Economy

Tuesday

Ed Holmes

Allowing growth, not forcing it

What is a “Budget for Growth,” and how can one be delivered? These questions have been preoccupying civil servants across Whitehall, policy folk in think tanks, and the press since the coalition announced in November that it would be reporting back on its “Growth Review” in the 2011 Budget. While foreign events rightly moved discussion of the impending Budget further back in last weekend’s papers, there was extensive coverage of the potential for targeted tax cuts and reliefs and incentives targeted at particular industries or sectors. The obvious problem with a number of these is that they cost money, and this is something the coalition does not have in spades.

Fraser Nelson Fraser Nelson

Inflationary troubles ahead of Osborne’s Budget

Unwelcome news for George Osborne: he will tomorrow present his Budget against a backdrop of the highest inflation for 20 years. The RPI index — what the nation called “inflation” until Brown changed the definition — is 5.5 per cent. It hasn’t been this bad since the aftermath of the ERM crisis, an unhappy comparison for the Tories. The CPI index is up to 4.4 per. And those who deploy the usual arguments about global food prices are spiking might wonder: why is Britain now even worse off than Greece?     Even the Zimbabwean media is laughing at us (their inflation is now considerably lower than ours). It’s shocking,

Sunday

Nick Hayns

Debunking UK Uncut

You may have heard of UK Uncut? They’re certainly good at attracting attention: forcing their way into Barclay’s bank the other week and managing to close a branch of TopShop temporarily.   But what they have in noise they lack in substance. New research by the Institute of Economic Affairs exposes how the ‘grassroots movement’ want Vodafone to pay tax in the UK on the profits it makes in Germany. It’s a reasonable principle – taxing companies based on where they are domiciled is fine. But they also want Boots, a Swiss company, to pay tax in the UK on the profits it makes selling items to Britons, from British shops.

Friday

David Blackburn

The world according to Alistair Darling

There was a time when  “http://blogs.wsj.com/iainmartin/2010/04/30/alistair-darling-labours-caretaker-leader-in-waiting/”>commentators on the right thought that Alistair Darling may become Labour leader, such was the respect he commanded. Alone among Brown’s Cabinet, Darling rose above the ideological opportunism and infighting to emerge with his reputation enhanced. Darling is ready to tell of his part in New Labour’s downfall. This morning’s Independent “http://www.independent.co.uk/news/people/profiles/alistair-darling-we-were-two-hours-from-the-cashpoints-running-dry-2245350.html”>previews the book by interviewing the former chancellor. Typically, perhaps, for the studious-looking Darling, he is not ‘spicing things up’ (it’s rather wonderful that he doesn’t use a derivative of ‘sex’ here). He promises to the ‘write the story down’ and is adamant that there will be none of the ‘gratuitous kiss and tell stuff’. Other than

Thursday

Peter Hoskin

Another Budget snippet

Benedict Brogan’s latest post is built around an observation from Jo Johnson on the 50p rate, yet it is Brogan’s own observation that gets a place in our Budget scrapbook: “Some people I have spoken to think George Osborne might be sufficiently worried about the growing exodus of entrepreneurs to put down a marker on 50p in the Budget next week.” Whether this “marker” transpires — and what it might look like, if it does — is something we shall have to wait for. In the meantime, it’s worth noting that Labour have already set a marker on 50p: that it will have to remain for the duration of this

Peter Hoskin

Osborne’s grand merger?

George Osborne’s Budget — his plan to deliver us from “rescue to recovery,” apparently — is less than a week away, and the wildfire of speculation is taking hold. Perhaps the most intriguing titbit in today’s papers is one that also appeared in the Express last Saturday: that Osborne is considering merging income tax and national insurance. This is a measure that the Office for Tax Simplification recommended in a report last week, suggesting that it would ease the administrative burden on small businesses. Yet that simply echoes a viewpoint that stretches back decades. This IFS report, for instance, quotes an article published by the British Tax Review during the

