Resolution Foundation finds rising house and asset prices have ‘turbo-charged’ gap between richest and poorestBritain’s wealth gap has ballooned during the pandemic with the richest 10% gaining £50,000 on average, dwarfing increases for the poorest third of the population, according to a thinktank report.The Resolution Foundation said wealth had increased during lockdown as a result of a lack of spending opportunities and rising house prices, but the benefits had been skewed to the richest by a ratio of more than 500 to 1. Continue reading...
Dearth of delivery drivers, abattoir staff and fruit pickers caused by Covid and Brexit are fuelling wage rises with 5% hike in prices forecastFood prices could rise by about 5% by the autumn – and turkeys and pigs in blankets could be in short supply this Christmas – as shortages of delivery drivers, abattoir staff and other workers drive up pay and other costs.Industry insiders say that pay for lorry drivers and other supply chain workers, including abbatoir workers, plus vegetable and fruit pickers and packers have all risen because of difficulties in finding sufficient staff.Related: England’s 19 July reopening may boost UK plc but a longer-term approach is needed Continue reading...
The economy needs a spending splurge but well thought out economic and welfare investment may help more than a bonfire of restrictionsThis is crunch time. Since March, the lockdown restrictions imposed at the turn of the year in all four UK countries have been eased but only gradually. Given that Britain has been at the forefront of the global vaccine effort, progress in opening up the economy has been relatively slow.That all changes on 19 July, with a big bang removal of statutory curbs on activity in England. The coming weeks will also see an easing of restrictions in Northern Ireland, Scotland and Wales.Related: Rishi Sunak has been running the economy on autopilot but needs to change course | Richard Partington Continue reading...
Rishi Sunak has signalled that a policy agenda favouring older people is in retreatHunger for fairness is universal. But to want fairness does not mean to want equality. Rather, it means acceptance of the economic and social reality that intelligence, muscle, effort, application and ability may vary, but rewards must remain proportionate. No one should receive more than their due desert.Crucially, fairness means recognising that life throws everyone undeserved good and bad luck, often through no fault of their own. The commonweal should step in to correct the resulting injustices. These concepts of proportionality and necessary collective action to mitigate the accidents of luck are deeply rooted. Nearly every society levies some tax when inheritance is passed from wealthy parents to wealthy children – and every society attempts to relieve, even if sometimes not very effectively, the circumstances of the children of the poor.Pensioners will be reaping the bulk of the 'savings' made through savage cuts to the aid budgetRelated: Rishi Sunak hints at suspension to pension triple lock Continue reading...
The Renaissance thinker, despite his reputation, believed politicians should act decisively to benefit the state. The PM has not done soThe Queen has recognised the achievements of doctors, nurses and ancillary staff by awarding the National Health Service the George Cross. Honours do not come much higher than that. And the government of Prime Minister Johnson and Chancellor Sunak? It has rewarded NHS workers with a 2% wage cut.The figure of 2% is the real wage cut that results from the already miserly 1% pay award once the impact on it of an estimated 3% rise in prices is taken into account.Johnson’s latest disaster is the announcement that caution will be thrown to the winds, and masks and social distancing abandoned. This is reckless Continue reading...
Banking and property did well even in lockdown, but businesses such as office services and retailing may see profound changeWithout any fuss, the UK financial services industry has clambered back to its pre-pandemic level and even added two percentage points of growth since February 2020, according to official figures last week.Banks and insurance companies may have slimmed down their staff, but customers have kept borrowing and saving, making the sector one of the few to have exceeded previous levels of activity. Continue reading...
Experts worried about long-term impact on low-income and non-white Americans, populations community colleges tend to serveDavid Ramirez, a student at Pasadena City College in Pasadena, California, struggled with balancing work and classes during the pandemic. Ramirez, who works at Starbucks, worked at least 30 hours a week in addition to his classes.He wasn’t alone. The number of students enrolled in community colleges – local educational establishments that offer two-year courses and are often seen as an affordable stepping stone to higher education – was down 9.5% this past spring, about 476,000 fewer students than in spring 2020, according to National Student Clearinghouse data released last month.Related: ‘The benefits outweigh the negatives’: US college students return to class Continue reading...
Cybersecurity comes down to which side has access to more information about the other and can utilize it bestThis week, shares in China’s giant ride-hailing app Didi crashed by more than 20%. A few days before, Didi had raised $4.4bn in a massive IPO in New York – the biggest initial public offering by a Chinese company since Alibaba’s debut in 2014.The proximate cause of Didi’s crash was an announcement by China’s Cyberspace Administration that it suspected Didi of illegally collecting and using personal information. Pending an investigation, it had ordered Didi to stop registering new users and removed Didi’s app from China’s app stores.Related: Didi the latest casualty as China tackles tech’s ‘barbaric growth’Robert Reich, a former US secretary of labor, is professor of public policy at the University of California at Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a columnist for Guardian US. Continue reading...
