George osborne

There’s a big coalition split coming down the road. Next month the Vickers’ review into banking reform, which is going to suggest a ring-fencing of the investment and retail arms of banks, will come out. The Liberal Democrats — led by Vince Cable — will push for the instant implementation of the report’s recommendations. The Treasury will argue that banks need to be given time to introduce these new rules. The result will be, as one senior Lib Dem source tells this morning’s FT, ‘a big fight’.   The tricky question for Cameron and Osborne is how do they win this argument when there’s a visceral desire for tough measures against the banks?

George Osborne was right to boast in the Commons that Britain has the “second highest rate of net job creation in the G7”. Coffee House recently pointed out that all of the increase is accounted for by foreign-born workers. But what if you narrow the definition to foreign nationals? We put in an information request to the Office for National Statistics and the below information came back. It is quite striking. Over the 12-month period to which Osborne refers, 90.1 per cent of the extra employment amongst the working-age population can be accounted for by an increase in foreign nationals working in the UK. Here are the figures. The phenomenon of pensioners returning to work is fascinating, but separate.

The future of the 50 per cent tax rate is growing issue within the coalition. Unlike most government wrangles, this one doesn’t split on partisan lines, with the yellows on one hand and the blues on the other. The debate is largely being forged by personalities. George Osborne is well entrenched; Eric Pickles weighed-in for the race last weekend, saying that he wanted people “to keep more money in their pockets”, indicating that he hopes the rate is temporary. (He went take a swipe at Vince Cable's mansions tax, which he described as a "big mistake".)   It’s David Willetts’ turn this weekend. The Times reports (£) that Willetts believes the tax must stay for the time being.

Angela Merkel must tire of repeating herself. Eurobonds are “exactly the wrong answer” to the European debt crisis, she said yesterday for the umpteenth time. She added that they would “lead us to a debt union not a stability union”, a free-for-all funded by German taxpayers. She concluded that “greater commitment” from the 27 member states of the European Union was required to stabilise the situation. Her comments would have, perhaps, placated her mutinous coalition in Germany, which is virulently opposed to Eurobonds and expensive integration.

Europe will be one of the political issues of the autumn. The government expects another round of sovereign debt crises in the autumn and these will add urgency to the Merkel Sarkozy plan for ever closer fiscal union between the eurozone members. Nearly every Tory MP and minister I have spoken to is instinctively sceptical of the Franco-German strategy. But Cameron, Osborne and Hague believe that because the Eurozone members won’t accept the break-up of the currency union, Britain has to back further fiscal integration in the hope that it will make the euro work. (Cynically, one might add that their position also makes life easier within the coalition given the Lib Dem’s Europhile leanings.

Last week, George Osborne boasted that Britain has the second-fastest job creation in the G7. In tomorrow's Spectator, we disclose official figures showing that 154 per cent of the employment increase can be accounted for by foreign-born workers. We on Coffee House have often questioned Labour's record: 99.9 per cent of the rise in employment was accounted for by foreign-born workers. The graphs for the Labour years and the coalition year are below:     The idea of 154 per cent is strange, so I will reproduce the raw figures below:     Now, no one outside Westminster expects the UK labour market to change the day a new government is elected, but what matters is that the problem still exists.

The word flying around Westminster this evening is that the government is going to announce a fresh package to stimulate growth tomorrow. In line with recent reports, the expectation is that new enterprise zones will be unveiled. Enterprise zones are, of course, the linchpin of the chancellor’s current strategy, offering generous tax breaks for start-up industries, relaxed planning regulations and investment in state-of-the-art broadband, so this would not be a novel move. But an announcement would be timely nonetheless.

Has the sheen come off BoJo? The question is echoing around some virtual corridors in Westminster this weekend. The Mayor of London was caught off guard by the recent riots and his initial decision to remain en vacances made him look aloof and remote, a sense that grew during his disastrous walkabout in Clapham. Then he joined Labour in calls for cuts in the police budget to be reversed, a decision that reeked on opportunism, superficially at least. The FT’s Jim Pickard has an excellent post on these matters and he reveals that Boris Johnson has been voicing these concerns in private for months and that he has a brace of Cabinet allies: Liam Fox and Michael Gove.

If there's one sentiment that defines George Osborne's article for the Telegraph today, it’s that there is no need for us Brits to panic. The economic convulsions of the past few days, contends the Chancellor, serve to prove that the coalition was right to approach deficit reduction as it has. "The alternative of more spending and yet more borrowing is now frankly ludicrous," he says, "and places those who advocate it on the outer fringes of the international debate." He has a point. As I blogged on Saturday, there are reasons to believe that we'd be hurtling towards a credit downgrade and higher borrowing costs were it not for the fact that our debt-GDP ratio is set to decline by 2015.

A number of papers report today that George Osborne is minded to replace the 50p tax with Gordon Brown's original proposal: a 45p tax. How the ex-PM will be laughing. As he knows, even the 45p tax will lose money — that's why Labour didn't raise the top rate until the final four weeks of its 13 years. But the Tories haven't worked that out yet, and the Treasury is still working on the false assumptions he programmed into it. In short, the amount of money that either tax rate will raise depends on what's called the "taxable income elasticity," or TIE — a figure suggesting how responsive various taxpayers are to rate changes. It varies for income groups. The lower-paid are less able to move their labour or money around than the rich.