Economy

Monday

Peter Hoskin

Ireland’s nightmare becomes Europe’s problem

"We certainly haven't looked to Europe." That was the message spilling from the mouths of Irish Cabinet ministers last night – but, as Alex suggested in a superb post on the matter this morning, their utterances may come to naught. After all, Europe has certainly looked to Ireland – and it doesn't like what it sees. Already, Brussels' moneymen are urging a bailout on the country, and Ireland's moneymen are thought to be in "technical discussions" about how that might work. The upshot is that a financial intervention from Europe is now considerably more likely than not. And with that come European demands over how Ireland should manage its public finances – and raise its taxes. There are plenty of lessons for all sides in this.

Sunday

Fraser Nelson

IDS shows how arguments are won

For years, I have complained that the Conservatives have timidly stayed within Labour’s intellectual parameters, arguing that they need “permission” to make certain arguments and need to stay within the limits of what the public find acceptable. Such intellectual timidity confined them to opposition: they can never win, playing by Labour rules. Iain Duncan Smith is breaking free of this. It may be rash to predict it now, but I believe he is on the brink of a breakthrough in the way that welfare is regarded in Britain. This victory in a battle of ideas could be the greatest single blow against poverty in a generation. The extent of this was crystallised by Polly Toynbee in the Guardian yesterday.

Saturday

Daniel Korski

The new Cold War?

In his recent cover story for The Spectator, the Financial Times' Gideon Rachman talked about how, in the United States, China was beginning to take on the appearance of a new Cold War-style foe. Many Americans accuse China of stealing US jobs, of keeping the its currency undervalued, of exporting deflation by selling its products abroad at unfair prices, and of failing to meet its commitments to the World Trade Organisation. Two months ago, a poll from WSJ/CNBC showed that the majority of Tea Party activists oppose free trade – seeing China as the sole beneficiary of a free trade policy. But it is not only the Tea Party that is goading for a US-Chinese clash.

Peter Hoskin

Whatever happened to Labour’s economic message?

For some weeks now, Labour have struggled to project a clear voice on the economy. You can see what they've been trying to do: pitch themselves as an alternative to immediate, deeper cuts, whilst also accepting the requirement to deal with the deficit. But, as I've said before, this all too often comes across as nervous equivocation; a kind of "on the one hand, on the other hand" stuttering that won't persuade many observers either way. You sense that Team Miliband have tried to correct this in recent weeks, with a few punchier performances, but, even then, mistakes and deceptions have greased into their offering. Anyway, I mention this because Alan Johnson's interview with the Times (£) today only adds to the confusion.

Friday

Mark Littlewood

Going beyond the IDS reforms

Iain Duncan Smith deserves credit for fully understanding the nature and scale of the welfare problem. But that’s the easy bit. Finding a solution with the right balance of carrot and stick and making it somehow affordable in these austere times is the tougher part of the equation. And it’s not at all clear that the IDS proposals have either enough carrot or enough stick.   He has certainly gone some way to tackling the lunacy of huge withdrawal rates – if by entering the workforce your new post-tax pay packet is less than the benefits you stand to lose, then don’t be surprised when an entrepreneurial work ethic fails to emerge in some of the country’s poorest areas.

Thursday

Fraser Nelson

50p tax: the coalition’s most expensive policy

In my cover story for this week’s magazine, I say that the damage of the 50p tax, various bank levies and general banker-bashing is far greater than Osborne realises. Here are the top points I seek to make:   1. We may hate to admit it but the British tax base, and our chances of reducing the deficit, are heavily reliant on a handful of very rich people. The highest-paid 1 percent will generate 23 percent of income tax collected in the UK in the year before the 50p tax (see the table below). And spot the correlation between the top tax rate, and the burden shouldered by the richest and the poorest. Which are the most progressive – the figures on the right, or the figures on the left? 2.

