According to the CPI, inflation is up to 4% – the highest for two years and double the official 2% target.  The rate is even higher if you use the old-money RPI.   The Bank of England and the Treasury argue that the rise is due to one-offs such as the January VAT increase and the soaring price of oil.  Maybe, but inflation has been rising for months and every increase has been blamed on one-offs outside the control of the Bank.

While I accept that increasing commodity prices and other global influences are inevitably playing a part in the rise of inflation, my gut feeling is that the stonking great boost to the money supply (aka quantitive easing) must also be having a significant effect.  If I’m right, then – before very long - inflation will climb further and interest rates will, ultimately, have to rise higher and faster.

At first glance, David Cameron and Hosni Mubarak have little in common.  But one thing they both share is a failure to manage expectations adequately.  This failure can totally undermine a government’s communications strategy.

The roar that emanated from the Cairo crowd when Mubarak said he was staying put to oversee the transition to democracy said it all.  They had been expecting him to announce his resignation and nothing less would do.  And within 24 hours he had indeed left office.  

Cameron’s situation is clearly somewhat less dramatic but he’s nevertheless got a problem selling his Big Society concept.  The communications strategy has worked brilliantly to the extent that everyone is talking about it.  The difficulty stems from the fact that few people have any idea of what they should expect from the concept. 

Philosophically it is about replacing the socialist doctrine of Big Government with the liberating notion of Big Society.  It is analgous to John F Kennedy telling Americans not to ask what the country could do for them but to ask what they could do for their country.  But we Brits don’t do philosophy; we have difficulty grappling with abstracts.  After decades of being told that the Government will sort it (whatever it may be), we can’t quite get our heads round the idea that we should sort things out for ourselves.  No wonder Andy Coulson wasn’t keen on selling the idea; it just doesn’t click with tabloid readers.

But the Government can’t just drop it and walk away. Cameron has personally identified himself with the idea, so somehow they have got to find a way in which readers of the Sun can relate to Big Society.  In the meantime, Labour is trying to conflate the concept with Budget cuts, which is not too surprising, given that Big Government is embedded in the party’s DNA.  

For what it’s worth, my advice to Cameron and his ministers is to concentrate on communicating a picture of what we can expect Britain to look like and feel like once the Big Society is in place.  Perhaps a slogan equivalent to Obama’s ‘Yes we can’ might help.

Update (20/2/11):   Jeremy Clarkson has hit the nail on the head in the Sunday Times.  He sums up the Big Society message as “ask not what the state can do for you but what you can do for yourself.”  Downing Street please note and circulate.

The hysteria with which the fall in fourth-quarter GDP has been greeted underlines how essential it is that the Government finds a replacement for Andy Coulson.  Cameron and Osborne urgently need someone who can explain to the man in the street why he should not lose faith in the  coalition’s programme for getting the economy back on track.  The absence of a coherent narrative has left the field wide open to the doom-mongers, whose every utterance tends to confirm my view that most media commentators are economically illiterate.

Anyone who seriously thought the recovery could be maintained without some bumpy patches belongs to lalaland.  Nevertheless, it is under way.  The devaluation of sterling has improved the prospects for exporters and the economy as a whole is well-placed to return to balanced growth over the next few years.  If previous announcements by the ONS are any guide, yesterday’s figures will be revised upwards in due course and could even cancel the fall in GDP.

That said, the reality is that the slow-down has been caused more by the ending of Labour’s pre-election economic stimulus than by the budget cuts, which have barely begun to bite yet.  So ministers need to regain the communication initiative and explain to people why the deficit needs to be reduced and why there is no such thing as a pain-free recovery.

Two cheers for the Government’s European Union Bill, currently due for its second reading, which will enshrine in law the  obligation to hold a referendum on any future moves to cede a significant amount of sovereignty to the European Union.  This obligation will extend to amendments to existing treaties .  So far so good.

The fly in the ointment is the definition of what constitutes “significant” and who will make that decision.  The Bill leaves this responsibility with the Minister concerned, but that is a receipe for fudge and muddle.  You can imagine, for instance, that former Lib Dem MEPs Clegg and Huhne might take a very different view of the issue to someone like Nick Herbert, the former chief executive of the successful No campaign against the euro.

