Economy

Monday

James Forsyth

Preparing for the strike

Wednesday’s strike is going to be big — unlike the one in June, which I suspect most people didn’t really notice. You’re not going to be able to miss this one as 90 per cent plus of schools shut — compared to a third in June — and it takes half a day for anyone coming to Britain to pass through passport control. Michael Gove’s speech this morning is being widely seen as the government taking a more confrontational attitude to the strike. But I think that’s only half the story. What Gove was trying to do was appeal to the union membership while attacking those union leaders who really

Peter Hoskin

Those gloomy OECD projections in full

Thanks to the tremors along Westminster’s grapevine, we already knew that today’s OECD Economic Outlook would make for pretty dreary reading. But now that the report is actually out, we can see the organisation’s numbers for ourselves. The headline point appears to be that the eurozone is in, or is facing, ‘mild recession’. Or to put it in graphic form: And the current situation isn’t look particularly encouraging for the UK either. The first heading in the section on us reads ‘The economy is weakening sharply’. And a subsequent pair of graphs predicts, first, that we’ll experience a mild recession of our own across the next two quarters, and then

Sunday

Daniel Korski

Tobin tactics

The biggest bone of contention between the UK and its EU allies these days is the ‘Tobin tax’, the idea of levying a tax on financial transactions. To the UK this is folly. Unless it is levied globally, a tax will force business to move elsewhere. And there is a greater chance of Silvio Berlusconi being elected ECB chief than the Tobin tax being levied globally.   Based on the experiences of Sweden in the 1990s, the tax will achieve none of what its proponents believe it will — and at a considerable cost to Britain’s and Europe’s economy, as companies look to list elsewhere to avoid it. As Ryan

Patrick Nolan

Why infrastructure isn’t a magic tonic for the economy

Growth plans are a high growth industry — with every day bringing yet another set of ideas, from one quarter or another, for how the government can fix the economy. And one suggestion pops up quite frequently in all these plans: bring forward spending on infrastructure. This is often presented as a simple thing to do, with few (if any) downsides. But how realistic is this? We know that infrastructure is important for growth. Economic texts generally suggest that the ‘multiplier effect’ (when government spending leads to more private spending later on) from is higher for infrastructure spending than for spending in other areas, such as health and welfare. We

James Forsyth James Forsyth

The Tories’ latest frustration with the Lib Dems

Nick Clegg’s interview in The Observer today highlights what is fast becoming one of the biggest tensions in the coalition: the Lib Dem desire to show that they are the governing party who cares. Allies of Iain Duncan Smith have been infuriated by Lib Dem suggestions that the government would be doing little about youth unemployment if it was not for them. But Clegg repeats the claim to The Observer: ‘Whether it’s on youth unemployment, whether it’s on youngsters, whether it’s on getting behind advanced manufacturing and not putting all our eggs into the City of London basket, I don’t think that would have happened without the coalition.’ A growing

Saturday

Daniel Korski

How can Cameron protect our interests in Europe in the short term?

Chatting to people in Brussels last week, I couldn’t help feeling that David Cameron’s EU problem is one of timing. The PM will probably be able to piece together a repatriation package that includes measures such as a withdrawal from the over-implemented Working Time Directive and a reduction in the EU budget. But none of this is likely to be enough for his party. Indeed, I suspect the budget won’t be finalised until two minutes to midnight during the Lithuanian EU Presidency in 2013. Add to this the Tobin Tax, where there seems to be little leeway for the British government. Barosso, Merkel and Sarkozy are determined to introduce it,

Friday

Peter Hoskin

A Clegg-up for young workers?

