Money

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

The G7 tax deal is an unworkable mess

Poverty will be abolished. Governments will be able to spend again. Inequality will be eradicated, our welfare systems secured and the power of the tech giants will finally be curbed. We will hear a lot of hype about today’s global tax deal. Given that the liberal-left have spent the last decade complaining that the main problem in the world is that Apple and Facebook don’t pay enough tax, a lot will be riding on the agreement reached by the finance ministers of the G7 today. There is just one small problem, however. The deal is an unworkable mess. Sure, the headlines are fine. There will be a global minimum corporate

Ross Clark

Joe Biden’s long road to recovery

In the middle of last year the US economy was something of a marvel: an economy which was creating jobs at an unprecedented rate, as other economies around the world remained in the deep freeze. Having shed jobs by the million in March, by May it looked as if the jobs market would be back to its pre-Covid position in months. But what has happened? Bureau of Labor figures published today show that once again, job creation for the month of May came in lower than expectations — with an extra 559,000 people on non-farm payrolls. It was better than April, when 278,000 new jobs were created — which was

John Ferry

Scotland needs English migrants

Post-pandemic economic recovery was on the agenda at Holyrood this week, with Scotland’s finance minister Kate Forbes in full JFK-style ‘ask not what your country can do for you’ visionary mode. ‘Wherever someone works, and in whatever capacity, if they think that they can serve our country as we face the prospect of rebuilding, this is their personal invitation. Our strength is in our united vision to work together — across party lines, sectors and regions — to rebuild,’ declaimed Forbes. A cynic might wonder if ‘serve our country’ will turn out to mean serving the nationalist interest rather than the national one. It would be no surprise if trade

Should the EU diversify – with blockchain?

The European Investment Bank has warned that the EU is not investing enough in blockchain — the technology that underpins cryptocurrencies — and artificial intelligence. In a report released Tuesday, the EIB wrote that the EU is falling behind both China and the US in these two areas, with the funding gap estimated at between €5 billion and €10 billion annually. This is problematic because, as the bank argues, AI and blockchain are two of the most significant disruptive technologies of our time, and they will have a major impact on the future economy. At present, the US and China account for more than 80 per cent of annual equity

Martin Vander Weyer

Will the new breed of retail investors cash in – or crash out?

‘Feed the ducks when they’re quacking’ sounds like advice from a foie gras farmer — but let’s leave gastronomy till last and focus first on stock market activity. The saying actually comes from Wall Street and means that if investor demand is strong, it’s best satisfied with ample supplies of new stock. What’s wrong with that? Nothing, if the investors understand risk and the offerings are sound. But is that what’s happening in the current retail investment craze on both sides of the Atlantic? Probably not. From its low in March last year, the FTSE 100 index has risen 40 per cent. A hectic London market in new issues since the

Tim Martin isn’t a Brexit hypocrite

Heinz is expanding a huge factory in the UK. Tesla is reportedly scouting the north for locations for a new car or battery plant. Even the pound is bouncing to three-year highs.  It has been a difficult few weeks for some hardcore Remainers. Still, at least there is finally something to cheer them up. Tim Martin, the pugnacious founder of the pub chain JD Wetherspoon argued today that the government should relax immigration rules to ease a shortage of labour.  For the dwindling band of believers in the EU, it was a gotcha moment. At last, one of the leading backers of our departure from the EU was experiencing some ‘Bre-mourse’.

Wolfgang Münchau

Is the euro area at risk of an inflation surge?

If you like a snapshot of a bang-on target, this is it: headline inflation in the euro area for May came in at 1.99 per cent on an annual basis, which gives a whole new meaning to close to, but below 2 per cent. The number itself, however, is entirely meaningless.  As ever, the more important number is the core rate of inflation, which excludes energy, food and alcohol, and which shows no sign of breaking out its range of around 1 per cent. But even the core rate is subject to some noise. For example, the pandemic-related cut in the VAT rate during the second half of last year

Ross Clark

Has Covid accelerated the cashless society?

Time is, I fear, running out. Running out, that is, to avoid handing to a small number of multinational corporations our right to buy and sell things. Running out to prevent governments and central banks helping themselves to our savings, by means of negative interest rates. The payments industry is closing in on its target of driving cash out of circulation and instigating cashless payments as the only way of doing business. That, at least, is the conclusion one might reach from reading a report by Worldpay: the Global Payments Report 2021. It claims that cash payments in UK shops in 2020 made up 13.4 per cent of total payments,

Susanne Mundschenk

France’s latest fiscal trade-off

France’s deficit is set to reach 9.4 per cent of GDP this year, more than last year, even though France’s first lockdown was more severe and lasted for a longer time. This may relate to accounting issues, as some spending is only reported this year even if it is related to last year. But these are details – the main issue is something else entirely. The journalist Dominique Seux wonders whether France has maxed out its spending capacity at the moment when environmental challenges require extraordinary efforts. Were France’s spending choices last year done with full awareness of how they would compromise future fiscal room for manoeuvre? France was always amongst the

Brexit Britain can capitalise on the breakdown in EU-Swiss talks

It is a leading player in finance, and it’s companies are giants in life sciences and consumer goods. There were already lots of similarities between the Swiss and British economies, except that they are quite a bit richer and more successful than we are. Now we have something else in common: we have both been frozen out of the European Union’s Single Market. But hold on. Isn’t there an opportunity there as well? In truth, this would be the perfect moment to offer the Swiss a deal that would work for both sides – a common market. The Swiss have always had a fractious relationship with the EU. It has