Centre for Policy Studies plan includes new limits on child benefit and foreign aid cutsA right-of-centre thinktank with close links to Downing Street has called for the pensions triple lock to be scrapped, the aid budget to be cut and child benefit further limited as part of £30bn worth of spending cuts designed to spare the UK from post Covid-19 tax increases.The Centre for Policy Studies (CPS) said its nine-point plan would ensure that the government was getting value for money and ensure that frontline services were protected as the Treasury took steps to repair the public finances.Related: UK economy nears 'perilous turning point' on Covid-19Introduced in 2011 by the coalition government, the triple lock guarantees that the basic state pension will rise by a minimum of either 2.5%, the rate of inflation or average earnings growth, whichever is largest.A cut of 160,000 in public sector administrative staff at an estimated saving of £3.5bn.The sale of high-value council homes and replacing them with cheaper properties (£1.5bn).Reducing the number of quangos and combining their back-office functions (£3bn).Streamlining local government and its administrative costs (£1bn).Improving e-procurement and data sharing (£4.5bn).Making child benefit part of the child tax credit system and tightening eligibility (£1bn). Continue reading...
Brazilian president’s stance on deforestation remains stumbling block for South America agreementBrussels is in talks with Brazil’s far-right nationalist president, Jair Bolsonaro, over commitments on the future of the Amazon as it seeks to persuade Emmanuel Macron and other EU leaders and parliaments to ratify the trade deal the bloc has negotiated with South America.The ratification of the draft trade agreement between the EU and the “Mercosur” or Southern Common Market free-trade zone – which spans Brazil, Uruguay, Paraguay and Argentina – has been in doubt almost since it was announced last June.Related: This is my message to the western world – your civilisation is killing life on Earth | Nemonte Nenquimo Continue reading...
Gertjan Vlieghe says the surge in Covid cases means the Bank will need a range of measuresNegative interest rates in the UK edged closer on Monday after a Bank of England policymaker warned the central bank would need extra firepower to boost the economy following the surge in Covid-19 cases.In a gloomy assessment of the next few months, Gertjan Vlieghe, who sits on the monetary policy committee, the bank’s interest rate setting body, said the second wave of Covid-19 was holding back consumer spending and suppressing business investment, which would push unemployment higher.What would happen to my mortgage? Continue reading...
From test and trace to care homes, it’s time to bring public services back in house and award contracts to social enterprisesEngland’s “world-beating” test-and-trace service has failed to materialise. Riddled with problems since its inception, it has been described as barely functional, with demand up to four times that of capacity and 90% of tests failing to hit the 24-hour turnaround target.But the problems with test and trace go far deeper than the incompetencies of this government. Over the last 30 years, Britain has shifted from having a market economy to being a market society where large swathes of public services are outsourced to the private sector. NHS test and trace is a prime example of this model, with management consultants such as Deloitte and Serco running large parts of a system where shareholder value appears to have trumped the needs of our frontline services.Related: UK coronavirus live: Johnson to hold press conference, following talks with Burnham about Greater ManchesterRelated: Private equity and care: a sector propped up by debt Continue reading...
Even the IMF believes that fiscal restraint is not the right way to deal with pandemic debt – but the UK can’t seem to move on“There’s no money left.” That is the ominous refrain repeated in hushed tones across Whitehall and public services. It is the same idea that scarred the UK economy for much of the past decade and inflicted misery on millions. Could austerity be set to return?At an international level, the consensus has certainly turned against austerity. Both the International Monetary Fund and the World Bank now advocate for fiscal activism rather than restraint. Continue reading...
FT economics columnist and author who influenced Wilson and Thatcher“No one is more senior to another on this paper, except for Sam Brittan.” Thus spoke Sir Gordon Newton, the longtime editor of the Financial Times, when one of his staff was claiming precedence over another.Newton was referring to Samuel Brittan, his prize economics commentator, whom he had hired as part of a graduate recruitment policy in the 1950s, among a formidable crop that included Nigel Lawson and William Rees-Mogg. Continue reading...
Beijing was fast to respond and increased public investment; it has not faced a second waveBy its own standards, China’s economy is having a bad year. After four decades of stellar growth, the east Asian country will barely expand at all in 2020.But just about every country – big or small – has faced a hit from the Covid-19 pandemic, and China has suffered less than most. Whereas most western industrialised nations are still struggling to get back to where they were before the virus struck, Beijing has reported that there was year-on-year growth in the third quarter.Related: China becomes first major economy to recover from Covid-19 pandemic Continue reading...
