Economics | The Guardian

John Marsh on modern monetary theory and David Cockayne on doughnut economics and artThe Guardian has done us all a service with this editorial (The Guardian view on Covid-19 economics: the austerity con of deficit hysteria, 14 July). I am reading Stephanie Kelton’s book and I believe that it may start a revolution in economic policy.Prof Kelton’s concern is not the government financial deficit – the balance between taxes and government spending – but the deficits and imbalance in the real economy such as unemployment and housing shortages. Modern monetary theory (MMT) suggests that governments which issue their own money cannot “go broke”. Continue reading...

GMB says employers need more support to ensure safe return on 1 August

Since March, unemployed Americans have received government money to pay rent and buy food – but if Congress can’t agree a new deal, what then?If Donald Trump and Senate Republicans have their way, roughly a week from now, the US will swap an imagined economic problem for a predictably devastating one, economists have warned.Related: 1.3m more file for unemployment as US economy continues to reelIt is such a feeling of being caged and trapped, and every decision I can make is a bad oneRelated: How will we know the US economy is recovering? Here are my key metrics | Gene Marks Continue reading...

Fund is accused of effectively bailing out private lenders to some of world’s poorest nations

Rolling coverage of the latest economic and financial news

Chancellor’s statement ‘corrosive to public trust’ for passing old funds off as newRishi Sunak has been accused of repackaging up to £10bn of previously announced government spending to form the backbone of his summer statement plan to save jobs during the pandemic.Serving the chancellor with a blunt rebuke, the Institute for Fiscal Studies said it was “corrosive to public trust” for the government to reallocate old funds and pass them off as new money. Continue reading...

End of furlough scheme likely to unmask true impact of coronavirus crisis on workers

ONS says number of workers on payroll fell 2.2% from March although rate of decline fell in June

British Chambers of Commerce reports big firms more likely to cut jobs than smaller businessesAlmost a third of companies plan to make job cuts in the next three months as the government prepares to wind down its furlough scheme, one of Britain’s leading business lobby groups has warned.Sounding the alarm amid warnings of a steep rise in unemployment, the British Chambers of Commerce (BCC) said 29% of businesses in a survey of 7,400 firms planned to cut the size of their workforce in the next three months. Continue reading...

City calls for state-owned recovery corporation to handle £35bn of unsustainable government-backed debt

Court defeat for Brussels is reminder of glacial pace at which international tax reform proceedsMargrethe Vestager may as well give up. If the EU’s competition commissioner can’t win her highest-profile case in the EU’s second-highest court, then the EU’s tax arrangements, as they apply to multinational tech companies, will remain a free-for-all.In practice, she may plough on. The Luxembourg-based general court’s order that Apple does not need to pay €13bn (£11.7bn) in back taxes to the Irish government can be challenged. Lawyers may yet enjoy many more years of lucrative work. Continue reading...

All you need to know about CGT and the possible outcomes of the chancellor’s surprise reviewIs capital gains tax (CGT) going to rise dramatically as the government attempts to claw back the cost of extra spending during the coronavirus pandemic? A surprise review of CGT unveiled on Tuesday by chancellor Rishi Sunak opens the door to higher taxes on the wealthy and possibly middle income earners, too. Continue reading...

Rolling coverage of the latest economic and financial news

From Covid-19 to the tobacco industry to the climate crisis ... a punchy, amusing history of the deliberate misuse of statisticsThe old saw that there are “lies, damned lies and statistics” is attributed to various figures, but was already considered proverbial in 1890 – perhaps as an adaptation of the old lawyers’ joke that there were three kinds of liars: “the liar simple, the damned liar and the expert witness”.Even though we have been well warned for more than a century, people still use statistics dishonestly all the time – as when, for example, it emerged that the number of Covid-19 tests the British government claimed were being performed each day included tens of thousands of test kits that had merely been sent out in the post, as well as multiple tests performed on the same individuals. Continue reading...

Lift to 0.6% in June from 0.5% in May also fuelled by lack of summer sales on high street

G20 countries aim their pandemic bailout spending at fossil fuel industries, leaving Paris climate change targets in doubt

Chancellor’s directive to focus on how people escape CGT ‘feels like starting pistol for a tax grab’, says analystWealthy households could be in line for tax rises to claw back the cost of extra spending during the coronavirus pandemic, after the government called for a wide-ranging review of capital gains tax.Rishi Sunak surprised backbench Tory MPs after he ordered the examination of the main tax on asset sales, which reaps billions of pounds for the exchequer each year on the sale of second homes, works of art and stocks and shares. Continue reading...

