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...

Unemployment is rising as the summer recovery fades and the furlough scheme scales back

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

Recession and slow recovery will leave borrowing about £100bn higher than when Johnson became PM, says IFS

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...

Robert Wilson and Paul Milgrom are sharing the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel for their work on auctions

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...

Poll says two-thirds of Britons feel gloomy about future and that government response to coronavirus has been shambolic

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...

Greater Manchester’s Andy Burnham said government package would mean ‘failure and collapse’ for businesses

Rishi Sunak announces new furlough scheme with PM set to outline ‘three-tier’ approach to local lockdowns on Monday

We delve into detail of Rishi Sunak’s plan to protect firms forced to closeThe chancellor, Rishi Sunak, has announced an expansion of the job support scheme to protect companies and workers forced to close during coronavirus lockdowns this winter.Against a backdrop of slowing economic growth, fresh government restrictions and rising job losses as the furlough scheme ends, the development comes just two weeks after Sunak announced his winter economy plan. Continue reading...

Rolling coverage of the latest economic and financial news after UK growth figures were released for August

Rishi Sunak must act swiftly after latest figures wipe out hope of V-shaped recovery

GDP rose 2.1% but is lower than expected as Covid lockdown measures were relaxed

Rolling coverage of the latest economic and financial news, as budget airline easyJet warns it lost up to £845m last year

With UK’s Liam Fox eliminated the contest is now between Yoo Myung-hee and Ngozi Okonjo-IwealaThe World Trade Organization is set to be run by a woman for the first time in its 25-year history after it was announced that the final choice to be its new director-general will be between South Korea’s Yoo Myung-hee and Nigeria’s Ngozi Okonjo-Iweala.Britain’s former international trade secretary Liam Fox failed to make the final shortlist as the number of candidates was whittled down from five to two.The eight candidates to be the next director-general of the World Trade Organization are: Continue reading...

MPs also hear that national debt is now more sensitive to movements in interest rates

Bernie Evans is clear where the chancellor’s rhetoric will take the country, and Dave Hunter believes Labour can offer a credible alternative, if only it puts in the workRishi Sunak is not the first Tory chancellor to claim he has a “sacred responsibility to balance the books for future generations”, while doing nothing to ease graduates’ debts, improve young people’s chances in the housing market, increase social mobility, close pay ratios, or increasing spending on all aspects of state education (Rishi Sunak: hard choices ahead to tackle debt from Covid crisis, 5 October).Future generations would benefit far more if the need for food banks was eradicated and there were guarantees of jobs and decent pay. Continue reading...

Covid-19, climate crisis and war combine to reverse decades of progress on raising living standards

Rolling coverage of the latest economic and financial news

Donald Trump said talks on a stimulus package are off – and the problems will only get worseHaving long been buttressed by ample liquidity, financial markets are entering the final quarter of 2020 amid an increasingly tentative global economic recovery, unusual political uncertainties and lagging fiscal and structural policy responses. And these headwinds come on top of the Covid-19 crisis, which has left most countries struggling to strike a balance between protecting public health, achieving a return to a semi-normal level of economic activity and limiting infringements on individual liberties.In this context, the hope is that today’s generous liquidity conditions, enabled and supported by central banks, will continue to provide a bridge to a better 2021, not only reversing the economic and social damage but also delivering further gains to investors. But will this bridging operation, already deployed for several years to compensate for other headwinds, be sufficient to overcome what is an increasingly complex pandemic cocktail?Related: Why are stock market prices rising despite the Covid pandemic? | Kenneth RogoffThe longer the delay, the greater the problems that any future package will have to address Continue reading...

Jerome Powell says risk of providing too little support outweighs risk of providing too muchFailure to provide more support for households and businesses hit by the coronavirus pandemic could have “tragic” economic consequences, the Federal Reserve chair, Jerome Powell, warned on Tuesday.As Congress remains gridlocked over a new round of stimulus in the wake of the coronavirus recession, Powell warned: “The expansion is still far from complete.”Related: Making billions v making ends meet: how the pandemic has split the US economy in two Continue reading...

Caroline Kay on the Bank’s governor from 1966 to 1973, who joined straight from school and worked his way to the topYour article (Andy Haldane: the funnyman central banker who’s not great at maths, 1 October) states incorrectly that if Andy Haldane became governor of the Bank of England, he’d be the first non-Oxbridge governor. How about Leslie O’Brien, governor from 1966 to 1973, who joined the Bank straight from school in 1927 and worked his way to the top through the ranks?I knew Lord O’Brien in his latter career as chair of the House of Lords committee for which I was clerk, in 1982. He was a delightful man to work for and his watchwords of integrity and prudence would serve many a banker, and indeed many an Oxbridge graduate in public life, very well.

Kristalina Georgieva warns against premature withdrawal of government measures

Rolling coverage of the latest economic and financial news, as the chancellor of the exchequer warns that many more jobs will be lost before the Covid-19 crisis is over

One reason is that big corporations have not faced the economic pain that small businesses have

Author Chris Goodall says tackling the climate crisis is neither difficult nor expensive and can help boost the economy

Opting for corporate hibernation doesn’t remove cinema chain’s urgent need for fresh fundsChoose your villain in the depressing no-action cinema thriller. The top nomination goes to the distributors of the James Bond franchise who have killed the Christmas season for the cinema industry by shunting the release of No Time To Die into next spring.Then there’s Andrew Cuomo, the New York state governor, who has helped to frighten Hollywood studios by closing the city’s screens. Cineworld itself, now planning to shut all its US and UK cinemas for an indefinite period, is hardly blameless. It is carrying $8.2bn (£6.3bn) of net debt, including lease commitments and its over-leveraged position existed before Covid-19 hit takings. Continue reading...

