Party shifts narrative to put focus on how ‘decade of Tory misspending’ has weakened economyThe UK lost £16.7bn in tax revenues over nine years of slow growth under the Conservatives, figures unearthed by Labour show, as the party seeks to underline the economic effects of the Tories in office.Labour, under the new shadow chancellor, Rachel Reeves, hopes to build a narrative about “a decade of Tory misspending” which would undermine Boris Johnson’s levelling-up rhetoric.Related: Austerity is alive and well, and giving public services a kicking | Phillip Inman Continue reading...
Legislation shows deeply divided parties are united on confronting China in the ‘race for technologies of the future’The US Senate has overwhelmingly approved a bill to boost American semiconductor production and the development of artificial intelligence and other technology in the face of growing international competition, most notably from China.The 68-32 vote for the bill on Tuesday demonstrates how confronting China economically is an issue that unites both parties in Congress. It is a rare unifying issue in an era of division as pressure grows on Democrats to change Senate rules to push past Republican opposition and gridlock.Related: Chips with everything: how one Taiwanese company drives the world economyRelated: China to overtake US as world's biggest economy by 2028, report predictsThe Associated Press, Reuters and Agence France-Presse contributed to this report Continue reading...
Continued rise stoked by tax breaks and demand from well-off households likely to deepen inequality, says Andy HaldaneBritain’s housing market is “on fire” thanks to the extension of government tax breaks for homebuyers and increased demand from richer households with more savings following coronavirus lockdowns, the Bank of England’s chief economist said on Tuesday.Andy Haldane warned that the property market was likely to continue running hot while all these factors, in combination with the central bank’s ultra-low interest rates, remained in place. He said the recent rise in house prices – which topped 10% over the 12 months to March 2021, according to official data – was very likely to worsen inequality. Continue reading...
We should expect price increases in the Covid recovery phase – and we have the tools to cool the economySlight increases in the rate of inflation in the United States and Europe have triggered financial market anxieties. Has Joe Biden’s administration risked overheating the economy with its $1.9tn (£1.3tn) rescue package and plans for additional spending to invest in infrastructure, job creation and bolstering American families?Such concerns are premature, considering the deep uncertainty we still face. We have never before experienced a pandemic-induced downturn featuring a disproportionately steep service sector recession, unprecedented increases in inequality and soaring savings rates. No one even knows if or when Covid-19 will be contained in the advanced economies, let alone globally. While weighing the risks, we also must plan for all contingencies. In my view, the Biden administration has correctly determined that the risks of doing too little far outweigh the risks of doing too much.Related: A shortage of workers is driving up wages: are we entering a new economic era? | John HarrisRelated: Post-lockdown summer: Americans out for fun and with money to spend Continue reading...
Until full employment is reached, governments need not cut back on public spendingA decade ago the financial press, echoing predictions from mainstream macroeconomists, obsessed about whether governments would run out of money as deficits rose to combat the global financial crisis. Stark predictions of rising bond yields and inevitable debt defaults came to nought.Now, with much larger deficits, the headlines are all about inflation. No one seems worried any longer about government insolvency as capitalism survives on fiscal life-support systems. The focus has shifted from meaningless financial ratios to substantive issues relating to real resource scarcity (that is, how close nations are to full employment). However, the inflation mania is as misconstrued as the earlier solvency fears.Related: What is modern monetary theory and could it fix Australia’s problems?Related: Why governments should keep spending, and stop worrying about inflation | Leah DowneyWilliam Mitchell is a professor of economics at the University of Newcastle, Australia, and docent professor of global political economy at the University of Helsinki, Finland. He is one of the co-founders of modern monetary theory Continue reading...
The real story includes the reconciling of domestic interests with international demandsA historic agreement has been reached. For decades, multinational corporations have abused gaps in an international tax system that has barely changed since agreements made at the League of Nations in the 1920s.After meetings in London at the weekend, the message from the G7 group of wealthy nations is clear: time is up on tax havens. In a landmark move, a global minimum rate of corporation tax has been agreed, alongside measures forcing large firms and online tech giants such as Facebook, Apple and Google to pay more tax in the markets where they make their money regardless of physical presence.For Rishi Sunak, it was about sending a message that post-Brexit Britain still holds sway in the world Continue reading...
