Economy

Friday

Ryan Bourne

There are economic reasons to cut the state, irrespective of the deficit

Treasury Select Committee Chairman Andrew Tyrie recently explained he would support cutting back the size of the state even if our public finances were in balance. I doubt whether the leadership of the Conservative party agrees. Cameron and Osborne seemed settled on the Brownite consensus until the financial crisis threw them a curved ball. This, in many ways, makes the so-called ‘austerity’ programme more difficult for them to implement. Without the argument that they genuinely believe in smaller government for economic or moral reasons, the party has had to adopt the ‘we wish we weren’t doing this but we have to’ line. It’s meant they’ve been unable to spell out

Thursday

James Forsyth

Leveson continues, but it is a sideshow to the Euro drama

Fred Michel’s testimony this morning at the Leveson Inquiry was embarrassing but not devastating. The texts between him and Jeremy Hunt are cringe-worthy but my read is that the Culture Secretary is not in a weaker position than he was this morning. More important for Hunt’s survival prospect is the appearance of his former spad Adam Smith this afternoon. The question is, did Hunt not know of the extent of contact between Smith and Michel? Everything going on at Leveson, though, is a sideshow compared to the economic news and the storm brewing on the continent. On that note, it does seem odd that Nick Clegg is suggesting that the

Wednesday

Jonathan Jones

Obama vs Balls

What do Ed Balls and Mitt Romney have in common? They both want you to think that Barack Obama is spending government money like never before. For Mitt Romney, it’s an attack: he wants to make Obama a Big Government bogeyman who’s failing to tackle America’s deficit. ‘I will lead us out of this debt and spending inferno,’ the Republican nominee promises. For Ed Balls, it’s an example for Britain to follow: ‘I will lead us into this debt and spending inferno’, the shadow chancellor promises. Well, essentially. But the Obama camp is pushing back hard against such claims, highlighting a Wall Street Journal article yesterday titled ‘Obama spending binge

James Forsyth James Forsyth

The pressure on Cameron to call Clegg’s bluff

The debate over the Beecroft report is now the politics of the viscera. For Tory MPs it has become symbolic of how the Liberal Democrats — and Vince Cable, in particular — are holding them back from doing what they need to get the country out of this economic emergency. On the Liberal Democrat side it has become emblematic of everything about Steve Hilton — ‘Thatcher in a t-shirt’ as they dubbed him — that annoyed them. Adrian Beecroft’s intervention today in the Telegraph and the Mail is bound to increase Tory tensions on the matter. He tells the Mail that Cameron and Osborne have ‘given up’ on unfair dismissal.

Peter Hoskin

Where will our politicians’ obsession with Hollande lead?

Hollande fever strikes again in Nick Clegg’s interview with the FT this morning. ‘I personally massively welcome the arrival of Hollande on to the scene,’ he says, but it goes deeper than that. You see, the Deputy Prime Minister also places an emphasis on ‘growth’, as opposed to ‘austerity’, suggesting that the government might do more to get infrastructure projects up and running. When asked why they didn’t do this before, Clegg responds, ‘It’s for the obvious reason — because the economy is flatter than we anticipated two years ago.’ In some respects, this is unsurprising. Not only did Clegg deploy similar language in an interview with Der Speigel the

Tuesday

Peter Hoskin

Clegg rallies behind Cable

It’s no surprise that the Lib Dems aren’t keen on Adrian Beecroft’s proposals for hiring and firing. This intra-coalition disagreement has been rumbling on for months now, after all. But when Vince Cable spoke out against them yesterday, it wasn’t entirely clear whether this was his party’s line or just Vince being Vince. Other Lib Dems might have taken a more conciliatory approach. Today, however, it’s clear that they’re not going to. Nick Clegg himself has charged in behind Cable, saying that ‘I don’t support [Beecroft’s plan for “no-fault dimissals”] and I never have, for the simple reason that I have not seen any evidence yet that creating industrial scale

