Economy

Now this is engrossing in a grim kind of way.  It's the Economist's brand new Global Debt Comparison feature, and charts public debt for the entire world ($39.1 trillion dollars, at the moment), while also providing details for individual countries.  If you want a sense of the debt crisis facing this country, then just click on the info for the UK across a few years.  In 2009, it's bad enough: the Economist has us in the highest debt group, with public debt at 79.6 percent of GDP. For what it's worth, that's slightly better ratio than, say, France (83.7 percent) or Germany (87.9 percent).  But by 2011, our public debt-GDP ratio has shot up to 112.5 percent, outstripping France (102.3 percent) and almost equal with Germany (115.8 percent).

So here it is.  After rumblings that Brown is prepared to set out spending cuts - rather than hiding them away in he small print of the Budget - Alastair Darling confirms the new strategy in an interview with the Times.  He doesn't actually use the word "cuts", but it amounts to that: "'As there is less uncertainty you can decide what your priorities are,' he said. 'This doesn’t mean you are going into some sort of Dark Age but we will have to decide, given what’s happened to the economy, how much we think we can afford to spend on services, how much we should be devoting to making sure we recover our fiscal position. That’s a judgment that I’m going to have to make at the Pre-Budget Report in the autumn.' ...

Labour’s attempt to create a new dividing line on cuts is intriguing because it suggests that the government reckons we are pulling out of recession – a message Alistair Darling has been stressing recently. Central to Labour’s argument is that their initial interventions, opposed by the Tories, preserved public services through the recession. By claiming that now is the time to make extensive cuts, beyond mere efficiency savings, suggests that they think the economy is robust enough to survive sweeping public spending cuts. If an economic boom couldn’t save John Major, I doubt a modest recovery will save Brown from defeat.

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.