile there were three holes in the floor awaiting display cases from Italy: turns out it will share its space with a 1217 Charter of the Forest – almost an appendix – and in front of them will sit the warm-up act, a visiting document that will change every few months. The first will be a “John Charter” from 1213, awarding liberties and freedoms to Lincoln Cathedral.

I barely scratched the surface in Lincoln. There was a stupendous cathedral roof tour, where the guide’s torchlight picked up Norman tunnels disappearing inside the walls, roof spaces bristling with thousand-year-old oak beams, and views on to unwitting visitors in the nave and transepts below. There was the Exchequer Gate, leading to the market square, where Magna Carta may well have been kept in the cathedral archives (it’s said to have hung on the wall for years).

It seems to me that Magna Carta Bagging makes the perfect jaunt, travelling between Lincoln and Salisbury via London, seeing all four documents in situ and in style. The Supremes of early medieval history would expect no less.

To read more of this article at the Telegraph, click here.

Prince Charles and Duchess of Cornwall visit 1297 Magna Carta & US memorials

The BBC, 19th March 2015

The Prince of Wales and Duchess of Cornwall have visited monuments to Abraham Lincoln and Martin Luther King Jr as part of their trip to the US.

They were joined by figures from the American civil rights movement, Jesse Jackson and Congressman John Lewis.

Later, speaking at an environmental conference, the prince called on governments and businesses to end the dumping of plastics into the oceans.

The couple will meet President Barack Obama at the White House on Thursday.

The couple – who arrived in Washington DC for their three-day visit on Tuesday – were given a guided tour of the Lincoln Memorial sculpture, pausing at the spot where Dr King gave his famous “I have a dream” speech in 1963.

At Dr King’s nearby memorial, they met Rev Jackson and Congressman Lewis, who helped organise the famous civil rights march in Selma, Alabama, in 1965 – dramatised in the recent movie Selma.

The prince and duchess were also given a tour of Mount Vernon – home of America’s first president, George Washington.

The duchess also paid a visit to Washington’s Shakespeare Theatre Company.

Prince Charles also visited the National Archives, where he viewed the United States’ Charters of Freedom and the 1297 version of the Magna Carta.

He later told leading delegates to an environmental conference on marine waste of his concerns about the “increasing quantity of plastic waste” in oceans.

He said he had been “haunted” by images of seabirds found dead after mistakenly eating plastic, and called for better recycling and disposal of plastics.

The solution to problems caused by a “throw-away society” was to move towards a circular economy, where “materials are recovered, recycled and reused instead of created, used and then thrown away”, he said.

To read more from the BBC, click here.



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