Money

Wolfgang Münchau

Can the EU save Italy?

There’s been a lot of hype around the green light given by the European Commission yesterday to Italy’s recovery plan. But let’s break it down: the final headline numbers are €68.9 billion in EU grants by the year 2026 and €123 billion in loans. If you take the grant component, and divide it over the six-year duration, you arrive at an average of 0.6-0.7 per cent of Italy’s 2019 GDP each year. It is front-loaded, and it’s by no means a modest sum. What’s harder to accept however, is folding in the loan component to arrive at some giant fake headline number. The whole point of this exercise is not

How to protect your finances against inflation

The economist Friedrich von Hayek once likened the control of inflation to the act of trying to catch a tiger by its tail: an impossible task with savage consequences for our macro and personal finances. Judging by the most recent inflation statistics, the big cat is already out of the bag. So how can we stop rapidly rising prices mauling our hard-earned wealth? Consumer price inflation in the UK was 2.1 per cent in May, trebling since March and surpassing the Bank of England’s predictions. The U.S. equivalent, meanwhile, rose to a whopping 5 per cent last month reaching its highest level since August 2008. Some experts agree with the central banks’

Ross Clark

It’s time to take back control of the public finances

It is called managing expectations: priming the public for really bad news so that when modestly bad news arrives it comes across as good news. Today’s public finance figures is a case in point. We have become so used to ever-grimmer predictions of the size of the government’s deficit that the latest figures released this morning ended up being reported in the form ‘borrowing is much lower than expected’.  In May the government borrowed £24.3 billion which, we are told in a government press release, is a whacking £19.4 billion less than last May. Furthermore, total borrowing for the financial year 2020/21, came in at £299.2 billion — which, we

Boris’s Brexit battle isn’t over yet

On the eve of the five-year anniversary of the Brexit referendum, it’s hard to shake the feeling that Brexit was the dog that never barked. Project Fear portended half a million job losses – a hard measure to test given a year of lockdowns and furlough, but before Covid hit (and now) the unemployment rate is lower than it was five years’ ago. We were warned of a ‘punishment Budget,’ as though there is ever any other kind. The hysteria, the stalling of Parliamentary machinery, the well-documented family rifts – was it all for nothing? First, a few caveats. There are many problems that still need fixing – especially in

The Tories should ignore the Amersham by-election

Chesham and Amersham has fallen. The once uber-Tory Chilterns citadel has been snatched by the Lib Dems, with local campaigners citing planning reform and HS2 as the main drivers for their success. After the ginormous swing — from a 16,000 majority to an 8,000-vote deficit — fears are growing that the Tories’ planning reforms might become a victim to demographic subsidence. Many of the government’s backbenchers are keen to undermine the party’s house-building efforts. They fear Amersham-style retribution from similar voters, eager to punish them for devaluing their most-prized asset and adding congestion to their quaint country lanes. The Nimbyist revolt has been a major political force for yonks Isle of Wight

The EU’s debt bondage expansion

In the global market for government debt, worth an estimated $92 trillion (£66 trillion), it amounts to little more than a drop in the ocean. The European Union this week issued the first €20 billion (£17 billion) of bonds to pay for its Coronavirus Rescue Fund. The money itself doesn’t amount to very much one way or another. And yet, the Commission’s President Ursula von der Leyen was surely right when she described it as a ‘truly historic day’. Why? Because, the Commission is already using it to seize control of fiscal policy, just as it used vaccine procurement to take control of health policy. Its enthusiasts have already hailed the

Kate Andrews

The true cost of cheap money: an interview with Andy Haldane

Britain’s economy is growing at the fastest rate in 200 years. Job adverts are 29 per cent above their pre-pandemic levels and employers say they can’t reopen because they can’t find staff. Wages are rising at the fastest rate in ten years. But here’s the question: how much more support does the economy need from the Bank of England’s printing press? Should the BoE stick to its pledge to bring QE up to £895 billion or stop £50 billion short? Its members met to discuss this last month and decided (as they always do) to press ahead — by eight votes to one. The dissenting vote — the first time

Martin Vander Weyer

Foreign opportunists are turning Britain into a corporate car-boot sale

The snatching of a 12 per cent stake in BT by French entrepreneur Patrick Drahi, last seen here when he bagged Sotheby’s for $3.7 billion two years ago, could be a good thing if it injects dynamism into the telecoms giant’s late-running plans to install high-speed broadband across the UK. But it’s also part of a wave of fast–moving foreign money hunting undervalued UK assets — which is positive if it fuels capital investment for growth, negative if it makes nothing but fast bucks for private investors. The logic is simple. The private equity fraternity is laden with cash and global in outlook; what it sees in London is an

Is lockdown’s tech bubble about to burst?

Netflix is not signing up subscribers at the rate it once did. Disney+ has stalled. At Boohoo, growth is not as red hot as it was just a few months ago, while Deliveroo’s float on the London stock market was quickly dubbed ‘flopperoo’ by City wags. Zoom’s shares price has stopped, er, zooming, at least in the upward direction. A random collection of snippets of business news? Well, to some degree. But there is also a common theme to all these stories, and one that is significant for investors. We are about to witness a serious bout of what might be termed the post-pandemic blues. The companies that did brilliantly

Ross Clark

Is inflation about to bite?

The signs were there for all to see — pubs, restaurants, hairdressers and so on all pushing up their prices. Businesses have to make a profit while observing social distancing, dealing with soaring fuel prices and fast-accelerating wages. Yet the latest inflation figures seem to have caught many people by surprise. The Consumer Prices Index (CPI) is back above the Bank of England’s target at 2.1 per cent. Fears that Brexit would lead to a surge in food prices appear to be unfounded Drill down into the figures and you can see that, while the current level of CPI is not in itself a problem, inflationary pressures are building. Producer price inflation —

Ross Clark

Is furlough holding back the jobs market?

