If coronavirus cases spike again consumers will lock down their spending and activity regardlessThe weather was hot. The risks of catching Covid-19 had diminished. The two-metre social distancing rule was being cut to one metre. Boris Johnson said the months of hibernation were coming to an end.Everything screamed the same message: time to say goodbye to the lockdown and hit the beach. Cue panic on the part of ministers and local officials fearful of a second spike in infections.Related: The low-paid need Britain to reopen. But this outbreak isn’t over Continue reading...
Many of the country’s poorest workers are shut out of their workplaces; but fears for public health remain realBritain is emerging from lockdown. After three months of tight controls bringing society to an effective standstill, the beaches are packed, the parks are full and pubs are readying for an influx of drinkers next weekend.Ministers believe the gradual easing of restrictions is the single most important step the government can take to help companies to stay afloat and to keep people in work – aiming to minimise the risk of a jobs crisis this summer.Hopes among retailers for a revival on the high street will be dashed by lingering fears among shoppers Continue reading...
The chancellor is a rightwinger and Treasury man. But a government that closes its economy must spend to fill the gap‘You are Keynesian?’ ‘I wouldn’t be one with my own money, I’ll tell you that,’ said Kaufmann.”This delightful quotation comes from John le Carré’s A Perfect Spy. I wonder if our relatively new chancellor, Rishi Sunak, knows it.But we are also told that he is planning tax increases and public spending cuts in an autumn budget. God help us! Continue reading...
Financial agility and adaptability will be essential if we are to weather the coronavirus crisisWhy is this crisis so hard for economic policymakers? Because it is huge, but also hugely uncertain.We are used to economic factors causing recessions – weak bank deregulation for the financial crisis or the exchange rate mechanism for Black Wednesday. Both were bad recessions, but their paths were clearer once we’d tackled the underlying economic causes by nationalising banks or leaving the ERM. Continue reading...
by Presented by Rachel Humphreys with John Harris; pr on (#551Z3)
Columnist John Harris has spent the past decade touring the country and reporting on what devastating budget cuts have meant to communities. Looking back, he sees some signs of hope amid the devastation. But will the government change its approach for the impending Covid-19 economic crash?When George Osborne delivered his spending review in June 2010 it ushered in what would become a decade of austerity measures. As budgets were slashed for children’s centres, libraries, parks and welfare, they were accompanied with the phrase “we are all in this together”.The Guardian columnist John Harris has been touring the country for the entire decade, chronicling the devastation that those cuts have made in local communities for his award-winning series Anywhere But Westminster. He tells Rachel Humphreys how his latest reporting on the Barnsley village of Thurnscoe is illustrative of what austerity does to a place. He finds children’s centres cut, the landscape blighted with litter and unmown verges, parks in disrepair and libraries curtailed. Continue reading...
Claims have fallen for 12 weeks in a row but remain historically high as about 47 million have filed for benefits in 14 weeksAnother 1.48 million people filed for unemployment insurance across the US last week, as the grim economic toll of the coronavirus pandemic continued and infection rates picked up in many states.Related: Trump administration sent $1.4bn in stimulus checks to dead people - liveThis article was amended on 25 June 2020. An earlier version of the final paragraph referred to a probable increase of 3% when it meant three percentage points. Continue reading...
Report identifies gap between market optimism and depressed state of economiesThe global stock market rally represents a gamble by investors that central banks will ignore the risks of a buildup in debt and continue to provide support at the current record levels, the International Monetary Fund has warned .In an update to its half-yearly global financial stability report, the IMF said central banks had been pivotal in the recovery of share prices from their Covid-19 trough but there was now a gap between the optimism of financial markets and the depressed state of economies. Continue reading...
Gail Mitchell grapples with the confusing new guidance, while Harvey Sanders is worried about Boris Johnson’s laissez-faire attitude. Plus letters from Philippa Edmunds, Colin Rogers, Paul Garrod and Penny AldredNow let me see if I’ve got this right (Pubs and places of worship: what 4 July lockdown rules mean for England, 23 June). Single people can only be in a bubble with one other household, but bigger households can meet with numerous other households and can stay overnight, but must stay 2 metres apart. And you can go into a pub as long as you stay 2 metres apart, unless you can’t stay 2 metres apart, then you must stay 1-plus metres apart. You can go up to the counter in a shop, but not in a pub or restaurant. You have to give your name and address if you go to a pub, but not in a shop. You have to wear a mask on a bus, but not in a shop (not sure about pubs). You can have your hair cut from 4 July, but not your nails painted or legs waxed.But that’s only in England. It’s completely different in Scotland or Northern Ireland. You can’t go to Wales, but you can go to Spain, but you can’t go out for two weeks when you come back. So just remind me: are we still supposed to be washing our hands?