Wednesday

Peter Hoskin

Not great, not a disaster

Last November, the OECD forecast — as it does — that the UK economy would grow by 1.7 per cent in 2011. Today, it has downgraded that figure to 1.5 per cent. I wonder, does this matter? Sure, it’s not an encouraging sign. And Ed Balls will be slathering at the thought of the OBR doing likewise next week. He has barely been able to contain his excitement already. Yet it’s worth pointing out two things. First, that the OECD is just one forecaster among many. The Treasury monitors no less than 39 independent organisations, and collects their forecasts on a monthly basis. Here’s what the picture looks like today:

Peter Hoskin

David Cameron’s dreams and nightmares are written into today’s employment figures

It is almost a cliche to describe jobs figures as a “mixed picture” — and yet that’s exactly what today’s are. Beneath the headline finding that the number of unemployed people has risen above 2.5 million, are numbers that will fuel not only David Cameron’s happiest dreams, but also his most paranoid nightmares. Let’s start with the nicer stuff first. The graph above shows the cumulative change in employment levels since the recession started to take hold in 2008. What it shows is something that often goes ignored: that is was the private sector, not the public sector, that took the greatest hit from the crunch. At the depth of

Tuesday

David Blackburn

The EU wants concessions out of Ireland

The mood in Dublin is febrile, despite the gloom of 14 percent unemployment. Everyone has advice for Enda Kenny on how to revive the Celtic Tiger. This morning, 17 prominent businessmen and public figures submitted A Blueprint for Ireland’s Recovery to the Department of the Taoiseach. The Irish Times reports that the authors propose deeper spending cuts and greater efficiency in the public sector. This is a different approach from influential Irish Economist Colm McCarthy, who argued on Sunday that ‘fiscal stringency is not enough to resolve the crisis’ because the banking restructure (contained within the IMF/EU bailout) is ‘impractical’. Enda Kenny, it seems, agrees with McCarthy, which is why

Monday

David Blackburn

A model council

Councils from Liverpool to Bromley have cut voluntary sector funding; but Reading Borough Council is defying the trend. It will increase its voluntary sector funding by more than £200,000 in 2011-12. This will be achieved by transferring £956,000 in loose grants to strict revenue contracts, which deliver greater value for money. This is part of a wider administrative rationalisation that raised an extra £181,000 for local groups, which will now apply for cash on a clearly specified basis to ensure that frugality survives the current efficiency drive. An efficiency drive was certainly needed. The detailed appendices to Reading’s Budget Grants (here for commissioning intentions and here for information on grants,

James Forsyth James Forsyth

Are two Eds better than one?

This was the question raised by today’s joint Balls Miliband press conference. The two Eds are very different in both body language and temperament. Balls is the far more pugilistic politician, always looking to dispute the premises of a question and happy to use aggressive language. While Miliband is far more of a conciliator, looking to find consensus and using only gentle humour. They even stand at the lectern in different ways: Balls hunched over his, leaning into the fight. Miliband hanging back from his, and taking a gentle step towards it when answering a question. The danger for Miliband is that Balls appears to be the alpha male, the

Peter Hoskin

Balls and Miliband fail the credibility test

Eds Miliband and Balls gathered the press corps together this morning to broadcast a straightforward message: oh yes, we do have an alternative. And the shape of that alternative? A repeat of the one-off tax on bankers’ bonuses that, Balls claimed, raised £3.5 billion last year. The money would be used for an entire buffet of economic delights, from the creation of new houses to the funding of job schemes for the young. The upshot, apparently, would be 110,000 new jobs. Nice work, as they say — if you can get it. But there are a couple of problems with all that, the first of which Labour has pre-empted. It

Thursday

Fraser Nelson

Our monetary policy needs sorting — and quick

Today’s decision to leave base rates at an emergency 0.5 per cent — the lowest since the Bank of England was founded in 1694 — shows how Britain is running out of options. Not even Mervyn King would deny that Britain has an inflation problem: global prices may be up, but the UK seems to have been hit worse than almost any major economy, as I blogged yesterday. With food prices up by 6.3 per cent and CPI inflation by 4.1 per cent, what’s happening to prices? The below graph, again out today from a FTSE350 survey, suggests that pay is up by just 0.5 per cent in the private

