Economy

Thursday

Fraser Nelson

King’s inflation nation

If Mervyn King and his team are trying to deal with Britain’s debt crisis by letting inflation rip, I do wish they would just say so – rather than go through this monthly farce. Yet again, base rates have been left at an absurd 0.5 per cent, in an economy expected to grow by a full 2 percent this year but with inflation at 3.3 percent or 4.8 percent depending on how you measure it. Petrol prices are bad, but now they are matched with soaring prices elsewhere – from train travel to groceries. Here’s a list of some price rises confronting shoppers:   Add Osborne’s VAT rise to non-food

Peter Hoskin

Five more things you need to know about the IDS reforms

Last November, I put together a ten-point summary of IDS’s benefit reforms – so why add five more points now? Two reasons. First, it’s worth dwelling on what, I believe, will be one of this government’s defining achievements. Second – and far more prosaic – the Insistute for Fiscal Studies released a report on the matter yesterday. The following points have all been harvested from that document, and represent the IFS’s judgement, so to speak. Only one judgement among many, but one that warrants some attention. Here goes: 1. Who gains and who loses (in financial terms)? This question courses through most of the IFS report, and stands out in

Wednesday

Daniel Korski

The China arms embargo should be discussed – though not lifted

Today’s Times splashed on the spat between Britain and EU foreign policy “czar” Catherine Ashton over the embargo barring arms sales to China. The embargo was put in place after the Tianamen Square massacre and has remained in place, largely at US insistence, ever since. But is it the right policy? The policy has not prevented China from becoming a military power — its annual defense budget officially stands at $70 billion, although the Pentagon believes the real figure to be twice as high. China is developing carrier-killing missiles that even NATO does not have, and will soon sell weapons rather than seek to import them. There is, of course,

Lloyd Evans Lloyd Evans

A shock for Dave

Wow. Dave had a real wobble at the start of PMQs today. Ed Miliband stood up, looking as mild as a puppy, and asked about the ‘tip’ of two million quid recently paid to the boss of Lloyds. ‘In opposition,’ said Ed, ‘the prime minister promised, “where the tax-payer owns a large stake in a bank, no employee should earn a bonus of over £2,000”.  Could he update us on how he’s getting on with that policy?’ He was already seated when the first peals of laughter echoed around the chamber. Dave had stood up but he didn’t speak. Nothing came out. Silence seemed to have mastered him for a

David Blackburn

Clegg: time to air our differences

Why vote Lib Dem? Even Nick Clegg is now asking that question. After 8 months of broken pledges, deep cuts and atrocious polling (due to reach its nadir tomorrow in Oldham East and Saddleworth), Clegg worries that his party is losing its identity. Speaking to the Guardian, Clegg reveals that he hopes to arrest decline by expressing publicly his private differences with David Cameron. This is not defiance from Clegg but a statement of positive intent. Taking brave decisions, he says, has proved that the Liberal Democrats can govern and that coalition works; the government’s strength is sufficient to withstand disagreement. That’s all very well, but Clegg needs more than

Tuesday

Peter Hoskin

Mixed attitudes towards the cuts

Forget the voting intentions, the real action in YouGov’s latest poll comes in the supplementary results. There, as Anthony Wells suggests, are attitudes towards spending cuts that will both perturb and hearten the coalition. Let’s take the bad stuff first: “Asked if the government’s cuts will be good or bad for the economy only 38% now think they will be good, compared to 47% who think they will be bad. In comparison between October and December last year it was roughly even between people thinking the cuts would be good and those thinking they would be bad. On whether the cuts are being done fairly or unfairly, 57% now think

Monday

Fraser Nelson

The crash from an Austrian perspective

It’s not all politics at Westminster. There’s a pretty good think-tank scene too, with lectures on topics that you’re unlikely to read about in the newspapers. One took place today: the Adam Smith Institute hosted a lecture by Steven G. Horwitz, from St. Lawrence University, entitled “An Austrian perspective on the great recession of 2008-09”. As many CoffeeHousers will know, “Austrian” refers to von Mises, Hayek and the others whose analysis of bubbles and crises certainly seems to fit current events. My colleague Jonathan Jones was there, and took some notes – which I have moulded into a six-point briefing.  It’s not often we do a post based on a