Former Labour prime minister’s proposal part of plan to prevent spike in youth unemploymentThe former prime minister Gordon Brown has called for employers to be given a wage subsidy of £100 a week to hire workers under 25 as part of a plan to prevent youth unemployment exceeding levels seen in the 1980s.Brown said 1.5 million young people would need help to find work over the next year, adding the government’s £2bn ”kickstart” scheme announced in the summer would not be sufficient.Provision of quality work experience.Training geared to new jobs, in sectors such as care, IT and logistics, jobs linked to the recovery from lab technicians and contact tracers, to care workers and teaching assistants, not training for continued unemployment.Help with job searches – which Brown said were a vital element of getting into work, as demonstrated by Labour’s 2009 future jobs fund.A wage subsidy for employers in the order of £100 a week for six months to take a young person on full-time. Continue reading...
Many would have thought the Tudor king needed to avoid a no-deal break but history has proved otherwiseBoris Johnson’s assertion that the UK should prepare for a no-deal Brexit has left the financial markets unconvinced. Brinkmanship is the name of the game, they say. Before negotiations can be concluded there always has to be a crisis when it appears all is lost, then both sides give a little and success is plucked from the jaws of failure.The big banks in the early 1530s did not employ armies of economists to opine about political events but had they done so the analysts of the 16th century would probably have been saying the same about Henry VIII’s divorce from Catherine of Aragon as they are now about Brexit. Henry is bluffing. He is not really prepared to break with Rome. A schism will do neither side any good, but there will be more damage to England than to Catholic Europe.Related: Boris Johnson is dancing with danger by threatening a crash-out Brexit | Andrew RawnsleyRelated: Boris Johnson takes note of Trump's game theory to keep EU guessing on Brexit | Larry Elliott Continue reading...
Organisations told financial help tied to crediting culture fund on web and in news lettersArts organisations and businesses desperate for financial survival have been told that rescue grants are tied to them publicly praising a government campaign.Emergency funding worth £76m was awarded to 588 venues, comedy clubs, circuses, festivals, regional theatres and local museums across the UK, in the second round of funding pledged from the government’s £1.57bn culture recovery fund. Last Monday, £257m was awarded to 1,385 applicants, bringing the spend by Arts Council England so far to £333m. Continue reading...
The signs are of relapse, not recovery, when it comes to the pandemic. Central banks must rise to the challenge againAs Britain and the rest of Europe battle the second wave of the Covid-19 pandemic, desperate eyes turn to central bank bosses, wondering what rescue plans they have up their sleeves.This year the Bank of England has pumped £300bn into the UK economy via its quantitative easing programme. The European Central Bank (ECB) pushed more than double that amount into the 19 eurozone countries, and the US Federal Reserve has done the same to keep credit flowing through the banking system. Continue reading...
Leave campaigners were heedless of the economic damage they might do. Now they must reckon with a pandemic as wellIt may come as an unpleasant surprise to my remaining Brexiter readers, but if it had not been for a suggestion by the late Sir Samuel Brittan, I might never have embarked on a life as an economics commentator – a role which most certainly involves keeping up the attack on the folly of Brexit and of all Brexiters.Sir Samuel, who died peacefully last Monday at the age of 86, was the senior economics commentator of the Financial Times for many years, and it was he who asked me to assist him in coverage of economic news. He was a mentor towards whom I have always been extremely grateful.The chancellor is being firmly told by many experts that the government is now not doing nearly enough Continue reading...
The government just reported nearly 900,000 new jobless claims, and 8m Americans have fallen into poverty since MayThe chasm between the two Americas – “Unemployment America” and “Stock Market America” – made starkly visible this spring, has not disappeared. Instead, the divide has widened.Related: IMF estimates global Covid cost at $28tn in lost outputWhen Trump’s refusal to wear a mask in public is taken as a sign of courage, the body politic is ailing Continue reading...
