Economy

Saturday

Peter Hoskin

Why Ed Balls shouldn’t brag if the OBR downgrades its growth forecasts

Some speculation (£) today that the Office for Budget Responsibility will shortly downgrade its 2011 growth forecast – and hence the growth forecast in next month’s Budget. If so, then you can expect Ed Balls to crow on and on about it. He did, after all, prime the attack in his recent clash with George Osborne across the dispatch box: “With consumer confidence falling, with inflation rising, with no bank lending agreement, no plan for jobs, no plan for growth, no plan B – does he really expect us to believe he can meet this forecast for economic growth this year or will he have to stand here at the

Friday

Fraser Nelson

Inflation: how the nightmare will continue

Each month, inflation numbers come out and seem to surprise everyone – except the chosen few who have access to the forecasts. So I thought we’d share with CoffeeHousers what is all too seldom put on public record: forecasts for inflation and base interest rates. It might be useful to anyone thinking of taking out a fixed rate mortgage deal. These forecasts are from Michael Saunders at CitiGroup, whom I regard as one of the best in the business. Pretty much every analyst thinks that interest rates will soon start a relentless march back to 5 per cent, so these 3 per cent fixed rate deals we’re getting right now

Peter Hoskin

It’s the Q1 2011 growth figures that matter now

The Office for National Statistics’ preliminary figures for Q4 growth, released a few weeks ago, were a curious beast. They they were, suggesting that because of a snow-laden December our economy had started shrinking again, to the tune of -0.5 per cent. And yet so many other indicators were doing rather nicely: from activity in the services sector to the Exchequer’s tax take. Many people, myself included, suspected it was only a matter of time before the ONS revised that -0.5 figure into more positive territory. Now time has passed, and the ONS has just revised the Q4 figure downwards, not upwards. Their preliminary figure wasn’t quite right, they say.

Peter Hoskin

What price a fuel duty stabiliser?

Last we heard, the government was considering what it should, and could, do to suppress rising fuel prices. I wonder whether they have now pencilled something into March’s Red Book. You see, after a swell of speculative fear triggered by events in the Middle East, the cost of oil is going up, up, up. Brent Crude touched $120 a barrel yesterday, the highest price since August 2008, although it eventually settled to around $111. Some observers predict it will soon exceed the previous record price of $150. Naturally, this threatens to unstitch the delicate fabric of the global economy – drastically rising oil prices could bring pervasive stagflation in their

Wednesday

Mats Persson

The EU should impose sanctions on Gaddafi’s Libya

The EU spends €460 million a year in operational costs alone on its new foreign policy department, the External Action Service, headed up by Catherine Ashton. This body – created by the Lisbon Treaty – was Europe’s ‘great white hope’ for the global stage, finally allowing it to speak with one voice and therefore giving it leverage where it previously had none.   It hasn’t quite worked out that way. Caught between Cairo and Tripoli, the EU has received yet another reminder that its bureaucracies and institutions cannot magically replace 27 individual foreign policies, as EU leaders continue their bickering over what to do.   The EU’s response to the

Daniel Korski

Going for growth

The government says it has a growth strategy. Speaking to the Confederation of British Industry’s annual conference last October, the prime minister said his government would adopt a “forensic, relentless focus on growth” in the coming years. The strategy has three elements: creating a framework for enterprise and business investment; directing resources into areas where Britain has a competitive advantage – such as wind technology; and making it easier for new companies and innovations to flourish. But for all this and the denunciation of Gordon Brown’s legacy, the coalition still seems to be reading from a core part of Labour’s pre-crisis script: businesses are spoken of primarily as agents for

Tuesday

Fraser Nelson

The 50p tax in action

Today, we have seen the 50p tax in action: reflected in January’s bumper tax receipts. A jubilant John Rentoul has just tweeted: “Where is Fraser Nelson when you need him? The 50p income tax rate has brought in a ton of money. He said it would probably reduce revenue.” He is absolutely right – but not for the reasons he thinks. Were John self-employed, he’d know that the tax paid last month was in respect of the 2009-10 tax year – when the top rate of tax was 40p. Of course, many of the super-rich are on PAYE – but that has happened since last April. It doesn’t explain a

