Economics | The Guardian

Stuart Gulliver has apologised following the revelations that its Swiss operation helped wealthy clients dodge tax. MPs have also questioned HM Revenue and Customs.

Benign disinflation means rising real incomes for lenders, pensioners, and workers - but ‘bad deflation’ means an increase in the real burden of debtIn 1923, John Maynard Keynes addressed a fundamental economic question that remains valid today. “[I]nflation is unjust and deflation is inexpedient,” he wrote. “Of the two perhaps deflation is … the worse; because it is worse…to provoke unemployment than to disappoint the rentier. But it is not necessary that we should weigh one evil against the other.”The logic of the argument seems irrefutable. Because many contracts are “sticky” (that is, not easily revised) in monetary terms, inflation and deflation would both inflict damage on the economy. Rising prices reduce the value of savings and pensions, while falling prices reduce profit expectations, encourage hoarding, and increase the real burden of debt. Continue reading...

The number of people employed on zero-hours contracts reached 697,000 in the fourth quarter of 2014. See the characteristics of people employed on zero-hours contracts in four chartsNew estimates show that the number of people employed on zero-hours contracts reached 697,000 in the fourth quarter of 2014, up from 586,000 during the same period a year earlier.The figures, published by the Office for National Statistics (ONS), are an estimate of people who are employed on zero hours contracts in their main employment, and come from the Labour Force Survey. By the end of 2014, the total number of people employed on zero hours contracts represented 2.3% of total in employment - up on the previous year when the figure stood at 1.9%. In its release, the ONS note that it is “not possible to say how much of this increase is due to greater recognition of the term ‘zero-hours contracts’ rather than new contracts.” Continue reading...

New Economics Foundation says 79% taxpayer stake in bailed-out bank should be used to create 130 locally run banks, boosting GDP by £38bnRoyal Bank of Scotland could be broken up into 130 locally run banks and operated along the principle of the John Lewis Partnership rather than be privatised by the next government, according to a report published on Wednesday.In an attempt to reopen the debate about the future of the bank as it prepares to publish its 2014 results on Thursday, the New Economics Foundation argues that carving out local banks would bolster GDP and be more beneficial than using the proceeds of any sale of the stake to cut the national debt. Continue reading...

Shares in Britain’s top companies pass high set at height of dotcom boom as Athens secures lifeline and belief grows about UK recovery gaining momentumLondon’s stock market has hit a record high, breaking through the levels set at the height of the dotcom boom on relief that debt-laden Greece had secured a lifeline from its creditors and increasing belief that the UK’s economic recovery is gaining momentum.After months of testing the previous record 6950 point mark – which was reached on the final trading day in December 1999 – the FTSE-100 index of the biggest companies on the London stock market hit 6959 on Tuesday. It closed at 6949, well above the previous closing record of 6930 – the level at which the benchmark index ended the 20th century.Related: FTSE 100 hits record high - timeline Continue reading...

Poll for CBI finds that most consumers believe firms abuse their trust and sacrifice loyalty for a quick returnConsumers believe businesses put profits before staff wellbeing and customer service, according to a poll for the CBI.The business lobby group said the word profit was used “like a dirty word” by a majority of consumers, who believe businesses abuse their trust and sacrifice loyalty for a quick return. It said the results should persuade companies to be more transparent about how they generated profits. Continue reading...

London’s blue chip index hits record high after eurozone ministers give their approval to Athens’ new economic reform plans.

European trade commissioner Cecilia Malmström says that limiting the scope of the investor-state dispute settlement system in the Transatlantic Trade and Investment Partnership will be difficult (US firms will not use secret corporate courts to muscle in on NHS contracts, says EU trade chief, 20 February). She is apparently tinkering with it to try to exclude publicly funded health services, but there are clearly doubts about the effectiveness of this tinkering. Why cannot she see that the simple answer is to remove this secretive ISDS court system from the treaty? Both the US and the EU have robust, transparent legal systems with courts at various levels such as state, national, federal and EU, with proper avenues for appeal. If companies think they have a case against governments, let them use these courts.Who can predict what actions a government may need to take in the future that might impinge of the profits of investors? Continue reading...

