Economics

Forget the desirability (or lack thereof) of tax hikes: can Britain survive them? That’s the economic question that kicked off the new year in cabinet this week when Jacob Rees-Mogg was reported to have encouraged the Prime Minister and his colleagues to roll back plans to bring in the new National Insurance levy this April. A recap on the proposals: the 1.25 per cent National Insurance hike will be paid by both employers and employees, and will eventually be funnelled into social care, we’re told. But for the first few years, most of the tax revenue it raises (roughly £12 billion) will go to addressing the NHS backlog and the millions

Tesla’s sleek, if expensive, electric cars are leading the battle against climate change. Its batteries are moving renewable energy into the mainstream, while its founder Elon Musk, the world’s richest man, likes to present himself as a free-thinking radical. It is hard to think of a company more right on than Tesla — well, okay, perhaps Unilever — or one that depends more on its politically correct credentials. But hold on. There turns out to be one opposed minority that Tesla couldn’t care less about: China’s Uighurs. Most of the corporate world will sooner or later have to make a tough decision: do they care about human rights? The company has landed

It is called managing expectations: the steady drip of forecasts and scenarios designed to prepare us for bad news, so that when that news does finally arrive it doesn’t seem nearly as bad as it would otherwise have done. So is that what the Bank of England is up to with its deputy governor, Ben Broadbent, telling us that inflation next April could ‘comfortably exceed’ 5 per cent? It is reminiscent of the moment in July when the Bank’s departing chief economist, Andy Haldane, dropped in the suggestion that inflation by the end of 2021 could be closer to four percent than three percent. The MPC is behaving like a Chancellor

The big central banks have been insisting for months now that the rise in inflation is temporary, and will fade once the great awakening of the world economy starts to settle down. The Federal Reserve, Bank of England and the European Central Bank have looked on as inflation has overshot their forecasts. But when the opportunity to tame it with an interest rate hike approaches, the banks pass it up, reiterating instead that it is ‘transitory’ — the monetary equivalent of ‘it’ll be fine’. With inflation now at a 30-year high in the United States — 6.2 per cent — it’s starting to look like a pretty big bump. But should

Last week, the Bank of England sent a number of confused messages. One was almost shocking: Andrew Bailey said that it isn’t his job to steer markets on interest rates ‘day by day and week by week’. But as economic commentator Matthew C. Klein dryly noted this is literally his job. It is debatable whether the Bank of England needs to manage the entire yield curve (ie, buying and selling bonds in an attempt to set interest rates years into the future) but the central bank should be in charge of the short end. Those opposing an interest rate rise say that central banks should never shock markets. The Bank

Rishi Sunak didn’t give too much away tonight when he spoke in the ‘ThinkTent’ at Conservative Party Conference. The Chancellor is known for being cautious with his words, and has been increasingly tight-lipped in the weeks leading up to his October Budget. But his presence at the fringe event was telling in itself. Sunak was only billed for one public fringe event this year, co-hosted by the Institute of Economic Affairs and Taxpayers’ Alliance. Their ‘ThinkTent’ boasts some of the most free-market, libertarian events you’ll find at conference: both organisations are strong advocates for a low-tax, smaller state. So, not necessarily an obvious place to find the Chancellor who has overseen record peacetime

Has the Bank of England’s Monetary Policy Committee quietly excused itself from its duty of keeping inflation down: namely, keeping the Consumer Prices Index (CPI) close to a 2 per cent target? I ask because the minutes of its September meeting, released today, show little inclination to raise rates from their historic low of 0.1 percent, even though it predicts that inflation will rise above 4 per cent and stay there at least into the second quarter of 2022.  The MPC seems to have evolved into a Committee for Leaving Interest Rates Alone or Occasionally Lowering Them You can argue that inflation isn’t everything, that growth matters more and that monetary policy should

Would you touch a ‘green gilt’ issued by the government, with an interest rate of just 0.87 per cent? Some people, apparently, would. The Treasury announced yesterday that it had shifted the first £10 billion tranche of ‘green gilts’ to raise finance for projects such as zero-carbon buses, wind farms and other green things. Indeed, the bond – which matures in 2033 – was ten times oversubscribed. The government had already planned to issue a further £5 billion, and might now be encouraged to issue far more. Green gilts are just more government borrowing, rebranded to make lending to the government look virtuous With the government’s preferred measure of inflation,

We are in the middle of a once-in-a-generation shift: working from home. There are skill shortages across the economy, supply bottlenecks, and empty supermarket shelves. A couple of million people are still set to come off furlough, back into jobs that may no longer exist. The labour market is in utter chaos. But, hey, here’s a good idea. Let’s whack a tax on jobs. Really? The government’s widely leaked plan to increase National Insurance, a tax on jobs, could not come at a worse possible time.  The government’s widely leaked plan to increase National Insurance, a tax on jobs, could not come at a worse possible time We can all debate whether

The horror! Yesterday we discovered that UK economic output — as measured by GDP — fell by 1.6 per cent in the first quarter of the year, 0.1 per cent worse than the 1.5 per cent originally reported. This is practically a rounding error. To put it in context, as recently as March the Office for Budget Responsibility, which crunches the numbers for the Chancellor, was forecasting that GDP would fall by 3.8 per cent in Q1. As well as still beating these gloomy expectations, the latest figures are also old news. But if anything, the detail is encouraging. The downward revision to headline GDP was largely due to a bigger decline

In the global market for government debt, worth an estimated $92 trillion (£66 trillion), it amounts to little more than a drop in the ocean. The European Union this week issued the first €20 billion (£17 billion) of bonds to pay for its Coronavirus Rescue Fund. The money itself doesn’t amount to very much one way or another. And yet, the Commission’s President Ursula von der Leyen was surely right when she described it as a ‘truly historic day’. Why? Because, the Commission is already using it to seize control of fiscal policy, just as it used vaccine procurement to take control of health policy. Its enthusiasts have already hailed the

The ONS recorded a sharp recovery in economic growth in March. The Bank of England has already increased its forecast for the growth of the UK economy in 2021. Now comes more evidence of rapid growth. The quarterly CIPD/Adecco Labour Market Outlook, published today, shows a sharp rise in the number of organisations that are hiring extra staff or are expecting to do so over the next few months. The survey, which goes out to 1,000 employers in the private, public, and voluntary sectors, found that 36 per cent of employers are planning to increase staff levels over the next three months. Nine per cent said they are expecting to