Money

Why Liz Truss fans might come round to Keir Starmer

We might have thought Trussonomics was dead and buried for a generation after its author’s short-lived premiership last autumn. But all of a sudden it has a high-profile, if slightly unexpected, convert: Sir Keir Starmer. In an interview with BBC Radio 4’s Today programme this morning, Starmer was sounding a lot like Kwasi Kwarteng last September: We’ve got the highest tax burden since the second world war. What we’ve had from the government is tax rise upon tax rise on tax rise. If they’ve proved one thing, it’s that their high-tax, low-growth economy doesn’t work. The Labour leader is absolutely correct, even if he is a little late to the

Ross Clark

Ed Miliband is wrong about BP’s profits

Are BP’s profits of $5 billion in the first quarter of this year really the ‘unearned, unexpected windfalls of war’, as Ed Miliband asserted this morning? The idea that any oil company’s profits are unearned must come as news to the geologists and engineers who are employed in the tricky business of exploring and drilling for oil. You might claim that oil traders sometimes make unearned profits, but surely not the oil companies which extract the stuff from the ground – a business which involves large amounts of capital and vast numbers of hours of human effort. BP certainly can’t be accused of profiting from Covid. In 2020 it made a thumping

Will the Fed torpedo Joe Biden’s re-election? 

Hollywood will be backing him en masse. The major newspapers will be rooting to put him back in the White House. And most of corporate America, in between filling in the forms for the next round of ‘green subsidies’, will be quietly hoping for another four years of lavish spending and protectionism to keep out all those irritating foreign competitors. As he launched his re-election campaign this week, President Joe Biden could count on plenty of mainstream support. There is just one problem: the Federal Reserve is about to torpedo his campaign – by tipping the American economy into recession.  GDP figures for the US released today showed an economy

The UK’s treatment of Activision shows it is closed for business

It was, admittedly, not quite as thrilling as an action sequence from Call of Duty. Even so, the statement put out by Bobby Kotick, chief executive of US video game publisher Activision, following the UK’s bizarre decision to block the company’s acquisition by Microsoft was about as bloodthirsty as any ever put out by a major corporation. The ruling ‘contradicts the ambitions of the UK to become an attractive country to build a technology business,’ he argued. Even worse, ‘it does a disservice to UK citizens, who face increasingly dire economic prospects’, and, to cap it all off, it shows that Britain is ‘closed for business’. Of course, it would

Ross Clark

The Bank of England is right: Brits can’t keep demanding pay rises

Bank of England chief economist Huw Pill isn’t going to win a popularity contest. Speaking on a podcast for Columbia Law School – a medium in which he perhaps felt a little less exposed than had he said it on a British TV programme – he said:  ‘Somehow in the UK, someone needs to accept that they are worse off and stop trying to maintain their real spending power by bidding up prices….What we’re facing now is that reluctance to accept that yes, we’re all worse off and we all have to take our share.’ Nurses, doctors, train drivers and everyone else contemplating striking for an inflation-beating, or even inflation-matching,

Kate Andrews

Stubborn inflation rates spell trouble for Rishi Sunak

The rate of inflation has come down, barely. This morning’s update from the Office for National Statistics shows inflation fell to 10.1 per cent on the year in March, down from 10.4 per cent in February. The rate remains in the double digits, where it has hovered since September 2022. Today’s update takes the rate back down only to where it was in January.  A trend has emerged with inflation data in the UK. As predicted across the board, energy prices are falling at significant pace, with the largest ‘downward contributions’ in March coming from a drop in motor fuel prices – which fell by 5.9 per cent in the year to

Michael Simmons

Is Britain getting back to work?

The UK’s labour market is cooling down, slowly. Although unemployment rose from 3.7 per cent to 3.8 per cent, figures published by the Office for National Statistics this morning show that job vacancies have fallen for the ninth consecutive period. They’re now down 47,000 but still stand at over a million. The number of people out of work and not seeking it (economically inactive) fell too, as students started hunting for work. The most startling figures, however, were those for wage growth. They showed that average pay rose 6.6 per cent in the three months to February. Hefty pay raises in normal times – but adjusted for inflation, that’s a

London’s stock market risks sinking into irrelevance

The chip maker ARM decided against listing its shares in London, despite plenty of arm twisting from the government. The building materials group CRH decided last month that New York was a better place for its equity to be traded, leaving the FTSE for good. The mining giant BHP has moved its listing from London to Sydney, while another materials group, Ferguson, switched from London to New York last year. And now hotel group IHG may make the same journey.  At these rates, no one will need the Prime Minister’s new plan to boost numeracy to count the number of companies still listed on the London market. The fingers of

Kate Andrews

The strikes are taking their toll on UK growth

February was a no-growth month, according to the latest update from the Office for National Statistics, published this morning. A rise in construction was offset by a fall in services, resulting in zero headline growth. The strikes are taking their toll. The biggest contribution to the fall in services came from education and public administration, as striking teachers downed tools. Education fell by 1.7 per cent. Meanwhile public administration fell by 1.1 per cent, as ‘this industry also saw industrial action take place within the civil service during February 2023.’ An optimist might note that while the strikes offset economic activity in other sectors, at least there was some growth to point

Ross Clark

Interest rates can’t go back to being as low as they were

Good news – at least for those who hold faith in economic forecasts. The IMF has just eradicated half the recession it forecast, in January, for Britain. At that point, it expected the UK economy to shrink by 0.6 per cent over 2023 – which would have meant Britain uniquely suffering a recession among advanced nations. Today, in its latest World Economic Outlook, the IMF has revised that down to a fall of 0.3 per cent. Moreover, while the outlook for Britain has improved, for a number of other countries it has worsened, most notable for Germany and Japan. Germany is now also forecast to share our recession, with output

