While the army of investment analysts has been trying to guess whether the Bank rate will be cut by a quarter per cent, a half per cent or not at all – it could even rise – the governor of the Bank of England said something much more important and interesting in his press conference on the Bank’s February inflation report. It was that the UK faced “a genuine reduction in our standard of living compared to where it would otherwise have been”. Despite the usual get-out qualifying clause, it made me sit up.

One can argue indefinitely about how to measure the standard of living. The Bank apparently measures it by real take-home pay, defined as “households’ post-tax wages and salaries per employee divided by the consumption deflator”. The latter is an inflation index derived from the national income data, which in principle is far superior to the three inflation indices that the government publishes every month. Unfortunately, it appears only every quarter after a considerable lag and is subject to revision; so it would be difficult (but not impossible) to use it as a target. In any case, the Bank’s take-home pay index has already been squeezed from an average rise of 3 per cent in 1997-2002 to 1 per cent in the succeeding five years even before the further squeeze now envisaged.