Beloved by Silicon Valley tycoons and tyranny-fearing libertarians, are cities atop the waves Earth’s next frontier?A white steel pole rises out of the sea off the Caribbean coast of Panama, poking above the waves like the funnel of a sunken steamship. Launched into the water last month, this is no shipwreck, but the base of what will soon become a floating home and, in the eyes of its makers, the first step towards building a brave new post-Covid-19 society, out on the open ocean.
The global economy must not suffer the consequences of the US doing too little, too lateWhat does the future hold for the global economy? As it stands, the most likely answer, unfortunately, is lower growth, worsening inequality, distorted markets, and rising financial risks. But this outcome is not preordained. With timely changes to the policy paradigm, policymakers can lay the groundwork for a more dynamic, inclusive, and resilient economy.The economic damage wrought by the Covid-19 crisis in the second quarter of 2020 was even worse than expected: economic activity plummeted, inequality rose, and elevated financial markets decoupled even further from economic reality. And with a vaccine yet to be developed, the path out of the pandemic – and the associated economic crisis – remains deeply uncertain.Related: Lack of international cooperation will hinder economic recovery | Howard DaviesRelated: Ten reasons why a 'Greater Depression' for the 2020s is inevitable Continue reading...
Study shows gulf in income inequality widening further as result of Covid-19 pandemicWhite households in the UK have incomes 63% higher than black households, and even after taxes and benefits are nearly a fifth better off, according to official figures.The Office for National Statistics (ONS) also found that income inequality in the UK has widened over the past two years – partly due to the benefits freeze – and indicated that it is likely to widen further as a result of the Covid-19 pandemic. Continue reading...
by Richard Partington Economics correspondent on (#54XEK)
Measures on VAT, business rates and training could be part of his July stimulus packageRishi Sunak is drawing up plans for temporary tax cuts and spending measures to reboot the British economy after three months of lockdown.Faced with the deepest recession in three centuries triggered by the coronavirus outbreak, the chancellor is expected to unveil the financial support package in early July. Continue reading...
My father, Simon Quin, who has died aged 77, was an economist with a long career at the International Monetary Fund (IMF). Simon’s passion was helping developing countries, especially in Africa, to improve their economic management in support of growth and alleviation of poverty. He travelled extensively, advising officials in central banks, ministries and statistical offices on data required to make better-informed economic policy decisions. He believed income inequality was the root of many of society’s ills.His contributions enhanced the quality of statistical work at the IMF and countries worldwide. His way of addressing issues from a different, often provocative angle was a signature, as was his delivery – with a quiet, mischievous smile – of some new insight which he knew would require his colleagues to think again. Continue reading...
Move to stimulate spending as part of Covid-19 recovery plan makes sense, says politicianThe former chancellor Alistair Darling has urged the government to consider an emergency cut in VAT amid growing speculation that the Treasury will make a tax cut on consumer spending the centre of a plan to boost Britain’s post-Covid-19 recovery.Rishi Sunak will announce a package of measures in early July intended to help those sectors of the economy, such as retailing, recover from the impact of a three-month lockdown.Electric vehicle-charging infrastructure investment, a rare example of a “shovel-ready” project.Gigabit-capable broadband, due to probable changing patterns of working in future.Investment in energy R&D, notably hydrogen, to help the UK decarbonise.Health-related infrastructure such as green walking and cycling routes.Transport upgrades, including support for local authorities, national parks and landowners such as the National Trust to encourage walking and cycling.Improving (and where possible adding to) public parks, sport, leisure and swimming facilities. Continue reading...
The borough council has lost a third of its budget and the results are plain to seeThurnscoe in South Yorkshire has a population of 8,500 and a local economy that speaks volumes about modern British history. Until the demise of the coal industry it was a pit village, where 80% of the male workforce earned their living from mining.Now, on the site of the former Houghton main colliery three miles down the road, there is a vast distribution centre run by the online fashion giant Asos.Related: Exclusive: Labour councils in England hit harder by austerity than Tory areas Continue reading...
by Felicity Lawrence, Niamh McIntyre and Patrick Butl on (#54VF5)
Exclusive: analysis by Guardian and Sigoma shows poorer, Labour-held areas lost over a third of spending powerLabour councils have borne the brunt of local government cuts over a decade of austerity, according to an analysis by the Guardian.It highlights for the first time the extent to which poorer, largely Labour-held areas of England had their funding slashed on average by at least a third, while more affluent, largely Conservative areas received greater protection.Related: 'Things vanish off the edge': Barnsley counts the cost of a decade of austerityRelated: Economists prove to be not keen on cuts after all | Torsten Bell Continue reading...