Anti-austerity programme of new prime minister Alexis Tsipras depends on collecting billions in unpaid revenuesThe new government of Greece, led by Alexis Tsipras, has promised to tackle tax evasion. It hopes this strategy will yield €3bn ($3.4bn) in the coming months in order to cover part of the cost of its €12bn Thessaloniki anti-austerity programme. This would entail various measures – a gradual increase in the minimum wage to reach €750, an extra month’s income for pensioners receiving less than €700 a month, and various welfare benefits – to help the most vulnerable members of the community.“If this government thinks it can change the system in a few weeks it is underestimating how complicated it is to collect tax in Greece,” says Haris Theoharis, narrowly elected to parliament for the centrist To Potami party. Between January 2013 and June 2014 he was secretary general for public revenue, a job imposed on the then conservative New Democracy government by the country’s creditors, increasingly irritated by slow progress against fraud and tax dodging. Continue reading...

Leading economic thinktank says UK’s failure to raise output per worker since the downturn has held back wages and well-beingBritain must fix its productivity problem to secure future economic growth and improve living standards, a leading thinktank has warned as it highlights a failure to grow output per UK worker since the downturn.The Organisation for Economic Co-operation and Development (OECD) has also downgraded its outlook for the UK this year but still sees it enjoying one of the fastest growth rates among advanced economies. Growth in 2015 is now projected to be 2.6%, matching last year’s pace but down from a forecast for 2.7% made in November. The 2016 forecast remains at 2.5% GDP growth.Weak labour productivity since 2007 has been holding back real wages and well-being. The sustainability of economic expansion and further progress in living standards rest on boosting productivity growth, which is a key challenge for the coming years,” says the OECD report, to be launched at a news conference with chancellor George Osborne on Tuesday morning.Income and wealth are below the G7 average and real earnings have been exceptionally weak as they have continued to reflect poor productivity,” its report into the UK says.Developing a knowledge-based economy, strengthening infrastructure investment and improving the financing of the economy are all critical in this regard,” the thinktank adds.Weak export performance and productivity could be driven by infrastructure weaknesses and difficult access to bank finance, especially for small and medium-sized enterprises (SMEs), holding back the emergence of new firms and high-skilled jobs.”In addition, house prices have increased rapidly and may create risks to financial stability in the case of a downward adjustment.”The chancellor will likely welcome the OECD’s comments on his austerity programme. The Paris-based thinktank notes the budget deficit has been “significantly reduced since the peak of 2009, but at a slower pace recently notably as growth has been insufficiently tax-rich.”

Six-page blueprint aimed at appeasing eurozone creditors expected to be endorsed by finance ministersGreece’s new leftwing government has moved to head off insolvency and a run on the banks by submitting a menu of structural economic reforms to Brussels aimed at appeasing its eurozone creditors and securing a four-month bailout lifeline.

As January sales end, retailers struggle to keep shoppers spending this month, CBI saysBritish retailers suffered a sharp slowdown this month with business falling at supermarkets and department stores as January sales drew to a close, according to a business survey.The latest snapshot of retailers from business group, the CBI, showed sales barely rose on a year ago, a much worse performance than City economists and retailers themselves had been expecting. Echoing other signs of pressure on retailers as they resort to discounting to attract consumers, the survey showed prices and headcount falling.After a strong start to the year, retailers were disappointed by the unexpected halt in sales growth. In particular, continually heavy discounting in the grocers sector seems to be weighing on activity.Looking ahead, the outlook for the retail sector is fairly positive, with the boost to household incomes from falling inflation likely to support spending ... However, as this survey shows, overall trading conditions on the high street remain challenging.”There is no getting away from the fact that CBI’s distributive trades survey for February is substantially weaker than expected. Even so, we suspect it is primarily a case of consumers taking a breather after spending at a robust rate through the fourth quarter...Despite the disappointing February CBI survey, the prospects for retail sales and consumer spending overall for 2015 still look largely bright. Households purchasing power is currently getting a double leg up from extremely low inflation as well as rising earnings growth. And there should be more improvement in purchasing power to come over the coming months, along with further rises in employment.” Continue reading...

Annual real earnings to rise for first time since 2007 but later retirement age and growing workforce is slowing pace of increases

Introducing a parallel currency would create money and delay Greece’s inevitable financial default. But the strategy will only work if investors believe the country won’t collapseThere’s almost no upside to a eurocrisis. You become part of a rolling maul of politicians, journalists and economists ripping and gouging at each other, both in private and on Twitter. The only advantage of being there is that it forces you to think laterally about money. Soon – if the Greek crisis is not resolved – one of the most audacious pieces of lateral thinking ever could get a try-out: a parallel digital currency, issued by the Greek government, modelled on Bitcoin, but with a crucial difference.Related: The Guardian view on the Greek debt deal: victory or defeat? | Editorial Continue reading...

