Economy

Tuesday

Clarissa Tan

The hurdles facing Greece

Greece’s problems are far from over. As Pete said this morning, the €130 billion bailout hardly means the country is out of the woods, or that it won’t still be ejected from the eurozone. Standard Chartered have released a handy guide to the many obstacles Greece faces. Here are some highlights: 1. The first hurdle is the private-sector debt swap due to take place March 8-11. This is when private creditors are supposed to swoop in and save the day. But, to be enticed to do so, Greek bonds will likely have to come with collective action clauses (CACs). Here’s where it gets technical — if these CACs are invoked,

Peter Hoskin

Greece saved at last? Nope…

Greece sorta defaulted last night. That’s what you need to remember when reading of Greek Prime Minister Lucas Papademos’s ‘happiness’ at the €130 billion deal reached by eurozone finance ministers in the early hours. Sure, the country will now be able to pay off its creditors when various loans mature on 20 March. But the concurrent ‘voluntary’ haircut of 53.5 per cent for private bondholders will still be seen as a ‘restricted default’ by credit rating agencies. And it could feasibly get worse if those private bondholders decide not to play along and instead trigger a credit event, either manageable or messy. The question hovering over Greece is now, really,

Monday

Jonathan Jones

Obama breaks clear

The rejuvenation of Barack Obama’s re-election hopes continues apace. He’s added seven points to his approval rating since November, improving it from the low 40s to around 50 per cent now. After months of polling neck-and-neck with Mitt Romney, he now boasts a six point lead. Just four months ago, the bookies thought he was more likely to lose the election than win it. Now Intrade gives him a 60 per cent chance of victory. Nate Silver has a great article on Obama’s chances in this week’s New York Times Magazine. He’s built a model to forecast the election results based on the three most important factors at this stage:

Friday

Peter Hoskin

Miliband’s NHS pledge

Ah, there he is! With the coalition — and David Cameron — dominating the political news on every day of this half-term week, Ed Miliband has finally caused a ripple in the national consciousness. He’s appearing before nurses in Bolton today to make a pledge: ‘Before he became Prime Minister, David Cameron concealed his plans for creeping privatisation of our National Health Service. So people didn’t get a vote on these plans at the last election. But I give you my word that if he goes ahead, they will be a defining issue at the next.’ Put aside the rhetoric about ‘creeping privatisation’ (which would surely make Tony Blair shudder),

Wednesday

Peter Hoskin

Post-Moody’s, King backs Osborne

Moody’s doubts might not be making much difference to the actual economy, but they could make a good deal of difference to the political battle being waged over it. George Osborne, of course, is citing this as further proof of the need for fiscal consolidation. Ed Balls, meanwhile, is redoubling his call for a ‘change of course’ — and somewhat misleadingly too. But what does Mervyn King think? Thanks to his comments in a press conference this morning, we don’t have to guess. Here’s how Bloomberg reported them earlier: ‘“It’s a reminder that we are facing a very challenging path to reduce the scale of our deficit so that, at

Jonathan Jones

How can employment and unemployment go up at the same time?

The employment level has risen since the election, according to today’s figures — albeit only slightly, from 29.0m to 29.1m. But unemployment’s up too: from 2.46m to 2.67m. So how come we’ve seen both more jobs and lengthening dole queues? Well, that’s because the ‘economically active’ population (people who are in work or ‘have been actively seeking work and are available to start work if a job is offered’) has grown faster than employment has. There are now 31.8m people in the UK who fit that description, an increase of 320,000 since the coalition came to power. But with only a 110,000 rise in employment, that means the number of

Tuesday

Jonathan Jones

How Obama’s new budget fits into the UK debate

Yesterday, Barack Obama set out his budget for ‘Fiscal Year 2013’ – that is, for the year beginning October 2012 (in the US, the fiscal year runs from October to September, rather than April to March as it does here). Of course, the federal budget has to be passed by both houses of Congress before being signed off by the President, so the final version will look very different to this one. It is better thought of as a statement of Obama’s intent, and his starting point for the negotiations between Congress and the White House. Nevertheless, it throws up a few interesting points, not least in how it relates to our own