Ross Clark

By reducing oil production, Opec is only helping Russia

Just when we thought inflationary forces were softening, the price of crude oil has shot up sharply today in response to an announcement by Opec that it will try to reduce production. A barrel of Brent crude, which touched $120 last summer before falling back to $75 last month, reached $85 at one point today. Some analysts expect it to hit $100. Given that the benign forecasts for inflation which shaped Jeremy Hunt’s budget were predicated on a falling oil price, has the case for economic recovery now collapsed? Unfortunately, in spite of the US’s drive towards energy independence in recent years, the world remains depressingly reliant on Opec for

Patrick O'Flynn

No wonder some Remainers are unhappy about the UK joining the CPTPP

The United Kingdom has become a member of a free trade bloc embracing 500 million consumers. And it isn’t the European Union. No wonder, then, that some Remainers are feeling triggered by Rishi Sunak’s success in steering Britain to join the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP). David Henig, UK director of the European Centre For International Political Economy and a longtime Remainer, griped: ‘It assists particularly those companies with trans-Pacific supply chains…The UK is mostly involved in European supply chains. And that’s why the economic impact is trivial. It could even be negative.’ The FT’s chief feature writer Henry Mance even used an old skit from Father Ted in

Ross Clark

The CPTPP trade deal shatters the ‘little Englander’ Brexit myth

Britain’s acceptance into the Comprehensive and Progressive Trans Pacific Partnership (CPTPP) will be presented by the government as a triumph, a statement that Britain really does, finally, have something substantive to show for Brexit.   It is a deal which could not have been done so long as Britain remained a member of the EU, as the only trade deals we were allowed to enter into were those negotiated by the EU on our behalf. Cynics might counter that there is limited point in joining a trade bloc when you already have bilateral trade deals with seven of its 11 members and have negotiated deals with two others which have yet to

Kate Andrews

Can the Bank of England escape the blame for the inflation spike?

Who, or what, is responsible for the UK’s sky-high inflation rate? Not me, says the Bank of England’s governor. Andrew Bailey has pointed the finger at a number of causes: pandemic and lockdowns, Russia’s war against Ukraine and Britain’s tight labour market. But he singled out one group in particular – early retirees – as a contributing factor for the recent inflation spike: ‘If those workers have accumulated enough savings to sustain a desired level of consumption much like the one they had before their early retirement, at least for a while, aggregate demand will not have fallen by as much as aggregate supply…we should expect this to put upward

Ross Clark

It will take a lot for the dollar to die

The end of the dollar as the world’s reserve currency has been predicted so many times that it is tempting to nod along with Jay Powell, Federal Reserve chairman, who pronounced last week that there is no immediate threat. But with high inflation in the US and China cuddling up with Russia, is it something the world should be taking seriously?      If the dollar was dumped then it would have serious consequences for the global economy. The status of the dollar allows the US to borrow much more cheaply than other countries, allowing it to sustain public debt of more than 100 per cent of GDP for the past decade.

Deutsche Bank’s collapse would be a threat to the whole eurozone

It could be next month. It might be next week. Or it might well happen over the weekend. But today’s collapse in the share price of Deutsche Bank, and the huge rise in the cost of insuring its debt against default, means it is probably only a matter of time before there’s an intervention. It looks increasingly inevitable that Deutsche will require some form of rescue, led by the German government and the European Central Bank. The trouble is: that will be a threat to the entire eurozone. If you have any money in Germany’s largest bank, the only rational move right now is to get it out To market

Kate Andrews

Will the interest rate hike be enough to tame inflation?

There was no easy option for the Bank of England’s Monetary Policy Committee (MPC) this week. Raising interest rates, even by a small amount, could add to financial instability following the collapse of Silicon Valley Bank and takeover of Credit Suisse over the past few weeks. But holding the base rate at 4 per cent might lead to accusations of ignoring double-digit inflation, which rose on the year in February for the first time since the Consumer Prices Index (CPI) peaked last October. Today, the MPC opted for the latter – voting 7-2 in favour of raising the base rate by 0.25 percentage points, from 4 per cent to 4.25

Jonathan Portes – my part in his downfall

In 2018, the Equality and Human Rights Commission commissioned and promoted a report which predicted that an extra 1.5 million children would be plunged into (relative) child poverty by 2021/22 if the government implemented Universal Credit. The proportion of children living in (relative) poverty would, it said, rise from 29 per cent to the unprecedented figure of 41.3 per cent. Portes’ prediction was a totem for all economic forecasting, most of which is little better than guesswork and should not be taken seriously If you think such prognostication is beyond the remit of the Equality and Human Rights Commission, I can only concur. The report was written by Howard Reed

Ross Clark

The Fed’s rate rise shows it is confident about the banks

So, things really are different this time. The US Federal Reserve has decided to raise its Federal Funds Rate (its main interest rate) by a quarter-point, to 4.75 per cent – 5 per cent, in spite of a banking crisis that has seen two large banks fail in the past fortnight. For the past two decades, this sort of thing didn’t happen. Under the unwritten laws of the ‘Greenspan put’, the Fed could be relied upon to provide some form of stimulus at the first sign of financial trouble. It began with the collapse of the hedge fund Long Term Capital Management in 1998, when the Fed put together a

Kate Andrews

Why is inflation going back up?

For the past few months, the debate over inflation in Britain has centred around just how fast the rate might fall. Both the Bank of England and the Office for Budget Responsibility’s most recent forecasts have been very optimistic, showing inflation falling back down to something approaching the Bank’s target of 2 per cent by the end of the year. Despite a slow start to the year, and CPI (core price inflation) remaining in the double digits, virtually everyone has assumed the headline rate was on a one-way track, heading downwards.  This makes this morning’s update a surprise and a blow to the economic consensus, as the Office for National