James Forsyth James Forsyth

Johnson running out of his nine lives

Ed Miliband’s press conference today was a classic example of clever opposition politics. He and Alan Johnson said that Labour would continue the bonus tax on the banks for one more year. This policy has the twin advantage of maximising the coalition’s discomfort over the whole issue of bankers’ bonuses and expiring well before the next election. The rest of Miliband’s press conference was devoted to an attempt to defend the record of the previous Labour government. Miliband kept making the valid point that in the years before the crash Cameron and Osborne weren’t saying that Labour was spending too much but were instead committed to matching Labour’s spending plans.

Friday

Daniel Korski

China in a bullshop

As if to illustrate Pete’s post about the rise of China and India, Chinese Vice Premier Li Keqiang has just finished a visit to Spain during which agreements worth 5.7 billion euros were signed. The Chinese delegation is said to have committed itself to buying six billion euros of Spanish debt, which helped calm markets and provided some relief for Spain’s recession-hit economy. Around the time that the Soviet Union collapsed, the Chinese used to say only they could save communism. Twenty years on, it seems only they can save capitalism. The Spanish are certainly in no doubt about the importance of their newfound Chinese friends. The left-leaning Spanish newspaper

Peter Hoskin

From the archives: Protesting the price hikes

The week began with grim projections about petrol prices, and has been coloured by the twin topics of tax and inflation since. So, a decent opportunity to look back on the fuel protests of 2000, in the latest shot from the Spectator archives. Here’s a piece from the time, by Coffee House regular, and Spectator theatre critic, Lloyd Evans:   Do you want a smack in the mouth?, Lloyd Evans, The Spectator, 16 September 2000 As I write this, the gravest crisis in our island story is unfolding before my eyes. The great four-star emergency of September 2000. Where it will lead, no one can tell. Frequent bulletins from BBC

Peter Hoskin

The rise of China and India, by numbers

We’re used to seeing growth forecasts for the next few years, but here’s an altogether rarer beast: forecasts stretching all the way to 2050. They were released by PricewaterhouseCoopers last night, and I thought CoffeeHousers might appreciate seeing them in graph form. Naturally, slap health warnings aplenty across this – economists barely know what will happen this year, let alone decades hence – but some of the trends are still pretty striking. Here’s a round-up: 1. This first graph suggests that – allowing for the relative values of different currencies – China’s GDP will top the US’s around 2020. India’s does likewise just before the 2050 endpoint:   2. The

Fraser Nelson Fraser Nelson

King’s ransom

How much bigger does Britain’s inflation have to become before Mervyn King realises it’s a problem? The VAT rise should have lifted prices by 2.1 percent – but shopkeepers over Britain have been applying far larger rises. Why? Because one of the most important factors in economics – expectation of inflation – is back. People are bracing themselves for another year of rising heat, transport and staff costs – so retailers hike up prices in anticipation, and a vicious spiral of inflation begins. The Retail Price Index was up 4.8 percent last November, and Consumer Price Index 3.3 percent. The price of this failure of monetary policy is paid by

Tuesday

Peter Hoskin

Will Osborne be vindicated in 2015?

VAT, VAT, VAT – but what’s this? The main headline on today’s FT doesn’t mention the sales tax at all, and the piece below it only does so in passing. Instead, a declaration that “UK austerity measures [are] expected to pay off,” based on a survey of economists conducted by the paper. Although those polled have concerns about inflation and the eurozone, only 13 percent say that George Osborne needs a Plan B for dealing with the public finances. As always, we shouldn’t place too much stock in this kind of thing. Some economists will back the coalition, others will back Labour; some will be right, others will be wrong.