Having been heavily involved myself in both the No Camapign and the ultimately unsuccessful battle to persuade Gordon Brown to hold a referendum of the European Consitution (aka the Lisbon Treaty), I am aware that what might be “significant” to most people can be dismissed by ministers as minor.  It was hugely frustrating to hear Brown and other apparatchiks continue to trot out the mantra that the Lisbon Treaty would have no significant constitutional impact. Everyone knew that was tosh but there was no mechanism to compel the Government to admit that they were signing up to a massive transfer of power to Brussels.

The solution, surely, would be to create an independent body – similar to the Office for Budget Responsibility – which would review all proposed European legislation and rule on the significance of any proposed transfers of power.  Worth a try?

Now might be a good time for the Government to implement its pre-election pledge to repatriate powers that have been appropriated by the EU.  In particular, they should insist that Britain retains control of the regulation of the financial sector.

As a nation, we have been so busy pillorying bankers and their obscene bonuses that we’ve lost sight of the bigger picture – ie that financial services in general and the City in particular constitute a major part of our economy.  Instead of nurturing this sector – including judicious pruning where necessary – Brown’s Government allowed the EU to set up its own regulatory bodies with power to overrule our national regulators – the Bank of England, Financial Services Authority and the Stock Exchange. And where will the new EU regulator be based? Paris, despite the fact that the UK has half of the EU’s financial services industry.  Talk about being asleep on the job.

This is more than just a matter of national pride.  As a conference this week organised by the think tank Reform made clear, Britain has failed to (a) prevent the EU’s proposals and (b) ensure that the top jobs in the new institutions went to Brits with an understanding of how our financial services work.  This  means that the City will undoubtedly suffer.  And jobs will move to less highly-regulated jurisdictions.

Having talked tough about Europe in the past, the Government needs to rediscover its eurosceptic credentials or suffer a loss of credibility.  Cameron and his team worked hard to shed the Conservatives’ “nasty party” reputation, but if they don’t get act swiftly, they will look weak and ineffectual when it comes to standing up for British interests.

First-class infrastructure is essential for much-needed economic growth.  So full marks to Yorkshire Business Insider for its campaign for new high-speed transpennine rail links between Manchester, Leeds and Sheffield – the so-called Northern Hub.  Network Rail has endorsed the scheme, which it estimates will cost about £530m – a lot of money at a time of government spending cuts but peanuts when seen in terms of the economic benefits such a scheme will bring.

Those of us with long-enough memories remember the huge boost that the M62 brought when it was opened.  And if anyone has any doubts as to the need for improved links between Leeds and Manchester, they should try driving from one to the other in rush hour or in the snow or in fog or when there are roadworks.  The time wasted by high-paid executives stuck in traffic must be worth tens of thousands of pounds a year.

This week Transport Minister Mike Penning acknowledged the economic benefits of the proposed Northern Hub but said the Government couldn’t at this stage commit to investing any money. Fair enough but isn’t this an opportunity for Network Rail and other intersted parties to think outside the box and come up with an imaginative alternative funding scheme? Rather than wait years for the Government to agree to devote taxpayers’ money to the plan -  the cost of which will probably have doubled by then – why don’t they raise the finance by selling bonds?  This would give those who will benefit most from the proposal the opportunity to invest in it as well. 

And while I’m on the subject, why can’t we also have proper road and rail links to Leeds-Bradford airport?

Not for the first time in my life, I’m glad that I’m not Irish.  Not because I don’t think they are delightful people (which they are) but because they are about to lose much of their remaining financial independence. And it’s all because their blinkered politicians were lured into joining the eurozone.

Sometime in the next 24 hours, there will probably be an announcement to say that other Eurozone countries have agreed to provide several billion euros to prop up the Irish economy.  And the price for this largesse will be Ireland agreeing to raise corporation tax from its current level of 12.5 per cent.   Low taxes have helped to attract international businesses to the country, thereby assisting in the transformation of the economy.  But they have also upset the French and Germans who object to being undercut in this way.

