Economics

Wednesday

Katy Balls

Rishi Sunak’s low tax pitch to MPs

Is Rishi Sunak a low tax chancellor? He certainly likes to tell anyone who will listen that he is. Yet his actions tend to suggest the opposite. The tax burden is currently on track to reach its highest level since the early 1950s, and while Sunak unveiled one big tax slash in the Budget in the universal credit taper rate cut, the main thrust of Sunak’s announcements was spend, spend, spend. Tonight Sunak addressed Tory MPs at a meeting of the 1922 committee. After announcing £150 billion in extra public spending, Sunak sought to convince his party that, despite this, he was committed to lowering taxes. Having said in the chamber that

Tuesday

Kate Andrews

Sunak faces the free-marketeers

Rishi Sunak didn’t give too much away tonight when he spoke in the ‘ThinkTent’ at Conservative Party Conference. The Chancellor is known for being cautious with his words, and has been increasingly tight-lipped in the weeks leading up to his October Budget. But his presence at the fringe event was telling in itself. Sunak was only billed for one public fringe event this year, co-hosted by the Institute of Economic Affairs and Taxpayers’ Alliance. Their ‘ThinkTent’ boasts some of the most free-market, libertarian events you’ll find at conference: both organisations are strong advocates for a low-tax, smaller state. So, not necessarily an obvious place to find the Chancellor who has overseen record peacetime

Friday

James Forsyth

We’re living through eerie reminders of the 1970s

There are eerie parallels with 1970s at the moment, I say in the Times today. The inflation of that decade was principally caused by the abandonment of the gold standard in 1971 and the oil shock of 1973-4, which saw the price of a barrel of oil go from $3 a barrel to $12. Today, we have seen huge amounts of quantitative easing from central banks to keep the economy going through Covid – and unlike the post-financial crash QE, which was largely used to repair banks’ balance sheets, it has gone into the real economy. On top of that, we have now seen the gas price rise fourfold. There are

Robert Peston Robert Peston

Could the squeeze on living standards bring down Boris?

There is about to be a two-phase onslaught on the living standards of those on low-to-middling incomes. On 1 October the energy price cap, for dual fuel, rises from £1,150 to £1,277. This is a rise of 11 per cent, at a time when furlough is ending and just a few days before the £1,000 a year uplift to Universal Credit is removed (which presumably Boris Johnson will not be swanking about in his big speech to Tory conference). That’s the first hit to living standards. There’ll then be a gradual further erosion of living standards with rising food inflation (of around five per cent, as per what Tesco’s chairman John

Thursday

Ross Clark

Has the Bank of England given up on its duty?

Has the Bank of England’s Monetary Policy Committee quietly excused itself from its duty of keeping inflation down: namely, keeping the Consumer Prices Index (CPI) close to a 2 per cent target? I ask because the minutes of its September meeting, released today, show little inclination to raise rates from their historic low of 0.1 percent, even though it predicts that inflation will rise above 4 per cent and stay there at least into the second quarter of 2022.  The MPC seems to have evolved into a Committee for Leaving Interest Rates Alone or Occasionally Lowering Them You can argue that inflation isn’t everything, that growth matters more and that monetary policy should

Kate Andrews Kate Andrews

China and the WHO are given an easy ride in the Covid blame game

Are you ready to relive 2020? That’s what Adam Tooze is offering as he tells the story of Covid-19 through the spectacular and terrifying economic consequences created by the global health crisis. For many, the answer will be a simple no. But for others looking to make sense of an utterly surreal year, Shutdown might seem an obvious place to start. Unfortunately, the book offers less analysis and more ranting than would normally be expected from an economic digest — especially one written about one of the most startling shocks to the economy the world has ever seen. Some readers may like the rant. If you’re of the opinion that

