The warning comes from the Policy Exchange, whose chief economist, Andrew Lilico, argues an economic recovery will unleash a wave of money.

Doctor Lilico believes a double-dip recession is likely, which would then be followed by a boom.

He argues that the US and UK monetary authorities will respond to this by printing more money.

Coupling that, he says, with the planned deep government spending cuts, would lead to the fastest economic growth rate since the late 1980s.

Doctor Lilico says in a research note: "Once the economy gets growing sustainably, there will be a huge expansion in the money supply, which will lead to inflation."

The Bank has already pumped £200bn into the economy under quantitative easing to help stimulate demand.

'Rise rapidly'

He says that policy of the Bank of England has quadrupled the monetary base and once the economy starts growing properly again, lending will expand and there will then be "too much money chasing too few goods".

Doctor Lilico believes that "once inflation rises, interest rates will rise rapidly as well. Since interest rate rises will raise mortgage rates, the initial effect will be even more inflation".

He expects inflation to hit a similar level to that of the early 1990s, in the region of 10%.

Base rates have been at record lows of 0.5% for the past 16 months.

At the last meeting of the Bank of England's Monetary Policy Committee (MPC), only one member suggested a modest rise in rates to 0.75%.

The Bank has said that it is not overly concerned about price rises, even though they are rising at more than 3% a year, above the 2% target.

The Bank's governor, Mervyn King said he had been "surprised" by the recent strength of inflation, but added the factors pushing prices higher were temporary.

From the bbc

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Identity fraud is likely to accelerate in 2010 as organised criminals target the rich, according to a report.

Some 72% of ID fraud in 2009 came in the second half of the year with company directors and business owners the most at risk, Experian found.

The credit reference agency said that the number of ID fraud victims rose by 20% in 2009 compared with 2008.

London remained the UK's crime hotspot area but Salford, Manchester and Cardiff were also vulnerable, it said.

Recession effect

Experian also noted a rise in the proportion of fraud cases when people manipulated their own information in order to access financial services such as credit.

The company estimated that these numbers would increase owing to lower levels of lending and the potential for more unemployment in 2010.

"Attempted fraud is on the increase and the nature of the threat is changing," said Nick Mothershaw, of Experian.

"Organised criminal fraudsters are moving into the mass-market, looking beyond those with obvious wealth towards lower-value but more vulnerable targets.

"At the same time, financial stress brought about by the recession is driving increasing numbers of people to commit fraud to maintain their lifestyles."

From the BBC

Revised GDP figures show that the uk economy grew by 0.3% in the 4th quater of 2009.

The initial estimate last month showed a 0.1% in the last quater of 2009.

The economy had been on a slide dropping for the last six quaters. The longest period since quaterly records where first recorded in 1955.

Poor winter weather drove UK retail sales down by 1.8% between December and January, the sharpest drop in 18 months, official figures have shown.

The fall was more than three times faster than analysts had forecast. However the figures were weighed down by the inclusion of petrol in the official figures for the first time as drivers stayed at home in the snow.

The data, from the Office for National Statistics, adds to concerns about the fragility of the UK economic recovery. Sales by value were up 0.9% from January 2009. Fuel sales slipped by 11.1% on the month. When the impact of car fuel sales was stripped out, overall retail sales fell by 1.2%. Food sales fell by 2.4%, but the ONS said the cold weather had boosted sales of clothing.

Double-dip' risk

The period covers the first month since Value Added tax (VAT) returned to 17.5% after a temporary drop to 15%. This is thought to have brought some sales forward to December, thereby hurting the January figures.The data follows on from news that UK inflation had accelerated to 3.5%, that the government borrowed another £4.3bn in January to plug the growing hole in the UK's finances and there had been an unexpected rise in people claiming Jobseeker's Allowance. "January's retail sales figures round off a pretty awful week for news on the UK economy," said Jonathan Loynes, chief European economist at Capital Economics."Of course, we knew the January sales figures would be bad after the VAT rise and bad weather. But the drop is even worse than the retail surveys had suggested." He added that sales could bounce back in the coming months - but that as people's wages grew only slowly and prices roses, spending growth was likely to slow.
"At the very least, these numbers provide a very weak platform for sales in the first quarter of this year and therefore raise the chances that the economy may succumb to a double-dip uk recession," Mr Loynes said.

The so-called 'double dip' refers to an economy in recession returning to growth, then quickly contracting again.

