The incoming governor will have no time to settle in as fears of recession grow and the clamour for rate cuts intensifiesAndrew Bailey will take over as Bank of England governor on Monday as the worst economic crisis since the 2008 financial crash unfolds, amid growing expectations that he will further cut interest rates to protect jobs and growth.The new governor is no stranger to baptisms of fire as he prepares to replace Mark Carney in the hot seat, having started his last job – as boss of the Financial Conduct Authority – a week after the Brexit vote.We’ve not heard the last from the Bank of England. Much will depend on the speed with which the virus progresses Continue reading...
The government’s debts are going to pile even higher if ambitious plans to double investment in R&D don’t pay offOnce more we are fighting a war with borrowed money, only this time it is not to rescue the villainous banking sector from its excesses. Now Britain will sink its few pennies and more into treating victims of the coronavirus, rescuing businesses losing customers and staff in equal measure, while plugging holes in a financial system that panics more often than Dad’s Army’s Corporal Jones.This time is different, says the new chancellor, Rishi Sunak, who last week laid out an expansive and overtly confident sweep of measures to tackle the Covid-19 outbreak and do much else besides. He outlined plans in the government’s first budget to spend £12bn on battling the virus while opening up two new fronts. First of these was an attack on austerity and the UK’s worn-out public services, with a further £18bn of spending; second was a revamp of the nation’s infrastructure, costing £600bn. Continue reading...
I have argued strongly for a decade against the Tories’ fiscal policy. Now, for this shameless chancellor, spending and investment are suddenly common senseBritain’s national debt over the past decade has always been a non-problem. For most of the last 300 years, it has been very much higher as a share of national output. Our public debt has been well-managed by the Bank of England, so that the average duration of government bonds is 15 years: there is close to zero chance of a crisis of refinancing or of confidence in public debt. At current rates of interest the overall cost of debt service is among the lowest in our history.Britain has thus plenty of room to spend and borrow, and there was no need for the draconian Cameron-Osborne austerity squeeze in which cumulative cuts in public spending in many areas of government exceeded 40%. Deficit reduction could have been more measured and the pain mitigated. It was baloney from top to bottom – a cruel hoax that was one of the reasons for the Brexit vote, imposing wanton and needless suffering. I and other Keynesian economists have made these arguments in vain for more than a decade – indeed for most of my working life. So Wednesday’s budget was an extraordinary moment.Yet a rubicon has been crossed. Keynesianism has been restored to its proper place in British public life Continue reading...
by Larry Elliott, Jasper Jolly and Jennifer Rankin in on (#50NBD)
Pledges of help from EU, China and Germany plus declaration of US emergency helped the S&P 500 to surge back after a torrid weekThe world’s most powerful central bank, the US Federal Reserve, is preparing a fresh attempt to shore up investor confidence despite a late rally on Wall Street on Friday that ended a torrid week for stock markets on a more positive note.Fresh pledges of help from China, Germany and the European commission combined with Donald Trump’s declaration of a national emergency over coronavirus to reassure investors after an ordeal for equities on both sides of the Atlantic that echoed the depths of the banking crisis.The Federal Reserve must FINALLY lower the Fed Rate to something comparable to their competitor Central Banks. Jay Powell and group are putting us at a decided economic & physiological disadvantage. Should never have been this way. Also, STIMULATE!Related: Trump's bid to calm crisis simply caused more financial chaos Continue reading...
The obsession with economic growth does not take into account the climate crisis or extreme poverty, writes Michael Bassey, while John Airs says the fight for socialism is far from overOnce again the concern is for economic growth (Tories splash the cash, but will it hit the right targets?, 12 March). When will rich countries like ours recognise that growth is damaging the planet and prejudicing the lives of our grandchildren?Rishi Sunak’s budget has allocated £27bn for roadbuilding and a further £4.2bn to eight local authorities for transport projects (Report, 12 March). He hasn’t said (and may not know) how much carbon dioxide these measures, and the resultant traffic, will add to the already overloaded atmosphere and the concomitant heating of the planet. Continue reading...
As I learned in the 2008 crash, a global problem requires governments to work together. Today’s populist nationalism puts us all at riskIt need not be this way but one of the most disastrous weeks in the history of global medicine and global economics has ended with country after country retreating into their national silos. They are fighting their own individual battles against coronavirus and in their own way.Each country has, of course, its own distinctive health systems that it relies on, rightly values its own medical experts and the disease is at a different stage in each. But why is there, as yet, no internationally coordinated medical project – equivalent to the wartime Manhattan Project – mobilising all available global resources to discover a coronavirus vaccine and to fast-track a cure?Related: Trump’s coronavirus ban on travel from the EU is backfiring already | Jonathan FreedlandRelated: Why is the government relying on nudge theory to fight coronavirus? Continue reading...
