Economy

Inflation at 4.2 per cent is nothing to cheer

Are today’s inflation figures cause for celebration? The Consumer Price Index rose a mere 4.2 per cent in the year to December, down from 4.8 per cent in November. So, yes, a sharp drop — but only a statistical boffin could describe this as good news. Sure, a similar drop can be expected when the VAT rise drops out of the comparison figures next month. But the prices confronting British shoppers are still rising at twice the supposed inflation target, and will keep rising above this target for months to come. The following graph shows the trajectory we can expect for CPI and RPI over the next few years: The

Clegg versus vested interests (and the Tories)

‘Another week, another speech about the evils of capitalism.’ So joked Nick Clegg at the start of his speech to Mansion House earlier, and there was some truth in this particular jest. All three parties are jostling to be seen as the harbingers of a new economy at the moment — one that doesn’t reward failure; that benefits everyone ‘fairly’; that won’t seize up as the old one did; that etc, etc. Ed Miliband sketched out his rather insipid vision for this economy last week; David Cameron will hope to do a better job later this week. Today, though, was the Deputy Prime Minister’s turn. So what did Clegg say?

Osborne visits China, but can’t escape Europe

Yet another day here in Westminster that’s all about the economy. Nick Clegg has just delivered a speech on the subject to Mansion House, focusing on ‘responsible capitalism’, which we’ll blog shortly. And two prominent forecasting groups, the Ernst & Young ITEM Club and the Centre for Economic and Business Research, have suggested that we’re effectively back in recession. They both reckon that the economy shrank in the final quarter of last year, and is wilting even further in this current quarter. But, like the OECD, they also predict that this ‘double dip’ will be relatively short-lived and relatively mild. Against that backdrop, enter George Osborne. The Chancellor spoke from

Miliband, dented but defiant

In the news bulletin after Ed Miliband’s interview on the Andrew Marr show, the headline was about Miliband saying he does listen to criticism of his leadership. It rather summed up Miliband’s problem at the moment: he can’t get beyond all the chatter about his leadership. In terms of the substance, Miliband’s explanation of Labour’s new economic position showed just how difficult it is going to be to explain it to the public. Miliband argued, as Balls did on Saturday, that the cuts are currently going ‘too far, too fast’ but that he can’t promise to reverse them. As one Tory said to me yesterday, Labour is saying that the

Labour’s new strategy in the cuts blame game

Even as Ed Balls embraces the need for austerity today, he takes a very different position to the coalition on why it’s necessary. The government has always blamed the need for cuts on the ‘awful economic inheritance’ bequeathed it by Labour. Balls, on the other hand, puts the blame squarely at George Osborne’s door. In his Fabian Society speech, he said: ‘George Osborne’s economic mistakes mean more difficult decisions on tax, spending and pay.’ His argument is that, by cutting ‘too far and too fast’, the coalition has caused the economy to stagnate and thereby created the need for more austerity. Labour has, of course, long been trying to shift

Balls’ attempt at credibility falls short

‘I must be responsible and credible in what I say.’ No, it’s not Bart Simpson writing on the blackboard at the start of The Simpsons, although it may have been said with just as little enthusiasm. It’s Ed Balls on the Today programme this morning, explaining his decision to endorse George Osborne’s public sector pay freeze. Balls’ interview in today’s Guardian is his biggest effort so far to sound ‘responsible and credible’ on the economy. His admission that ‘we can make no commitments to reverse any of [the cuts], on spending or on tax’ is nothing new – in his September conference speech he said ‘no matter how much we

Salmond’s dangerous corporatism exposed

How would an independent Scotland have fared during the crash? Given that the liabilities for RBS alone represent 2,500 per cent of Scotland’s economic output, it’s a difficult question for Alex Salmond. He replies that the banks in Scotland would have been better-regulated by wise, old him, so the problems would not have arisen. But Faisal Islam at Channel Four has unearthed a letter that rather explodes this theory, written from the First Minister to Fred the Shred egging him on with the calamitous acquisition of ABN Amro. This, as CoffeeHousers will know, is the acquisition which was so hubristic that it went on to sink the whole banking group.

A green-light for HS2 — but the coalition’s political instincts should tell it to stop

Earlier today, the Government announced that it is still planning to go ahead with a new high-speed rail line that will reach Birmingham by 2026, and then be connected to Manchester and Leeds. And it’s doing so in the face of widespread scepticism among the public and business leaders. When we at the TPA commissioned YouGov to test public support for different cuts in public spending, 48 per cent of the public supported cutting the project against just 34 per cent opposed. While organisations like the CBI back high-speed rail, the Institute of Directors (IoD) actually asked their members and found that 38 per cent thought HS2 would represent poor

Can Scotland make it on its own?