Peter Hoskin

Osborne and Johnson battle over the new tax divide

Now here’s a thing: a radio appearance by Alan Johnson that actually clarified some details about Labour’s economic policy in the Miliband era. Sure, the shadow chancellor spent most of his time on the Today Programme setting about the coalition’s VAT hike, with all the usual arguments about jobs and growth. But there was also confirmation that Labour’s deficit reduction plan would split 60-40 between tax rises and spending cuts, and that they would raise national insurance levels rather than VAT. It repositions the argument some way beyond the simple Do/Don’t divide that was developing around VAT. Now there are two choices for voters to make. Do they prefer a

Monday

David Blackburn

Miliband swings into action by warning of inflation

The seasonal interlude has ended and Ed Miliband is sallying north to Oldham East. He will resuscitate old favourites from 2010: progressive cuts, fairness and a government bent of an ideological mission: but he will illustrate his point with reference to tomorrow’s VAT rise. Miliband will say: ‘Today we start to see the Tory-led agenda move from Downing Street to your street. At midnight VAT goes up, hitting people’s living standards, small businesses and jobs. The VAT rise is the most visible example of what we mean when we say the government is going too far and too fast, because it’s clear that it will slow growth and hit jobs.’

Saturday

The Spectator

Leader: Winter sunshine

Every day of this new year, some 200,000 people are likely to be lifted out of what the United Nations defines as extreme poverty: living on $1.25 a day or less. Every day of this new year, some 200,000 people are likely to be lifted out of what the United Nations defines as extreme poverty: living on $1.25 a day or less. This remarkable pace of improvement will probably quicken over the rest of the decade. This is not due to any government development goal or charity outreach programme. It is driven by global capitalism, just like the transformation of India, China and other emerging markets. We are living in

Peter Hoskin

Rising costs: a problem for the public and the coalition in 2011

Ne’er mistake correlation with cause, I know. But, during the Brown premiership, the correlation between petrol prices and poll ratings was still pretty striking. Mike Smithson graphed it early last year, but the basic story was this: the Tories enjoyed their biggest poll lead over Labour when petrol prices were at their highest, and Labour closed the gap to only 1 percent when petrol prices were at their lowest. At the very least, it gives us a hypothesis to work from: prices up, the government suffers; prices down, the government recovers. And it looks as though we’ll be able to test that hypothesis soon enough. Today’s Express reports that –

Thursday

Fraser Nelson

A debt-filled New Year

The Spectator is out today, with a cover story that I would commend to CoffeeHousers. Failure to learn from history usually condemns a nation to repeating its mistakes. That’s why we should be nervous that no one seems to have worked out what caused the crash. Little wonder: the guys doing the analysis are the same guys who failed to spot the crisis building up, so it suits everyone to blame the banks. “How was I to know,” says everyone from Gordon Brown to Joe the Pundit, “that they were doing all these complex debt swap thingies? They deceived everyone, the bounders.” There is another analysis – and it’s our

Monday

Peter Hoskin

Going for growth in 2011

Just as at the turn of 2010, economic growth is going to be big news in 2011. Back then, the question was when we would return to any growth at all. Now, it’s more about how fast our recovery can be. So just how fast can it be? If you notice, Labour have fallen very quiet about the possibility of a double dip recession. But they’ll still leap clamourously upon any sign that coalition policies are stalling growth and jobs. In this, they might even be joined by those on the right who are sceptical of the coming VAT hike. To put some sort of perspective on proceedings – albeit an incomplete

Wednesday

James Forsyth

Paid to deliver

Payments by results is the key to innovation in the public sector. It will help transform public services from something delivered by a state monopoly into being provided by a variety of suppliers who compete for state funding with best practice rewarded. The work programme to move the unemployed off benefits and back into work – outlined by Chris Grayling today –  is the biggest move to payments by results we have seen in this country. Groups can be paid up to £14,000 for moving the long-term unemployed permanently back into work. This should ensure that groups have an incentive to tailor their programmes to the individual rather than relying