Labour problems may be an early sign of inevitable economic readjustments around the world following the pandemicJamie Rogers is a former semi-finalist in the BBC’s Masterchef: The Professionals, and the founder of an award-winning restaurant called Twenty Seven, located in the south Devon town of Kingsbridge. As it reopened for business after the recent lockdown, a handful of staff handed in their notice. As he told me last week, he then began to explore what was happening in his part of the economy, and was confronted with huge changes: “Jobs that were worth £10 an hour last year are suddenly paying double that.”Brexit is part of the story. “A lot of international people have gone home – a lot of people are telling me that,” he said. So too is a shift among British-born workers. “I bumped into someone the other day who was working in Tesco. He used to be a head chef. He said, ‘I’m happy where I am now.’ He’s seen that he doesn’t have to work a 60- or 70-hour week, and he’s still probably making the same money.”Related: UK ‘faces labour shortage’ as Covid and Brexit fuel exodus of overseas workers Continue reading...
Perhaps Labour should wake up and start addressing the besetting sins of unfettered capitalismIt’s no good expecting people to be nice. That’s an important rule of thumb when working out how to run things or, indeed, when designing a system that decides who runs things. And if you think that’s too cynical, remember not to lock your door when you next leave the house.Obviously, many people are very nice. Some people are nice all the time and almost everyone is nice some of the time, but, when you’re trying to build a system, thinking about that is a waste of headspace. We hope for the best but prepare for the worst, with alarms, passwords, insurance, Tasers and scanning everyone’s shoes before they get on an aeroplane.You can’t just steal stuff, but you can trade stuff and you can make stuff Continue reading...
Wise Bank of England heads are pondering the case for a state-run digital currency this week. But do we really need one?When Google announced that bitcoin traders would be allowed to buy advertising space on its pages from August, central banks were alerted to the next likely surge in publicity for cryptocurrencies.The increasing activity around digital currencies has not gone unnoticed at the Bank of England, and on 7 June Threadneedle Street’s brightest will publish a consultation document, setting out how a publicly operated electronic coinage system – one that would rival bitcoin – might work. Continue reading...
Parts of the continent potentially face a decade of crisis. These two measures are more important than any other in avoiding itThere are so many good causes in the world it is often difficult to know where aid money should go. As leaders line up to attend the G7 summit in Cornwall, the most effective destinations for aid money have become clearer – a global vaccination programme and improving girls’ education.This is especially true in sub-Saharan Africa, where so much can go wrong over the next 10 years – a population explosion, massive biodiversity loss, desertification, famine and mass migration to mention just a few – that unless we focus our efforts on vaccines and girls’ education, whatever is done to alleviate poverty or tackle the climate emergency will be threatened or even sabotaged in almost every other region of the world.African leaders are well aware of the benefits that flow from educating girls, from the immediate economic income to the wider gains for the planet. What they lack is the resources Continue reading...
Analysis: As the UK’s post-lockdown hospitality sector struggles to find staff, one obvious solution presents itselfFrom Michel Roux Jr to Tim Martin, from swanky Le Gavroche in London to Wetherspoons pubs, the message is the same: we need more staff. Labour shortages were not a problem envisaged when the UK was plunged into lockdown in the spring of 2020. Then, the fear was of massive job losses and the highest unemployment since the 1930s.Now, the hospitality sector says a lack of chefs, bar staff and waiters is affecting trade. Roux has announced he is closing Le Gavroche at lunchtimes. At Wetherspoons, Brexit-supporting boss Martin has urged ministers to use their ability to set immigration laws to grant visas to EU citizens.One of the basic tenets of economics is that raising the price of something increases its supply Continue reading...
Government data shows unemployment rates for many groups remain high, even as post-pandemic hiring picks upThe coronavirus pandemic sparked one of the deepest, and strangest, downturns in employment in US history. On Friday, the Bureau of Labor Statistics said the US had added another 559,000 jobs in May, and the unemployment rate had fallen to 5.8% – a dramatic drop from its 14.8% high in April last year.Employers say they are struggling to hire workers, and yet the US is still 7.6m jobs short of where it was before Covid-19 struck. Below, in the first of a monthly series, we take a look at what lies behind the headline figures for the highly influential jobs report.A job should get you out of poverty, not keep you in it.
By the time a family gets a social worker, it’s usually 20 years too late, writes Jean Robertson-Molloy, who has 40 years of experience in the sectorHaving worked in social services at the “coalface” for nearly 40 years, and also being a member of the Movement for an Adoption Apology, I welcome Nina Lopez’s letter drawing attention to today’s forced adoptions (Letters, 1 June). I believe we are the only country in western Europe which regularly sanctions adoptions opposed by the birth family.During my career, I saw the profession change from one that was primarily concerned with supporting families in difficulties, to one which will only allocate a social worker to a family where it is believed that the children could already be in danger. And the fear, sadly often justified, that the main function of social services nowadays is to remove children from home, means that few families will now even think of asking for help from this source. As a result, by the time a family gets a social worker, it’s usually 20 years too late. And much of the blame for this must lie with successive governments, who have cut to the bone the subsidies which councils need if they are to employ enough social workers to reverse this trend.