A new book is a much-needed piece of heretical questioning for politicians who argue that something needs to be done about the size of the public debtThe record government deficits are keeping the economy on life support during the Covid-19 crisis, and removing them would be like pulling the plug. Without the state stepping in, there would be mass unemployment and bankruptcies. The government is spending so much because people and companies cannot do so. It ought to be obvious that fiscal deficits, in and of themselves, are neither good nor bad. They should be used to save jobs and keep inflation low.Yet the message from the chancellor, the government’s economic watchdog and thinktanks is that the current level of spending is unsustainable and needs to be brought down by raising tax revenues or reducing spending, or doing both. This is not an economic argument but a political one. The public is being made anxious about the “debt” so that this fear can be weaponised. By persuading voters that something must be done about the national finances, and sustaining that outrage, politicians can push for spending cuts. This is a repeat of the familiar austerity con that voters fell for a decade ago. Continue reading...

Office for Budget Responsibility forecasts UK’s biggest peacetime deficit in 300 years and permanent ‘economic scars’

Worst-case scenario warns output may not rise to pre-pandemic levels until 2024

Britain’s economy has shrunk by a quarter since the pandemic began...and its fiscal watchdog fears the recovery will be slow and painful

There was nothing inevitable about a weak bounce back – the UK government has delayed the recovery by its dithering

GDP would shrink 12.4% and unemployment more than double in one scenario as budget deficit hits £322bn

‘We’re running a bit like a club,’ says chief executive, as grocery firm sales rise 40% in MayOcado has 1 million customers waiting to join its online grocery service after struggling to cope with a surge in demand during the coronavirus pandemic.Tim Steiner, its chief executive, said Ocado, which has about 800,000 customers, could have increased sales more than five times over, given the level of demand during the pandemic, but had been held back by the limits of its warehouses and delivery network. Continue reading...

An edict seen by some as un-Conservative is exposing divisions over the prime minister’s cautious approach to the pandemicIn the fortnight before the UK went into lockdown, Boris Johnson appeared in a video chat with Dr Jenny Harries to answer a series of questions about coronavirus. The deputy chief medical officer went over the regular symptoms, the low risk of large gatherings and the cons of face masks for all. She told a nodding prime minister that masks should only be worn if a medical professional tells you to, otherwise you could contaminate the mask and transfer the virus: “It’s really not a good idea and it doesn’t help.”Fast forward four months and that advice – along with several other parts of their conversation – has gone out of the window. The government has announced that face coverings will soon become compulsory in shops and supermarkets. Following in the footsteps of Scotland, and after a weekend of mixed messages from ministers, the new rule will come into effect on Friday 24 July, with a £100 fine for anyone caught not wearing one. Continue reading...

Agricultural groups call for more government help to access new markets amid concerns over heavy reliance on ChinaAustralia’s barley industry has raised fears it is bearing the brunt of “a fracture” in the relationship with China, as Canberra rejected the latest travel advice issued by Beijing as “disinformation”.A parliamentary inquiry on Tuesday heard calls from Australian agricultural groups for more help from the government to access new markets, amid concerns over the risks caused by a heavy reliance on China.Related: Australia's Hong Kong intervention was hardly strident but that didn't matter to ChinaRelated: China trade tension to hit Australian beef and wool exports, Rural Bank says Continue reading...

GDP for May at 1.8% disappoints analysts expecting a bigger boost after lockdownThe British economy returned to growth more slowly than expected in May as coronavirus lockdown restrictions were gradually relaxed after the sharpest plunge on record a month earlier.The Office for National Statistics said gross domestic product (GDP) grew by 1.8% in May as the economy staged a modest recovery from April, when GDP crashed by a fifth during the first full month of lockdown. Continue reading...

Significant pressure on high street outlets as consumers remain wary of health risks

Incoming head of OBR says lack of forecasting means emergency measures’ success will be hard to gaugeRishi Sunak’s multibillion-pound economic response to Covid-19 has been criticised for lacking transparency by the incoming head of the Treasury’s independent tax and spending watchdog.Richard Hughes, the economist picked by the chancellor to lead the Office for Budget Responsibility, told MPs on the Commons Treasury committee that taxpayers lacked enough information to know whether the measures outlined by Sunak at last week’s summer statement would be cost effective. Continue reading...