The chancellor cheers at his failure to deliver his stated ambition of price rises of 2%. That must surely mean that it’s time to change the targetAs polling day nears, we can look forward to a dismal burst of politics as archery. Ministers will brag about bullseyes hit (2m apprenticeships), the opposition will seize on arrows that have veered off course (immigration, the deficit) and wise commentators will explain how the obsession with targets produces all sorts of perversities.Last week, however, when things went wildly off course in relation to the most important target of the lot, we got a topsy-turvy reaction. Instead of popping up with sheepish excuses, the government’s top brass bugled news of their big miss to anyone who would listen. The target is for an inflation rate of 2.0%, with a percentage point miss in either direction being taken so seriously that the governor of the Bank of England has to pick up his pen and explain to the chancellor what’s going on. An undershoot is, very explicitly, formally regarded as “just as bad as inflation above the target”, and so when the January number came in at 0.3% then that represents – surely – a serious misstep.Inflation matters, not only as an imperfect gauge of the industrial mood but also in its own right Continue reading...

The Syriza-led government in Athens has until late Monday night to come up with a list of structural reforms such as deregulation and anti-tax evasion measuresHaving clinched an outline agreement to extend Greece’s bailout by four months in crunch talks in Brussels on Friday, Athens now has its work cut out.Finance minister Yanis Varoufakis and prime minister Alexis Tsipras have until Monday night to come up with a list of proposed structural reforms that will then be scrutinised by international creditors – the troika of the European Central Bank, the European Union and the International Monetary Fund.Related: Greek government races to meet Monday fiscal reform deadline Continue reading...

Five centuries may have passed but Cromwell’s Tudor times offer some remarkable parallels with the economic plight of Britain todayHe works all hours, first up and last to bed. He makes money and he spends it. He will take a bet on anything. A description of a foreign exchange dealer taking big punts in the City? No, think again for this is Hilary Mantel’s description of Thomas Cromwell.The TV adaptation of Wolf Hall ends this week with the fall of Anne Boleyn. Throughout the six episodes, the focus has been on the political themes addressed in the book: Henry VIII’s determination to have a male heir, who’s up and who’s down at court, the break with the Pope over the king’s divorce from Catherine of Aragon. Continue reading...

Minister of state Nikos Pappas said the government was drafting list of reforms including making the civil service more effective and laws to combat tax evasionGreek government officials are racing to complete a list of reform proposals that will be scrutinised by the country’s international creditors this week as Athens seeks an extension to its €240bn (£177bn) bailout.

An unbelievably convenient boost to demand in Britain has come in the nick of electoral time for the ConservativesWhen it comes to the economy, the prime minister and chancellor are enjoying the luck of the devil. After the financial crisis struck in 2007-09, they opposed the Keynesian measures necessary to avert a 1930s-style great depression; and when they assumed the reins of office in 2010 they made misleading comparisons between the state of the British economy and that of Greece and introduced wholly unnecessary “austerity” measures.These latter not only stopped the burgeoning economic recovery in its tracks: they sapped the animal spirits of entrepreneurs and wrecked any hope of the boost to confidence they were supposed to encourage. There followed several years of “flatlining” and missed investment opportunities in the public and private sectors.Instead of counteracting the weakness in demand, the coalition took measures to aggravate it. I am not making this up Continue reading...

Without the single currency and bailouts, Greek, Irish and Portuguese banking systems would have collapsed. Anti-Europeans should acknowledge thisWolfgang Schäuble, Germany’s finance minister, says that the radical left party Syriza will have some difficulty selling what is seen in some circles as Greek climbdown during Friday’s cliffhanger negotiations that tried to put an to end austerity. Elected on an impossible mandate to renegotiate the country’s tough bailout terms and stay in the euro, Syriza now finds itself recommitting to austerity as the price of getting crucial loans extended for four months. Without them, Greek banks would have collapsed. Mr Schäuble seems almost happy that the tieless Syriza leaders, shamelessly talking about reparations for the second world war, have had to confront “reality”.Meanwhile Britain’s army of Eurosceptics have had a field day. If the negotiations had gone wrong, as many predicted, and Greece went on to leave the euro and restore the drachma then it would be the best vindication yet that Eurosceptic Britain was right. The eurozone, already accused of being the single most important, if not the only cause of Europe’s economic plight, would be exposed as teetering on collapse. And if instead Greece managed some compromise deal, then it would be a slap in the face for democracy. Greek voters would have been denied what they had voted for. The EU stands accused, variously, of denying democracy and tethering a country to self-defeating austerity. Continue reading...