Analysis: National sporting success has failed to boost the economy in the past, but this time might be differentOn Saturday 30 July 1966 the then prime minister, Harold Wilson, took his seat in the royal box at Wembley to watch England play West Germany.If ever there were a moment for sporting triumph to prompt an economic feelgood factor it was when Geoff Hurst raced through in the final seconds to seal England’s 4-2 victory.Related: Cup tie: Gareth Southgate’s lucky polka dot neckwear prompts sales surge Continue reading...
A pledge to use the state’s £290bn procurement budget to buy from British companies is all about a future outside the EUWhatever the patriotic gloss and 1960s-sounding slogan, the shadow chancellor Rachel Reeves’s Buy British policy announcement is a genuinely smart response to a newly emerging economic consensus. Pledging that a Labour government would use the state’s £290bn procurement budget to buy from British companies, provide funds for bringing supply chains back to the UK and seek improved agreements with the European Union on key trade pressure points such as professional qualifications, Reeves’s package is the surest indicator yet that both parties have accepted the previous assumptions of decades of free-market, “neoliberal” globalisation are shifting. Government intervention is back, in a big way, and the political arguments of the future will be about who can do it best, not whether it should be done at all.Strikingly, this is the first major economic announcement under Keir Starmer’s leadership that directly confronts Britain’s future outside the EU. By insisting that government spending could be deliberately targeted to create secure, high-paying jobs and support domestic supply chains, the policy would run up against the EU’s level playing field rules if Britain were still a member. When Jeremy Corbyn’s Labour launched a similar initiative in summer 2018, promising to Build it in Britain, the howling from certain quarters about “red Ukip” or worse pushed the party into a retreat. Now the country is decisively outside the EU, Starmer’s Labour faces no such constraint.James Meadway is director of the Progressive Economy ForumThis article was amended on 9 July 2021 to make clear that a government decision on Nvidia’s bid to buy ARM awaits the outcome of an inquiry. Continue reading...
ECB denies ‘moving the goalposts as prices begin to rise’ and says new strategy will be easier to communicateThe European Central Bank (ECB) has overhauled its rulebook to allow for the expansion of its unprecedented stimulus programme in a direct rebuff to German politicians concerned that printing billions of extra euros this year will spark an inflationary spiral.After an 18-month review, the central bank for the 19-member eurozone said it would shift its inflation target from “below but close to 2%” to a 2% target it said was easier to communicate to financial markets and the public.Related: Tax financial transactions to help Covid recovery, G20 told Continue reading...
by Richard Partington Economics correspondent on (#5KZRP)
Rush to reopen and departure of overseas workers have caused problems in areas including transport, hospitality and constructionBritain’s employers are struggling with the worst staff shortages since the late 1990s, amid the rush to reopen from lockdown and a sharp drop in overseas workers due to Covid and Brexit.Sounding the alarm over the risks to economic recovery from acute labour shortages, the Recruitment and Employment Confederation (REC) and the accountancy firm KPMG said the number of available workers plunged in June at the fastest rate since 1997. Continue reading...
by Richard Partington Economics correspondent on (#5KW9E)
Research by Resolution Foundation and IFS suggests 18- to 24-year-olds could bear scars of crisis for yearsMore than one in four young people are worried that poor mental health will affect their ability to find work after the Covid-19 pandemic, according to a report.After the opening up of the British economy this spring, the Resolution Foundation said young workers were still suffering a heavier toll than their older colleagues and were paying a heavier price with their mental health.Related: Revealed: rise in stress among those working from home Continue reading...
Ground of pandemic is shifting, so forecast of post-Covid consumer spending boom could be mutedEngland is on the move. Despite rising infections and the race between coronavirus vaccines and variants back in full swing, there has been a distinct shift in tone from ministers over the past week about the English exit from pandemic restrictions.For several weeks the government has been watching and waiting, poring over Covid-19 data in the hope the link between infections, hospitalisations and deaths has been broken by the vaccination programme. So far, the news is encouraging despite rising concern as the Delta variant drives a fresh wave in the pandemic.Further growth in infections will put the recovery on the back foot, regardless of whether restrictions are relaxed Continue reading...