Declining job retention bonus was honourable and underlined £9.4bn scheme’s shockingly poor designRishi Sunak, the chancellor, readily conceded last week that there would be a “dead weight” cost to his policy of offering firms a £1,000 bonus for every employee recalled from furlough and kept in employment until the end of next January. That weight is the waste of rewarding firms for doing what they would have done anyway as the economy reopens.So it is good news, of a sort, for Sunak that some are too embarrassed to take the money. Primark was first out of the blocks at the weekend. The fashion retailer didn’t need a financial incentive to get 30,000 furloughed staff back in the shops and warehouses, so it would decline the kind offer of £30m of public money. Well played. Continue reading...

Rolling coverage of the latest economic and financial news

IoD says half of companies questioned cannot fully plan for end of transition period due to lack of clarity on rules

Campaign group One, founded by U2 frontman, is calling for a reorganisation of aid spending

Vulture funds want to change Argentina’s debt structure. We need to stop them from setting a dangerous precedentIn the wake of Covid-19, there is an urgent need for sovereign debt restructuring, including debt relief. In the circumstances caused by the pandemic, many countries’ repayment obligations could have devastating social consequences if they are not adjusted. Financial markets face risks of sovereign default.While some ad hoc relief has already been promised by official creditors, indebted poor countries are again facing private creditors without a sovereign-debt restructuring mechanism – the global equivalent of a bankruptcy regime. In the absence of such a framework, called for by the United Nations General Assembly and advocated by many experts and stakeholders, there have nevertheless been some constructive innovations in contractual approaches to sovereign debt. These address at least some of the collective-action problems of restructuring, including opportunistic holdout behaviour.Related: Invest in the green economy and we'll recover from the Covid-19 crisis | Joseph Stiglitz Continue reading...

With his £1,000-per-employee bonus plan, the chancellor is effectively saying, ‘If you give me £3, I’ll give you £2 in return’, writes Chris SimmondsWhile Rishi Sunak’s furlough scheme has been a much-needed and welcome lifeline to many, the sums don’t add up for his plan to pay businesses £1,000 per employee still in work by the end of January (UK business leaders warn over closure of furlough scheme, 8 July).I currently have 44 employees on furlough, most of whom I will be forced to release from the scheme at the end of August, because there is no revenue to pay the employers’ contribution. But let’s say, for the sake of argument, that all 9 million people currently on furlough are still on it when it ends in October, and their employers can afford to pay them £520 a month for the three months for the period November to January to qualify for the £1,000-per-employee bonus. Employers, many with no other revenue coming in, would be paying out £1,560 per employee to then get £1,000 back. The minimum cost to employers would be £14bn, with the government reimbursing £9bn. What the chancellor is effectively saying is: “If you give me £3, I’ll give you £2 in return.”

Nations are entering the critical economic phase of the pandemic: how to get consumers spending again

Brexiters are drawn to the romance of hard-bitten seafarers, so why not repurpose it to boost theatres?On the quay at Port Isaac yesterday evening, lit by a midsummer moon, I stood before an assembled shoal of grizzled Cornish fishermen, fat Henry V in Fred Perry, waving my Olivier award like a sword. “I know you. You’ve survived storms at sea, gales that tear trees from fields. You’ve withstood winds that raise roofs, and endured the tossing of tempests. And if you have the courage to do all that, my fishermen friends, then maybe, just maybe, there’s a future for all of you… on the stages of British theatres!” A cheer went up. Oliver Dowden, the new secretary for digital, culture, media and sport, stood behind his film crew, loving what he saw. I knew he would.The mythic allure of the British fishing industry was central to the dishonest Brexit campaign of 2016, a propaganda war that finally delivered the most incompetent and cynical government in our union’s modern history. As part of the 2016 offensive Michael Gove claimed the fishing business owned by his father, Ernest, was destroyed by EU policies. That June, however, Ernest contradicted his addled son, citing factors including competition for docking space from North Sea oil vessels as other reasons for his voluntary sale, complicating his son’s expedient and confected anti-EU narrative. Continue reading...