It is not just the obvious candidates whose shares have fallen – there is now a fear of financial contagionYou’d expect Larry Summers, former US Treasury Secretary under President Bill Clinton and adviser to President Barack Obama, to twist the knife, and he did so stylishly. By destroying “about $500bn in equity market value in course of an 11-minute speechâ€, President Donald Trump had set “what I believe is a new world record for presidential market value destructionâ€.Fair point. Trump’s ban on flights from 26 European countries lacked rhyme or reason. It runs counter to the World Health Organization’s advice and virtually guarantees the economic hit to the US will be intensified. More to the point, the president said virtually nothing about how the US will construct its healthcare response to the pandemic.Related: Business Today: sign up for a morning shot of financial news Continue reading...
Christine Lagarde delivered a disappointing set of measures to mitigate the impact of coronavirusFor Christine Lagarde, it was the moment to stamp her authority on the European Central Bank – and she blew it.Back in 2012, Mario Draghi announced his arrival at the ECB with his now famous “whatever it takes speechâ€: a commitment to use all the weapons at the bank’s disposal to halt a run on Italian and Spanish bonds that was threatening the existence of the eurozone.Related: ECB announces plan to help eurozone banks withstand coronavirus Continue reading...
Thinktank expressed some disapproval but Sunak can count himself relatively luckyIt is part of budget tradition that the chancellor gets a kicking from the Institute for Fiscal Studies 24 hours after presenting his package to parliament. By that token, Rishi Sunak can count himself relatively lucky.The UK’s leading tax and spending thinktank certainly had its criticisms of the budget but, given Sunak’s decision to spend and borrow hundreds of billions of pounds extra over the coming years, it could have been a lot worse.Related: An end to austerity? It’s a nice line – but one budget can’t undo the damage | Simon Wren-Lewis Continue reading...
Yes, George Osborne’s calamitous public spending cuts have been halted by Rishi Sunak. But the chancellor hasn’t reversed themDid Rishi Sunak’s budget mark an end to austerity? It wouldn’t be the first time. During the past three years, successive government budgets have supposedly “ended austerityâ€. So why is it that the end of austerity never actually arrives?Related: Johnsonism’s first budget is floating on hype and hot air | Aditya ChakraborttyRelated: Rishi Sunak’s big-spending budget throws Labour a huge challenge | Martin Kettle Continue reading...
by Richard Partington and Phillip Inman on (#50KXG)
Thinktank praises Covid-19 response but says ‘splurge’ relies on already announced plansRishi Sunak’s first budget is not as generous as it seems and many Whitehall departments will still be worse off than they were before the spending squeeze began in 2010, according to Britain’s foremost economics thinktank.The Institute for Fiscal Studies said the chancellor made the budget sound more substantial than it was, while relying on previously announced spending plans.Related: An end to austerity? It’s a nice line – but one budget can’t undo the damage | Simon Wren-LewisRelated: Sunak's spending plan will increase net debt by £125bn, says OBR Continue reading...
Politicians have more power over the economy than they like to admit. The chancellor is deploying his to the fullI am used to being astonished by Conservative budgets. Towards the end of my time as a special adviser to Vince Cable under the coalition, I was incredulous at how the then chancellor, George Osborne, was willing to threaten years more of cuts, despite having already slashed spending across the “non-protected†departments. Never mind whether the economy could take it, or the bond markets demanded it – this was no longer cutting fat or even muscle, but bone.Now I stand equally astonished, but this time for the opposite reason. The figures produced by Rishi Sunak in his first outing as chancellor might have come from a Conservative attack document titled “Labour’s secret plans to borrow hundreds of billionsâ€. Glance over the budget measures table and you can find promises to spend an extra £175bn over five years, and raise just £25bn of that in tax. And this not just for cherished projects like the doubling of R&D or an infrastructure revolution – this is a chancellor willing to bandy around phrases like “fiscal stimulusâ€. The once-heretical idea that public spending might boost the economy is back with a bang.Related: Rishi Sunak’s big-spending budget throws Labour a huge challenge | Martin Kettle Continue reading...