Art Laffer and Others

How to kick-start the economy

This morning’s news is a stark reminder of the desperate need to get the UK’s economy growing faster than the 0.9 per cent it managed in 2011. So far, George Osborne’s seemed short of ideas in this area, so, back in November, we asked a select group of economists and politicians to suggest some for him: Cut the 50p tax Arthur Laffer, Chairman, Laffer Associates Reducing the burden which government places on the economy, through tax cuts, is the surest way to promote growth. I have never heard of a country that taxed itself into prosperity. Yet Britain last year raised the top rate of income tax from 40 per

James Forsyth James Forsyth

Inflation falls as the VAT rise drops out

Late last year, the Tory party’s brains trust found that the inflation numbers corresponded directly to whether or not people thought that the economy was on the right track. When inflation was going up double-quick, the ‘wrong track’ numbers went up. But when the pace of inflation slowed, the ‘right track’ numbers increased. It is for this reason that the Tories are quietly confident that this year will see an uptick in economic confidence. They expect the inflation rate to fall steadily throughout the year as the VAT rise drops its way out of the calculation and the effects of the oil shock recede. Obviously, though, today’s inflation numbers will

Peter Hoskin

Labour’s plan would have cost us our AAA rating

For Ed Balls this morning, there is only one conclusion to be drawn from the news about our credit rating: ‘A change of course is needed.’ But to what? Balls no doubt means a shallower course of deficit reduction — less far, less fast. But Moody’s are clear that we have been placed on a negative outlook because of doubts that our fiscal consolidation will continue strongly enough. Specifically, they say that, ‘Any further abrupt economic or fiscal deterioration would put into question the government’s ability to place the debt burden on a downward trajectory by fiscal year 2015-16.’ So how would Labour have fared? We already know that they

Peter Hoskin

Moody’s puts UK’s AAA rating on negative outlook

‘It’s now clear that Britain’s economic reputation is on the line at the next general election, another reason for bringing the date forward and having that election now … For the first time since these ratings began in 1978, the outlook for British debt has been downgraded from stable to negative.’ So said George Osborne when S&P placed Britain’s AAA credit rating on a negative outlook in May 2009, when Labour were in power. But guess what? Another credit-rating agency — Moody’s — has just done the same to our rating this evening. Given how much Osborne made of Britain being a ‘safe haven’, it’s rather a tricky one for

Monday

Peter Hoskin

Project Merlin may not wield a magic wand

Are Project Merlin’s lending targets just a myth? On the basis of today’s figures it’s still rather hard to tell. The arrangement between the government and the banks did yield £214.9 billion of gross lending to businesses in 2011 — against a target of £190 billion, and a 20 per cent increase on 2010. But net lending also declined in every quarter of the year. And the target for lending to small businesses of £76 billion was missed by £1.1 billion.  The banks have put this shortfall down to fewer small businesses coming forward for credit — and there’s actually some truth in that. This survey suggests that small businesses

The Spectator

The shale revolution

Shale, what is it good for? How about fuelling Britain’s energy needs for decades to come? The Sunday Times reported yesterday (£) that the reservoir of shale gas discovered in the North West could — depending on how it extracts — supply us with energy for up to 70 years. And we devoted our leader in this week’s magazine to the wider potential of this resource. Here is that leader, for CoffeeHousers: Economies of shale, The Spectator, 11 February 2012 The weather conditions of the past week could not have been better conceived to show up the inadequacies of Britain’s — and the rest of Europe’s — energy policy. A vast anticyclone extending

Sunday

Fraser Nelson

Nassim Taleb: Ban Tesco bonuses

There have been precious few people able to make sense of the crash. The main commentators didn’t see it coming — and so have focused their energies stressing how no man born of woman could have predicted it. But Nassim Taleb did. He has been a voice of sense, originality and common sense throughout, and David Cameron has been listening. The respect is mutual: Taleb even described Cameron as ‘the best hope we have left on this planet’ because he understood the dangers of deficits. If CoffeeHousers haven’t come across Taleb’s books, such as Fooled by Randomness and Black Swan, I can’t recommend them enough. I met him recently, and