Rolling coverage of the latest economic and financial news, as EU leaders said Brexit talks would continue next week3.04pm BSTThe main market story has centred on investor reaction to Brexit talks after Boris Johnson urged the UK to prepare for no deal. While EU counterparts suggested negotiations would continue next week, a spokesperson for the UK prime minister essentially said the EU shouldn’t bother unless the bloc fundamentally changes its stance.2.38pm BSTUS stocks are climbing in part due to vaccine hopes, after pharma giant Pfizer said it may apply for emergency use of its Covid vaccine as early as November.The world is waiting for a safe and effective #COVID19 vaccine. Today our Chairman & CEO penned an open letter to help people understand the criteria we must meet and the expected timelines for our investigational vaccine program. https://t.co/RlhDYq4vK0Assuming positive data, Pfizer will apply for Emergency Authorization Use in the U.S. soon after the safety milestone is achieved in the third week of November.All the data contained in our U.S. application would be reviewed not only by the FDA’s own scientists but also by an external panel of independent experts at a publicly held meeting convened by the agency.2.31pm BSTUS stock markets have opened in positive territory:2.25pm BSTData flash: US industrial production has come in far lower than expected, having contracted 0.6% in September.That’s compared with forecasts for 0.5% growth, according to a Reuters poll, and August’s growth of 0.4%2.14pm BSTAnd yet again, the pound has tumbles to around-0.3% versus the dollar to 1.2881 after a spokesman for Boris Johnson reportedly said trade talks with the EU are over unless the bloc fundamentally changes its stance.Reuters reports the spokesman as saying:The trade talks are over: the EU have effectively ended them by saying that they do not want to change their negotiating positions.There is no point in trade talks if the EU does not change its position. The EU effectively ended the trade talks yesterday. Only if the EU fundamentally changes its positions, will it be worth talking.2.01pm BSTIt’s easy to see why sterling is struggling to settle this afternoon, given that the UK’s ‘no-deal is looming’ statement is being interpreted as a sign of concession by others.The latest comments from EU leaders comes from Dutch prime minister Mark Rutte. Reuters reports Rutte saying that he interprets Boris Johnson’s comments as a sign that Britain is prepared to compromise.1.41pm BSTFortunes have turned for US futures on the back of the stronger than expected retail sales:Futures gaining in the pre-market after retail sales clobber expectations https://t.co/Vshxd2Niyi pic.twitter.com/i7PjIJFHLd1.39pm BSTData flash: US retail sales for September have comfortably beat estimates, having jumped 1.9% compared to a month earlier.That compares to Reuters polls forecasting a 0.7% month-on-month rise.1.32pm BSTBoris Johnson’s dismal Brexit update crucially did not rule out further talks with the EU, and markets are now taking cues from European leaders who said negotiations would continue in London next week.It’s been a roller coaster ride for the pound this afternoon. After dropping more than 0.3% following Johnson’s comments, it’s now back in positive territory and is nearly up 0.1% at 1.2926.12.55pm BSTPret a Manger is to cut 400 jobs and close six more outlets in London after a slowdown in sales growth since September as coronavirus infection rates increased in the UK.The coffee and sandwich shop chain has struggled to deal with the slump in commuter numbers since the pandemic struck, with branches in the City of London particularly hard hit.It’s absolutely right that we take steps to stop the spread of the virus and tackle the new wave of infections. Sadly, the result of the rise in infections and the necessary shift in public health guidance mean that our recovery has slowed.We’ve said all along that it’s up to Pret to decide our own future and that we must adapt to the new situation we find ourselves in. That’s why we have to make these further changes as we continue to transform our business model and prepare for the six months ahead.Related: Pret a Manger to cut a further 400 jobs and close six more stores12.47pm BSTThe EU Commission president confirms Brexit negotiations are set to continue in London next week.- talks: the EU continues to work for a deal, but not at any price.
Howard Davies warns of technical and contractual issues if cost of borrowing cut furtherBritain’s banks are not ready for negative interest rates, according to the chairman of NatWest.“We’re not completely ready for it,” Howard Davies said. “There would be technical issues and many contractual issues.”What would happen to my mortgage? Continue reading...
Every country wants to fight the virus with minimal economic damage. Our attempts have created the worst of all worldsIt’s the textbook example of being caught between a rock and a hard place. The number of people being treated for Covid-19 in hospital is rising fast and is currently higher than it was when the UK went into full national lockdown on 23 March. Worse is to come.Simultaneously, the threat of mass unemployment looms ever larger. More workers were made redundant in the three months to August than at any time since the period when the banks almost went bust a decade ago. Worse is to come here, too.Larry Elliott is the Guardian’s economics editor Continue reading...
Ultra-low interest rates mean wealthy countries can continue to spend, a luxury the poorest cannot affordGo out there and spend. Don’t worry about the build up of debt. You will be making a mistake if you remove support for your economies too soon. That’s the message from Kristalina Georgieva, the managing director of the International Monetary Fund, to finance ministers as they contemplate how to deal with the economic damage caused by Covid-19.Well, some of them at least. Finance ministers such as Rishi Sunak are certainly getting the green light to spend more. That’s the right advice and it should be heeded, not least because ultra-low interest rates mean debt servicing costs are going down even as borrowing goes up. Continue reading...