Fraser Nelson Fraser Nelson

Osborne shouldn’t spend the extra money

Lucky old George Osborne. The British economy is not in “meltdown,” but churning out tax revenue like a fruit machine. Figures out from the ONS today show that the tax haul for January alone was £58.4 billion – pushing the public finances into a surplus £3.7 billion for that month (an almighty £3.6 billion more than expected). If this rate continues (no reason why not, seeing as we’re all getting drunk on Mervyn King’s underpriced debt again), then Citi estimates he will have £8 billion more to play with than expected in the current financial year. So what will he do? Osborne’s decision will tell us plenty about what type

Sunday

Fraser Nelson

British jobs for whom?

Immigration isn’t a topic much discussed nowadays, because it’s one where the Tories and Lib Dems don’t agree. That’s a shame. Because there’s an urgent problem to be fixed in the British labour market: that every time the economy grows, it sucks in immigrant workers. If this dysfunction continues, it will finish Cameron. The News of the World (where yours truly is a columnist (£)) has today looked at the latest figures for this. I reprint them for CoffeeHousers below. They show that during that disastrous fourth quarter in 2010, where the economy shrank by 0.5 percent, the number of employed British-born people fell by 110,000. As grim as you’d

Saturday

Guy Newey

Tinkering with solar panel subsidy risks making bad policy worse

The fallout from Chris Huhne’s sudden review of the government’s system of subsidies for small-scale renewable energy gathers momentum. Solar firms, who built business cases on the system of subsidies, are threatening judicial review over the Energy Secretary’s change of direction. So why did the government raise concerns about the policy? Apparently, because it has been too successful. The scheme encourages householders, communities and businesses to cover their roofs in solar panels and erect wind turbines by offering them a generous subsidy for the electricity they produce. It was introduced by the Labour government with three aims: to cut carbon emissions; to help reduce the costs of the technologies; and

Friday

Matthew Hancock-Mp

Balls’ shrill attack on King

Ed Balls’ irresponsible attack on Mervyn King is a clearly calculated attempt to undermine the Bank of England for Balls’ own narrow political ends. Balls both approved Mervyn King’s appointment and supported King as Governor when he was Chief Economic Adviser to the Treasury. Balls was central to creating the record deficit left by Labour, yet who has no plan for clearing the mess up. Now he is attacking the Governor of the Bank of England for supporting the Government’s plan to deal with the deficit. In what way is it political for the Governor to support the Government? I’d say that’s deeply non-political. By contrast, to play narrow party

Thursday

Matthew Hancock-Mp

Miliband’s economic immaturity

As an economist working in politics, I’m sometimes shocked at some of the arguments about the economy. But today’s statement on welfare reform is economically shocking.   Miliband argues that you can’t reform welfare until there are more jobs. Set aside the fact that this is another area where Miliband’s argument is Lord make me virtuous, but only tomorrow. Team Brown delayed welfare reform for over a decade under Labour, and their position today is to call for yet more delay.   Let’s look at the economics.   First, Miliband falls for the classic lump of Labour fallacy. It’s as if he thinks there are a set number of jobs

David Blackburn

Cameron fells the forestry consultation

Despite his easy charm, David Cameron is unsentimental. His dismemberment of Caroline Spelman’s sagging forestry policy at yesterday’s PMQs was as ruthless as it was abrupt. The Prime Minister cannot be an enemy of Judy Dench and other doughty dames, so the hapless environment minister had to be shafted. Cameron’s strategic withdrawal did not end there. Several newspapers report that the 12-week consultation will be curtailed by the end of the week, on the simple grounds that the public does not like it. Spelman is expected to pronounce the project dead in the Commons at lunchtime today, and the chamber will ring with the noise of Labour’s braying benches. Ed

