Recession

Expect Labour to make much of today’s employment figures, which show that unemployment fell by 7,000 in the three months to last November.  Already, Yvette Cooper has claimed it as a success for “government investment”.  While Gordon Brown will surely repeat that message in PMQs. But is it really testament to government action?  Or is it a result of a naturally improving economy (which, let’s not forget, is taking longer in the UK than most other developed nations)?  Well, a study commissioned by the Spectator from Oxford Economics found that Brown’s “investment” would “save” around 35,000 jobs in 2009 – but then destroy considerably more jobs from this year on. 

Alistair Darling’s got an interview in today’s FT, and you know the story by now.  Yep, the government thinks that borrowing needs to come down drastically; extra growth would go towards cutting the structural deficit; there’ll be the “toughest settlement” on public spending for twenty years, only it shouldn’t be introduced too quickly; those bankers aren’t quite as evil as previously suggested; and so on and so on.  As we’ve said before, it’s certainly an improvement on that fatuous investment-vs-cuts line.  But you’ve got to wonder whether the public will find it credible, in view of what Brown & Co. have said, and done, in the past. Reading the complete

The Tories have said plenty to dismay me in the last few weeks, so I was delighted to pick up the FT today to see George Osborne talking sense – and boldness. Given that we have to increase taxes, it’s an obvious one to raise. The “too big to fail” principle means that the state now provides de facto insurance to banks – so it’s reasonable that they pay for that insurance. The whole tone of Osborne’s interview is reassuring, especially as he indictates he is studing the aggressive Swedish reponse to the fiscal crisis. He indicates Tories are looking at plugging the deficit with 80 percent cuts and 20percent

Oops! Britain’s inflation is heading back to 4 per cent territory ­ as you’d expect with the Bank of England printing money and using the debt to finance government spending. If you create more money, you reduce the value of the money. Citi has done another brilliant research note, which it is putting online, laying out the implications. The punters are facing pay freezes, or settlements below 2 per cent. The cost of living is soaring. Result: misery. Here are the two graphs from Citi that spell it out. First, inflation (much affected by the VAT hike ­ in the same way that it was artificially reduced by the VAT

Oh, Darling, what hast thou done?  There are few more pertinent, or more damning, examples of what the government’s soak-the-rich policies could mean for the country than the news that JP Morgan is having second thoughts about developing a £1.5 billion European HQ in Canary Wharf.  Of course, the bank may still go ahead with it.  But just imagine if they don’t: the work lost for construction workers and a thousand other contractors; the tax revenues lost for the public finances.  The damage won’t just – or even mostly – be to the financial sector. Thing is, I imagine that Number Ten will be fairly happy with the story.  As

There are some pretty cheeky claims in today’s Pre-Budget Report. One is that “Cyclically-adjusted borrowing is lower than at Budget across the medium-term forecast.” (page 171). That makes it sound like it’s all under got a bit better since the Budget. But in fact the “cyclically adjusted” improvement is entirely because of a redefinition of the cycle – not because of any actual reduction in the deficit.  For example, the PBR forecasts the deficit for 2013/4 as 5.5 percent of GDP – exactly the same as that in the 2009 Budget.   Another claim is that “The annual pace of consolidation set out in this Pre-Budget report is faster than

Moody’s AAA sovereign monitor was published today, and whilst the UK’s AAA status remains ‘resilient’ the situation is far from rosy. The report states: ‘The UK economy entered the crisis in a vulnerable position, owing to the (overly) large size of its banking sector and the high level of household indebtedness. Both continue to weigh on economic performance. Net bank lending to the UK business sector has continued to contract through Q3 2009, and repairs to household balance sheets (i.e. the rising savings ratio) may weigh on demand for some time to come. The depth of the crisis has been mirrored by the ongoing deterioration of public finances (with gross

With the largest transfer of liabilities in British history – the insurance of the risk of loss on £240 billion of toxic RBS assets by taxpayers – proceeding, there is worryingly little information being given about either what these assets may be or what risks there are to the taxpayer. Rather than the parliamentary enquiry and detailed disclosure Swiss parliamentarians demanded when UBS needed similar assistance, a small press release noting such exotics as “structured credit assets “ has been issued. The spin continues to be that there is nothing to worry about and all this money will come back fine. Bank of England data shows that UK bank exposure

This afternoon Jim Knight MP, the minister for welfare reform, proclaimed that the Government wants to turn the Jobcentre Plus network into a careers service for everyone. He said that welfare advisers, who currently try to help get people on benefits back into work, will start to “provide opportunities for progression” for anyone in a job – no matter whether the person is a banker or a bin man. This is a bad idea for a simple reason: it is far more important to help the unemployed back into work than give assistance to people who already have a job. The longer that someone is out of work, the worse

An Abu Dhabian official has briefed Reuters that Abu Dhabi will rescue Dubai on a “case-by-case basis”. The official stated: “We will look at Dubai’s commitments and approach them on a case-by-case basis. It does not mean that Abu Dhabi will underwrite all of their debts. “Some of Dubai’s entities are commercial, semi-government ones. Abu Dhabi will pick and choose when and where to assist.” This is potentially bad news for the UK taxpayer, who faces the prospect of provided further cover for British banks, who invested $50bn in the region at the height of the boom. The reason we’re in the firing line? Generous though they are, Abu Dhabi