Peter Hoskin

Johnson’s deceptions and out-of-date figures

Oh, how Labour enjoy misleading the public about their record on the public finances. Ed Miliband did it a couple of weeks ago, with some very loose rhetoric about how the previous government had "paid down the debt". And now Alan Johnson's at it, with a fiery speech at the RSA which reheated many of the themes in his recent New Statesman article. The passage that struck me was this: "In 2007/08 as the crisis hit, we have the second lowest debt level in the G7 reduced by 14 percent in the 10 years we'd been in office... …The year before the crisis hit we were borrowing 2.4 percent of GDP compared to the 3.4 percent we inherited from Ken Clarke." Some points: 1) Second lowest debt level in the G7.

Gideon Rachman

Playing with fire | 11 November 2010

As the G20 summit begins in Seoul, the emphasis in much of the papers is on the economic hostility between America and China. The FT's Gideon Rachman wrote a cover piece on this matter for The Spectator two weeks ago, which we've reprinted here for the benefit of CoffeeHousers: In a couple of weeks’ time, David Cameron and George Osborne will arrive in China and witness at first hand an economic boom that is shaking the world. The British duo will doubtless receive a polite and outwardly respectful reception. But, as I discovered on a visit to Shanghai last week, Chinese diplomats and academics have noted the deep cuts in British spending — and they are drawing the obvious conclusions about the relative fortunes of the two nations.

Wednesday

Daniel Korski

G-20 in Seoul: Beyond “Camerkelism”

David Cameron is now in Seoul for the first G-20 summit hosted by a non–G-7 member state. It will be the Prime Minister’s second G-20. But things have changed dramatically since he came to power and had to jet to Toronto for his multilateral baptism. Then the Prime Minister’s arguments for austerity measures were theoretical - and a minority position. Now, they are real and have become the majority view. “Camerkelism”, the idea that short-term fiscal consolidation will induce sufficient private-sector activity to more than fully offset the fiscal drag seems to be in the ascendant. Yet the forced smiles at the traditional G-20 class photo will belie a number of continuing problems. The biggest issue will be about the Chinese exchange rate.

Peter Hoskin

The coalition pins a number on its welfare reforms

The coalition has few better defenders of its cause than Nick Clegg. And if you need proof, then I'd point you in the direction of his article for the FT when the IFS first called the Budget "regressive"; his article on welfare reform for the Times in September; or his summertime speech on social mobility, which, along with his 2009 conference speech, is perhaps the defining statement of his politics. I mention all this now, because there's another effective Clegg article in the papers this morning – again on welfare reform, and again dripping with punchy arguments in the coalition's defence.

Monday

Daniel Korski

The world is now in China’s hand

The world is undergoing a permanent shift of power from West to East, with China being the biggest beneficiary and middling states (like Britain) likely to be the biggest losers. The government may, in the words of William Hague, reject any kind of strategic shrinkage. But if China's economy continues to grow at even half the rate it has developed until now, Britain will end up looking small no matter what policy it pursues. What is the best way to deal with a country like China, which on current projections, will have a larger economy than the United States by 2050? How best to position Britain if the US and China abandon peaceful co-existence, and, as the FT's globe-trotter Gideon Rahman predicts in his new book Zero-Sum World, begin to fight?

David Blackburn

Apocalypse soon

Writing in the Irish Times, Morgan Kelly has denigrated the Irish government’s handling of the economy. Comparisons are often counter-factual – Irish politics is not divided along lines of left and right, and the Celtic Tiger was made of tissue paper. But, to English readers - servicing a colossal national debt with their punitive tax bills, facing crumbling house prices, waiting for the moment when mortgages become beyond the reach of all but the cash rich, and encumbered with billions in worthless global bank assets - it is a truly terrifying read. I urge CoffeeHousers’ to read the whole piece, but here is its essence: ‘By next year Ireland will have run out of cash, and the terms of a formal bailout will have to be agreed.

Sunday

Daniel Korski

What happened to Germany’s European identity?

What has happened to Germany? Policy-makers and analysts have been pondering the question for the last few years. No longer happy to be the pro-European par excellence, Germany has become more assertive, more self-centred - in others words more normal. German scholar Ulrike Guerot has called the new Germany "post-Romantic", ie more interest-based and less willing to let its history determine its future. Dominic Moisi says Germany has become "a second France." Part of the reason is the change among the country's political elite. The post-war generation has left the scene and the new leaders - on the Left and Right - have little time for Helmut Kohl's cheque-book diplomacy.