Buoyant Labour sets out post-Brexit vision promising that more public contracts will go to UK companiesLabour has announced a new post-Brexit economic vision for the UK involving ambitious plans to “make, sell and buy more in Britain” as it seeks to build a strongly patriotic policy platform with which to take on the Tories.Emboldened by its morale-boosting victory in Thursday’s Batley and Spen byelection, when the party halted Tory advances into its strongholds in traditional manufacturing areas, the move marks the opening shot in a new campaign to be led by Keir Starmer focused on jobs and the battle against crime in all local communities.Related: MPs criticise ministers’ failure to plan industrial policyRelated: Forget incremental change: the left shouldn’t be afraid of thinking big | Ed Miliband Continue reading...
But with government more keen on avoiding a crash than addressing inequality, property prices look safeHouse prices are soaring and gazumping has returned in property hotspots. The average cost of a home jumped by 13.4% in June from the same month last year, according to Nationwide building society.This is more than four times the 3% annual rate of growth in wages during April and more than six times the 2.1% increase in consumer price inflation (CPI) registered in May. According to upmarket estate agent Knight Frank, figures out next month are likely to show sales across Britain hitting an all-time record.£10bn of help-to-buy subsidy has done nothing to make homes more affordable for first-time buyers Continue reading...
June’s numbers suggest economy is continuing to recover at steady pace – but another pattern shows people are quitting their jobsThe Bureau of Labor Statistics reported on Friday that the US economy added 850,000 jobs last month. Hidden by this encouraging figure is the hint of an unusual trend: people are beginning to quit their jobs in extraordinary numbers.June’s numbers, in combination with last month’s figures, suggest that the economy is continuing to recover at a steady pace. The rate of unemployment was 5.9% and 9.5 million people remain unemployed. Continue reading...
• Joe Biden hails ‘historic progress’ and credits stimulus package• Number in or seeking work still 3m below pre-pandemic peakThe US added 850,000 jobs in June, a sign that the country’s post-vaccine rebound is continuing to accelerate.The national unemployment rate remained relatively stable, rising 0.1% to 5.9% in June, probably because more people came off the sidelines to join the labor force.Related: US adds 559,000 jobs in May as fears of hiring slowdown fade Continue reading...
UK GDP has fallen – yet house prices have soared. Even a small rise in interest rates could hurt the economyUK house prices appear to have defied economic gravity over the past year. The lockdowns triggered by the pandemic led to a 10% fall in GDP, the largest fall in 300 years, since the Great Frost of 1709. Yet the latest data shows house prices have grown at the fastest annual rate – 13.4% – in 17 years. Are we in the midst of another housing bubble?An optimistic scenario is that the current boom is driven by the unusual circumstances of the pandemic rather than more systemic problems. Spending more time at home has led many homeowners to desire more space and a better environment. They have used the record buildup of household savings, amassed during the lockdowns and supported by the government’s furlough scheme, to buy larger homes or move out of cities (property prices outside cities have increased by 14% compared with 7% within them).Related: UK house prices rise at fastest rate since 2004 amid stamp duty rushRelated: House price inflation will continue for now, hitting the young and low-paid | Larry ElliottJosh Ryan-Collins is head of finance and macroeconomics at University College London’s Institute for Innovation and Public Purpose Continue reading...
Warning signs are there for global economy, and central banks will be left in impossible positionIn April, I warned that today’s extremely loose monetary and fiscal policies, when combined with a number of negative supply shocks, could result in 1970s-style stagflation (high inflation alongside a recession). In fact, the risk today is even bigger than it was then.After all, debt ratios in advanced economies and most emerging markets were much lower in the 1970s, which is why stagflation has not been associated with debt crises historically. If anything, unexpected inflation in the 1970s wiped out the real value of nominal debts at fixed rates, thus reducing many advanced economies’ public-debt burdens.The same loose policies that are feeding asset bubbles will continue to drive consumer price inflation Continue reading...
by Richard Partington Economics correspondent on (#5KS0P)
Landmark moment for world economy with OECD plan that also covers prevention of profit-shiftingEfforts to force multinational companies to pay a fairer share of tax have taken a decisive step forward after 130 countries and jurisdictions agreed to plans for a global minimum corporate tax rate.In a landmark moment for the world economy, the Organisation for Economic Co-operation and Development (OECD) issued a statement committing each of the countries to a two-pillar plan to radically reshape the global tax system. Continue reading...
by Vincent Ni China affairs corresponent on (#5KRFV)
Xi Jinping himself has warned China’s wealth gap is not only economic but political and could threaten party’s legitimacyWhen Wang Zhenyu moved out of his small village in central Henan province to the coastal city of Dalian at 18, he was astonished. “It was like a culture shock for me, even though it was just a big city in my country, not a foreign land.” A few years later when he was enrolled in Peking University as a graduate student, he found much fewer students in the country’s top university coming from a similar background to his.Growing up in a small village of 2,000 farmers, many of Wang’s childhood friends dropped out of school after finishing their nine years of compulsory education. Now with a decent academic job, Wang begins to experience “reverse culture shock” every time he goes back to his village for the annual lunar new year.Related: China has almost wiped out urban poverty. Now it must tackle inequalityRelated: China: 'ruthless' campaign to evict Beijing's migrant workers condemned Continue reading...
