Economy

Thursday

Tim Leunig

Right to reply: Why QE isn’t a disaster for pensioners

From our UK edition

The best of all possible worlds for the pension industry is a buoyant economy. Workers have enough money to save, share prices rise and dividend growth is robust. Interest rates are positive in real terms so annuities are good value. The economy ground to a halt in 2008. The overwhelming priority for everyone is to get growth going again. Without growth the services that pensioners depend on — such as the NHS — will struggle. Traditionally, governments cut interest rates and raise spending to get the economy moving. The Bank of England has cut interest rates as much as possible and the government deficit remains very high. We have exhausted conventional policies, and yet the economy is not growing.

Fraser Nelson

The questions Alex Salmond can’t answer

From our UK edition

Should Scotland be independent? I’d have thought that only a few people — most of them Scottish — would care enough about the question to come to a debate hosted by a think tank, but the Policy Exchange fight club was packed last night. The sole nationalist was the SNP’s Pete Wishart, allied with Sir Simon Jenkins making his English Nationalist points. Sir Malcolm Rifkind spoke against the motion, with yours truly his support act. As you might expect from a London audience, those opposed won easily. But two things struck me. The first is Sir Malcolm’s eloquence. He was brilliant, better than Salmond, a reminder of what was cut dead in the 1997 election — perhaps never to grow again.

Wednesday

Jonathan Jones

Unemployment’s high, but at least it’s stopped rising

From our UK edition

So, new jobs figures out today. Which do you want first: the bad news, or the kind-of-alright news? The bad news is that employment’s showing no signs of growth: the total number in work has been stuck at 29.1 million since it fell there in the summer. It’s a touch better than the trough of 28.8 million we hit at the end of 2009, but still half a million below where we were when the recession hit. And we’re showing no signs of getting there any time soon: And the not-so-bad news? Unemployment’s slightly down on last month, which was slightly down on the month before. It’s not a big drop — well within the margin of error — and the number of unemployed still stands at 2.7 million, so this doesn’t exactly count as good news.

Fraser Nelson

The Bond Bubble’s getting bigger

From our UK edition

George Osborne is planning to launch a 100-year bond, says the FT — a sure sign that the Bond Bubble is getting even bigger. These devices are usually used by American universities: the California Institute of Technology issued one at 4.7 per cent, MIT did one at 5.6 per cent, and a few American companies have tried at 6 per cent. The Mexcians sold a billion bucks' worth of century bonds a while ago at 6.1 per cent, so it would only be a matter of time before HM Treasury — a world leader in, ahem, novel debt vehicles — was going to do the same. The US Treasury Borrowing Advisory Committee suggested that the Fed does this last month. It’s not quite as crazy as it sounds: in today’s yield-starved environment you can get away with anything.

Monday

Fraser Nelson

Cameron’s sub-prime thinking

From our UK edition

You’d think the American sub-prime crisis would have taught politicians the world over not to try to rig the housing market. But no, David Cameron is back on it today — about how to ‘unblock’ the system so the debt geyser starts to gush again. ‘The problem today is that you have lenders who aren’t lending, so builders can’t build and buyers can’t buy,’ says the Prime Minister. ‘It needs the government to step in, and help unblock the market.’ The idea that lenders may not lend because they feel the housing market may fall, and people may be unable to repay, is instantly dismissed. He speaks as if debt is the solution, and unavailability of debt is a self-evident problem.

Jonathan Jones

Rising gas prices hurt Obama

From our UK edition

Barack Obama’s re-election has been looking more and more likely in recent weeks. His approval rating has risen fairly steadily, economic forecasts have improved and he’s opened a nice lead in head-to-head polling against Mitt Romney, as the Republican primaries have taken their toll on his most likely opponent. But the latest polls show things moving dramatically in the other direction, for the first time since early October. A Washington Post-ABC poll conducted last week shows Obama’s approval rating dropping from a healthy 50 per cent last month to 46 per cent now. It also shows Romney leading Obama 49 to 47, compared to 51-45 to Obama last month.