With bad news on jobs, and ongoing risk from Covid-19, hopes for a V-shaped recovery look misplacedHow quickly can Britain’s economy rebound after the pandemic? Last week, the chancellor, Rishi Sunak set out an upbeat recovery vision, with a plan to get restaurants buzzing again. It was perhaps the swiftest gear change in years: just days earlier, restaurants in England were banned from opening. In Leicester, they remain closed. But from August the government will pay 50% of diners’ bills in an attempt to get them eating out.This week the economic outlook is likely to be much less appetising. On Tuesday, the tax and spending watchdog, the Office for Budget Responsibility, will publish a report on the path ahead for Britain. It probably won’t make for uplifting reading.Footfall on high streets is at half last year’s levels, even after non-essential shops, pubs and restaurants reopened Continue reading...

New research from Sweden reveals that good genes don’t make you a success but family money, or marrying into it, does

Crashing out of the EU would put paid to the prime minister’s ambitions to become a big-spending RooseveltDoes Boris Johnson want to go down in history – or just down and down? At present all the signs are that, if he goes on in the direction he and his frightful lieutenant Dominic Cummings are heading, he will go down (and down and down) as having run the most disastrous government most of us can remember. Moreover, he will be forgiven by neither this generation nor the next.We shall come back to that. First we must consider the big news of the moment, Chancellor Rishi Sunak’s summer statement – a mini-budget whose scope necessitates a redefinition of mini-budgets. It was breathtakingly huge, but necessary. Inevitably, there were gaps, where an effort to rescue jobs and compensate for the damage caused by a government-imposed depression helped many victims but neglected some. But, on balance, a rightwing chancellor and a Treasury whose traditional raison d’être is to keep an eye on spending levels have together risen to the occasion, with a little help from our “build, build, build … spend, spend, spend … end austerity” prime minister. Continue reading...

Job losses, homelessness, school closures and acute hunger set to rise dramatically without urgent support, Christian Aid warns

The World Bank’s flawed and misunderstood poverty benchmark has led to a deceptively positive picture and dangerous complacency

Rolling coverage of the latest economic and financial news as England’s leisure businesses prepare to re-open

Small business owners want to know when – or if – a recovery will take place. I do too – and I have seven key metricsIs the pandemic over? Not even close. Cases are rising and no one really knows if, when or how the dreaded “second wave” will occur. There are lots of economists, analysts and experts pontificating on the future of the US economy. Don’t believe any of them. No one really knows.Related: For small business owners, the pandemic proves it: millennials were right Continue reading...

Grim day in UK retail as Boots announces plans to cut 4,000 jobs and John Lewis Partnership shuts eight stores

Chancellor failed to offer financial help to nurseries in summer statement

Thinktank predicts budget deficit of £350bn this year and tax rises from 2022

Thinktank fears deficit will go higher, new job retention plan is wasteful, and questions stamp duty and VAT cutsBritain is in the middle of an unprecedented crisis but some things never change. On the day after a budget or a mini-budget, the chancellor of the exchequer can expect to have what he considers a flawless package picked apart by the Institute for Fiscal Studies.Rishi Sunak’s summer statement was not accompanied by new forecasts for the economy and the public finances but there was still plenty for the thinktank that specialises in all things to do with tax, spending and budget deficits to get its teeth into. Continue reading...

Now that it has its own financial hubs on the mainland, Beijing may be prepared to risk the fate of its golden gooseLast week, the Chinese government passed a broad national security law criminalising dissent in Hong Kong. While the law has already had a chilling effect on protests, the consequences for Hong Kong’s economy are unclear. Since 1 July, Hong Kong’s stock market has climbed. Some foreign businessmen in Hong Kong have dismissed the law’s potential effect on business. This incredulity is unsurprising: for decades Hong Kong has thrived as a gateway for international capital into and out of China. Surely Beijing wouldn’t kill its own “golden goose”?But investors and businessmen, used to the unencumbered movement of capital, may have lost sight of recent changes. Contemporary China is different today to just 10 years ago, let alone to the 1990s when Hong Kong was handed over by the British. Now a global power that commands one-sixth of the world’s GDP and is increasingly authoritarian, it is approaching Hong Kong with a new rationale that is both political and economic.If Hong Kong loses its legal and economic institutions, investors can skip straight to Shanghai, Shenzhen and BeijingRelated: China's grip on Hong Kong eroding its status as financial hub, investors believeJames Lin is an assistant professor of international studies and history at the University of Washington Continue reading...

Victoria records 165 new cases, with 30 linked to outbreaks and 135 under investigation. Follow live news and updates