There was a time when Nick Clegg was the most agile and persistent defender of the coalition’s deficit reduction programme. But now — although he’s still got it in him — he is more often wheeled out to announce some spending wheeze or other. A couple of weeks ago, it was the next instalment of the government’s regional growth fund. Today, it’s a £1 billion scheme, spread out over three years, to encourage companies to take on young people. This latest scheme is one of those that looks very neat on paper. Put aside questions about how it will be funded, and what we have is a plan whereby £2,275

James Forsyth James Forsyth

Europe’s debt overspill

That Italy is now paying around 7.8 per cent for two-year borrowing, compared to the 4.5 per cent it was paying just last month, is a reminder that the imposition of a technocratic government was far from a solution to the country’s problems. With €8 billion more debt to be sold on Tuesday, there’s little respite for Italy coming up. One does have to wonder how long they can carry on like this.   But Italy’s troubles need to be seen in conjunction with what happened at the German bund auction this week. The problems that even Germany is having in getting its debt away at a good rate is

Thursday

James Forsyth

Miliband’s opportunity in the economic debate

Political debate is going to be dominated by the economy between now and the autumn statement. Ed Miliband is trying to use this moment to persuade the public that the Coalition’s economic policies have failed. By contrast, the Tories want to highlight how much deeper trouble the country would be in if it did not have the confidence of the bond markets. The Tories hope that this ‘stay close to nurse for fear of something worse’ approach will eventually deliver an election victory for them in 2015, given how hard Labour is finding it to regain credibility on the economy. As Ben Brogan wrote the other day, this strategy worked

Wednesday

Lloyd Evans

Ed looks more dead than deadly

If Roman Abramovich owned the Labour party, Ed Miliband would be toast by now. The floundering opposition leader gave the sort of inept, predictable and ill-organised performance at PMQs that would get a manager sacked in the Premiership. It scarcely helps that Mr Miliband seems to prepare for these sessions like a deluded psychic. He and his team of prophets at Labour HQ clearly believe they can foretell what the prime minster will say and how best to smash his answers to pieces. Referring to the rise in unemployment, Mr Miliband began by attacking the PM for scrapping the Future Jobs Fund in March. He boasted, rather weirdly, that ‘under

James Forsyth James Forsyth

In PMQs, a preview of next week’s battles

Today’s PMQs was a preview of the debate we’ll be having after next week’s autumn statement. Miliband, struggling with a bit of a cold, tried to pin the economy’s problems on Cameron. The Prime Minister’s retort was ‘who would want to put the people responsible for the current mess back in charge’. It was a simple message and one that carried him through the session. The other feature of today’s joust was also a preview of next week: a tussle over the strikes. Cameron said strikes were the ‘height of irresponsibility’. He also made sympathetic noises when Tory MPs asked about imposing minimum thresholds for strike ballots. Afterwards, we learnt

Daniel Korski

Opening Europe

It is an article of British faith that further liberalisation of Europe’s market is a worthwhile goal. But few people realise the boost the UK economy would actually get from the finalisation of the EU’s internal market – especially implementation of the Services Directive, creating an integrated market for energy, modernising public procurement rules and liberalising the digital market. Implementation of the Services Directive alone would add 1.5 per cent of GDP to the EU as a whole in the next nine years, according to European Commission calculations. As the UK has one of the strongest services sectors, this will have direct benefits here. Taken together, progress in all these

Tuesday

Campbell Robb

The government’s housing policies don’t match its strong rhetoric

Yesterday’s housing strategy offered a mortgage guarantee for first-time buyers of new properties, one of the few new announcements in a document largely consisting of re-hashed policy. At best, the mortgage guarantee helps to provide a boost to house builders and welcome relief for some credit-worthy borrowers who simply can’t build up a sufficient deposit. At worst, it encourages risky lending, subsidises high house prices and raises unrealistic expectations for young families. Unaffordable, reckless lending (at least, up until the credit crunch and collapse of the sub-prime market) threatened the stability of the financial sector and caused misery to thousands of homeowners who later found themselves falling behind on payments

Monday

Peter Hoskin

Talkin’ ’bout long-term stagnation

Politics is often a messy squiggle, but this morning’s Resolution Foundation event did much to reduce it to a binary choice. Do we follow the US into a decades-long stagnancy around low-to-middle-income earners? Or do we not? James Plunkett explained the basic dilemma on Coffee House earlier, but more was said by a group of panellists which included Jared Bernstein, Martin Wolf, Steve Machin and Lane Kenworthy. Here, for the saddest CoffeeHousers, are eight points that I’ve distilled from my notes. This is more reportage than opinion, but I thought you might care to applaud or eviscerate some of the arguments that were put forward: 1) The UK triumphant. Or

James Plunkett

Are we facing an American nightmare?