Peter Hoskin

The IMF says it’s the Bank’s economy now

When the IMF published a report into the UK economy last year, I wrote a blog post detailing how it managed to please everyone: George Osborne, Vince Cable, Mervyn King, Ed Balls, everyone. This morning, I’ve been tempted to just publish that post again — because the IMF’s latest report is basically the same. Osborne will be pleased with its emphasis on deficit reduction, including the line that ‘Strong fiscal consolidation is underway and reducing the high structural deficit over the medium term remains essential.’ And he’ll also want to draw attention to its suggestion that the UK’s weak growth is largely down to ‘transitory commodity price shocks and heightened

Monday

Clarissa Tan

Bondholders are sheep — and they’re flocking out of the euro pen

Sweden’s Anders Borg (Fraser’s favourite finance minister) is wrong, says Citigroup. Bondholders and deposit holders are not like wolves, as Borg has made them out to be. They’re more like sheep — and currently they’re baa-a-a-cking out of the eurozone pretty quickly. We all know that money’s leaving the Continent — but how much and how rapidly? Citi’s credit strategist Matt King, basing his analysis on imbalances in TARGET2 (the euro area’s main payment settlement system) relative to eurozone countries’ current accounts, has come up with a few interesting observations. — Since mid-2011, Spain has suffered private-sector outflows of €100 billion, and Italy €160 billion (or a tenth of their

Peter Hoskin

Europe is set to exacerbate the coalition’s internal tensions

As James suggested yesterday, the publication of the Beecroft proposals this week could be a significant moment. If the coalition can carve a constructive agenda from them, then we might have a set of growth policies worthy of the name. But if it degrades into yet another internal squabble, then that chance may be missed. So, what’s it to be? It must be said, the tea leaves aren’t terribly encouraging this morning. Yesterday, we were told that David Cameron and George Osborne are minded to unravel the red tape that surrounds businesses when it comes to hiring and firing. But, today, one of their fellow ministers has spoken out against

Saturday

Peter Hoskin

All eyes on Hollande

Have you noticed the weird hold that François Hollande has over our politics? If you haven’t, then let me tell you: his name has been almost inescapable in Westminster over the past couple of weeks. Even in PMQs this week, David Cameron and Ed Miliband couldn’t resist of spot of Hollandery. Behind-the-scenes, too, there is much consideration being given to how the new French President should be treated. Political strategists recognise, as I’ve suggested before, that his election could be a significant moment in the life of the Eurozone and the European Union. Potentially, it’s the moment when the supranational consensuses of the past couple of years broke down, leading

Fraser Nelson Fraser Nelson

Why reason doesn’t apply to the Eurozone

The Eurozone is a kind of lunacy if you look at it as an economic project. But this isn’t about economics, or rationality — it’s about emotion, as the leader in today’s Telegraph says. The Brits and Americans often fail to understand this fully because we judge a currency union in terms of its economic merits. But many European nations see it as part of another, wider, agenda. For the Spanish and Portuguese it’s about not going back to dictatorship. For Greece it’s about being Western rather than Eastern (and not being run by the military). As John O’Sullivan wrote for The Spectator recently, Eastern European states still — even

Friday

Fraser Nelson

No time to tinker

Next week, the Institute of Directors and the Taxpayers’ Alliance will release what I humbly suggest will be the most powerful summary of the case for radical supply-side reform in a generation. The report of the 2020 Tax Commission runs to 417 pages, choc full of academic literature showing how big government chokes growth, and looking at what the optimal size of the state is. Broadly speaking, government spending is about half the size of economic output now and the optimal size is about a third. The recommendations are not being released until Monday, but it opens a very timely debate, which I preview in my Telegraph column. Here are

Thursday

Clarissa Tan

Eurozone v Facebook — which is the economic model of our time?