A group of European ministers and the EC’s commissioner for international partnerships call for measures to foster long-term resilience in the global economy and environmentThe world is facing an unprecedented crisis. In just a few months, the Covid-19 pandemic has swept across the world, bringing human tragedy and causing an economic shock of historic proportions. While it poses a tremendous challenge to our economies and societies, the Covid crisis also gives us an opportunity to work towards a future that is more fair, equal and green.This week, the World Bank Group and the International Monetary Fund are holding their annual meetings. We will discuss our efforts to fight poverty and hunger, support socioeconomic recovery and respond to the emerging debt crisis. “Business as usual” is not an option. It is imperative that the World Bank’s development financing of $160bn for the coming year is directed towards a sustainable and inclusive future. This is the time to strengthen our economies in line with the sustainable development goals and the Paris climate agreement. Continue reading...
Latest ruling could inflame trade tensions from long-standing Boeing-Airbus dispute over subsidiesThe EU has been given permission to levy tariffs on US products worth $4bn in retaliation for subsidies given to Boeing, in the latest salvo in a bitter 16-year battle between the US plane maker and its European arch rival, Airbus.The ruling by the World Trade Organization (WTO), delayed by the coronavirus pandemic, could increase trade tensions shortly before the US presidential election on 3 November, although it could also set the stage for tariff negotiations between the EU and the US, which has already imposed levies on European goods in parallel action against Airbus.Airbus – 1,700 jobs
World economic outlook says 2020 impact is less than thought but there will be deep scarsThe International Monetary Fund has scaled back its estimate of the hit to the global economy from Covid-19 this year but warned that the final bill for the pandemic would total $28tn (£21.5tn) in lost output.Gita Gopinath, the IMF’s economic counsellor, described coronavirus as the worst crisis since the Great Depression, and said the pandemic would leave deep and enduring scars caused by job losses, weaker investment and children being deprived of education. Continue reading...
International Monetary Fund says policies targeted at women and young people will help prevent ‘widening inequality’ as it projects Australia’s economy will grow by 3% in 2021Lockdowns may aid economic recovery by helping to reduce coronavirus infections, leading to a short and sharp downturn, but they disproportionately harm women and young people, according to the International Monetary Fund.In its world economic outlook, released on Tuesday evening, the IMF called for policies targeted at women and young people to prevent “widening inequality” as a result of the Covid-19 recession.Related: New Zealand's Covid-19 response the best in the world, say global business leadersRelated: The budget that forgot women Continue reading...
There must be a blueprint for what follows sterling and a transition to the euroThe odds of Scotland becoming independent are rising by the day. In Scotland’s 2014 referendum, about 45% of voters favoured independence. Brexit, which about 60% of Scotland’s voters opposed, is now forcing the Scottish electorate to choose between staying in the UK and remaining in the EU, shifting public opinion further towards independence.Boris Johnson’s shambolic EU trade negotiations heighten that dilemma. Reflecting such pressures, pro-independence sentiment has exceeded 50% in six polls conducted this year.Related: Covid has reduced Scottish independence to a basic question: Sturgeon or Johnson? | David Clegg Continue reading...
US academic Robert Wilson had to walk across the street at 2am to deliver the news to his fellow Stanford University colleague Paul Milgrom that the two had won the 2020 Nobel prize for economics. Milgrom had his phone on silent mode, prompting his neighbour to step outside and deliver the news in person. 'I was asleep and the doorbell rang at 2 in the morning. And then I picked up the phone - it's a video doorbell. And I saw Bob's face and he was knocking at the door, telling me that they were trying to call me and that we had won a Nobel Prize, which is pretty, pretty good news,' Milgrom told Reuters. The pair won the prize for work on auctions hailed as benefiting buyers and sellers around the world of everything from fishing quotas to aircraft landing slots
Lenders asked what steps they would take if official borrowing costs were pushed below zeroThe Bank of England has moved a step closer to adopting negative interest after writing to banks asking them how ready they would be for the groundbreaking move.Sam Woods, one of Threadneedle Street’s deputy governors, has asked banks what steps they would need to take in the event that official borrowing costs were pushed below zero.What would happen to my mortgage?Related: Bank of England plays down use of negative interest rates to aid recovery Continue reading...
Fears that poorest countries will be worst hit if a trade war erupts due to talks failingEconomies struggling with the costs of Covid-19 could face a double blow from escalating trade wars unless international talks to rewrite cross-border tax rules are successful, the OECD has warned.The Paris-based organisation, which has been steering the talks, said governments would come under further financial pressure from retaliatory tariffs should governments fail to agree a global tax framework by an extended deadline of mid 2021.Related: Mathias Cormann nominated for OECD top job despite its criticism of Coalition’s climate change policy Continue reading...