Governments can opt to repeat the failure of austerity or take the opportunity to invest in the futureIt all takes some explaining. The government has borrowed more than £100bn in two months and the national debt ratio is bigger than the economy’s annual output, but investors don’t care a bit.Orthodox economic theory says rising budget deficits lead to rising interest rates because the financial markets get nervous and demand a higher price for lending to the state. Not these days. There have even been examples of investors paying for the privilege of lending to the British government.Related: How worrying is Britain's debt? Surprisingly, we economists say: not very | Ethan Ilzetzki Continue reading...
Research suggests joblessness will stay high for years after the pandemicWe are in a jobs crisis with 600,000 fewer employees on payroll and 2 million more of us on universal credit. Tackling this economic and human tragedy will become the central economic challenge of the early 2020s.The Bank of England expects almost one in 10 of the workforce to be unemployed, the highest for 25 years. But will unemployment fall as swiftly as it has surged? Continue reading...
A government spending money hand over fist will turn to the private sector, wooing it with assets going cheapA mix of enthusiasm and panic inside the government is set to produce a toxic trail of poor decision-making, probably just in time for the next budget. The enthusiasm flows from the potential for a broad and far-reaching revolution ministers can see in the worst health and economic crisis for several generations.This could be the best opportunity since the second world war to reshape Britain’s way of life, recasting the relationship between citizens and state. From a Tory perspective, ministers can champion self-reliance and sideline collective organisations that put barriers in the way of change.Property developers are among the Tories' biggest donors. They can’t wait to get their hands on land at knockdown prices Continue reading...
It may have tumbled to 0.5% this week but economists warn that it may not lastThis week we saw some rare good news on the economic front; inflation tumbled to only 0.5%, its lowest rate in four years. Savers can even earn “real” interest, with National Savings offering instant-access accounts paying 1% interest. Don’t laugh at the paltry amount – it has been a long time since they have come anywhere near to beating inflation.How long will the good news last? It’s one of the thorniest questions vexing economists and money managers alike. Half think that huge job losses, a deep recession and vast spare capacity in the global economy will see inflation banished for years. The other half thinks the trillions of dollars, euros and pounds from pandemic-inspired government stimulus packages must, with almost mathematical inevitability, result in higher inflation.Related: UK inflation falls to 0.5% on back of cheaper petrol and toysWages and prices are likely to remain depressed as job losses cascade through the economy in the second half of 2020 Continue reading...
Younger generations have accepted extraordinary constraints to protect us from coronavirus. We can’t justify a system that favours wealthy pensionersA volcanic eruption is about to explode the government’s triple lock on pensions. There is no way the Tories can or will keep their pledge/bribe, introduced by the coalition government in 2011, to guarantee the state pension will always rise by either 2.5%, the rate of average national earnings growth or the rate of inflation, whichever is higher. The policy was maintained during a decade of near-stagnant incomes for most. Abandoning it – however rational and inevitable in these extraordinary economic times – will hurt. With the political stage strewn with Covid-19 memorials to older people who died partly through the neglect of care homes, this risks marking the end of Tory hegemony over the pensioner vote.Here’s why the triple lock’s future is in question. This year, the earnings of millions plunged by 20% when they were furloughed, while pensioners were still getting their 2.5% rise. Next year, with luck, many people will see incomes bounce back, while others will be unemployed with no earnings to count; if average earnings soar, freakishly, by 18%, then pensioners get an 18% rise too in a dismal recession for most. The triple lock will go or be suspended, but after that, should it return?By suspending the triple lock, the chancellor could rebalance all pensioner subsidies and redirect them towards the poorestRelated: Furlough effect leaves Rishi Sunak with 'triple lock' pensions dilemmaPolly Toynbee is a Guardian columnist Continue reading...
To build a fairer, greener society, money must be made to serve the people, not the other way aroundIn the past few months, the world’s central banks, above all the US Federal Reserve, have rescued the global economy from complete collapse for the second time in a generation. Wading unto the breach and armed with the knowledge of how close capitalism came to a system failure in 2008, they have fired the “big bazookas” of monetary policy, pumping trillions of dollars into the world’s giant pool of money, effectively creating wealth out of nothing.Since 2 March, the Fed’s total assets have leapt by more than half. Since 2008, its balance sheet has grown to 30% of the size of the US economy. Central bankers seem confident their actions will find public approval. “A firefighter has never been criticised for using too much water,” the governor of the Bank of Canada said.The stock market’s worst fears seem to have been allayed by congressional action and the Fed’s promised bond-buying spreeRelated: Pity the central banks' lockdown dilemma: do they fight inflation or deflation? | Larry ElliottQuinn Slobodian is an associate professor of history at Wellesley College, Massachusetts Continue reading...