Even as our attention is gripped by a crumbling eurozone, another huge economic entity is emerging in the marketplace — Facebook, which has just upsized its number of IPO shares by a quarter before its $100 billion flotation tomorrow. Providing the crisis in Europe does not blow out into a huge political standoff (and just stays the gigantic economic mess it currently is), which entity would future historians regard as the defining business model of our age? Both the eurozone and Facebook, in a way, try to deal with the problems of geography — how to connect people from different places and cultures. But they do it in radically different

James Forsyth James Forsyth

Cameron can no longer laugh off Ed

The Cameroons have long taken comfort in their belief that Ed Miliband will never be Prime Minister. They have seen him as a firebreak between them and electoral defeat. Three things have driven their conviction that the Labour leader will never make it to Number 10. First, their belief that he fails the blink test: can you see him standing outside Number 10? Second, the next election will almost certainly be fought on the economy, Labour’s weakest area. Their final reason was a sense that he would never get the full support of those on the Labour side who know how to win elections. But recent events suggest that this

Jonathan Jones

Regional pay: a new coalition divide

As if Lords reform, communications surveillance powers and same-sex marriage weren’t enough, it looks like there’s another issue that’ll cause a good deal of friction between Liberal Democrat and Conservative MPs: plans for regional public sector pay bargaining. It’s something George Osborne is understandably keen on — James laid out the political and economic reasons behind it just before the Budget — but now the Lib Dems are making clear that they don’t share the Chancellor’s enthusiasm. In the Q&A after his pupil premium speech on Monday, Nick Clegg said: ‘Nothing has been decided. I feel very, very strongly, as an MP from South Yorkshire with a lot of people in

Tim Morgan

Cuts or spin?

Writing here on Tuesday, I made two accusations regarding the government’s deficit reduction plan. First, I said that cuts so far had been minimal. Second, I argued that higher taxation, rather than cuts in spending, was being used to reduce the deficit. On this basis, I said, government and opposition alike are being mendacious when they speak of ‘savage cuts’ in public spending. In reply, Matthew Hancock said that I was using the wrong periods for comparison. The government, which took office in May 2010, could not be held responsible for spending in 2010-11, so it was misleading for me to use Labour’s last year in office (2009-10) as my

Wednesday

Clarissa Tan

Metaphorical Merv

Mervyn King unfurled a mast of metaphors this morning. ‘We are navigating through turbulent waters, with the risk of a storm heading our way from the continent,’ he said. ‘We don’t know when the storm clouds will move away.’ The eurozone, he said, is ‘tearing itself apart’.   So poetic was his language — a rare gift in a central banker — that it almost made one forget the painfully prosaic nature of his facts and figures. Inflation, already at target-busting levels, will be much stronger than the Bank initially envisaged, remaining above 2.5 per cent for the rest of the year. That’s almost a whole percentage point higher than

Jonathan Jones

A part-time recovery

Today’s jobs figures show a 105,000 rise in employment and a 45,000 fall in unemployment, from the final quarter of 2011 to the first quarter of 2012. Welcome news, although both figures are within the margin of error, meaning we can’t say with confidence that employment is indeed higher or that unemployment is lower. But even taking the figures at face value, there’s another cause for concern: the rise in employment is coming in part-time, rather than full-time, jobs. First, let’s take a look at that total employment figure, which has risen 105,000 since the last quarter and 219,000 since the general election: Second, the number of full-time workers: As

Lloyd Evans Lloyd Evans

Cameron injects some anger into a playful PMQs

Strange mood at PMQs today. Rather good-natured. Like a staff awayday with both sides joshing each other for fun. A Tory from the shires, Pauline Latham (Con, Mid-Derbyshire), stood up in her best garden-party dress and made this lament: ‘My constituents are having a very difficult time at the moment.’ Labour MPs cheered like mad. They wouldn’t have done that before the local elections. Cameron and Miliband were in a similarly playful mood. After an enforced separation of two weeks they seemed almost glad to see one other. Ed Miliband charmingly conceded that today’s drop in unemployment was welcome. And Cameron welcomed this welcome from his opponent. Miliband then teased

James Forsyth James Forsyth

Cameron gets tough with the eurozone

Today’s PMQs will be remembered for one thing, Cameron saying that the eurozone had to ‘make up or it is looking at a potential break-up’. This is a distinct hardening of the government’s line on the single currency. Cameron’s comment was particularly striking coming just days after George Osborne said that ‘open speculation’ about whether or not Greece would leave the euro was ‘doing real damage across the whole European economy’. However those close to Cameron are not resiling from the remark. Instead, I understand that we can expect more from the Prime Minister on this subject when he makes a speech on the economy tomorrow. The break-up of the