News comes one month after labor department announced US added just 266,000 jobs, far below the 1m gain expected for AprilThe US added 559,000 jobs in May as the coronavirus pandemic receded, shaking off fears of a substantial slowdown in hiring after April’s disappointing monthly report.The Bureau of Labor Statistics said on Friday that the unemployment rate had fallen to 5.8% from 6.1% in April, still significantly higher than the 3.8% unemployment rate recorded in February 2020 before Covid 19 hit the US but less than half its 14.8% peak in April last year.Related: ‘No one wants to work anymore’: the truth behind this unemployment benefits myth Continue reading...
Widespread shortages and wait times due partly to impact of Brexit and the Covid pandemicA record surge in the cost of timber, bricks and steel sent construction industry costs soaring in May as new orders across the sector grew at the fastest pace in 24 years.Severe shortages of essential building materials lay behind the increase in prices as the combined impact of Brexit and the pandemic caused supplies, many of them imported, to be held up on their way to the UK. Continue reading...
While the private sector wants to keep control of the green transition, what’s needed is massive public investmentThe pandemic, we often hear, is forcing a rethink in economics. We are leaving behind one model: the austerity-obsessed small state that outsources the job of macroeconomic stability to unelected central banks. Central banks, in turn, worked to target inflation under a regime of benign neglect for unemployment; it was assumed, meanwhile, that the bond market should and would discipline governments into fiscal rectitude.Now, the Biden administration’s “once in a generation” spending plans suggest a paradigm shift is under way. It puts governments, through fiscal policy (taxing and spending), back in the driving seat. In this sense, macroeconomics has the potential to become more democratic. But are we celebrating too soon? The big test of the paradigm shift, possibly the fundamental test, is how we go about decarbonising our economies.Daniela Gabor is professor of economics and macrofinance at UWE Bristol
By swimming against the tide of sentiment on fairness, the island could become a pariah stateCyprus has dared to swim against the tide of sentiment running to all corners of the globe that multinational firms should pay a fairer share of tax.The island nation’s threat to block EU officials from signing up to Joe Biden’s minimum 15% corporate tax plan risks a backlash of greater force than the loss of a few hundred million euros in tax receipts should an agreement be signed. Continue reading...
Many believe it’s actually the expectation of inflation that causes prices to risePeople have been freaking out about inflation. Recent numbers from the UK and the US seem to have confirmed their fears. Prices are clearly rising. Anyone trying to build a house or do up their garden for the summer can attest to that. The question is, are they rising because of lockdowns, Brexit and the big, marooned ship or are they rising because, on both sides of the Atlantic, we’ve over-egged our fiscal response to the pandemic?Before we conclude “it is clear that inflation is here” we should think long and hard about what is causing prices to rise and who has the ability to influence that trend. The prevailing narrative is that inflation is the product of overly “ambitious government spending”. The chancellor, Rishi Sunak, has expressed these fears. And the former US treasury secretary Larry Summers said of President Biden’s spending proposals: “I’m concerned that what is being done is substantially excessive.”Leah Downey is a PhD candidate in the department of Government at Harvard University, and a visiting academic at the Sheffield Political Economy Research Institute (SPERI) Continue reading...
Three main factors are propping up prices but eventually a lack of first-time buyers will slow themWhen house prices started to rise in the summer of 2020 there was an easy explanation. Potential buyers, it was said, had been deterred by the tough lockdown imposed when the Covid crisis began and so there was a burst of pent-up demand as restrictions were eased.When property inflation continued during the autumn and winter it was put down to Rishi Sunak’s stamp duty holiday for all properties up to £500,000. But pent-up demand no longer looks a convincing reason for the house price inflation of 10.9% reported by the Nationwide building society, and anyone trying to take advantage of the chancellor’s tax break would have needed to have had an offer accepted before now. Continue reading...
Town on edge of Knowsley – and Liverpool city region’s mayor – use cultural pull to help rebuild area’s economyLevelling up Britain’s unbalanced economy comes in many guises and in Prescot, a town on the edge of Knowsley on Merseyside, it comes in the form of a replica cockpit-in-court theatre.Shakespeare is reported to have connections with Prescot when he was a travelling player in the late 16th century and the idea is to make the new theatre the third side of a cultural triangle along with London and Stratford-upon-Avon.This is not Field of Dreams, a case of build it and they will come; we are building and they have already comeWe need a more diverse economy because we rely on the visitor economy Continue reading...