Thursday

Peter Hoskin

Alan Johnson: this time it’s personal

Alan Johnson has been more comic than cutting during his spell as shadow chancellor. It's not so much that he's doing a bad job, but rather that he's taken a singular approach to the biggest political issue of the day. Where Labour MPs have wanted moral outrage, he has delivered easy quips. Where the public might expect self-confidence, he has chosen self-deprecation. It may be charming, but the question is: does it win votes? Which is why it's intriguing to see Johnson change course today, via a surprisingly spiky article in the New Statesman. There is, so far as I can tell, not one intentional gag in the entire piece – but a sizeable dollop of coalition baiting. Johnson calls for a new mantra from his party: "Labour's record was good".

Thursday

David Blackburn

The Big Society in action

The Big Society, in so far as it can be defined at all, envisages an empowered people taking responsibility for their local communities. The little platoons’ efforts could determine the atmosphere of a place, by helping to deliver public services, founding employment schemes, running activities that unite the rich and the dispossessed, and exercising more influence over planning authorities. It is, in effect, an assault on adamantine local government, overbearing central government and predominant corporatism.

Tuesday

James Forsyth

A double boost for the coalition’s economic strategy

Perhaps, the most important thing about the 0.8 percent growth figure for the third quarter announced this morning is that all but 0.1 percent of it came from the private sector. The strength of the private sector in this quarter suggests that the coalition is right to think that the private sector can more than make up for the jobs that will be lost in the public sector over the coming months. In another piece of good economic news for the coalition, Standard and Poor have taken Britain’s triple A credit rating off negative outlook and returned it to stable. This should help keep the yield that the government has to pay on its gilts down.  The coalition has taken a bold, and I believe correct, judgment on the economy.

Peter Hoskin

Stronger than expected growth

The growth figures for the third quarter of the year have just been released, and it's better than we thought: 0.8 percent, twice the 0.4 percent figure that was expected, but down on the 1.2 percent achieved in the spring. In any case, it should play well for Osborne & Co. We've just witnessed the fastest third-quarter expansion of the economy for a decade. Double speed, rather than double dip. Really, though, these figures throw up more questions than conclusions. By far the most important is: where next? The coalition would have been untroubled by an even larger reduction in growth now (caused by weak consumer spending, among other variables), so long as we get stronger growth in future.

Monday

Peter Hoskin

Cable takes his wind-up act to the stage

A luminous streak of self-aggrandisement in Vince Cable's speech to the CBI this afternoon, which began thus: "I should acknowledge that that the CBI has been remarkably far sighted; Digby Jones first invited me to speak to you eight years ago, the first Lib Dem asked to do so. I recall some members wondering 'Vince Who?'" And continued, as Paul Waugh notes in a typically insightful post, with a passage that will wind up the Business Secretary's detractors in the Tory party: "Just a few years ago, most people in politics, not only Gordon Brown, thought the growth problem had been solved.

Peter Hoskin

Cameron’s certainty contrasts with Miliband’s equivocation

An opportunity to compare-and-contrast David Cameron and Ed Miliband outside the sweaty heat of PMQs, with both party leaders delivering speeches to the CBI this morning. Given the audience, both majored on business, enterprise, and all that – and it meant there was plenty of overlap on areas such as green technology and broadband. There were some differences, though, that are worth noting down. Cameron was first up, setting out a three-step plan for boosting British business. Broadly speaking, it revolved around what the government is trying to achieve in the Spending Review – and so the PM boasted that, "last week, we took Britain out of the danger zone.

Peter Hoskin

The coalition’s feel-good factor

Since last week's Spending Review – and even before – the government has been operating in a toxic news environment. I mean, just consider the three main news stories that have surrounded the cuts. First, the 500,000 public sector job losses. Then, the IFS report and that single, persistent word: "regressive". And today – on the covers of the Independent and the Times – warnings that we could be dipping back into recession. Set alongside that tidal swell, the outpourings of Simon Hughes and the polling companies register as little more than sour footnotes. Even if the coalition plans to hide some of its better news, there's a clear need for it to push back against the gloom – lest it erode both public and Lib Dem support for they are doing.