Wednesday

David Blackburn

Unemployment rises

It was the snow wot done it. The new unemployment figures have been published and the headline figures are that unemployment increased by 44,000 to 2.49 million between December 2010 and January 2011; the claimant count also went up by 2,400 to reach 1.46 million. It’s disappointing news, especially as figures from Germany are markedly different. Miliband may exploit the news at PMQs. But there are reasons to be positive. The government’s mouthpiece on these issues, Chris Grayling, who is less attack dog more beast of burden these days, argued that Q4’s negative growth figures will have had some effect on employment (and it’s likely to continue to do so

Tuesday

Fraser Nelson

Why we need a rate rise

Now that today’s inflation figures are up, to a predictable and predicted 4.0 percent on CPI and 5.2 percent on RPI, we can expect the usual response. Nothing from the government (even though the declining standard of living will eclipse cuts as the no.1 problem of 2011); plenty of shocked news stories; and, then, the round of commentators saying that Mervyn King should “hold his nerve,” and not increase the absurdly low base rates of 0.5 percent. Inflation is temporary, he says, and should be okay again this time next year (that’s what he said about the start of 2011). The Spectator does not have much company in finding fault

James Forsyth James Forsyth

Inflation up again

CPI inflation running at four percent, twice the bank’s target level is a problem for the Bank of England’s Monetary Policy Committee which remains set against a rate increase. I suspect we’ll hear much about how this rise is partly prompted by the one off effects of the VAT rise and the role of global commodity prices in driving inflation. But it is hard to get away from the fact that inflation has been above the two percent target rate for 14 months now. (Personally, I’d favour the scrapping of inflation targeting). The most immediate political consequence of this inflation is that it is hitting living standards. Wages are not rising

Monday

Daniel Korski

Aid to India to be replaced with pro-growth help

How to manage Britain’s aid to India? The fast-rising country has a space programme, costing nearly the same as Britain gives in annual aid. To many people, that is reason enough to cut all aid. Yet, at the same time, India is one of the world’s poorest countries. 456 million people live on less than $1.25 per day. Annual income per person is only $1,180, compared to $3,650 in China and $41,370 in the UK. That means there are 20 percent more poor people in India than in sub-Saharan Africa. But India receives only $1.50 in aid per person, compared to $28 for Sub-Saharan Africa. A good example of India’s

David Blackburn

China eclipses the Japanese economic miracle

Official figures suggest that China has replaced Japan as the world’s second largest economy, after an estimated 10 percent growth rate left China with an economy worth close to $5.8trillion at the end of quarter four 2010. Japanese growth hovered around the 3 percent mark in 2010 with a total GDP value of $5.47 trillion. Analysts have told the BBC that it is ‘realistic’ that China will overhaul the US’ economy in about a decade, which, as Pete has demonstrated, does not look too outrageous a suggestion.  All of this puts me in mind of the European Union. The CIA World Factbook records that the EU leads the globe in

Sunday

Fraser Nelson

Britain’s coming crunch with Europe

It did not take David Cameron long to realise that there were three parties in his coalition. A few months into government, the Prime Minister worked out that only half of the policies he was enacting came from the shared agenda drawn up when the Tories and LibDems got together. The other half comes from the EU. Or, more specifically, the Civil Service machine, which is busy implementing various EU Directives, often passed many years ago. Cameron is trying to put the brakes on this process. As I say in my News of the World column, this has led to much frustration in Whitehall. And dismay: the Civil Service remembers

Saturday

David Blackburn

Clarke: Middle England hasn’t got a clue

Ken Clarke’s political career has had the resilience of a cockroach, but even he now seems to be cracking. Tim Montgomerie has shot a vicious broadside at Clarke’s dated politics in today’s Mail. And Clarke, for his part, has given an interview to the Telegraph, where he gives a convincing impression of a man completely out of touch. Clarke concedes (just) that the ECHR needs reform, but he defends its supreme jurisdiction: ‘Some people are very angry [about prisoner voting], but we should be able to resolve that. The jurisdiction of the [European] court remains the fraught issue. I don’t see how we can say that we don’t obey courts if we don’t want to.