Debt of 73 low-income countries at end of 2019 was up 9.5% on previous yearThe World Bank has stepped up its call for a comprehensive programme of debt relief after revealing that the amount owed by the poorest countries was at record levels even before the onset of the Covid-19 crisis.Statistics released by the Washington-based institution showed that the external debt of the 73 countries currently eligible to have this year’s repayments suspended stood at $744bn (£568bn) at the end of 2019 – an increase of 9.5% on 2018.Formed in 1999, the G20 is a group featuring 19 of the world's largest economic powers and the European Union. It was formed in the wake of financial crises in the late 90s, with a view to providing some governance for the global economy. Since 2008 it has held an annual leaders' summit. Continue reading...
Figures show wide variety of experiences for ethnic minorities in England and WalesThe pay gap between white and ethnic minority employees in England and Wales has narrowed to its smallest level since consistent records began in 2012, the Office for National Statistics has said.The ONS found that median hourly earnings in 2019 for white workers were £12.40 an hour – just more than 2% higher than the £12.11 an hour for ethnic minority workers. The gap is down from a peak of more than 8% in the mid-2010s. Continue reading...
The government needs an environmental sense of purpose that specifies the appropriate ends for economic activitySaving the planet ought to be a goal for, not a cost to, humanity. Yet this insight appears lost in the discussion about the climate emergency. Last week, it emerged that the Treasury was thinking about levying a UK-wide carbon tax. This approach, it was suggested, could be sold as a way of “raising revenue while cutting emissions”. Properly targeted taxes can change behaviour. But “revenue raising” green policies invariably end up being valued by the amount of taxes they produce rather than on their effectiveness in combating the climate crisis. UK governments have frozen fuel duties for a decade because it is politically easier to rake in cash than deter driving.A carbon tax is superficially appealing. The Treasury desires taxes to offset government spending. No 10 would like to align, rhetorically, with the green agenda. But without careful thought a carbon levy could backfire. A maladroit attempt to tax fuel on environmental grounds kindled France’s gilets jaunes (yellow vests) protests. Continue reading...
Partial sale would help poor countries during pandemic, says Jubilee Debt CampaignDebt campaigners are calling for the International Monetary Fund to sell some of its stockpile of gold to cover the debt payments owed by the world’s poorest countries for the next 15 months.With a looming developing world debt crisis high on the agenda at this week’s annual meetings of the IMF, the Jubilee Debt Campaign (JDC) said gold sales would help the most vulnerable countries cope with the Covid-19 shock and pave the way for a broader debt deal.Related: IMF and World Bank must act fast after Covid caught policymakers napping Continue reading...
Tide went out for global economy in 2020 and just about everybody was caught skinny-dippingWarren Buffett once quipped it was only when the tide went out that it was possible to see who had been swimming naked. The legendary investor had companies up to their eyeballs in debt in mind when he made that comment but it now has a wider significance. In 2020, the tide went out for the global economy and just about everybody was caught skinny-dipping.Clearly, there is never a good time for a pandemic but the brutal reality is that the world was ill-prepared for the arrival of Covid-19 at the start of the year. Policymakers had turned a blind eye to problems that had been getting steadily worse for years. Weaknesses that ought to have been tackled were left unaddressed.Related: Campaigners urge IMF to sell gold to provide debt reliefThe IMF and the World Bank were created from the wreckage of the Great Depression and the war that followed Continue reading...
The government’s change of heart on job support came too late – after many redundancies had already been madeBritain’s economic recovery is running out of steam. Even before the launch of tough new restrictions as the second wave of Covid-19 spreads across the country, the rebound from the first lockdown appears to have fallen significantly short.Figures released last Friday showed that gross domestic product (GDP) in August rose by 2.1% on the previous month – half the rate expected by City economists. Despite a rapid rebound earlier in the summer, and a boost from the “eat out to help out” scheme, the UK economy remains some 10% below its pre-pandemic level. Continue reading...
Thinktanks urging cuts in business taxes seem to forget that many industries which once powered growth are now dyingThe strangely easy agreement between economists of right and left that the chancellor should set aside concerns about Britain’s rising debt levels still holds seven months after the first Covid-19 lockdown was imposed.Thatcherite free-market thinktanks sing the same carefree song as Keynesian academics when debate turns to the size of this year’s public spending deficit. There are differences in tone and it goes without saying that all would want money spent wisely, but their efforts focus on competing proposals for growth.The Treasury view is that spending must be careful. As such, it is almost inevitable that recovery will take a decade or longer Continue reading...