Quantitative easing reduced government borrowing costs as Covid-19 crisis hit markets

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...

Motor vehicles and transport equipment sub-sector leads decline during lockdown

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...

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...

Government borrowed a record £55bn in May on back of coronavirus crisis

Leaders clash over coronavirus recovery funds, with Germany pushing for swift resolution

Rolling coverage of the latest business news, as new public data reveals the growing costs of the Covid-19 pandemic

Supermarkets also drive 12% rise, although sales are still below pre-lockdown levels

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...

Jump seems consistent with idea of V-shaped economic recovery but is too soon to tell

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...

QE increase of £100bn shows Bank’s answer to all economic problems is still to print cash

Quantitative easing expanded to help Britain recover from coronavirus crisis

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...

Proportion of people aged 15 and over in work has shrunk from 62.5% to 58.7%, ABS says

Drop to near four-year low in May likely to prompt fresh stimulus by Bank of England

State pensioners will receive 18% increase if chancellor does not scrap manifesto promise

Printing money to ward off recession is the right approach - but it’s fraught with risk

Australian and New Zealand ministers say they are eager to do deals with the UK as their economies emerge from the coronavirus crisis

Analysts say year-on-year increase is most dramatic hit to UK labour market for 100 years

US Fed and IMF predict recession for most economies in 2020 because of impact of Covid-19

With FCO spending focused on middle-income trading partners, the world’s poorest countries may end up with lessTony Blair used to have a line in his speeches to the effect “every Labour government has created a department for international development, and every Tory government has got rid of it”.It has taken a while for this Conservative government to fulfil this historic mission. David Cameron saw the preservation of the department, and the commitment to spend on 0.7% on aid as central to giving the Conservatives a modernising message. He often cowered in front of the Daily Mail, but not on the issue of aid, and its contribution to Britain’s reputation. On Tuesday he took the unusual step of branding the merger as a mistake. Continue reading...

Live rolling coverage of business, economics and financial markets as stocks rise strongly in Europe and futures point to Wall Street gains

The pandemic-induced collapse has brought a formal declaration faster than in 2008On 8 June, the business cycle dating committee of the National Bureau of Economic Research declared that economic activity in the US had peaked in February 2020, formally marking the start of a recession. But we already knew that we were in a recession that had likely begun around that date. So, why does the NBER’s formal declaration matter?It is no secret that measures of employment fell sharply from February to March. Real (inflation-adjusted) personal consumption expenditure (PCE) and real personal income before transfers both peaked in February as well. Official measures of GDP are released only quarterly but the economic free-fall in late March was enough to pull first-quarter GDP growth down to an annualised rate of -4.8% (relative to the last quarter of 2019).Related: US has officially entered first recession since 2009 Continue reading...

Experts say coronavirus outbreaks are almost inevitable given the close-knit nature of college life, and many social events might not returnWhen Nicole Spriggs-Moye of Washington DC imagined what her first year in college at Louisiana State University would look like, she imagined meeting new people and exploring new places. She envisioned bonding with her new roommate and joining the Black Student Union and student radio station. She planned to find mentors in her professors, who would teach her mass communication and pre-law.Related: 'Adapt and overcome': class of 2020 inherits worst labor market since the Great DepressionA lot of us feel displaced right now being at home and not having our friends, peers and professors close with usRelated: Ivanka Trump complains of 'cancel culture' after university cancels her speech Continue reading...

The furlough scheme has given employers breathing space, but its impact will be reduced by autumn

Why would households spend savings when unemployment is a distinct possibility?

Two senior civil servants say Whitehall did not devise economic plan after 2016 simulation

Caroline Lucas MP and Prof Richard Murphy on the need for all political parties to support green initiatives, Christopher Tanner on reimagining the idea of economic growth and Dave Young on the importance of building social infrastructureYour editorial (9 June) rightly calls for the post-coronavirus economy to be rebuilt in a fairer, labour-intensive and environmentally sustainable way. What wasn’t addressed, however, was the crucial question of how such an enormous transition could be paid for.In the short term, the government’s sensible response to the crisis has been to turn on the spending taps, maybe to the tune of £300bn. Expanding this to tackle the climate emergency is made easier by the government’s ability to borrow money at negative interest rates. Green quantitative easing could also help, while members of the Green New Deal group have also proposed that private savers’ money be used to help fund the green transition by changing the rules on Isas and pensions, so that some of the £170bn saved annually in such accounts and pensions might be invested in government-backed green bonds. Continue reading...

Oil company says it may be forced to leave some of its fossil fuel discoveries in the ground

Global stocks fall as investors fear that a fresh wave of Covid-19 may be on the horizon, just as lockdowns start to ease

Tory MPs are missing the point: lifting restrictions won’t ease this recession, people need to feel the outbreak is under control

Group of 57 organisations says bailouts must be on condition of firms reducing carbon footprint

EY Item Club further downgrades UK economic prospects with full recovery unlikely until 2023The British economy will shrink by 8% this year and is unlikely to recover from the damage wrought by the coronavirus crisis until 2023, according to a leading economic forecaster.After official figures showed Britain’s economy shrank by a record 20.4% in April – putting the country on course for the worst recession in more than three centuries – the EY Item Club was moved to produce its first interim report between two quarterly updates to reflect the deteriorating outlook. Continue reading...

Devastated high street needs sales to survive coronavirus crisis, retail groups say

Governments now know the economic, social, health and educational costs of full Covid-19 lockdowns scar too deeply

The high street is open again. But an explosive rise in unemployment is

The vacuum left by the G20 will leave the world’s poorest nations battered by Covid-19 and with a fraction of the wealth required to revive themselvesNo country is emerging unscathed from the Covid-19 pandemic, but the impact on the world’s poorest countries is especially severe. Extreme poverty is on the rise and underfunded health systems are woefully ill-prepared to cope with the virus. The number of children in Africa dying of preventable diseases is increasing. The gains made in development since the turn of the millennium are being reversed.The international community is well aware of what’s happening. More than 100 countries have sought financial help from the International Monetary Fund. The IMF’s sister organisation, the World Bank, says emerging market and developing economies will shrink by 2.5% this year, their first collective contraction in 60 years. The G20 – the body that brings together the biggest players from the developed and developing worlds – has recognised that oppressively high debt levels make it impossible for low-income countries to boost health spending. Continue reading...

Three businesses explain the challenges presented by Covid-19, lockdown and an end to furlough

It goes without saying that the 20.4% contraction in April is the worst on record

Latest figures are double the drop during the miners’ strikes and winter of discontent in the 1970s

Right now, the burden is manageable – but that doesn’t mean we should take our eyes off the deficit clock

Former cabinet minister sent financier furious email over delay in payment of £5m in feesThe prominent businesswoman Amanda Staveley fell out with the former cabinet minister David Mellor as the pair worked on securing the billions of pounds that saved Barclays during the 2008 financial crisis, the high court has heard.Staveley is suing Barclays for up to £1.5bn after her client, Sheikh Mansour bin Zayed Al Nahyan of Abu Dhabi, invested £3.25bn as part of an emergency fundraising 12 years ago. She claims that the UK bank was secretly offering superior terms to Barclays’ largest investor, the state of Qatar. Continue reading...