Peter Hoskin

How Mervyn King’s role has changed

From our UK edition

A week devoted to Mervyn King and his eight-year reign at the Bank of England sounds like pretty turgid stuff. But, already, the series that has started in the Times (£) this morning — building up to an interview with the man himself — is anything but. Here, for instance, is a snippet from one of its articles, by David Wighton, on how Mr King reacted to the crumbling of Northern Rock: ‘As the plight of Northern Rock and other banks worsened, Sir John Gieve and Paul Tucker were urging Sir Mervyn to act, but he would not budge. “He mocked them as ‘crisis junkies’ and more or less accused them of enjoying it,” one former official says. Sir Mervyn took a different approach.

Sunday

Peter Hoskin

The politics of post-2015

From our UK edition

Have you noticed, CoffeeHousers, that our politicians are talking more and more about what they'd do after the next election? This has been happening, really, since last November, when George Osborne extended the forecasting horizon of his Budget to 2017. That had a hint of chicanery about it, ensuring that Osborne continued to meet his first fiscal rule — but it has still triggered a fashion for future gazing. Since then, both Labour and the Lib Dems have talked, in broad terms, about what they would offer for after 2015. I mention this now because of a story in today's Sunday Times (£).

Saturday

Peter Hoskin

JET — three letters that spell trouble for the coalition

From our UK edition

JEET. That, according to Andrew Grice in the Independent, is the new 'buzzword' circling around Libdemville (population: 57 MPs, and a few others). And it stands for the issues that they want to keep mentioning whenever they can: jobs, education, environment and tax. Fair enough. Although it is striking that only one of these issues is unlikely to put them in close combat with the Tories. Both parties of the coalition support free schools and academies, and the Lib Dems are getting their pupil premium too, so education is relatively uncontroversial territory. But as for the others... Jobs. The conflict here focuses on the role of the state.

Friday

Peter Hoskin

Ed Miliband turns back to Brown (again)

From our UK edition

At the end of last year, Ed Balls suggested that Labour would be ‘taking a tougher approach to conditionality [for benefit claimants]. If people can work, they should work.’ Now the party are starting to outline what that means. As the Independent puts it today, summarising a speech that Liam Byrne has given in Birmingham, ‘The unemployed would be guaranteed the offer of a job but could lose their benefits for six months if they turned it down, under a tough new policy on welfare planned by Labour.’ The paper characterises this as an attempt to ‘outflank the Tories on welfare,’ which is surely true. But the whole thing also reminds me of the Brown era.

Thursday

Louise Cooper

The wealth transfer and where it’s going

From our UK edition

The last three years have been one big transfer of wealth from savers to borrowers. Thanks to record low interest rates, savers have gained little from tucking their money away in bank accounts, whereas borrowers have reaped the benefits. According to data from the Bank of England, mortgage holders paid interest of £1328 billion in the three years from 2008-2011, compared to £1897 billion in the preceding three years. That's a difference of £569 billion, or just over £50,000 for each of the UK's 11.2 million mortgage holders. Call it a stimulus if you like. But it's a stimulus that involves clobbering savers so that borrowers can buy a flatscreen TV at the end of the month. There are signs, though, that this transfer is slowing.

Tuesday

James Forsyth

Osborne backs the Beecroft proposals

From our UK edition

In a speech tonight, George Osborne calls on businesses to respond en masse to the government’s consultation on whether to exempt small businesses from unfair dismissal claims. The Chancellor will say: ‘And now we’re beginning a call for evidence on the case for a new compensated no-fault dismissal for our smallest businesses. Plenty of trade unions and others will be submitting their evidence for why we shouldn’t do this. If you think we should, and it will increase employment, then don’t wait for someone else to send in the evidence. Send it in yourself.’ The fact that Osborne is personally throwing his weight behind the Beecroft agenda is striking.

Fraser Nelson

Ed Miliband just doesn’t get globalisation

From our UK edition

If you think things couldn’t get worse than Ed Miliband’s Five Live interview, read his speech on patriotism. It seeks to build on his ‘predators’ speech, which suggested a Manichean divide between bad companies and good companies. Labour MPs of Mr Miliband’s political heritage always place manufacturers in the latter camp. He hails the success of many of them. ‘You know better than I that this success has been achieved against the odds.’ I suspect they know better than he the effect that a 25 per cent devaluation has on exports. ‘Economic protectionism is what governments reach for when they don’t believe firms can compete. And we will never return to those days,’ he says – before doing just that.