Wednesday

Ross Clark

Green bonds offer nothing but virtue-pleasing

Would you touch a ‘green gilt’ issued by the government, with an interest rate of just 0.87 per cent? Some people, apparently, would. The Treasury announced yesterday that it had shifted the first £10 billion tranche of ‘green gilts’ to raise finance for projects such as zero-carbon buses, wind farms and other green things. Indeed, the bond – which matures in 2033 – was ten times oversubscribed. The government had already planned to issue a further £5 billion, and might now be encouraged to issue far more. Green gilts are just more government borrowing, rebranded to make lending to the government look virtuous With the government’s preferred measure of inflation,

Friday

Matthew Lynn

Three big problems with the government’s planned tax hike

We are in the middle of a once-in-a-generation shift: working from home. There are skill shortages across the economy, supply bottlenecks, and empty supermarket shelves. A couple of million people are still set to come off furlough, back into jobs that may no longer exist. The labour market is in utter chaos. But, hey, here’s a good idea. Let’s whack a tax on jobs. Really? The government’s widely leaked plan to increase National Insurance, a tax on jobs, could not come at a worse possible time.  The government’s widely leaked plan to increase National Insurance, a tax on jobs, could not come at a worse possible time We can all debate whether

Sunday

Ross Clark

The NHS blood tube shortage should concern us

One of the great lessons from the early stages of the pandemic was the need to shorten supply chains and make them more robust. This was especially true for medical supplies. Just-in-time supply chains have been developed over the years to increase efficiency, but had never been tested in a global crisis when demand for certain medical products is high and supply is weak. The government ended up paying huge sums for PPE which, in some cases, was not even suitable for use. The shortage raises eyebrows because a plastic tube is, after all, a plastic tube It seems the lesson has not entirely been learned. There is now a shortage of

Thursday

Julian Jessop

Ignore the gloomsters, the economy is roaring back

The horror! Yesterday we discovered that UK economic output — as measured by GDP — fell by 1.6 per cent in the first quarter of the year, 0.1 per cent worse than the 1.5 per cent originally reported. This is practically a rounding error. To put it in context, as recently as March the Office for Budget Responsibility, which crunches the numbers for the Chancellor, was forecasting that GDP would fall by 3.8 per cent in Q1. As well as still beating these gloomy expectations, the latest figures are also old news. But if anything, the detail is encouraging. The downward revision to headline GDP was largely due to a bigger decline

Thursday

Matthew Lynn

The EU’s debt bondage expansion

In the global market for government debt, worth an estimated $92 trillion (£66 trillion), it amounts to little more than a drop in the ocean. The European Union this week issued the first €20 billion (£17 billion) of bonds to pay for its Coronavirus Rescue Fund. The money itself doesn’t amount to very much one way or another. And yet, the Commission’s President Ursula von der Leyen was surely right when she described it as a ‘truly historic day’. Why? Because, the Commission is already using it to seize control of fiscal policy, just as it used vaccine procurement to take control of health policy. Its enthusiasts have already hailed the

Monday

Ross Clark

Is Britain facing a jobs crisis?

The ONS recorded a sharp recovery in economic growth in March. The Bank of England has already increased its forecast for the growth of the UK economy in 2021. Now comes more evidence of rapid growth. The quarterly CIPD/Adecco Labour Market Outlook, published today, shows a sharp rise in the number of organisations that are hiring extra staff or are expecting to do so over the next few months. The survey, which goes out to 1,000 employers in the private, public, and voluntary sectors, found that 36 per cent of employers are planning to increase staff levels over the next three months. Nine per cent said they are expecting to

Friday

Charles Parton

What China wants from Britain

What are we to do about China? To turn a phrase beloved by the Chinese Communist party (CCP) on its head, Beijing is increasingly ‘interfering in our internal affairs’. Yet if you hoped to answer that question by reading the recent integrated review of defence and foreign policy, the most you would find is that China is a ‘systemic competitor’. But recognition is not a strategy; at best, the review indulged in ambiguity, or perhaps obfuscation. The Prime Minister wants good relations with China. Who doesn’t? Certainly, a new Cold War would be disastrous, for us and for the CCP. But if we do not set clear boundaries, we risk

Kate Andrews Kate Andrews

A windfall tax would only hurt our weakened economy

The calls for tax hikes is ramping up. Last December the Wealth Tax Commission recommended a ‘one-off’ 5 per cent levy on the assets of Britain’s wealthy to pay for the growing costs of Covid-19. In January Oxfam followed suit, using its yearly inequality report to call for big taxes on wealth and high incomes. Now, it’s the International Monetary Fund’s turn, recommending not only a temporary income tax hike for high earners, but also a windfall tax — that is, a tax on ‘excess profits’ — on businesses that faired well and profited during the pandemic. The concept of wealth taxes on individuals is bad enough. Over the past

Thursday

Annabel Denham

Is this the end of the gig economy?