Tim Morgan

Cuts? Regulation needs to be cut

The cuts in spending are going to feel very unpleasant indeed. Rising interest costs, resulting from past expansions in public debt, are going to crowd out other parts of the budget. It is proving difficult to curb the cost of transfers, such as benefits and pensions, and this combines with the ring-fencing of health and development spending to leverage the cuts in unprotected departments. But, as I show in my report published today by the Centre for Policy Studies, the stark reality is that the spending clock is only being turned back to 2008-09, not to the dark ages.   In fiscal year 2014-15 the government plans to spend £758bn,

Wednesday

Matthew Hancock-Mp

Abel fights back

One of the hardest tasks of any opposition is to gain the trust and credibility to run the economy. After what happened over the last few years, Labour have an enormous credibility gap. Ed Balls’ decision to oppose any measure to deal with the deficit has reduced Labour’s economic credibility still further. So too has the two Eds’ decision to make attacks based on mis-truths, like denying there was a structural deficit before the election; or attacking the coalition for cutting bank taxes, when it is actually putting them up; and like backing another bonus tax, despite opposing it at the election, and despite Alistair Darling’s careful explanation of why

Monday

James Forsyth

A princely problem

Tonight’s Six o’clock news had a long package on Prince Andrew that ended with Laura Kuenssberg reporting from Downing Street on the government’s attitude to the prince. The fact that the government is now so much part of this story is due to an unforced error on its part.   It was the briefing yesterday about how if more came out then Andrew would have to resign as trade envoy that pushed the government right into the middle of this sorry story. This set journalistic hares running and had everyone demanding to know what the government’s position was. The government, which had got involved in this story more through cock-up

Saturday

James Forsyth

Osborne’s political economy

George Osborne’s speech to the Tory spring conference today showed the classic left-right way in which he wants to frame the political debate about the economy ahead of the Budget on the 23rd of March.  In a move straight out of the election-winning centre-right playbook of the 80s, he attacked Balls and Miliband as “Two left-wing politicians who don’t understand anyone who wants to get up and get on, anyone who want a better life for their family, anyone who want to create wealth, and start a business, and create jobs, and leave something to their children.” He tried to portray the Conservatives as the antithesis of this, as the

Friday

Alison Munro

The economic case for HS2 explained

Matthew Sinclair’s piece on high-speed rail makes two main criticisms, both of which have already been addressed in the material published earlier this week for the consultation – but I would like to explain our approach again here.   First, Matthew criticises our forecasts. He would prefer us not to forecast demand beyond 2026, but HS2 would be a long term investment and would bring benefits for successive generations over many decades. It would be absurd to forecast only 10 years ahead. Therefore, we have taken a longer term but still realistic view. Demand for long distance rail travel more than doubled between 1994 and 2009 – an annual growth

Mark Littlewood

Plurality or not?

With all the provisos attached to News Corp’s takeover of BSkyB, opposition to the deal has surely now been diluted. But there are, perhaps, two groups who can still legitimately complain about the outcome.   Firstly, those of us who believe that unrestricted freedom of speech is vital in the TV broadcasting arena. The Murdoch empire has had to surrender its news channel in order to, essentially, buy a profitable platform for broadcasting sport and movies. This is seriously disturbing for anyone who feels that the BBC’s output of ‘neutral news’ needs to be challenged. The only major independent broadcaster – ITV – gave up long ago with their own

Wednesday

David Begg

The strong business case for HS2

Matthew Sinclair argues that the government’s plans for high-speed rail would not create enough jobs to justify the government spending money on the project. But his argument is disingenuous as he is not comparing like for like. He is comparing predictions about jobs created directly by high-speed rail with predictions about jobs created indirectly by investment in the wider economy. The 40,000 jobs created directly by high-speed rail are simply the tip of the iceberg – tens of thousands more will be created by the investment boom in the cities the new line will link up. These are the jobs being created by the “wider economy” that he mentions, but