Economy

An especially businesslike relationship

The ash cloud nearly claimed its first victim last night: Barack Obama had to leave Ireland early in order to fly to Britain. The Palace’s insistence on protocol has been upset and the President’s entourage has been advised not to risk the tap water; other than that, all is well. However, the visit has set sceptical tongues wagging. Some diplomats wonder why the President is here. Afghanistan, the Middle East, joint national security and the world economy are on the agenda, but there is no unifying theme to discussions. Some ideologues fear that the eternal bond between Britain and America is relaxing into a union of convenience. On the other

Fraser Nelson

The austerity hasn’t started yet

Another month, and another all-time record for state spending in Britain. The government splurged £1.8 billion a day in April — of which £332 million a day was borrowed. Up goes the national debt. All of which leaves us with the question: where is this austerity that George Osborne keeps talking about? He’s been in No.11 a year now, and each month state spending has been — on average — 4.9 per cent higher than the same month under Gordon Brown. He seems to be taking the St Augustine approach to fiscal conservatism: Lord, give me spending restraint. But not yet. The below graph shows state spending, per month. The

Cable’s latest warnings and provocations

My favourite part of the Guardian’s interview with Vince Cable today? When the business secretary says that his sermonic prescriptions from during the crash are of “enduring relevance” now. But there’s more to the article than self-aggrandisement, not least Cable’s gloomy overview of the British economy. It’s not quite the same as Alastair Darling’s Guardian interview in August 2008, but there is a touch of that here. “I think it is not understood that the British economy has declined by 6 or 7 per cent — it is now 10 per cent below trend,” says Cable, “Britain is no longer one of the world’s price setters. It is painful. It

Brown hasn’t contacted Cameron or Osborne about IMF job

‘Brown makes pitch for IMF job with plea to rich nations to meet education pledges’ reads the headline on page 3 of The Guardian today. This is all part of a growing body of evidence that Gordon Brown really does think he is in with a chance of succeeding Dominique Strauss-Kahn. Certainly, the usual suspects are out and about talking up his chances. Realistically, Brown is not going to get the job. But if Brown really does want to have a go, it is bizarre that he’s not tried to contact either David Cameron or George Osborne to reassure them about how he’d behave if he got the job; Danny

Clegg adheres to the script on deficit reduction

What a curious speech by Nick Clegg to the CBI last night. Curious, not because it was bad — but because, in straining to give a uniquely “liberal” justification for deficit reduction and the spending cuts, the Deputy Prime Minister actually crafted an address that most Tory ministers should, and would, deliver themselves. Take his “liberal analysis” of the last decade: “On a liberal analysis, the last decade represented the worst of all worlds. On the one hand: unchecked private debt; an unsustainable housing market; an overleveraged banking sector; overreliance on City-based financial services while other regions and sectors suffered neglect. On the other: an inefficient state; central government wasting

DSK resigns from IMF

The IMF has issued three press releases on Dominique Strauss-Kahn since his arrest last week, but none more resonant than the latest. It contains this statement from their now former-Managing Director: Ladies and Gentlemen of the Board, It is with infinite sadness that I feel compelled today to present to the Executive Board my resignation from my post of Managing Director of the IMF. I think at this time first of my wife—whom I love more than anything—of my children, of my family, of my friends. I think also of my colleagues at the Fund; together we have accomplished such great things over the last three years and more. To

Keeping the States interested

David Cameron has a good relationship with Barack Obama, which will be on display when the US president visits Britain shortly. They speak regularly and frankly and their senior advisers are in near-constant contact. The idea that the Lib Dems would foist a more “Love Actually” policy onto the coalition has come to naught. Yet Britain’s influence in Washington has waned. This is no fault of the Prime Minister. In fact, his personal diplomacy has probably slowed-down the process. Instead it has to do with structural changes in the US: the coming to power of a “pacific” President, the importance of US-China ties, the emergence of the Tea Party. As

Inflation bites back

  Good job we didn’t unravel the bunting after last month’s inflation figures. Because today we discover that CPI inflation rose again in April, by 0.5 percentage points, to 4.5 per cent — its highest level since October 2008. That drop in March does look like a blip after all. Even with RPI inflation continuing to fall (by 0.1 percentage points), we seem to have returned to a grim, upwards trajectory. Most forecasters predict that inflation will keep on rising for the rest of this year, outstripping wage growth along the way. The squeeze on living standards continues: We have dwelt on the political problems this creates for Osborne before,

Could a Briton run the IMF?

With Dominique Strauss-Kahn, known as DSK, undertaking scientific and forensic tests to determine if he sexually assaulted a hotel maid, the International Monetary Fund will be run by its No. 2 official, John Lipsky. A former banker, Lipsky was appointed “first” deputy managing director in 2006, and was expected to step down later in the year. But the change at the top will bring the former Permanent Secretary of the Department for International Development, Minouche Shafik, into the limelight. She recently left London to take up a post as deputy managing director at the IMF; she will now take Strauss-Kahn’s place at a meeting with Europe’s finance ministers in Brussels

Mixed news from the Eurozone

France and Germany’s better than expected growth numbers are making news today. But the divergence within the Eurozone — Estonia grew at 2.1 percent in the first quarter, Portugal shrank by 0.7 per cent — highlights one of the single currency’s biggest problems: how can one interest rate fit all? Economists expect Germany, whose GDP is now larger than before the financial crisis, to continue to outperform the rest of the Eurozone. Given that Germany and France together make up half of the Eurozone economy, interest rates will have to be set with this in mind. But, on the other hand, the Iberian countries and Greece are struggling with austerity

Who cares about immigration? (Or education?)