From the bbc

LONDON (Standard & Poor's) Jan. 28, 2010--We no longer classify the United
Kingdom (AAA/Negative/A-1+) among the most stable and low-risk banking systems
globally, Standard & Poor's Ratings Services noted in a report titled "Banking
Industry Country Risk Assessment: United Kingdom" published today on
RatingsDirect. This is due to our view of the country's weak economic
environment, the reputational damage we believe has been experienced by the
banking industry, and what we see as the high dependence on state-support
programs of a significant proportion of the industry.

We placed the U.K.'s banking system in Group 3 out of our 10 Banking Industry
Country Risk Assessment (BICRA) groups on Dec. 21, 2009, which primarily
reflects our view of relatively high leverage in the U.K. economy and the
losses the industry could bear during the deleveraging process. (For more
information, see "U.K. BICRA Revised Downward To Group 3 From Group 2 Due To
High Leverage In The Economy And Weak Earnings Prospects".) The scale ranges
from Group 1 (strongest) to Group 10 (weakest). The macroeconomic and banking
industrywide factors that affect the BICRA influence all bank counterparty
credit ratings in the U.K.

"In our opinion, the weak U.K. economy will continue to hinder the credit
profile of the U.K. banking industry. This reflects the sharp decline in
economic output and our expectation that the unwinding of the high level of
debt (of the government, households, and certain industrial segments) will
weigh heavily on relative economic growth prospects and banks' financial
performance," said Standard & Poor's credit analyst Nigel Greenwood.

We believe this factor affects the profile of the U.K. banking system more
than it influences the banking systems of most other major mature market
economies in Europe and around the world, notably Canada, France, and Germany
in BICRA Groups 1 and 2.

"In our opinion, the near collapse of a number of financial institutions
damaged the reputation of the U.K. banking system. This led to wide-ranging
state support, including significant government stakes in two of the four
major banking groups. We note that there is a wide dispersion in credit
quality among U.K. banks and that some banks did not require direct government
support," added Mr. Greenwood.

In our view, enhanced regulatory oversight and reform of the framework for
financial stability remains incomplete. Eventually, higher capital and
stronger liquidity requirements may affect the industry's risk profile
positively but, in our opinion, medium-term earnings prospects for the sector
are weak.

The U.K. banking system is concentrated, which helps pricing and efficiency,
and extensive and diversified overseas operations support the credit profile
of three of the four major banking groups. We consider that competition has
reduced as a result of significant ownership changes over the past two years
and retrenchment. Despite the dominance of the major lenders, the U.K. system
has a track record of being both open and attractive to new lenders.
Representing a major financial pool, we consider that the U.K. market will
remain appealing.

The risk appetite of the U.K. banking system is likely to remain constrained
for the foreseeable future. We consider that the financial profile of the
industry will likely only improve gradually as the economy recovers. At the
same time, the U.K. banking industry is likely to undergo profound regulatory
and structural changes over the next several years. If, in our view, these
changes render the industry less prone to excessive credit expansion and more
resilient to economic shocks, we could raise the U.K.'s BICRA classification.
Conversely, the BICRA could be lowered if the U.K. economy fails to strengthen
due to persistent budget deficits and continued imbalances.

The report is available to RatingsDirect on the Global Credit Portal
subscribers at www.globalcreditportal.com and RatingsDirect subscribers at
www.ratingsdirect.com.  If you are not a RatingsDirect subscriber, you may
purchase a copy of the report by calling (1) 212-438-7280 or sending an e-mail
to research_request@standardandpoors.com. Ratings information can also be
found on Standard & Poor's public Web site by using the Ratings search box
located in the left column at www.standardandpoors.com.  Alternatively, call
one of the following Standard & Poor's numbers: Client Support Europe (44)
20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708;
Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow (7)
495-783-4011.

From standard & poors

Switzerland (Reuters) - Chancellor Alistair Darling urged regulators, politicians and the world's leading banks to reach a swift agreement on regulatory changes to keep up momentum generated after the credit crunch.

Speaking to Reuters on the sidelines of the World Economic Forum after two hours of talks between dozens of financial sector heavyweights on Saturday, Darling said some common ground had been reached.

"What has changed is there is an acceptance on the part of banks that they need to make changes and they need to make changes quickly," Darling said in the Swiss resort of Davos.

He said areas of agreement between the sides include the need to increase capital adequacy and living wills.

Referring to a weekend press report that some top bankers had agreed on the need for a wind-down levy, Darling said this was "one of a number of ideas," but said there was no agreement: "This was a discussion forum, no agreement has been reached. Agreements of this nature have to be reached by regulators, it has go to be reached by governments, and banks."

From reuters