Before too long, news that Uber will offer 70,000 drivers holiday pay and the national living wage will be viewed less as an unmitigated triumph than a Pyrrhic victory. In the UK you can be an ’employee’ with an ever-growing raft of employment rights, a ‘worker’ with rather fewer rights, or ‘self-employed’. These statuses have different implications for tax purposes. Last month, the UK Supreme Court, ending a six-year case brought by two Uber drivers, ruling that the ride-hailing firm must classify drivers as workers rather than self-employed. This week, the consequences of that judgment begin to be felt — though it is the government’s fault that, in repeatedly failing

Monday

Patrick O’Flynn

Why Farage’s successor is ignoring the culture war

The departure of Nigel Farage from the stage does not necessarily mark the end of the ‘revolt on the right’ that has so shaken up British politics over the past decade. Followers of the fortunes of the Brexit party, which has now morphed into Reform UK, will know that Richard Tice has been the coming man for many months. Today Farage’s newly-appointed successor as party leader (the party doesn’t, as yet, do internal elections) sets out the ground on which he has chosen to take on the political establishment — for which one should read ‘nibble away at the Tory vote share’. And Tice has chosen to ignore the fashionable notion

Saturday

Jethro Elsden

The big state won’t save our post-Covid world

The big state is back. The Budget puts Britain on a path to having the highest tax levels since the 1950s, and a state that controls as much of our GDP as it did in the days when it still owned carmakers, phone lines and travel agents. Despite Rishi Sunak’s best efforts to contain spending, the figures are likely to go higher still, as the bills for the NHS, social care, and disrupted education continue to rise. But it’s not just about the numbers. Even before the pandemic, the political winds were blowing towards larger government, with Boris Johnson embracing a more muscular, state-led industrial strategy. But the pandemic has

Friday

Ross Clark

Why aren’t we in a recession?

Well, that’s alright, then — we’re not going to have another recession. True, the Bank of England’s monetary policy committee expects the economy to shrink by 4 per cent in the first quarter of this year — following a fall of 9.9 per cent fall last year, itself the deepest plunge in economic growth in modern times. By the spring, we may have several million unemployed as the furlough scheme comes to an end. Many thousands of businesses could go bust as they run out of money and government help is withdrawn. But at least we won’t be in recession: because that ended last June and now we’re back in

Monday

Cristopher Snowdon

Covid-19 and the problem with ‘happiness’ research

Today is supposedly Blue Monday. Sixteen years ago, a travel agency published a press release claiming that the third Monday in January is the most depressing day of the year. The idea is superficially plausible. It’s mid-January. It’s cold. You’re skint after Christmas. You’re back at work after the weekend. There are worse candidates for the most miserable day of the year. But as a scientific claim, it was swiftly debunked and the academic responsible for it has since disowned it. It lives on as a way of filling space in newspapers and is probably most famous for being untrue. If it weren’t for the ‘I think you’ll find it’s

Wednesday

Katy Balls

Can Labour win back trust on the economy?

What’s the Labour party’s biggest weakness at the ballot box? After the last election, Brexit and Corbyn were credited by Tory MPs with helping them win the biggest Conservative majority since Margaret Thatcher. But now the UK is out of the EU and Keir Starmer in charge, there’s an argument that it’s now the economy that is their biggest weakness.  A YouGov poll over the summer found that while Starmer’s personal approval ratings are promising, only 19 per cent of voters believe that Labour to be best at handling the economy, compared with 37 per cent who say the Tories are. Given that six in ten voters view the economy as their