Who cares about immigration? In theory, everyone. It’s always mentioned as the policy that exercises voters but is ignored by politicians. (Europe generally comes second in this category.) Let’s see what YouGov reports. In one of their tracking polls this week they asked voters to pick the three most important issues. Chart? Fully 66% of Conservative supporters think immigration a vital issue, as do 54% of Londoners and 55% of C2DEs. Other points of interest: only 11% of Tories say Tax is one of the three most important issues, the same percentage as thinks education is in the top three. Europe is mentioned by just 9% of those polled (though

The Royal Wedding around the world

So we’ve seen the ceremony at Westminster Abbey. How was the Royal Wedding celebrated – by expats and locals alike – around the world? In Afghanistan, British troops celebrated with bunting on the front line. In Australia, foods associated with the ‘Mother Country’ flew off supermarket shelves, with the biggest sellers being Maynards wine gums and Colman’s classic mint sauce. Even Aussie republicans appear to have been inspired to hold parties and wear tiaras. In China, a couple recently had a knock-off Royal Wedding, complete with horse-drawn carriage and archway of swords. And cashing in perhaps on the wedding fervour, McDonald’s in Hong Kong started offering wedding party packages. India

Why David Blanchflower has it wrong

Gordon Brown may have gone, but advocates of his calamitous policies remain. David Blanchflower, the chief exponent of borrowing more, has a piece in The Guardian today which is worth examining. Written with his trademark chutzpah, it’s a very clear exposition of the Labour argument — along with its flaws. Here are some extracts, and my comments: “In his budget speech last month, Chancellor George Osborne suggested that he was hoping for ‘an economy where the growth happens across the country and across all sectors. That is our ambition”. Sadly, to judge by Wednesday’s GDP figures, growth under this coalition remains just an ambition, a mere illusion.” And why would

Righting the wrong of sickness benefits

He may no longer be an MP, but the spirit of James Purnell lingers on. It was, after all, the former Work and Pensions Secretary who introduced the Employment Support Allowance as a replacement for Incapacity Benefit in 2008, with the idea of encouraging people – the right people – away from sickness benefits and into the labour market. And now we have one of the strongest indications yet of just how that process is working. According to figures released by the DWP today, 887,300 of the 1,175,700 claimants who applied for ESA between October 2008 and August 2010 failed to qualify for any assistance – with 458,500 of them

What the GDP figures mean politically

The coalition can breathe a little easier today. The economy returned to growth in the first quarter of this year, avoiding a double-dip recession. It expanded by 0.5 percent which is in the middle of City economists’ forecasts but below the OBR’s prediction of 0.8 percent. Recoveries are generally choppy and particularly so when coming out of a debt-induced recession.  Labour, though, will see these numbers as a further chance to claim that cuts have sucked the confidence out of the economy and that Britain is just bumping along the bottom. This, obviously, isn’t the whole picture. The deficit reduction plan has, crucially, kept the cost of borrowing low and

Economy grows by 0.5 per cent in the first quarter of 2011

So, we’re not back in recession, and growth of 0.5 per cent in the first quarter of this year is in line with what many forecasters were predicting, but… It is hardly indomitable stuff. As Duncan Weldon explained in a useful post yesterday – in which he rightly picked me up on a loosely worded post of my own (since, cheekily, edited) – 0.5 per cent merely compensates for the shrinkage experienced thanks to the snow last year. Across the last two quarters, economic growth has effectively plateaued. It’s as we were, Q3 2010. The politics of the situation is fissile, even if we are stuck in the murky area

Osborne is on track to rebalance the economy

It may look diminutive in between Easter and the Royal Wedding, but tomorrow is still a big day in the political calendar. It is, after all, the day when we hear the official growth estimate for the first quarter of this year. A negative number, and we shall have experienced two consecutive quarters of shrinkage — which is to say, the country will be back in recession. A positive number, and we shall have avoided that unhappy fate. So what are the forecasters saying? The consensus among bodies such as the NIESR and the CBI is around 0.5 percent, which – as Duncan Weldon explains in a very useful post

Brown reinforces his presence on the world stage

I’m sorry to do this to you, CoffeeHousers, at the start of a bank holiday weekend — but I thought you might have a morbid sort of interest in Gordon Brown’s latest role. Turns out that, as expected, our former PM is to join the World Economic Forum in an advisory capacity. He won’t be paid for his work, although the Forum will cover his staffing costs. One of his spokespeople has told ITV’s Alex Forrest that his task is to “stop the next financial crisis.” Which is to say, he’ll be saving the world. Again. If nothing else, it’s yet another demonstration of Brown’s peculiar resilience. Our former PM

Reasons for optimism in the Middle East | 22 April 2011

As the Libya crisis drags out, and Bashar al-Assad orders a crackdown in Syria, many have begun to doubt whether the changes seen in Tunisia and Egypt will actually spread to the rest of the Middle East. One former British ambassador recently suggested that perhaps the peoples of the Middle East preferred a mixture of authoritarianism and democracy — and that Britain should accept this; not impose its values and views.   But there is plenty of reason for optimism. The first is to look at the countries that have transformed themselves over the course of the last fifty years. Powerhouses like India and Brazil, but also smaller countries such

Standard & Poor’s bombshell

A mute, almost disbelieving response (except on the Markets) has met Standard & Poor’s announcement that the US government’s fiscal profile may become ‘measurably weaker’. The credit rating agency has put a ‘negative outlook’ on the US’s AAA rating; the accompanying report said:    “We believe there is a material risk that U.S. policy makers might not reach an agreement on how to address medium- and long-term budgetary challenges by 2013. If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns.” Robert Peston tweets, “S&P’s announcement that outlook