Pessimistic analysts say this week’s crash might be the start of a global ‘bear market’. What have bears got to do with the market?Stock markets crashed this week on the twin shocks of coronavirus projections and an oil-price war between Saudi Arabia and Russia. Pessimistic analysts said this might be the start of a global “bear marketâ€. But what have hairy quadrupeds got to do with it?This is one of those terms for which the internet offers various competing “folk etymologiesâ€, which is the linguist’s polite term for nonsense. Bear markets are named because bears attack by swiping their paws downwards? No. The origin in fact lies in the old proverb warning that you shouldn’t sell a bear’s skin before you have caught the bear. In the 18th century, speculators who did sell borrowed commodities before they had paid for them – in anticipation of profiting from a fall in price – were therefore called “bearskin jobbersâ€, later shortened to “bearsâ€. Continue reading...
US stock markets have been on an unprecedented streak since 2009, a bull market of gainsWall Street’s record-breaking 11-year “bull market†came to an end on Wednesday as fears about the spreading Covid-19 pandemic hit stock markets again.US stock markets have been on an unprecedented streak since 2009, a bull market of gains. On Wednesday investors sold off shares across all sectors after the World Health Organization declared the outbreak a pandemic for the first time and criticized “alarming levels of inaction†by governments in corralling the virus.AP contributed to this story Continue reading...
by Kate Proctor Political correspondent on (#50JS3)
Former PM and ex-chancellor lead charge of MPs worried about impact of spending hikeTheresa May, the former prime minister, and Sajid Javid, who was chancellor until last month, sounded warnings over the level of spending in the budget, stressing the continued need for fiscal discipline. May led the charge of backbenchers apprehensive about the long-term impact of the public and capital spending hike.In a debate in the Commons after Rishi Sunak delivered his first statement, she said: “Although spending a lot of money may be popular and may seem the natural thing to do, there is of course that necessity to have a realistic assessment of the longer-term impact of those decisions and of the longer-term consequences.Related: 2020 budget: the Guardian panel’s verdict | Polly Toynbee, Katy Balls, Tom Kibasi and Miatta FahnbullehRelated: Sunak delivers budget bonanza: Politics Weekly podcast Continue reading...
If it’s possible to secure incomes due to coronavirus, why can’t we help families who can’t access healthy food?This was no ordinary Conservative budget – but these are not ordinary times. In his first budget since taking office a month ago, Rishi Sunak was ebullient as he stated that this government would spend and invest “what it takes†to drive productivity and growth, and “level up†the country. His plan to address the economic impacts of coronavirus was comprehensive, clear in its understanding of the nature of the threat, and included many commendable measures – from making it easier to access statutory sick pay and benefit payments, to helping small businesses cover sick pay costs, though the TUC has called for greater support for low-paid workers. Many of today’s proposals could have come from a Labour chancellor.That said, in a budget proclaiming an intention to “get things doneâ€, there were some major omissions. Coronavirus may be the most immediate crisis facing the UK, but it is far from the only one: we face a climate emergency; our public services – especially those run by cash-strapped councils – are at breaking point; and for too many, the economy is not delivering security or hope. The chancellor’s budget fell short of the mark on these.It was perhaps inevitable that on support for social care services the can was, as ever, kicked down the roadRelated: Road to hell: budget tarmacs over climate ambition Continue reading...
Extra £2.6bn is for capital projects only, with no new funds for maintaining existing defencesExpenditure on flooding will be doubled, the chancellor has announced in the budget, but analysis has revealed that the figure is less generous than it seems. Spending will be increased to £5.2bn for the period from 2015 to 2021, but the extra £2.6bn that includes will be for capital projects only, with no extra funds for maintenance.From the financial year 2015-16 to 2018-19, spending on flood defences was just over £3bn, and a further £815m was allocated for the financial year about to end. That comes to £3.9bn, of which about £1.3bn went on the maintenance of existing flood defences and other routine tasks. Continue reading...
A £30bn package to stimulate the economy was announced by Rishi Sunak as the government and Bank of England sought to protect jobs and livelihoods against the coronavirus crisis. Here are the main measures set out by the chancellor:
There will be gain for some consumers but pain for others after the Bank of England’s decisionThe emergency 0.5% rate cut by the Bank of England in the midst of the coronavirus outbreak will mean monthly savings for householders with tracker mortgages but more pain for savers as interest paid shrivels again – and for most borrowers who have fixed-rate mortgages, there is no gain at all. Continue reading...