Of course it didn’t have to be like this.  The Irish could have opted to stay outside the eurozone, like Denmark, Sweden and the UK.  But the country’s political and commercial establishment was so flattered at being invited to join the same club as the French and Germans that they ignored the warnings.  As Alistair Heath has commented in The Spectator, the eurozone interest rate was just 2.25 per cent, when 9 per cent would have been more realistic.

This ridiculously low rate fueled the mother of all property booms.  And, when the bubble burst, the banks which had had financed the spending spree were destined to go belly up too.  And they would have done if the Irish Government had not promised to guarantee 100 per cent of all bank deposits, while failing to fix the country’s main banks.

As a swivel-eyed eurosceptic, I should be gloating at the situation facing not just Ireland but also Greece, Portugal and Spain.  The reason I’m not is that these countries are our trading partners (we sell three times as much to Ireland as we do to China!) and, if they go broke,they will no longer be able to buy our goods and services.

I was fascinated by the latest fgures from News International, showing that around 50,000 readers have now signed up to become monthly subscribers to the Times and Sunday Times websites.  While this is not a huge figure, it is still significant, especially when you bear in mind that readers can still freely access the online editions of other quality dailies.

The figures work out at some 12,000 new subscribers a month.  At this rate, the two papers could have nearly 1.5 million online subscribers after 10 years, which compares favourably with the current sales of conventional hard copies. 

However, the real reason why my money is on Rupert Murdoch making the paywalls work is his track record.  Having worked for him in Australia, I have a huge respect for his ability to make a success out of ventures that others believe are doomed.

His entry into the Sydney newspaper market started when he bought the failing Daily Mirror from the Fairfax group.  He not only turned it round but made into the city’s biggest-selling afternoon paper.  He later repeated this trick in London, when he bought the failing Sun.  And then he staked everything on investing in the hugely expensive Sky satellite television when nobody else dared to.

The fact that Murdoch is not a particularly sympathetic character should not blind us to his unrivalled media skills.  What’s more, I bet other newspaper publishers will have followed him down the paywall route within two years.

Memo to Alan Johnson: You need to get out more if you want to get to grips with being Shadow Chancellor.  For a start you should talk to some of the 35 captains of industry who today wrote to the Daily Telegraph endorsing the Government’s plans to slash public spending.  These guys live in the real world – not the Westminster bubble – and produce real profits by running real businesses. 

If Mr Johnson ever has the wisdom to ask their opinion, they will explain why raising taxes will not only not work but will do real damage.  In very basic terms, Governments can only spend what they either raise in taxes or borrow on the money markets.  They do not create wealth.  It is more efficient for taxpayers – the real wealth creators - to spend their money (where they choose) than to give it to the Government to spend it on their behalf (usually on things they would not choose to spend it on).  

So, if spending needs to be cut, it is far better to cut Government spending which by definition (and experience) is both wasteful and inefficient rather than private spending. 

Individuals and businesses will continue to spend if they are confident that the economy is on the mend, that interest rates and taxes are not going to shoot up and that Government knows what it is doing (see my previous post).  Nobody likes uncertainty, least of all businesses, and the thought of returning to the sterile, failed policies advocated by Labour is enough to make most us want to emigrate.

Roll on Wednesday.  Then, hopefully, we can get on with our lives again.  Much of the business community seems, understandably, to have deferred all decision-making until the results of the Government’s spending review are known.   So on Wednesday we will know the worst.  George Osborne has pledged to cut state spending by a whopping £83bn by 2015/16 but the focus of his review will be where the axe falls and how quickly the cuts are implemented. 

Few people are shedding many tears for the public sector which has enjoyed an exponential increase in spending over the past 13 years.  But there is a question which everyone is asking: how will these cuts affect me?  For the Government, the acid test will be how effectively they explain not just why the cuts are necessary (most people understand that spending was out of control), but what the effects will be in the short, medium and long-term.  It will not be enough simply to promise a bright future one day.  If people are making sacrifices, they want to know how long the pain is likely to last and when they can expect to feel better.   The Government must now develop - and communicate - a message of hope.