Anguish for Andrew Bailey

The problem for the beleaguered Monetary Policy Committee is that its members are invited to believe in three impossible things before breakfast. Not quite as bad as the Red Queen’s six, but here’s the clue. The objectives of the Bank of England shall be: “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.” The letter to the governor, Andrew Bailey, is dated October 2021 and signed by the Chancellor, Rishi Sunak.

Since then, the 2 per cent inflation target has been swept away by seismic events which the MPC totally failed to see coming. Yesterday it funked yet another chance to claw back a little of its battered credibility, raising Bank Rate to 3.5 per cent when a 0.75 per cent rise would have shown it was determined to get back on top of the first part of its remit.

Unfortunately, it was again stymied by the the letter’s woolly demand to think about prospects for growth and employment. It should be admitted that the prospects for both are pretty bleak, but tacking them on to the simple target for inflation just adds confusion to the MPC’s decision-making, inevitably pushing it towards the lowest Bank Rate it can plausibly impose.

The minutes more or less admit that the rate will have to go higher (the market expects at least 4.5 per cent) so it is doubly hard to see the point of small steps. “If it were done when ’tis done, then ’twere well / It were done quickly.” That might serve as the MPC’s motto for 2023.

World wonders at Whitby

“System working well, please send more money” said the man as he tried to break the bank at the casino in Monte Carlo. The version from Stephen Pearce, finance director at Anglo American, looks much the same, only with more zeros attached. The system, in this case, is the Woodsmith fertiliser mine, an extraordinary project under the North Sea near Teesside. Not very near, unfortunately, and inside a National Park, which means it requires a 23 mile underground transporter system from the mine to the port.

When Anglo rescued the project nearly three years ago, the £405m price looked generous to all but the locals who had been seduced into the project and lost money. At the time, Anglo reckoned it would take $3.3bn to complete. This month Pearce, describing it as Anglo’s second-biggest capital undertaking, explained how he was improving the project’s configuration to get full value over the coming decades. “This will extend the development schedule and the capital budget, compared to what was anticipated prior to our ownership, and so potentially impact our carrying value of Woodsmith for accounting purposes at the year end.”

Such an elegant turn of phrase, Mr Pearce, for having to make a socking great provision against the cost. He expects to spend another £800m next year, as the project really gets going. On completion, the conveyor taking the output under the North Yorks moors to the port will be one of the wonders of the world, far longer than anything similar attempted in the past. Fortunately, Anglo is big enough to absorb the financial and engineering pain. One day, in the far future, the mine might even prove financially worth while. One day.

Nuclear conFusion

We do love our “nuclear breakthrough” stories, to help us dream of the day when we can create almost infinite power for the cost of turning a few hydrogen atoms into energy, as in Einstein’s famous equation. This week’s excitement was of a “milestone”, creating more energy from a controlled nuclear reaction than it cost to stimulate it. A few small details need to be sorted before the great day dawns.

For a start, the “gain” ignored the energy cost of turning a vast surge of electricity into lasers to fire at the huddled group of atoms suspended in the middle of billions of dollars of hardware. The reports also mostly ignored that those atoms weren’t any old hydrogen atoms such as you find in tap water, but a mixture of deuterium, or heavy hydrogen, with its extra neutron. If deuterium is rare, then the other component, tritium (with two extra neutrons) is so rare that the best guess is that there is only 50lb of it on the planet. You can pick some up for about $1m an ounce.

One day, maybe, commercial nuclear fusion will be a reality, but it won’t be in my lifetime or yours. In the meantime, we will have to keep plugging away with nuclear fission and hydrocarbons, while clinging on to the delusion that we can all keep warm on windmills and sunbeams.

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