Economy

Tuesday

Robert Halfon-Mp

Fuelling the recovery

Today, the government has listened. In his Autumn Statement, George Osborne scrapped the fuel tax bombshell that was scheduled for January 2012.    As regular Coffee House readers will know, more than 100 MPs supported my cross-party campaign for cheaper petrol. At its height, it saw an e-petition attract more than 124,000 names — triggering a full MPs’ debate in Parliament. It has been a very long campaign, working with many organisations, from FairFuelUK and the RAC, to the independent forecourt industry, The Spectator and the Sun, to thousands of members of the public who wrote to me in support. Over several months, I have asked questions in Parliament, spoken

Fraser Nelson Fraser Nelson

Osborne has made the right choice — but it’s not without its costs

Today, George Osborne had a choice. Growth prospects have evaporated, and tax revenues along with it. Should he reopen the 2010 Spending Review and cut the spending totals? Or stick with those totals, and finance this with extra debt? He chose the latter. And I think, on balance, he was right to do so. Credibility is the most valuable currency in this eurozone crisis, and Osborne said it was a fixed five-year plan. He chose more debt over less certainty, and it looks today like the markets believe he chose correctly.  But all this comes at a cost. The government will now run deficits higher than those which Labour proposed.

Peter Hoskin

Growth has upset Osborne’s plans — and it’s likely to get worse

The real story, as everyone expected, wasn’t in the Pre-Budget Report ‘Green Book’ — but in the supplementary document produced by the Office for Budgetary Responsibility. Growth forecasts have taken a dive. And while that is both unsurprising and not all that revealing, it carries grim implications for so much else. I mean, just look at the graphs we produced in our last post: forecasts for debt, unemployment and borrowing are all up. It is not a pretty picture. But despite the dreariness of it all, I suspect that the numbers are far too optimistic. The clue comes at the start of the OBR report: ‘The central economic and fiscal

Peter Hoskin

On the road to break-up?

Before we plunge into the Autumn Statement, we really ought to mention the poison cloud hanging over Brussels today. European finance ministers, including George Osborne, are meeting there later — and it’s certainly not going to be good for their collective health. Klaus Regling, the head of the European Financial Stability Facility (EFSF), is expected to tell them that there’s basically no chance of them boosting the bailout fund to €1 trillion in the near future, as was promised at the end of last month. Back then, David Cameron urged eurozone leaders to bring a ‘big bazooka’ to the fight. They have barely managed a cap gun. This is far

Monday

James Forsyth

Osborne has a few cards up his sleeve, but no aces

In some ways, George Osborne will always be haunted by his 2007 Tory conference speech. That speech and the reaction to his commitment to raise all estates worth less than £1 million out of inheritance tax contributed to Gordon Brown not calling an early election. It has a claim to be one of the most important speeches in modern British politics — it is certainly the one that saved the Cameron project. But it has also created an expectation that Osborne has a set of aces up his sleeve every time he stands up to give a big speech. Tomorrow’s speech won’t see the Chancellor pull out any unexpected trumps.

James Forsyth James Forsyth

Preparing for the strike

Wednesday’s strike is going to be big — unlike the one in June, which I suspect most people didn’t really notice. You’re not going to be able to miss this one as 90 per cent plus of schools shut — compared to a third in June — and it takes half a day for anyone coming to Britain to pass through passport control. Michael Gove’s speech this morning is being widely seen as the government taking a more confrontational attitude to the strike. But I think that’s only half the story. What Gove was trying to do was appeal to the union membership while attacking those union leaders who really

Peter Hoskin

Those gloomy OECD projections in full

Thanks to the tremors along Westminster’s grapevine, we already knew that today’s OECD Economic Outlook would make for pretty dreary reading. But now that the report is actually out, we can see the organisation’s numbers for ourselves. The headline point appears to be that the eurozone is in, or is facing, ‘mild recession’. Or to put it in graphic form: And the current situation isn’t look particularly encouraging for the UK either. The first heading in the section on us reads ‘The economy is weakening sharply’. And a subsequent pair of graphs predicts, first, that we’ll experience a mild recession of our own across the next two quarters, and then