Saturday

Peter Hoskin

The 50p tax debate won’t be settled this year — but it might be escalated

More evidence this morning that the government won’t be dropping the 50p rate any time soon, in the form of an interview with Danny Alexander. ‘This is not the time to be looking to reduce the tax burden on the wealthy,’ he says to the Daily Telegraph’s James Kirkup and Robert Winnett. This is a line that other ministers have deployed recently, and not just Lib Dems. And it suggests that the coalition is confident that HMRC’s forthcoming review of the rate will say that it does indeed raise revenue. But the matter won’t end there. The IFS recently said of the HMRC review that, ‘tax records for just one

Friday

Melanie McDonagh

Cameron should leave this terrible ‘tax breaks for cleaners’ idea in Sweden

There are times when you think, really, the Prime Minister should get out less. The good ideas he comes back with when he goes abroad are fine and dandy — of which, more later — but the bad ones are very bad indeed. One notion he is considering just now after attending a Nordic-Baltic summit is the Swedish/Finnish one of giving people who employ domestic help tax relief on half of the cost. On the plus side, you get more women in the workplace, by allowing them to subcontract the domestic drudgery, and you shift thousands of workers, mostly female, from the black economy to the respectable economy. For the

Thursday

James Forsyth

One for the Tories’ manifesto in 2015

David Cameron’s comments today that he finds a Swedish-scheme that offers tax breaks for employing domestic workers ‘very interesting’ and would ‘want to look at further’ are, predictably, being attacked by Labour. They are claiming that they are proof that he is ‘out of touch’. But it is, actually, a thoroughly sensible idea.   As I wrote back in October, the Cameroons have long been interested in the idea of trying to make childcare tax deductible. The appeal of this policy is that it would make it far more attractive for many highly-skilled — and high-earning — people to return to the workforce. It would also move many child-minders who

Peter Hoskin

Cameron’s quotas: a policy or a threat?

We’ve heard enough about David Cameron’s woman troubles to regard anything he says about the fairer sex as a naked pitch for votes. But I reckon his comments today, about getting more women into boardrooms, are just as much motivated by concerns about the economy. ‘The drive for more women in business is not simply about equal opportunity, it’s about effectiveness,’ is how he put it earlier, ‘It’s about quality, not just equality.’ It’s a claim that reflects both the thinking of Masters of Nothing — a book by two highly-regarded members of the 2010 intake, Matthew Hancock and Nadhim Zahawi — and its continuing influence in Cameroonian circles. Part

Peter Hoskin

A feast of Quantitative Easing

Fire up the printing presses, once again. The Bank of England has just announced another £50 billion of Quantitative Easing, bringing the total monetary expansion up to £325 billion. And it probably won’t end there: Citi, among other analysts, forecast that it could go as high as £600 billion next year.  So what are we getting for all this free money? The Bank would tell you that its supporting the economy: keeping interest rates down and encouraging investors to flush money into growth-inducing schemes and mechanisms. And there’s obviously truth in that. But we, and the suits of Threadneedle St, shouldn’t pretend that QE doesn’t create victims too — and

Tuesday

James Forsyth

Osborne defends ‘rewards for success’

George Osborne’s speech to the Federation of Small Businesses tonight tries to offer some reassurance that the coalition isn’t caving into the anti-business zeitgeist. Referring to the recent rows over executive pay, he deplores rewards for failure before saying ‘a strong, free market economy must be built on rewards for success. There are those who are trying to create an anti-business culture in Britain – and we have to stop them.’ How reassuring business leaders will find this remains to be seen. As Robert Peston reported yesterday there’s a lot of grumbling from them about the government’s handling of the Hester bonus and other matters. (To be fair to Osborne,