Fraser Nelson

The child benefit cut risks alienating striving families

From our UK edition

Why should someone on the minimum wage subsidise the childcare arrangements of someone on £100,000? So runs the argument for abolishing child benefit for higher-rate taxpayers. You can see why George Osborne went for this: in theory, we are talking about the best-paid 14 per cent. If he was going to cap benefits, he had to be seen to hurt the rich too. The 50 per cent tax was not enough; axing child benefit would be just the tool he needed to say ‘we’re all in this together’. The problem is that the 40p tax band is set far too low in Britain, and now takes in policemen and teachers. People who can not really be described as rich, especially if one earner is supporting a family and paying off a mortgage.

Monday

Lucian Cook

Why a mansion tax is wrong for Britain

From our UK edition

There’s a huge amount of confusion surrounding the proposals for a ‘mansion tax’ and, more generally, taxation at the top end of the housing market. Old and novel arguments are rolled out by its proponents: that it is easier to tax wealth that can’t be taken offshore, or that the current level of taxation on high value property (generally perceived to be low) isn’t fair on first time buyers struggling to raise a deposit at the other end of the market. In reality, there are three main reasons why a mansion tax is unwarranted and potentially counter-productive, which I discuss in more detail in a Centre for Policy Studies report released today.   1. It would unfairly penalise the income poor, equity rich.

Peter Hoskin

Will Osborne accept the Lib Dem offer?

From our UK edition

Try telling George Osborne that ‘tax doesn't have to be taxing’ — I'm sure he'd laugh at the sentiment. The story this morning is that he has a grand, gritty choice to make ahead of the Budget: to tax income or to tax wealth. The Lib Dems have apparently agreed to relent on the 50p rate, but only if they get a mansion tax on properties worth over £2 million in return. The thinking is that, in the current political environment, the government must always be seen to be hitting the well-off in some way. So, will Osborne accept the offer? He and other Tories will certainly be tempted to do so.

Sunday

Fraser Nelson

Salmond chooses the Brownite way

From our UK edition

Can you trust someone like Alex Salmond to save Scotland from future crashes? The First Minister appeared on BBC1’s Sunday Politics earlier, where he was challenged about how he sees it. And it seems he may just be a graduate of the Gordon Brown school of Scottish financial mismanagement. In a Times debate on Friday,  SNP deputy leader Nicola Sturgeon said they’d use sterling — whether the Bank of England liked it or not — and would not need the Bank to be a lender of last resort because Scotland would be so sensible it wouldn’t need it. An interesting suggestion, given that the 1707 Union between Scotland and England is the result of a bailout.

Peter Hoskin

Putin’s dilemma

From our UK edition

If you enjoy scoring tiny but likely returns on your wagers, then how about putting some money down on Vladimir Putin to win today's presidential election in Russia? William Hill are currently offering odds of 1/100, if you're interested. Like John Simpson, writing for this week's Spectator, they regard this as ‘Russia’s Coronation Day’. A near cert. The rest of Simpson's article is worth reading, but it's his conclusion that we'll pull out here. Putin, he says, will ‘walk it in the first round’ today, but his medium-term future looks far less secure: ‘Russia is changing. It can’t simply be told to shut up any more.

Jonathan Jones

Which tax cuts do the public want?

From our UK edition

YouGov’s new poll for the Sunday Times includes one set of numbers that will be of particular interest to George Osborne at the moment. It asks the public: ‘If the government has money available to cut taxes in the budget later this month which of the following tax cuts would you most like to see?’ Here are the results: With the news this week that fuel prices are at an all-time high and expected to rise further, it’s hardly surprising that the public support a cut in the taxes on it. The AA, among others, has already called on the Chancellor to abandon the 3p rise in line with inflation currently planned for August. Last week, Osborne didn’t sound terribly likely to bow to their demands, but as Pete said on Tuesday, he might surprise us still.

Thursday

Peter Hoskin

The conflict over 50p has escalated once again

From our UK edition

Just like fuel duty, George Osborne can't shake off the fury and discontent over the 50p tax rate. This morning, in a letter to the Telegraph, 537 bosses of small-to-medium-size businesses have called on the Chancellor to drop the rate. ‘The tax, which is in effect a 58p tax after national insurance is taken into account,’ they note, ‘puts wealth creators like us in a very awkward position.’   Usually, it's easy to be both sceptical and dismissive of these mass-signed letters. They tend to be party political constructs, such that another group of ‘experts’ will soon reply to profess the opposite. But this one is different, and could help cast the whole battle over 50p in a fresh light.