Amid concern over Covid-19, the idea is to show Bank and Treasury are working as a teamThere is no point in doing things by half and the Bank of England has wheeled out the big bazooka in its effort to minimise the impact of Covid-19 on an already shaky economy.Threadneedle Street’s expertise does not extend to immunology so the Bank has no real idea how serious the outbreak will be. It thinks the impact will be temporary but admits it could be “sharp and largeâ€. In any event, there is going to be some serious short-term disruption to activity and the aim is to ensure there is no long-term harm. Continue reading...
How the chancellor can offset the worst affects of the coronavirus fallout, from motoring to welfare, pensions to BrexitHow will the budget support the government’s plan to protect the economy from the worst affects of the coronavirus? Will Covid-19 prevent chancellor Rishi Sunak from spending to “level up†the regions and boost infrastructure spending? Here is our checklist of what to expect: Continue reading...
by Richard Partington Economics correspondent on (#50HKR)
Chancellor Rishi Sunak’s budget will be seen by many as an emergency statement on the coronavirus crisisThe chancellor, Rishi Sunak, will deliver one of the most difficult budgets in recent times against the backdrop of the coronavirus outbreak.The de facto emergency statement will outline the government’s response to the unfolding economic crisis, while Sunak is also expected to offer some indications about how he plans to deliver on Boris Johnson’s promises for higher spending made before the election. Continue reading...
Standard Life Aberdeen boss hoping for ‘short sharp downturn’ but urges big stimulus in UK budgetIf the coronavirus outbreak can be contained in the west as it has been in China there could be a short sharp economic downturn followed by a recovery in six months’ time, according to one of the UK’s biggest investment managers.Keith Skeoch, the chief executive of Standard Life Aberdeen, said the recent sell-off in global stock markets – which recorded their biggest losses since the 2008 financial crisis on Monday – reflected “pure panic†among investors about a coronavirus-driven economic downturn and an oil price war. Continue reading...
The likely coronavirus response will disrupt family life and show just how many children, parents and grandparents need careThere is an unlovely 20-second gap, in the parenting experience, between any given negative event and a sense of solidarity kicking in: the quick thrill of “I’m all right, Jackâ€. Toddlers, screaming in the supermarket? Not my circus, not my monkeys. Schools closing down for two months straight, which realistically would mean the Easter holidays rolling into September, the world transformed into one endless summer? My kids are 12 and 10, and I work from home. What could possibly be more clement, I thought? It’ll be like having co-workers, except in pyjamas.This was only fleeting, before the calamity kicked in. The disruption caused by mass school closures would be simply unmatched by any freak event in living memory: no flood, no ash cloud, no financial crash comes close to losing so much of the workforce to childcare, and for so long. We have some experience of multiple schools closing across a number of regions, for norovirus; that tended to be for no more than a couple of days, for deep cleaning. We know what it’s like to have snow days dispersed across a few counties, or for the whole country to seize up after a strong wind (if you can remember as far back as 1987). Few economic effects were observed, and none talked about, because the disruption was absorbed into each individual family, as misfortunes tend to be.Related: Charities preparing to feed children if schools shut over coronavirusThe World Health Organization is recommending that people take simple precautions to reduce exposure to and transmission of the Wuhan coronavirus, for which there is no specific cure or vaccine.Related: Even a starved NHS is still our best defence against the coronavirus | Polly Toynbee Continue reading...
An economic collapse may have already begun and globalisation will make recovery more difficultThe world appears to be on the brink of a sudden recession. The economic disruption caused by the coronavirus might put an end to what has been a heady decade on the world stock market since, after the 2008 global financial crisis, low interest rates and quantitative easing became the new normal. Today’s markets are registering massive falls of up to 10%, unprecedented since 2008. Billions of dollars and pounds are vanishing. It is Black Monday all over again.The coronavirus has shown a world vulnerable to fear of illness. We have yet to experience its vulnerability to the economic consequences of that fearRelated: Coronavirus won’t end globalisation, but change it hugely for the better | Will Hutton Continue reading...
FTSE100 expected to fall 6.3% on opening on Monday after Asian shares are battered by growing fears of a worldwide recessionCoronavirus: latest updates
Move follows Russian refusal to join Opec-led production cut aimed at keeping prices highThe price of crude oil has plunged by almost 27% after Saudi Arabia, the world’s top oil exporter, said it would step up production from next month, flooding global markets and most likely depressing petrol and diesel prices.Brent crude was at $33.09 a barrel on Monday morning, a fall of 27%. It was the worst one-day fall for Brent since the start of the first Gulf war in 1991. US crude fell 27% to $30.Related: Coronavirus live updates: stock markets plunge on global recession fears Continue reading...
Economics | The Guardian