The chancellor’s speech signals that he wants to debate spending cuts, not increasesRishi Sunak is the Conservatives’ most modern politician in terms of style. But he is traditionalist in substance. In his conference speech, the chancellor extolled the virtues of good housekeeping to sell the idea that he would balance the nation’s books. The household analogy is a powerful one in politics because it seems to correspond to everyday observations about thrift. But it makes no sense to compare personal experience with the economics of a nation. The late Roy Jenkins, two decades after serving as a Labour chancellor, rightly said Margaret Thatcher was trading in lousy economics when she sold herself as a prudent housewife able to save Britain from Labour overspending.“I think it is nonsense,” he told the BBC, “because there is an essential difference between the position of a family budget and the national budget, and that is that on the whole a family cannot increase its income by increasing its spending, whereas a nation, a government, by increasing its spending [can] substantially increase the total of the national income”. It speaks volumes about how much of the debate around political economy has been conceded to the right that the current Labour shadow chancellor could not match the unapologetic Keynesianism of Lord Jenkins. Continue reading...

Higher public spending urged as way of boosting employment and GDP at relatively low costThe International Monetary Fund has told its member governments they can create millions of jobs and boost recovery prospects if they use higher public investment to respond to the severe economic challenge posed by Covid-19.Before its annual meeting this month, the Washington-based fund said historically low interest rates meant it was a good time to borrow for long-term infrastructure projects and said the spending would help tackle rising unemployment.Related: Without clarity and leadership, there's plenty to fear for the UK economy | Larry Elliott Continue reading...

Rolling coverage of the latest economic and financial news

Chancellor hints at tax rises or spending cuts to balance books after pandemic

Jets scheme will help those laid off during pandemic, chancellor to tell Tory conference

Zambia could become the first country to default on its debts amid the fallout from Covid-19, but it won’t be the lastZambia is running out of money to pay its debts. It has asked bondholders for breathing space so that it can put a restructuring plan in place. The copper-rich African state is at risk of being the first country to default on its debts since the start of the coronavirus pandemic.Not the last though. Zambia is the canary in the coalmine, a harbinger of a full-blown crisis that has been lurking in the background from the moment the seriousness of Covid-19 became apparent. Continue reading...

The chancellor and his cabinet colleague Michael Gove are both ‘on manoeuvres’ as Boris Johnson’s premiership floundersA friend who has always shared my distrust of Boris Johnson said to me recently that he had at least hoped our prime minister would “grow into the job”.Alas, as even former supporters – not least those who made the historic mistake of electing him leader – acknowledge, Johnson has not grown into the job. Day by day, he has grown out of it. Continue reading...

Reductions in government support as the original furlough scheme ends point towards a brutal round of redundanciesThe UK economy continued its rapid rebound from the depths of the coronavirus lockdown in August, the latest official data on growth is expected to show on Friday, but many economists are braced for a grim winter as job losses mount.The Bank of England’s chief economist, Andy Haldane, predicted last week that GDP would be “only around 3-4% below its pre-Covid level” by the end of the third quarter, covering July to September. Continue reading...

The prime minister has been unable to resolve the tension between his party’s free-market orthodoxy and a desire to cater to new working-class votersBoris Johnson claims he is a “one nation Conservative”, bringing together the wealthy “classes” with the “masses”. Leaks from Downing Street signal a leftwing approach on economics and rightwing one on culture. Mr Johnson presents himself as the first Tory post-Thatcherite prime minister. His Brexit sales pitch was that he was prepared to sacrifice business profitability to regain “sovereignty”. Yet the Covid pandemic has shown Mr Johnson is unable to resolve the tension between his party’s free-market orthodoxy and a desire to cater to new working-class voters.Pre-crisis the British economy was characterised by low levels of business investment, a poor skills base, stagnating wages and the zombification of UK companies, which had taken on £1.2tn of corporate rated debt. Covid presented a chance to reset the economic model that has seen the share of wages fall as a share of the country’s gross domestic product. As providers of capital, investors might think that having a bigger share of economic output is a good thing. But companies also need customers who can afford to buy their goods and services. Continue reading...

Rolling coverage of the latest economic and financial news, as the US president confirmed he had Covid-19

Jobless rates have fallen sharply since hitting a record low in April, but the rate is still far higher than the 4.8% when Trump took officeThe US unemployment rate fell to 7.9% in September, the labor department announced on Friday, in the last snapshot of the jobs market ahead of the presidential election.Unemployment has fallen sharply since hitting a historic record of 14.7% in April after the coronavirus pandemic shut down the US. But the rate is still far higher than the 4.8% when Trump took office in January 2017 and the recent pace of recovery is slowing. The current level marks the worst job loss that any president has faced going into an election based on records going back to the second world war. Continue reading...

To survive the challenges we must reinforce respect for science and nature, sensible public policy and the interconnected world

Assuming the financial package is completed, collapse or a full-blown state bailout should be off the table for a whileThe process was slow and spluttering, but Rolls-Royce got there in the end: there will be a fully underwritten rights issue to raise £2bn, plus a new £3bn debt package. If the civil aviation market comes out of hibernation by 2022, it should be enough.The UK’s premier engineering company didn’t even have to trot off to Singapore for sovereign wealth money. It appears that current shareholders said that, if new shares are to be printed at desperation prices, they’ll take them. Continue reading...