Tackling global warming is not just a global responsibility, argues the leader of the Labour party, it’s an economic necessity for BritainThe general election means 2015 is a critical year for Britain. It is also a critical year for the world on climate change. Within months of Britain voting, the UN is holding a summit in Paris to agree a binding global agreement to tackle climate change.But there is a real danger that this great chance to achieve action is going to slip by, without the world even noticing. That might suit some politicians at home but it will be a disaster for our country and the world.Climate change has never been just an environmental issue. It affects the economy, migration and living standards too Continue reading...

Prime minister says his anti-austerity government now faces its toughest work, in first public reaction since deal made to extend bailout for four monthsThe Greek prime minister, Alexis Tsipras, has said the country has won a significant battle but has yet to win the war, in his first public reaction to the latest deal to keep the debt-stricken nation financially afloat.Addressing Greeks less than 12 hours after the agreement was sealed at an emergency meeting of eurozone finance ministers in Brussels, the leftist leader said the hardest work now lay before his anti-austerity government. Continue reading...

Alexis Tsipras and Yanis Varoufakis could have threatened the eurozone with default. Instead, they showed their hand early – and the troika is still in chargeGerman officials chose a suitably Greek metaphor last week as they rejected the anti-austerity Syriza government’s initial demands, accusing finance minister Yanis Varoufakis and his colleagues of wheeling out a “Trojan horse”.As the fraught talks played out, however, instead of an army of fearsome Greek warriors emerging at Varoufakis’s side, it appeared more like one weary foot-soldier, waving an enormous white flag.Debt forgiveness, much talked about during the campaign, seemed to be off the agenda Continue reading...

Syriza’s ministers seem to have agreed bailout terms not very different from those they were elected to rejectAfter five years of living on the brink, Greeks have become inured to make-or-break crisis meetings in Brussels. Wrangling over the details of austerity plans is no longer enough to push irate demonstrators on to the streets of Athens in protest – even if the leftist-led government has done little else since it was catapulted into power three weeks ago.Instead, the Greek capital’s boulevards were buzzing all through last week. On Sunday, as Syriza’s outspoken finance minister, Yanis Varoufakis, prepared to confront his eurozone paymasters for the first time, thousands thronged central Syntagma Square imploring the European Commission, the European Central Bank and the International Monetary Fund – the bodies that have kept their bankrupt nation afloat – to “give Greece a chance”.“Greece has always managed to hold its head high. I think people will respect us, and fear us a little, after this.” Continue reading...

Savers should be prepared to step outside their comfort zone to beat low interest ratesCompanies around the world paid out a record $1.17tn in dividend income during 2015. The figures, published by Henderson Global Investors, highlight an important point for investors: while interest rates remain stuck at historic lows, income seekers who are prepared to take at least some risk with their capital can do far better.Henderson’s analysis shows the UK was one of the world’s best performers last year for dividends, with total payouts up 31% to $135bn. And globally, the stock market has been delivering higher payouts for five years now: total dividend income was 60% higher in 2014 than in 2009. Continue reading...

Move follows S&P’s downrating as agency predicts Ukraine crisis, falling oil price and rouble plunge will bring further gloom

The extension of the Greek bailout with barely a concession to Yanis Varoufakis’s demands proves only that Europe wants him to stick with the programme

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American Legislative Exchange Council combines litigation and legislation in two-pronged attack on ‘new battleground’ of workers’ rights, documents revealA network of Republican lawmakers and their rightwing corporate funders are battling behind closed doors to block minimum wage increases in cities across the US, in a step-by-step counter-attack that could cut back the incomes of millions of Americans despite an economic upswing.According to strategic details obtained by the Guardian, the American Legislative Exchange Council (Alec) – along with its localised sister organization, ACCE – is trying to prevent elected city representatives from raising the minimum wage to levels above those set by their states. The group has launched an aggressive dual-track mission that combines legislation and litigation in what Alec calls a “new battleground” over worker compensation.Related: Obama talks up US recovery and urges Republicans to back higher wages Continue reading...