With the Chancellor’s autumn statement due next Tuesday, we’re all talking about growth. The ECB and Bank of England now say the UK economy is set to grow at less than half the rate the OBR forecast back in March. That makes it all but certain that George Osborne will announce dramatic downward revisions to UK forecasts when he stands up in parliament next week. But before all the fighting about Plan As and Bs reaches fever pitch, it’s worth asking what the next decade looked like under the previous, more optimistic growth projections. The answer isn’t pretty and it helps highlight one major question that’s rarely asked in our

Saturday

Fraser Nelson

Nigel Lawson versus Mervyn King

In this week’s Spectator we have a piece from one of our former editors, Nigel Lawson, where he confronts this idea that the West’s woes can be blamed on a new bogeyman called ‘global imbalances’. This is fast becoming the received wisdom, something that even the bankers can point to and blame. It gets everyone off the hook, and takes attention away from the basic failure to regulate the supply of money and quality of investments. CoffeeHousers may be familiar with the argument by now. Time and time again, we hear central bankers shrug their shoulders and say something like: ‘Don’t blame us central bankers and financial policymakers for the

Peter Hoskin

Assessing the sick

Should GPs determine whether people on long-term sick leave are too ill to work? Perhaps not, according to the draft copy of a government-commissioned review into sickness absence. It proposes setting up a new, separate and independent body to assess those on long-term sick leave, on the grounds that doctors have no incentive — nor, perhaps, the specific knowledge — to prod and coax them back towards employment. The new service, it is said, would advise sick leavers, and their employers, about just what they can and can’t manage. If the government does introduce this, it will be another sign of their intent to untangle the problems with sickness benefits.

Friday

Jonathan Jones

200,000 extra working pensioners

Despite – or perhaps because of – the recession, pensioner employment has increased dramtically over the past few years. In his Telegraph column today, Fraser remarks on this important but largely ignored trend in Britain’s workforce. ‘A million jobs have been lost since the Great Recession began’, he says, ‘but the number of pension-aged people in work has increased by 200,000.’ Here’s that phenomenom in graph form: Why has this happened? Fraser puts his finger on one important factor: ‘Crucially, they pay less tax. A pensioner manning the tills in Tesco will take home 12 per cent more than a working-age colleague on the same salary.’ You see, employees over 65 don’t

Jonathan Jones

From the archives: Fall of the Rock

Yesterday, George Osborne announced the sale of Northern Rock to Virgin Money. Here, to mark the occasion, is the piece Allister Heath wrote on the bailout of the bank in 2007: Northern Rock: morally hazardous, Allister Heath, 29 September 2007 First we heard about ‘sub-prime mortgages’; then it was ‘collateralised debt obligations’; now it’s the turn of ‘moral hazard’ to appear on the Ten O’Clock News. Jolted out of prosperous complacency by market turmoil, the public has started to care about economics: strange jargon and obscure concepts previously familiar only to investment bankers are going mainstream.    The best way to understand moral hazard is to reflect on how taking

James Forsyth James Forsyth

Cameron and Merkel: all smiles but no progress

David Cameron and Angela Merkel were clearly keen to show that, whatever the tensions over the role of the European Central Bank, they still get on. I lost count of the number of times in their press conference that they used the word ‘good’ to characterise their relationship and their discussions. But there did not appear to have been any actual progress on how to deal with the current crisis. Certainly, there was no softening of Germany’s opposition to using the ECB as the backstop for the Eurozone. Merkel conceded that she had raised a European-only financial transactions tax with the Prime Minister but that, unsurprisingly, no progress had been