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Poor software and bias toward making only small, sequential changes is one of the reasons economic forecasters at the Bank of England failed to predict and prepare for the cost of living crisis, brought about by high inflation, according to a “once in a generation” review.

The review announced last year was undertaken by the former head of the US central bank, known as the Fed, and said the quality of the Bank’s economic expectations “deteriorated significantly in the past few years” due to out of date software and “excessive incrementalism”.

Economic shocks ‘by their nature difficult to forecast’

Though the “unusually large forecasting errors” were said to be “probably inevitable”, according to the review, conducted by Dr Ben Bernanke.

The problem was not unique to the Bank, rather something all central banks and private forecasters suffered from, it said.

Large and unprecedented global shocks hurt economies across the world and brought prices up.

COVID lockdowns brought about supply chain shortages and bottlenecks, while the invasion of Ukraine led energy prices to soar.

Former Federal Reserve chairman Ben Bernanke speaks after he was named among three U.S. economists awarded the 2022 Nobel Economics Prize, during a news conference at the Brookings Institution in Washington, U.S., October 10, 2022. REUTERS/Ken Cedeno
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Ben Bernanke. Pic: Reuters/Ken Cedeno

Such events are “by their nature difficult to forecast”, the Dr Bernanke review said.

The Bank had made a number of inaccurate forecasts – such as expecting a year-long recession and not factoring in the impact of wage rises on inflation – and has been accused of failing to raise interest rates high enough or soon enough to slow inflation.

Interest rates have now been risen to a 2008 financial crisis-era high of 5.25% in an effort to draw money out of the economy and dampen activity.

One of the ‘most serious problems’

One of the “most serious problems” with forecasting at the Bank, the review said, is “key software is out of date and lacks important functionality”.

There’s been “material under-investment” due to short term pressures at the Bank, Dr Bernanke said.

“Major financial investment” is needed to fund upgrades, the review said, though sums were not discussed.

New ways of doing things

New ways of forecasting should also be adopted, according to Dr Bernanke’s report.

To be more accurate, the Bank should model for various economic scenarios, including if wage prices were to rise.

Greater attention should be paid regularly reviewing supply chains, jobs market supply and trade policy.

Modelling should also be done for other sectors that impact the economy, including the financial, housing, and energy sectors.

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The Bank welcomed the review, with Mr Bailey saying work to implement the recommendations has already begun.

It will take “some time”, however, to develop detailed plans before they can even be implemented, he added.

No timeline for adoption has been given, though Mr Bailey said “a phased approach to implementing changes is likely to be appropriate for a programme of this scale”.

Mr Bailey admitted last year there were “very big lessons” to learn about how the central bank had dealt with the economic shocks of recent times.

Dr Bernanke steered the world’s largest economy through the financial crisis of 2008 while at the helm of the Federal Reserve.

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Hundreds of NHS quangos to be axed – as plans unveiled for health funding to be linked to patient feedback

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Hundreds of NHS quangos to be axed - as plans unveiled for health funding to be linked to patient feedback

NHS funding could be linked to patient feedback under new plans, with poorly performing services that “don’t listen” penalised with less money.

As part of the “10 Year Health Plan” to be unveiled next week, a new scheme will be trialled that will see patients asked to rate the service they received – and if they feel it should get a funding boost or not.

It will be introduced first for services that have a track record of very poor performance and where there is evidence of patients “not being listened to”, the government said.

This will create a “powerful incentive for services to listen to feedback and improve patients’ experience”, it added.

Sky News understands that it will not mean bonuses or pay increases for the best performing staff.

NHS payment mechanisms will also be reformed to reward services that keep patients out of hospital as part of a new ‘Year of Care Payments’ initiative and the government’s wider plan for change.

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Speaking to The Times, chief executive of the NHS Confederation Matthew Taylor expressed concerns about the trial.

He told the newspaper: “Patient experience is determined by far more than their individual interaction with the clinician and so, unless this is very carefully designed and evaluated, there is a risk that providers could be penalised for more systemic issues, such as constraints around staffing or estates, that are beyond their immediate control to fix.”

He said that NHS leaders would be keen to “understand more about the proposal”, because elements were “concerning”.

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Health Secretary Wes Streeting said: “We will reward great patient care, so patient experience and clinical excellence are met with extra cash. These reforms are key to keeping people healthy and out of hospital, and to making the NHS sustainable for the long-term as part of the Plan for Change.”

In the raft of announcements in the 10 Year Health Plan, the government has said 201 bodies responsible for overseeing and running parts of the NHS in England – known as quangos – will be scrapped.

These include Healthwatch England, set up in 2012 to speak out on behalf of NHS and social care patients, the National Guardian’s Office, created in 2015 to support NHS whistleblowers, and the Health Services Safety Investigations Body (HSSIB).

The head of the Royal College of Nursing described the move as “so unsafe for patients right now”.

Professor Nicola Ranger said: “Today, in hospitals across the NHS, we know one nurse can be left caring for 10, 15 or more patients at a time. It’s not safe. It’s not effective. And it’s not acceptable.

