Economy

One of the most significant news stories of the day comes courtesy of the Institute of Chartered Accountants: "Confidence among business professionals has surged, suggesting the recession is at an end, a survey has said. The Institute of Chartered Accountants' index of business confidence rose to 4.8 at the end of June, from -28.2 in March, the biggest rise for two years." Economically speaking, this is encouraging stuff – it's the view from the frontline of the real economy, after all.  And these types of surveys always tend to have a self-fulfilling quality, as more confident companies adopt the measures – spending, hiring etc. – which are likely to drive us out of recession.

A major political headache is how to ensure the recession doesn’t claim another lost generation. Official figures suggest that nearly 1 million people under the age of 25 are already on the dole, with a further 1.5 million being economically inactive. These figures will only get worse. Polly Toynbee thinks that Germany is pulling out of recession because they have the answer: ‘Labour's efforts are directed towards getting people into work. But Germany focuses on stopping people falling out of work, by contributing to wages. A study this week says a ¤6bn scheme prevented a major rise in unemployment, and helps explain why Germany is already pulling out of recession.

It's noteworthy enough when David Blanchflower - a member of the Bank of England's MPC until May this year - says that the government "isn't doing enough" to stem the unemployment crisis, as he does in an article for today's Guardian.  But his more specific points about the "lost generation" of unemployed young people are also worth highlighting. As Fraser blogged yesterday, this recession is taking a particular toll on those aged under 25.  Partially, this is down to school and university leavers being unable to find work.  But, as Blachflower points out, there's another effect at play - young people with jobs are the first in line to lose them, as firms make redundancies: "A policy of last in, first out is also operating.

Anyone listening to Lord Mandelson’s claim this morning that the Brown stimulus saved “at least” half a million jobs would have smelt a large, whiskered rat. The Treasury has tonight told The Telegraph that the 500,000 figure was a maximum estimate, not a minimum as Mandy claimed. Your baristas here at Coffee House have asked the Treasury to show us their study – not available, it seems. So we have submitted a Freedom of Information request for it. While we all hold our breath, it’s worth looking at this claim in more detail because it is a Brownie we are highly likely to hear again.

Ok, Fraser - I'm not going to let this tax 'n' marriage debate rumble on interminably, but I do want the final word!  First, I appreciate your response - it makes a very strong case, but one which fails to convince me.  Why?  Well, largely because I agreed with most of it already.  As I said in my original post, IDS and others have unearthed plenty of statistics which show just how important marriage is to the functioning of society, and to the lives of people within it.  This evidence, much of which you raise, is important and shouldn't be ignored.   But there are still reasons - beyond those set out by Philip Collins today - for being wary of, specifically, tax-breaks for married couples.  For starters, what's to be gained from them?

So, the News of the World claims that the Tories are planning to shelve some of their tax-cutting proposals - including the inheritance tax cut and tax breaks for married couples - to help combat the fiscal crisis.  Guido suspects that the news came direct from the Blackberry of Andy Coulson, but the Tories have told Tim Montgomerie to "treat the story with a ton of salt". Either way, I do - like Tim - have some sympathy for the idea that commitments will have to be sidelined to overcome Brown's debt mountain.  The longer those terrible deficits remain, the more future generations will be burdened by the Dear Leader's fiscal sabotage, and the more likely that potential investors will turn away from the UK.

You've got to hand it to Alistair Darling: he really does seem to be making the most of his post-reshuffle security.  His interview with the Telegraph's Ben Brogan today is a case in point.  Once again, he goes against the Brown/Mandelson claim that there won't be a spending review before the next election.  But it's this passage which jumped out at me: "In another departure from Mr Brown, he even talks about reversing tax increases, including the planned rise in the top rate to 50p on those earning more than £150,000. 'Looking into the future I would like to be able to reduce tax. Raising the top rate is something I didn’t want to do.'" Brown will be livid.  Just imagine: a Chancellor who speaks against the authority of Number 10.

We all know Labour has failed to run an efficient economy or public services, but what’s little discussed is its failure to achieve even its own goals. Had Brown bankrupted the country but, say, made the poorest much better off, then Labour members might not be facing such an existential crisis. As it stands they won three victories, trebled health spending, redistributed some £1.5 trillion – and will end up with a society even more ‘unequal’ than it ever was under Thatcher. I look at this in my column today, and thought I’d share a few of the points with CoffeeHousers. First, equality. This (rather than making the poor better off) is the great leftist goal – and it can be nominally achieved by hurting the rich.

Over at the FT's Westminster blog, Jim Pickard picks up on an important comment from Stephen Timms, the Treasury minister, speaking at a committee meeting this morning.  Timms suggests that Treasury hasn't ruled out a public sector pay freeze, as recommended by the Audit Commission's Steve Bundred.  Here are the minister's words:   “It’s certain the case that our pay policy needs to reflect the wider economic circumstances ... we will be deciding on pay policy over the next few weeks, the policy has got to be fair to people who work in the public sector just as we have to be fair to everybody else. The suggestion by Steve Bundred has made is certainly one we will reflect on but the details on that will be made over the next few weeks.

Today's White Paper on financial regulation avoids introducing some unnecessary regulatory changes at the expense of failing to introduce some necessary ones.  In particular, it fails to recognise the abject failure of Gordon Brown's "tripartite" framework, in which prudential supervision of the banks was taken from the Bank of England and given to the FSA. Prudential supervision is the proper task of the central bank, for only if it has oversight of banks can the central bank decide whether they should receive last resort lending when they need it.  Without prudential oversight, the Northern Rock debacle is the likely result, and the fact that we are still debating this the best part of two years into the credit crunch is a sorry indictment of UK policymaking in this period.

There was a time when the government seemed to be announcing new measures to get the economy and the banking sector in particular moving again on an almost daily basis. Today, the Wall Street Journal has done a rather good audit of these measures. For instance, in January “the British government created a guarantee program meant to revive the dormant market for asset-backed securities. The program aims to spur purchases of banks' asset-back securities, or bundled consumer loans, by guaranteeing them for buyers. The guarantees were made available in April, but since then, none of the major U.K. banks has issued a security with such a guarantee.” Also, only 13 firms have joined in the government’s £5 billion trade insurance programme.