Obama suggests Republicans are pretending to support the middle class, and teases them by saying: ‘If you want to be the party of higher wages, then come on’Casting his opposition as “shouting” enemies of the average American worker and minimum wage increases, President Obama suggested on Friday that Republicans were faking an interest in the wellbeing of the middle class – and insisted that a recovering economy vindicated his leadership.“The new plan is to rebrand themselves as the party of the middle class,” Obama said of Republicans, to cheers from core party faithful at the Democratic National Committee winter meeting in Washington DC. “I’m not making this up … I think their shift of rhetoric is good if it actually leads them to take different actions. If it doesn’t, it’s just spin.” Continue reading...

After reaping the benefits of world trade we are about to harvest some of the pain, argues one of the UK’s most experienced hedge fund managers

Stubbornness based on pride and prejudice is driving the rift. Reason must kick in before Grexit devastates EuropeAt the heart of the rift that runs through Europe at the moment lies a technocratic debate drowned in emotion. Germany has rejected Greece’s bailout request on the basis of the semantic difference between a programme extension (acceptable) and a loan extension (unacceptable).True, words are substance. But when the German finance minister, Wolfgang Schäuble, or his allies take the floor to explain their critical stance, the underlying reasons become evident: they quickly shift to moral and emotional grounds, invoking trust, values and cultural differences. Continue reading...

The chancellor still has many reasons to be cautious despite the improvement in public finances seen in JanuaryIn an ideal world, George Osborne would be sitting in the Treasury putting the finishing touches to a nice, fat giveaway budget. Five years ago he imagined that by now he would have cut the deficit to below £40bn, providing the scope for some pre-election sweeteners.Doubtless the chancellor will still have a couple of surprises to spring on 18 March, but despite the improvement in the public finances in January, the budget will still need to be a relatively frugal affair.Related: UK finances buoyed by influx of payments from wealthy taxpayers Continue reading...

Chancellor hails biggest monthly surplus in seven years as signal of economic recovery, but critics warn long-term challenges persistThe government’s finances improved last month to post their biggest surplus in seven years, after an influx of delayed payments from wealthy taxpayers who benefited from a cut in the 50p top rate of tax.

Retail figures show average store prices declined at an annual rate of 3.1% last month – the largest drop since records beganPrices in Britain’s shops and forecourts declined at a record pace in January, as plunging global oil prices slashed the cost of petrol.Official retail sales figures, published on Friday, showed average store prices declining at an annual rate of 3.1% last month – the largest drop since records began in 1997. Continue reading...

Outcome of meeting remains clouded in uncertainty after Germany rejected Greek compromise proposalEurozone finance ministers are gathering in Brussels for make-or-break talks that could determine Greece’s future in the eurozone.

Breakaway region relies on Kremlin for 70% of its budget and motherland’s economic woes have left residents feeling the pinch, reports Eurasianet.orgFifty-eight-year-old Veronica Zinici, a pensioner from the rebel republic of Transnistria, recently traveled to the Moldovan capital Chișinău for medical treatment. She also brought with her a tale of hardship.Related: Inside Transnistria, the breakaway nation loyal to Russia – in picturesRelated: Russia’s rouble crisis poses threat to nine countries relying on remittances Continue reading...

Greek finance minister Yanis Varoufakis’s suggestion that “things could get worse in perpetuity, without getting better” (How I became an erratic Marxist, 18 February) is at odds with a key notion of the business cycle – that after a deflationary clearout of the capitalist system in crisis, states have reformed the system to assist the cyclical recovery in such a way as to improve things in the long-run.Marx and the neoliberal economists have relied on the wrong sort of mathematical models to solve the problems, hence the continuation of the crisis without end which Yanis alludes to. Marx was not too hot on understanding what businesses could do to avoid crises, but within any value system appropriate accounting techniques need to be allied to economic theory to work on solving the problems over time. But, yes, stability needs to be established first, as Yanis suggests.

Your piece on the alleged fall of the inflation rate to 0.3% (Report, 18 February) fails to mention that CPI is the government’s claimed measure of inflation, but that RPI is at 1.1%, still not high, but a good bit higher. The government seems to have ground down the journalist profession on this scam and CPI now seems to be the press’s preferred form of inflation too. Despite the recent report by Paul Johnson of the IFS favouring CPI (well CPIH but let’s not go into that), most statisticians in the Royal Statistical Society still say that RPI is a good deal nearer real inflation than CPI and they have written to the UK Statistics Authority, which commissioned Johnson, to say so. This deception adversely affects most pensions and welfare payments, and it is today’s young who will suffer most (as usual) since the effects get cumulatively worse the longer it goes on. It also, of course, allows the government to overstate the real rate of growth.