“For these proposed changes to be effective, government must take ownership of the real issue, the staffing crisis on our wards, and not just shuffle people into new roles. Protecting patients has to be the priority and not just a drive for efficiency.”

Elsewhere, the new head of NHS England Sir Jim Mackey said key parts of the NHS appear “built to keep the public away because it’s an inconvenience”.

“We’ve made it really hard, and we’ve probably all been on the end of it,” he told the Daily Telegraph.

“The ward clerk only works nine to five, or they’re busy doing other stuff; the GP practice scrambles every morning.”

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Cocaine haul worth nearly £100m seized in one of UK’s biggest-ever drugs busts

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Cocaine haul worth nearly £100m seized in one of UK's biggest-ever drugs busts

A haul of cocaine worth nearly £100m has been seized at a UK port, authorities say.

The haul, weighing 2.4 tonnes, was found under containers on a ship arriving from Panama at London Gateway port in Thurrock, Essex.

It had been detected earlier this year after an intelligence-led operation but was intercepted as it arrived in the UK this week.

With the help of the port operator, 37 large containers were moved to uncover the drugs, worth an estimated £96m.

The haul is the sixth-largest cocaine seizure in UK history, according to Border Force.

Its maritime director Charlie Eastaugh said: “This seizure – one of the largest of its kind – is just one example of how dedicated Border Force maritime officers remain one step ahead of the criminal gangs who threaten our security.

“Our message to these criminals is clear – more than ever before, we are using intelligence and international law enforcement cooperation to disrupt and dismantle your operations.”

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Container ships are one of the main ways international gangs smuggle Class A drugs into the UK, Mr Eastaugh said.

Cocaine deaths in England and Wales increased by 31% between 2022 and 2023, according to the latest Home Office data.

Elsewhere this weekend, a separate haul of 170 kilos of ketamine, 4,000 MDMA pills, and 20 firearms were found on a lorry at Dover Port in Kent.

One of the 20 firearms found at Dover Port. Pic: NCA
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One of the 20 firearms found at Dover Port. Pic: NCA

Experts estimate the ketamine’s street value to be £4.5m, with the MDMA worth at least £40,000.

The driver of the lorry, a 34-year-old Tajikistan national, was arrested at the scene on suspicion of smuggling the items, the National Crime Agency said.

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Fixing welfare a ‘moral imperative’, Starmer says, after government U-turn

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Fixing welfare a 'moral imperative', Starmer says, after government U-turn

Sir Keir Starmer has said fixing the UK’s welfare system is a “moral imperative” after the government’s U-turn.

The prime minister faced a significant rebellion over plans to cut sickness and disability benefits as part of a package he said would shave £5bn off the welfare bill and get more people into work.

The government has since offered concessions ahead of a vote in the Commons on Tuesday, including exempting existing Personal Independence Payment claimants (PIP) from the stricter new criteria, while the universal credit health top-up will only be cut and frozen for new applications.

Speaking at Welsh Labour’s annual conference in Llandudno, North Wales, on Saturday, Sir Keir said: “Everyone agrees that our welfare system is broken, failing people every day.

“Fixing it is a moral imperative, but we need to do it in a Labour way, conference, and we will.”

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Starmer defends welfare U-turn

Sir Keir also warned of a “backroom stitch up” between the Conservatives, Reform UK and Plaid Cymru ahead of next year’s Senedd elections.

He said such a deal would mark a “return to the chaos and division of the last decade”.

But opposition parties have hit back at the prime minister’s “imaginary coalitions”, with Plaid Cymru accusing Labour of “scraping the barrel”.

Reform UK said the NHS “isn’t safe in Labour’s hands” and people are “left waiting in pain” while ministers “make excuses”.

Voters in Wales will head to the polls next May and recent polls suggest Labour are in third place, behind Reform and Plaid.

Labour have been the largest party at every Senedd election since devolution began in 1999.

Conservative Party leader Kemi Badenoch has not ruled out making deals with Plaid Cymru or Reform at the Senedd election.

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At the conference, the prime minister was joined on stage by Wales Secretary Jo Stevens, First Minister Eluned Morgan and deputy leader of Welsh Labour Carolyn Harries.

He described Baroness Morgan as a “fierce champion for Wales” and “the best person to lead Wales into the future”.

Sir Keir said the £80m transition board to support Port Talbot steelworkers after the closure of the plant’s blast furnaces was a result of “two Labour governments working together for the people of Wales”.

He described Nigel Farage as a “wolf in Wall Street clothing” who has “no idea what he’s talking about” on the issue.

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The PM said the Reform UK leader “isn’t interested in Wales” and has no viable plan for the blast furnaces at Port Talbot.

“When you ask him about Clacton, he thinks he’s running in the 2.10 at Ascot,” Sir Keir joked.

“He’s a wolf in Wall Street clothing.”

Mr Farage has said his party wants to restart the blast furnaces at Port Talbot.

Around 20 tractors were parked on the promenade in Llandudno ahead of the speech, as farmers gathered outside the conference to stage a protest.

It was later followed by a pro-Palestine demonstration of around 200 people, with around a dozen counter-protestors also in attendance.

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