Economy

Matthew Sinclair’s piece on high-speed rail makes two main criticisms, both of which have already been addressed in the material published earlier this week for the consultation – but I would like to explain our approach again here.   First, Matthew criticises our forecasts. He would prefer us not to forecast demand beyond 2026, but HS2 would be a long term investment and would bring benefits for successive generations over many decades. It would be absurd to forecast only 10 years ahead. Therefore, we have taken a longer term but still realistic view. Demand for long distance rail travel more than doubled between 1994 and 2009 – an annual growth

Matthew Sinclair argues that the government’s plans for high-speed rail would not create enough jobs to justify the government spending money on the project. But his argument is disingenuous as he is not comparing like for like. He is comparing predictions about jobs created directly by high-speed rail with predictions about jobs created indirectly by investment in the wider economy. The 40,000 jobs created directly by high-speed rail are simply the tip of the iceberg – tens of thousands more will be created by the investment boom in the cities the new line will link up. These are the jobs being created by the “wider economy” that he mentions, but

National Pay Bargaining is one of the major impediments to rebalancing the national economy and improving the quality of public services. But as Julian Astle, the head of the Liberal think tank Centre Forum, notes the coalition is doing little about it. It knows that the public sector unions will go to the wall for national pay bargaining and so are holding off. Gordon Brown flirted with doing something about national pay bargaining, announcing a review of it in the 2003 Budget. But he then backed away from the issue. One area where the coalition is chipping away at national pay bargaining is schools. Academies and free schools have the

Today, we have seen the 50p tax in action: reflected in January’s bumper tax receipts. A jubilant John Rentoul has just tweeted: “Where is Fraser Nelson when you need him? The 50p income tax rate has brought in a ton of money. He said it would probably reduce revenue.” He is absolutely right – but not for the reasons he thinks. Were John self-employed, he’d know that the tax paid last month was in respect of the 2009-10 tax year – when the top rate of tax was 40p. Of course, many of the super-rich are on PAYE – but that has happened since last April. It doesn’t explain a

The fallout from Chris Huhne’s sudden review of the government’s system of subsidies for small-scale renewable energy gathers momentum. Solar firms, who built business cases on the system of subsidies, are threatening judicial review over the Energy Secretary’s change of direction. So why did the government raise concerns about the policy? Apparently, because it has been too successful. The scheme encourages householders, communities and businesses to cover their roofs in solar panels and erect wind turbines by offering them a generous subsidy for the electricity they produce. It was introduced by the Labour government with three aims: to cut carbon emissions; to help reduce the costs of the technologies; and

As an economist working in politics, I’m sometimes shocked at some of the arguments about the economy. But today’s statement on welfare reform is economically shocking.   Miliband argues that you can’t reform welfare until there are more jobs. Set aside the fact that this is another area where Miliband’s argument is Lord make me virtuous, but only tomorrow. Team Brown delayed welfare reform for over a decade under Labour, and their position today is to call for yet more delay.   Let’s look at the economics.   First, Miliband falls for the classic lump of Labour fallacy. It’s as if he thinks there are a set number of jobs

It was the snow wot done it. The new unemployment figures have been published and the headline figures are that unemployment increased by 44,000 to 2.49 million between December 2010 and January 2011; the claimant count also went up by 2,400 to reach 1.46 million. It’s disappointing news, especially as figures from Germany are markedly different. Miliband may exploit the news at PMQs. But there are reasons to be positive. The government’s mouthpiece on these issues, Chris Grayling, who is less attack dog more beast of burden these days, argued that Q4’s negative growth figures will have had some effect on employment (and it’s likely to continue to do so