Ministers overrule Trade Remedies Authority to defend sector against cheap imports, notably from ChinaThe steel industry has welcomed the government’s extension of measures to defend the ailing sector from a flood of cheap imports.Liz Truss, the international trade minister, said the government had overruled the Trade Remedies Authority, a public body that had said protectionist tariffs and quotas on 10 types of steel product should be maintained for three years, but lifted on nine others. Continue reading...
Commonwealth research says UVI is better measure of small island states’ aid needs, especially on climateSmall island nations on the climate crisis frontlines have been overlooked in overseas aid, according to a new index.Urging a move away from the current benchmark of using gross domestic product (GDP) to measure aid allocation, researchers from the Commonwealth secretariat and the Foundation for Studies and Research on International Development (Ferdi), a French thinktank, have developed the universal vulnerability index (UVI) as an alternative. GDP, they claim, fails to reflect the realities nations face, particularly on climate.Related: UK to slash funding for overseas water and sanitation projects by 80% Continue reading...
The tech giant’s move to combat fraud and dodgy ads has taken too long. The online safety bill must change“We are committed to leading the necessary changes to help fight online scammers,” trumpeted Google’s UK managing director, Ronan Harris, this week, as if the tech giant were somehow a pioneer of a crackdown on online financial fraud and adverts offering “bonds” with implausibly high rates of interest.The reality is that Google’s harder approach has taken an age to appear. It was 18 months ago that the frustration of Andrew Bailey, then the chief executive of the FCA, boiled over. He called for “more assistance from the big internet service companies, particularly Google” on taking down obviously dodgy adverts quickly. If a bank or a regulated financial institution had received such a public shaming, immediate action would be expected.Related: Bank of England’s Andy Haldane warns of inflation rises Continue reading...
by Richard Partington Economics correspondent on (#5KQHB)
Departing chief economist says central bank could be forced to stop economy from overheatingThe Bank of England’s outgoing chief economist has warned that inflation could rise by more than expected and force the central bank into a dangerous “handbrake turn” to stop the economy from overheating.In a parting shot at his fellow rate-setters on his final day at Threadneedle Street on Wednesday, Andy Haldane said he expected that a surge in consumer prices would drive UK inflation close to 4% this year. Continue reading...
Job loss or need for universal credit add to vulnerability once firms required to pay more into plan, thinktank findsOlder workers are at most risk of being made unemployed in the second half of the year as the government’s furlough scheme is phased out, according to a leading welfare thinktank.The Resolution Foundation said the chancellor’s decision to wind down furlough support for employers from today would endanger the jobs of more than one in four workers aged 55 to 64 who have remained on the scheme since the recent lockdown.Related: Beware scaling back UK furlough scheme too soon, warns Resolution Foundation Continue reading...
by Lisa O'Carroll Brexit correspondent on (#5KPA0)
High political stakes in NI protocol shown in research released hours before unveiling of new UK-EU dealVoters in Northern Ireland are evenly split over the need for Brexit checks on goods coming in from Great Britain, a new survey has shown just hours before a new deal between the EU and the UK is revealed.The EU will on Wednesday say it is retreating from the threat of a trade war and confirm a “package” of arrangements to take the heat out of the bitter dispute over the sales of British sausages, secondhand cars and potted plants in Northern Ireland. Continue reading...
Bank for International Settlements says inflation spike could raise the cost of borrowing to post war highsInflation could spike this year, putting pressure on central banks to raise the cost of government borrowing to post war highs, according to the Bank of International Settlements, which warned of “daunting” issues confronting policymakers during the post-pandemic recovery.With UK government debt spiralling to £2.2tn due to the costs of the pandemic, a jump in interest rates to levels last seen in the 1990s could more than double the cost of national borrowing. Continue reading...
Car finance deals and personal loans increase as interest rates fallHouseholds increased their borrowing in May for the first time in eight months as the easing of lockdown rules coincided with a fall in loan interest rates.Figures from the Bank of England showed the first significant credit spending surge since last August, as a run of net repayments by households came to an end in May when £280m more was borrowed on consumer credit than was repaid. Continue reading...