Sunday

Daniel Korski

Tobin tactics

The biggest bone of contention between the UK and its EU allies these days is the ‘Tobin tax’, the idea of levying a tax on financial transactions. To the UK this is folly. Unless it is levied globally, a tax will force business to move elsewhere. And there is a greater chance of Silvio Berlusconi being elected ECB chief than the Tobin tax being levied globally.   Based on the experiences of Sweden in the 1990s, the tax will achieve none of what its proponents believe it will — and at a considerable cost to Britain’s and Europe’s economy, as companies look to list elsewhere to avoid it. As Ryan

Patrick Nolan

Why infrastructure isn’t a magic tonic for the economy

Growth plans are a high growth industry — with every day bringing yet another set of ideas, from one quarter or another, for how the government can fix the economy. And one suggestion pops up quite frequently in all these plans: bring forward spending on infrastructure. This is often presented as a simple thing to do, with few (if any) downsides. But how realistic is this? We know that infrastructure is important for growth. Economic texts generally suggest that the ‘multiplier effect’ (when government spending leads to more private spending later on) from is higher for infrastructure spending than for spending in other areas, such as health and welfare. We

James Forsyth James Forsyth

The Tories’ latest frustration with the Lib Dems

Nick Clegg’s interview in The Observer today highlights what is fast becoming one of the biggest tensions in the coalition: the Lib Dem desire to show that they are the governing party who cares. Allies of Iain Duncan Smith have been infuriated by Lib Dem suggestions that the government would be doing little about youth unemployment if it was not for them. But Clegg repeats the claim to The Observer: ‘Whether it’s on youth unemployment, whether it’s on youngsters, whether it’s on getting behind advanced manufacturing and not putting all our eggs into the City of London basket, I don’t think that would have happened without the coalition.’ A growing

Saturday

Daniel Korski

How can Cameron protect our interests in Europe in the short term?

Chatting to people in Brussels last week, I couldn’t help feeling that David Cameron’s EU problem is one of timing. The PM will probably be able to piece together a repatriation package that includes measures such as a withdrawal from the over-implemented Working Time Directive and a reduction in the EU budget. But none of this is likely to be enough for his party. Indeed, I suspect the budget won’t be finalised until two minutes to midnight during the Lithuanian EU Presidency in 2013. Add to this the Tobin Tax, where there seems to be little leeway for the British government. Barosso, Merkel and Sarkozy are determined to introduce it,

Friday

Peter Hoskin

A Clegg-up for young workers?

There was a time when Nick Clegg was the most agile and persistent defender of the coalition’s deficit reduction programme. But now — although he’s still got it in him — he is more often wheeled out to announce some spending wheeze or other. A couple of weeks ago, it was the next instalment of the government’s regional growth fund. Today, it’s a £1 billion scheme, spread out over three years, to encourage companies to take on young people. This latest scheme is one of those that looks very neat on paper. Put aside questions about how it will be funded, and what we have is a plan whereby £2,275

James Forsyth James Forsyth

Europe’s debt overspill

That Italy is now paying around 7.8 per cent for two-year borrowing, compared to the 4.5 per cent it was paying just last month, is a reminder that the imposition of a technocratic government was far from a solution to the country’s problems. With €8 billion more debt to be sold on Tuesday, there’s little respite for Italy coming up. One does have to wonder how long they can carry on like this.   But Italy’s troubles need to be seen in conjunction with what happened at the German bund auction this week. The problems that even Germany is having in getting its debt away at a good rate is

Thursday

James Forsyth

Miliband’s opportunity in the economic debate

Political debate is going to be dominated by the economy between now and the autumn statement. Ed Miliband is trying to use this moment to persuade the public that the Coalition’s economic policies have failed. By contrast, the Tories want to highlight how much deeper trouble the country would be in if it did not have the confidence of the bond markets. The Tories hope that this ‘stay close to nurse for fear of something worse’ approach will eventually deliver an election victory for them in 2015, given how hard Labour is finding it to regain credibility on the economy. As Ben Brogan wrote the other day, this strategy worked