Pensioners won the 2019 election for the Tories but a focus on improving pay and conditions for workers could swing power Labour’s wayEven before the Covid-19 pandemic Britain was becoming a more unequal country. The crisis of the past 15 months has hit poorer blue-collar workers harder than better off white-collar workers but official figures last week showed that the gap between rich and poor households was already wide.The trend is clear. The Office for National Statistics says the Gini co-efficient – one measure of inequality – has been increasing by 0.2 points a year for the past decade. During that time the incomes of the richest 20% – after tax, benefits and inflation were taken into account – rose by 0.9% a year on average, while those of the poorest 20% fell by 0.3% on average.Related: Why poverty has become the scourge of those in work | Larry ElliottRelated: Workers are again learning the power of collectivism | Torsten Bell Continue reading...
The relationship between PM and adviser did not collapse soon enough to save us from the damage caused by leaving the EUNo, “Eyetest” Cummings is not my new best friend. However convincing his criticisms of the prime minister are, the tragedy is that the fallout between the two came much too late for the good of the country. It is not even good enough for Cummings to say that we Remainers are “reasonable people”.If only this spectacular bust-up had occurred during their all- too-successful Brexit campaign. Alas, it did not, and day by day we receive further news of the disaster. Unfortunately, the general public is, understandably, so concerned about the pandemic that widespread appreciation of the Brexit damage has still to sink in.Frost said the government was going to hire an external adviser to identify 'post-Brexit opportunities'. It seems they were so intent on shutting the door that they hadn’t thought much further Continue reading...
With an unfair, inefficient global rollout, the west is squandering trust and risking its own prosperityThe proper functioning of any interconnected economic system depends on trust. And a global system that has been designed by advanced economies requires a significant level of buy-in from the developing world. Both become even more important as more developing economies, led by China, gain systemic importance.Related: WHO and global faith leaders call for fair access to Covid vaccinesRelated: South-east Asian countries battle Covid resurgence amid lack of vaccines Continue reading...
Nature’s financial value must be considered to avoid ‘irreversible’ degradation to biodiversity and landThe world needs to quadruple its annual investment in nature if the climate, biodiversity and land degradation crises are to be tackled by the middle of the century, according to a new UN report.Investing just 0.1% of global GDP every year in restorative agriculture, forests, pollution management and protected areas to close a $4.1tn (£2.9tn) financial gap by 2050 could avoid the breakdown of natural ecosystem “services” such as clean water, food and flood protection, the report said.Related: Top scientists warn of 'ghastly future of mass extinction' and climate disruption Continue reading...
by Vincent Ni China affairs correspondent on (#5JAVA)
Both sides emphasised importance of bilateral trade relations and agreed to further negotiationsTop US and Chinese trade negotiators have held “candid” talks, their first under the Biden presidency, as Washington continues to raise concerns over Beijing’s trade practices.In the long-awaited first official engagement between the US trade representative Katherine Tai and the Chinese vice-premier, Liu He, held virtually on Thursday morning (Beijing time), the two sides emphasised the importance of the bilateral trade relations and agreed to further negotiations.Related: China replaces Germany as UK’s biggest import market Continue reading...
After the 2008 crash, hawks worried about debt. Amid this one, they’re fretting about price rises. They were wrong then, and they’re likely to be wrong nowInflation is back. That old foe of central bankers, mugger of pensioners and fashion staple of the 1970s is once again in the news. Its return is being talked about at Threadneedle Street and at the US Federal Reserve. It is creeping into newspaper headlines and on to market-watchers’ worry lists. But some perspective is essential: the price rises of today are nothing like those we saw half a century ago, because the world we live in is nothing like that one. Many of the fears expressed over any sign of rising prices are misplaced.Economists are perhaps not the first people you might want to hear from about fashion, but one guaranteed revival for this spring/summer is: price rises. They will be in the news a great deal over the coming months. Last week’s news of a doubling of the inflation rate is just the beginning. The primary reason for that is mechanical. Last year saw many parts of the economy put in deep freeze to prevent the spread of Covid; with the reopening of pubs, restaurants and clothes shops, and the return of high street spending, prices will tick up. In this sense, inflation is to be welcomed as a sign of economic growth after a record slump. Another factor will not have passed motorists by: fuel prices, both at the petrol pump and to heat homes, are on an upward march. Continue reading...
National debt pile still climbs to £2.17tn or about 98.5% of GDP, the highest ratio since March 1962Britain’s stronger than expected recovery during the third lockdown limited government borrowing in April to just less than £32bn, an improvement of £16bn on the record high set a year earlier.As parts of the economy reopened and businesses adapted to Covid restrictions, tax receipts improved from a year earlier and government spending on the furlough scheme fell, said the Office for National Statistics (ONS). Continue reading...