What would an independent Scotland’s public finances look like? ‘Good, actually,’ says the SNP as they present their ongoing case for independence. They like to claim that, discounting the rest of the UK, Scotland was in surplus for ‘four out of the last five years’ — it’s Westminster, not Holyrood, that can’t manage the public’s money.  Which would be a powerful argument were it actually true. You see, the SNP are talking about the ‘current budget balance’, which excludes the £6.4 billion a year that Scotland spends on capital. When you include that spending — according to the Scottish government’s own figures — there has been a deficit for every

Miliband’s speech fails to excite

Was Ed’s Big Speech worth the extended wait? Not really. It wasn’t a stone-cold terrible speech, but neither was it the rambunctious, attention-grabbing number that his leadership could do with. In fact, we could have saved ourselves the effort by simply reading his New Year’s message again. That was considerably shorter, and covered almost all of the same ground. Squeezed middle? Check. Tackling vested interests? Check. An admission that Labour will need to cut? Ch… oh, you get the point. The best that could be said about today’s speech is that it presented some of these arguments more clearly than in the past. Indeed, the attack on George Osborne’s fiscal

The Miliband puzzle

So why did Ed Miliband stop his brother being leader of the Labour Party? As each month of his uninspiring leadership passes, it becomes more of a puzzle. In today’s Guardian interview, we learn that he can solve a Rubik’s Cube in 90 seconds. Perhaps David Miliband took two minutes, leaving Ed to regard him as being intellectually inferior. The rest of the interview shows Ed trying to row back towards positions that David Miliband would have adopted from the offset: trying to claim fiscal responsibility, and credibility. The ‘In the black Labour’ movement is also an attempt to repair the repetitional damage being wreaked by Balls, whose calls for

Miliband comes out swinging

After being mostly absent in an embarrassing week, which culminates in today’s Sun headline of ‘Block Ed’ referring to the Labour leader’s Twitter gaffe yesterday, Ed Miliband has emerged with a self-assured interview in the Guardian. In parts, he is even boastful. Miliband declares himself ‘someone of real steel and grit’ and brags ‘I am the guy who took on Murdoch… I am the guy that said the rules of capitalism as played in the last 30 years have got to change’. He claims – contrary to Maurice Glasman’s criticism this week – to have ‘a very clear plan’ about what needs to change in Britain. And what is it

Immigration to fall in 2012 — but still not on track to hit the Tory target

Immigration will remain at the heart of political debate in 2012. Economic downturns tend to heighten concerns about migrants competing for jobs and depressing wages, and spending cuts tend to sharpen resentment over migrants claiming benefits or adding to pressure on public services. The latest e-petition to garner a hundred thousand signatures will get its reward of a day in parliament, debating the effects of immigration on Britain’s growing population. And while Labour and the Liberal Democrats might be reluctant to talk about immigration, the Tory leadership clearly see it as useful in handling those on the right who are unhappy with life in coalition — commentators as well as

Clegg tries to reassure his troops

Only a few weeks ago, a statement from Nick Clegg in firm support of the coalition wouldn’t have been noteworthy at all. It’s just what he, as Deputy Prime Minister, did. But now, after his very public palpitations over Europe, the New Year’s message that Clegg has broadcast today is a little more eyecatching than it would otherwise have been. This is no provcation to rile the Tories, but a more or less sober assessment of what the Lib Dems have achieved in government, along with a few lines about how fixing the economy ‘remains the number one priority for our party and the coalition.’ Most strikingly of all, Clegg

Russia looms significant across 2012

The Christmas weekend was, I’m sure you noticed, rich with political incident. And yet, from continued turbulence in the Middle East to continued turbulence in Chris Huhne’s career, few things stood out as much as the protests against Vladimir Putin in Russia. They were, by most reasonable estimates, the largest in that country since the fall of the Soviet Union. And they add to the wave of disgruntlement that has been swelling since even before this month’s disputed parliamentary elections. The wave, of course, hasn’t broken yet. But few seem sure about how far it will travel and how much change it will wreak. The best article I’ve read on

The rising cost of Christmas dinner

While we’re talking Christmas, how about this release from the Office for National Statistics today? It reveals how the cost of certain ‘Christmas shopping basket’ items has risen over the past year. We’ve put them into a table below — but let’s just say, you might want to start stocking up on carrots.

Why ‘starving the beast’ may not work

Steven F. Hayward’s audit of the state of American conservatism, which David Brooks judges to be one of the best magazine articles of the year, argues that the Reaganite ‘starve the beast strategy’ has failed to halt the growth of government. Hayward writes: ‘Thirty years after the arrival of the Reagan Revolution, government is bigger than ever. The Reagan years appear to have been little more than a mild speed bump in the progress of ever-larger government. The regulatory state advances relentlessly on every front. The soaring national debt threatens economic oblivion sooner or later. In short, the Reagan era, for all that was accomplished, was not an analogue to

Another fine mess at HMRC

Today’s report by the Public Accounts Committee hasn’t so much been released as detonated onto the Westminster scene. The Exchequer is owed around £25 billion, it suggests, from major companies that have been handled too leniently, or just plain wrongly, by HM Revenue & Customs. And much of the blame is attached to Dave Hartnett, the outgoing civil servant in charge of revenue collection. Interviewed on the Today Programme earlier, the chair of the committee, Margaret Hodge, implied that Hartnett had too ‘cosy’ a relationship with big business. She went on to add that, ‘you’re left feeling that the sort of deals that are made with big business — “sweetheart”

The latest act in Europe’s comic opera

If it was not all so serious, the efforts to save the single currency would be worthy of a comic opera: the Germans could compose the score, the Italians could write the libretto, and the French could take care of the stage directions. The latest IMF-related effort is, perhaps, best described by the website ZeroHedge, which is required reading during these troubled times: “Germany will be responsible for €41.5 bn, France at €31.4 billion, and Italy will need to provide €23.5 billion and Spain another €15 billion. To, you know, bailout Italy and Spain” What is becoming increasingly clear, when you take this news combined with the comments of the