Wednesday

Lloyd Evans

Ed looks more dead than deadly

If Roman Abramovich owned the Labour party, Ed Miliband would be toast by now. The floundering opposition leader gave the sort of inept, predictable and ill-organised performance at PMQs that would get a manager sacked in the Premiership. It scarcely helps that Mr Miliband seems to prepare for these sessions like a deluded psychic. He and his team of prophets at Labour HQ clearly believe they can foretell what the prime minster will say and how best to smash his answers to pieces. Referring to the rise in unemployment, Mr Miliband began by attacking the PM for scrapping the Future Jobs Fund in March. He boasted, rather weirdly, that ‘under

James Forsyth James Forsyth

In PMQs, a preview of next week’s battles

Today’s PMQs was a preview of the debate we’ll be having after next week’s autumn statement. Miliband, struggling with a bit of a cold, tried to pin the economy’s problems on Cameron. The Prime Minister’s retort was ‘who would want to put the people responsible for the current mess back in charge’. It was a simple message and one that carried him through the session. The other feature of today’s joust was also a preview of next week: a tussle over the strikes. Cameron said strikes were the ‘height of irresponsibility’. He also made sympathetic noises when Tory MPs asked about imposing minimum thresholds for strike ballots. Afterwards, we learnt

Daniel Korski

Opening Europe

It is an article of British faith that further liberalisation of Europe’s market is a worthwhile goal. But few people realise the boost the UK economy would actually get from the finalisation of the EU’s internal market – especially implementation of the Services Directive, creating an integrated market for energy, modernising public procurement rules and liberalising the digital market. Implementation of the Services Directive alone would add 1.5 per cent of GDP to the EU as a whole in the next nine years, according to European Commission calculations. As the UK has one of the strongest services sectors, this will have direct benefits here. Taken together, progress in all these

Tuesday

Campbell Robb

The government’s housing policies don’t match its strong rhetoric

Yesterday’s housing strategy offered a mortgage guarantee for first-time buyers of new properties, one of the few new announcements in a document largely consisting of re-hashed policy. At best, the mortgage guarantee helps to provide a boost to house builders and welcome relief for some credit-worthy borrowers who simply can’t build up a sufficient deposit. At worst, it encourages risky lending, subsidises high house prices and raises unrealistic expectations for young families. Unaffordable, reckless lending (at least, up until the credit crunch and collapse of the sub-prime market) threatened the stability of the financial sector and caused misery to thousands of homeowners who later found themselves falling behind on payments

Monday

Peter Hoskin

Talkin’ ’bout long-term stagnation

Politics is often a messy squiggle, but this morning’s Resolution Foundation event did much to reduce it to a binary choice. Do we follow the US into a decades-long stagnancy around low-to-middle-income earners? Or do we not? James Plunkett explained the basic dilemma on Coffee House earlier, but more was said by a group of panellists which included Jared Bernstein, Martin Wolf, Steve Machin and Lane Kenworthy. Here, for the saddest CoffeeHousers, are eight points that I’ve distilled from my notes. This is more reportage than opinion, but I thought you might care to applaud or eviscerate some of the arguments that were put forward: 1) The UK triumphant. Or

James Plunkett

Are we facing an American nightmare?

With the Chancellor’s autumn statement due next Tuesday, we’re all talking about growth. The ECB and Bank of England now say the UK economy is set to grow at less than half the rate the OBR forecast back in March. That makes it all but certain that George Osborne will announce dramatic downward revisions to UK forecasts when he stands up in parliament next week. But before all the fighting about Plan As and Bs reaches fever pitch, it’s worth asking what the next decade looked like under the previous, more optimistic growth projections. The answer isn’t pretty and it helps highlight one major question that’s rarely asked in our