Economy

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,

James Plunkett

Cameron is right to focus on quality apprenticeships

If there are ‘no votes in skills’, as the old dictum goes, there seem to be some in apprenticeships. Hence David Cameron’s call this morning for apprenticeships to become a ‘gold standard’ qualification ranking alongside degrees from the best universities. His goal is to rectify Britain’s shockingly poor performance on mid-level skills compared to world leaders such as Germany. So how hard would it be for us to catch the Germans? The numbers speak for themselves. Of every 1,000 employed people in England 11 are apprentices; compared to 40 in Germany. Here, fewer than one in ten employers are training an apprentice; in Germany it’s roughly a third. Although the

Daniel Korski

Where has the pro-EU camp gone?

Did you see that amazing article by a group of pro-EU businesspeople? What about that clever ad paid for by ‘Better To Be In’, the new pro-EU lobby group? Nope, me neither. The reason we haven’t seen anything like that is because the pro-European camp in Britain is in total disarray. Like a beaten army, it is withdrawing in a state of confusion, while some diehards stage energetic but un-strategic counterattacks against the advancing Eurosceptic forces. A letter from pro-EU businessmen was, frankly, unimpressive: the signatories were hardly a who’s who of Britain’s business community, and even included some former officials. Hardly a show of strength. But yesterday’s letter from

Thursday

James Forsyth

Bankers need to realise that things have changed

In a speech tomorrow, Ed Miliband will call for ‘one nation banking’. The Labour leader will argue that banks have to show that they are part of the society in which they operate.   But, perhaps, most interesting is Miliband’s point — previewed in the political column this week — that the behaviour and pay structures of banks are fair game for parliament because they are ‘either directly or indirectly supported by the taxpayer.’ Labour will, indeed, propose a vote on the broader bonus culture. The clear target of this motion will be Barclays and Bob Diamond.   Before the bailouts it would have been easy to dismiss all this

Wednesday

Matt Cavanagh

The MoD wastes another opportunity

Today’s White Paper on defence procurement makes disappointing reading for the UK defence industry — and for anyone who believes that one of the lessons of the last few years is that we need a more active industrial policy. IPPR set out the case in a recent report on globalisation, arguing for sustained support for industries, like defence, which have high potential for growth, for exports, and for high-skill manufacturing jobs. We need robust safeguards on the sale of defence equipment to repressive regimes, as well as greater transparency on government lobbying to avoid a return to the bad old days of the Pergau Dam — or minor embarrassments like

Peter Hoskin

Your six-point guide to the Green Budget

As promised earlier, here’s my more detailed supplementary take on today’s IFS Green Budget. I’ve distilled it down into six points, but obviously there’s much, much more in the actual document itself. I’d recommend that you read the chapters on public sector pensions and pay, the 50p rate, and child benefit, in particular, if you’re so minded — as they’re very good summaries of some complicated fiscal areas. Anyway, here are my points: 1) The scary graph. As it does every year, the IFS has produced what I call the ‘scary graph’. It shows what our debt/GDP ratio would look like for decades hence under various circumstances. Even extending Osborne’s

Peter Hoskin

The view from the Institute for Fiscal Studies

It’s the halftime coffee break here at the launch of the Institute for Fiscal Studies’ Green Budget, so I thought I’d send CoffeeHousers a quick update. But first, just to be clear, that’s green meaning green, not green meaning environmental. This is the IFS’s annual, different-hued version of the Treasury’s Red Book. It’s their overall take on the economy and public finances. So far, there has been little that will surprise or disconcert George Osborne as he prepares his own Budget: the picture is expectedly grim. As John Walker, chairman of Oxford Economics, put it in his warm-up routine on the general economy, 2011 was ‘disappointing’ and 2012 will be

Tuesday

James Forsyth

Fred shredded down to size

The removal of Fred Goodwin’s knighthood serves the coalition’s political purposes. It shows them being tough on a bad banker and reminds everyone that these problems happened on the last government’s watch and that Alex Salmond was cheering on RBS’s bid for ABN Amro. There are even some in government who are up for a fight over clawing back part of his pension or past bonuses believing it would put both Goodwin and the human rights act in the dock. This is not to say that the removal of his knighthood was not merited. Goodwin didn’t do much of a service to banking, after all. There’s another lesson in this:

Jonathan Jones

The Tories are extending their lead on the economy

It looks like Dave’s still made of Teflon. Even after the economy shrank by 0.2 per cent and the unemployment rate rose to its highest point since 1995, the public still think his party is better at handling the economy than Labour. And the Tories’ lead on what is by far the most important issue to voters hasn’t just survived all this bad economic news — it’s actually grown. Before Christmas, 31 per cent said the Tories would best handle the economy, against 27 per cent for Labour. In today’s YouGov poll, that four point lead has trebled to become a 12 point lead — the biggest since autumn 2010:

Monday

James Forsyth

Modernisation 2.0

One of the flaws of Tory modernisation was that it was never interested enough in pounds and pence. Social issues, the environment and public service reform were what the modernisers specialised in, not economics. But tonight’s Macmillan lecture by Nick Boles, one of the most intellectually influential modernisers, is devoted to the subject of how Britain’s global competiveness in the global economy can be improved. His argument is that: ‘What really threatens the general wellbeing of the British people is the stalling of productivity growth and the certainty that the next 20 years will expose them to competition that is vastly more intense than anything we have ever seen. If

Sunday

Peter Hoskin

The government’s Hester problem intensifies

First there was Fred Goodwin, now there’s Stephen Hester. The chief executive of RBS is fast becoming the bête noire of the British banking system, thanks to his roughly £1 million share bonus which, we learn in the Sunday Times (£) this morning, may be topped up with an extra £8 million over the next few years. Little wonder that Iain Duncan Smith admitted on the Marr show earlier that there may be a severe public backlash, and that the government could suffer from it. He suggested that it would be better, for all concerned, were Hester just to forego the million. It’s one of those debates where it’s easy

Saturday

James Forsyth

Alexander identifies Labour’s problem

Douglas Alexander may sometimes hide the meaning of what he says under a layer of jargon but he remains one of the more interesting political strategists on the Labour side. Alexander, a Brown long-marcher turned Blairite, saw before many of his colleagues the need for Labour to level with the public on cuts. He privately thought that Gordon Brown’s attempt to fight the last election on a reprise of the investment versus cuts strategy of ’01 and ’05 was a mistake. So, it is no surprise that Alexander, now shadow Foreign Secretary, is trying to use the opportunity created by Ed Balls’ acceptance of the need for a public sector