The latest employment figures, published this morning, confirm a remarkable aspect of the Covid pandemic: that it appears to have caused no more than a little bump in the jobs miracle of the past decade. That is in spite of the economy shrinking by nearly 10 per cent in 2020 — a performance that in the past would have led to millions out of work. In May the unemployment rate fell by 0.3 per cent to 4.7 per cent. By contrast, it reached over 8 per cent during and after the 2008 financial crash. But of course, the unemployment figures don’t tell the whole story — not when we have a

We don’t have to swap sovereignty for trade

A new court will be established with powers over both countries. Labour and product laws will be harmonised. Flags with kangaroos and crowns will flutter over buildings, there will be a special parliament moving weekly from Cairns to Coventry and an anthem that mashes up Rolf Harris and The Beatles will be played at every opportunity.  For years, we have been lectured by europhiles that free trade requires a pooling of sovereignty There were lots of things that could have been in the Australian-UK trade deal that was finally agreed today but which aren’t. In truth, the most significant point about the deal is not what it includes, but what

The cost of delaying ‘freedom day’

When Boris Johnson announced that unlocking would be guided by ‘data not dates’ he handed detractors ample scope for derision and defiance. In the four months since, lockdown critics have rightly insisted that he uphold the slogan and accelerate a roadmap, designed to move at such a glacial speed, that it risked fraying the DNA of our economy and permanently crushing our joie de vivre.  Why did we spend Easter isolated from loved ones? April in wintry beer gardens? Why did we roll out the vaccine at phenomenal pace only to keep restrictions in place as the number of Covid deaths hit single digits? Contrary to expectation, however, that mantra

Kate Andrews

Will the third wave stop our economic recovery?

The UK economy continued to rebound in April, with this morning’s update from theOffice for National Statistics showing GDP grew 2.3 per cent — slightly better than the consensus prediction of 2.2 per cent. The reopening of non-essential shops and outdoor hospitality on 12 April contributed to the boost. GDP now sits 3.7 per cent below its pre-pandemic levels, the closest we’ve come to achieving full recovery. Forecasters are increasingly confident that we’ll be back to pre-pandemic levels in 2021, even possibly before Q4. Capital Economics says ‘early indicators suggest that GDP growth was strong in May as well,’ when more indoor activity opened and numbers on indoor and outdoor socialising relaxed further. Oxford

Two reasons why Andy Haldane is right to worry about inflation

Companies are facing critical shortages of staff. Commodity prices keep spiking upwards. Central banks are printing money on an unprecedented scale, and governments are running deficits of a size that haven’t been seen in peacetime before. What could possibly go wrong?  Well, quite a bit, as it happens. And the departing chief economist of the Bank of England Andy Haldane is completely right to warn that the real risk we face over the next couple of years is not a prolonged slump, but a re-run of the spiralling prices of the 1970s.  To his credit, Haldane was seldom afraid of challenging orthodox views during his time at the Bank. Now

James Forsyth

Why this G7 summit matters more than most

It’s risky planning a trip to the British seaside at any time of year. But if the weather forecast is to be believed, Boris Johnson will get away with this gamble at the weekend’s meeting of the G7 at Carbis Bay in Cornwall. Brexit’s critics were always going to seize on any evidence that Britain was being sidelined by the rest of the world after we left the EU. So it is fortunate for the government that the UK is the host of this year’s summit because it has placed this country at the centre of things. This G7 is unusually consequential. It is the first time that these leaders

Martin Vander Weyer

Suddenly used cars are hot property

Companies should willingly pay tax wherever they generate profits — this column has long argued — because it’s fair they should contribute to the cost of the public services on which all business ultimately relies, and because the reputation of capitalism as a whole is tainted when corporate tax bills are reduced to absurdly low levels by the use of offshore domiciles and spurious royalty payments that most governments lack the willpower to challenge. So I welcome at least one half of the G7 finance ministers’ agreement last weekend on a new global corporate tax regime. The half I’m ready to praise is the proposal that all countries should have

Ross Clark

Will the G7 tax deal survive?

What are the chances of the G7’s agreement on a minimum rate of corporation tax actually coming into effect? While it was presented as a done deal last weekend, things are not going too well. Firstly, the G20 will have to agree — which is far from guaranteed given that smaller countries have less to gain from the proposal than the US. It is a tax designed to help countries with a large number of multinational companies who currently operate through subsidiaries in countries with lower corporation tax rates. While no G20 country currently has a rate below the agreed 15 per cent, (and the biggest loser, Ireland, with its 12.5 per cent

In defence of the foreign aid cut

It says something for the persuasive powers of former international development secretary, Andrew Mitchell, that he mustered enough potential votes to inflict defeat on Boris Johnson’s government, if only his amendment had been permitted and a vote had been held. Mitchell’s consolation prize, awarded by the Speaker in recognition of the strength of feeling in the Commons, is an emergency debate on what would have been the substance of his amendment: to reinstate foreign aid at 0.7 per cent of GDP from next year, rather than the reduction to 0.5 per cent that was set in the Budget.  The rift this row has exposed among Conservative MPs could embarrass the Prime

Kate Andrews

The hidden costs of the G7 tax deal

Calls to reform corporation tax are nothing new and don’t just come from the left. The inefficient and bureaucratic nature of the tax has been highlighted by free-market advocates for years, as it becomes increasingly obvious that, in the age of multinationals and digital tech giants, the structure is no longer fit for purpose. Action is now being taken. This afternoon the advanced economies which form the G7 agreed a new structure for taxing big corporations. The historic deal will see a major shift in the way companies are taxed: away from the existing model in which they are taxed in accordance with where their product is created to a new