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Economy
After a decade of austerity: what now? – podcast

Columnist John Harris has spent the past decade touring the country and reporting on what devastating budget cuts have meant to communities. Looking back, he sees some signs of hope amid the devastation. But will the government change its approach for the impending Covid-19 economic crash?

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When George Osborne delivered his spending review in June 2010 it ushered in what would become a decade of austerity measures. As budgets were slashed for children’s centres, libraries, parks and welfare, they were accompanied with the phrase “we are all in this together”. The Guardian columnist John Harris has been touring the country for the entire decade, chronicling the devastation that those cuts have made in local communities for his award-winning series Anywhere But Westminster. He tells Rachel Humphreys how his latest reporting on the Barnsley village of Thurnscoe is illustrative of what austerity does to a place. He finds children’s centres cut, the landscape blighted with litter and unmown verges, parks in disrepair and libraries curtailed. Now, with the coronavirus pandemic set to usher in a new economic crisis, will the present Conservative government take a different approach this time around?

Economy
A muddled approach to easing lockdown rules | Letters

Now let me see if I’ve got this right (Pubs and places of worship: what 4 July lockdown rules mean for England, 23 June). Single people can only be in a bubble with one other household, but bigger households can meet with numerous other households and can stay overnight, but must stay 2 metres apart. And you can go into a pub as long as you stay 2 metres apart, unless you can’t stay 2 metres apart, then you must stay 1-plus metres apart. You can go up to the counter in a shop, but not in a pub or restaurant. You have to give your name and address if you go to a pub, but not in a shop. You have to wear a mask on a bus, but not in a shop (not sure about pubs). You can have your hair cut from 4 July, but not your nails painted or legs waxed.But that’s only in England. It’s completely different in Scotland or Northern Ireland. You can’t go to Wales, but you can go to Spain, but you can’t go out for two weeks when you come back. So just remind me: are we still supposed to be washing our hands?Gail MitchellGotham, Nottinghamshire• Your editorial (23 June) reminds us that the government had said that any easing of the lockdown would depend on there being an effective test-and-trace system. Well, that seems to have been conveniently forgotten. This seems to be collateral damage as a result of the libertarian in the prime minister, who has been bursting to get out, is finally being released and is now implementing the classic libertarian shibboleths of maximising autonomy and freedom of choice while exercising individual judgment.It is all very well for Boris Johnson to say that he can trust people to “use their common sense in the full knowledge of the risks”, but regrettable that this is happening just at the very time that we desperately need the guidance that the libertarian view would eschew, in order to assess what those “risks” really are.Harvey SandersLondon• Given that the government is allowing pubs and funfairs to reopen, it should at least let outdoor swimming pools join them on 4 July. Swimming is the most accessible sport for all ages and backgrounds, and often the only safe sport for disabled people. The Royal Life Saving Society has issued guidance on how to rescue swimmers while protecting lifeguards from Covid-19, and Swim England has stated that Covid-19 is not transmissible in chlorinated pool water.Philippa EdmundsEast Twickenham, Middlesex• Boris Johnson has said that it will be imperative that people who have symptoms get themselves tested immediately. Here in Cornwall, we face a huge influx of visitors. It is likely that there will be an increased number of cases, yet testing facilities are non-existent.A friend sought a test last weekend, but no home tests were available. She requested an appointment at a testing centre, but found there were none in Cornwall except those for NHS and care home staff. Thus the only way of getting “tested immediately” was to drive to Exeter, a round trip of up to seven hours. Why is it not clear to the government that restrictions should not be eased until a fully functioning testing service is available to all? Colin RogersPenzance, Cornwall• Pubs before gyms? Yes, that reinforces confidence that our leaders know what they’re doing. Which group, I wonder, will be more adept at social distancing? Beer drinkers or people who care about their health?Paul GarrodPortsmouth• I should have thought our classicist prime minister would have known better – hibernation happens in winter; in summer it’s aestivation.Penny AldredLondon

Economy
Britain nearly went bust in March, says Bank of England

Britain came close to effective insolvency at the onset of the coronavirus crisis as financial markets plunged into turmoil, the governor of the Bank of England has said.Laying bare the scale of the national emergency at the early stages of the pandemic, Andrew Bailey said the government would have struggled to finance the running of the country without support from the central bank.Asked in an interview with Sky News what would have happened had the Bank not intervened, Bailey said: “I think the prospects would have been very bad. It would have been very serious.”“I think we would have a situation where, in the worst element, the government would have struggled to fund itself in the short run.”The Bank of England stepped in by pumping £200bn into the market for UK government bonds in March amid widespread investor panic as the virus spread, under a policy known as quantitative easing (QE). Under QE, the central bank electronically creates new money in order to buy bonds from financial institutions, with the aim of lowering borrowing costs for the government, businesses and households.By providing an influx of new money into the bond market, the policy can also soothe investor fears over a potential lack of buyers of government bonds, encouraging them to stay in the market. This in turn can help the government to sell new bonds to investors when it needs to borrow money.Although the governor said the country would still have had options available to avoid effective insolvency, he cautioned that the nation was facing “serious disorder” in financial markets and that the intervention from the central bank was vital.The government’s debt management office, which sells bonds to international investors, said in April it planned to raise £225bn from bond market investors in just four months to fund the huge increase in public spending during the coronavirus pandemic.However, Britain’s borrowing prospects have improved markedly since the Bank of England intervention. In a sign of the government’s ability to continue attracting investment to fund its response to the Covid-19 pandemic, Britain sold a bond with a negative yield for the first time in May. A negative yield effectively means investors pay to lend money to the government, and are sought during times of stress as safe-haven investments.During the 2008 financial crisis, the government failed to find enough buyers for some of its debt. However, Bailey said that the scale of the shock in government bond markets this March and the risk of effective insolvency was unprecedented.“We basically had a pretty near meltdown of some of the core financial markets,” he said.The rapid spread of Covid-19 and the prospect of the worst global recession since the 1930s Great Depression plunged financial markets into meltdown in March, making it harder for governments and businesses to raise money.Conditions in the market for UK government bonds deteriorated substantially, as investors sold sovereign debt, particularly the long-term debt favoured by the UK government, in order to raise cash.Bailey had previously warned of “pretty big dislocations” in financial markets during his first days as the Bank’s governor after replacing Mark Carney on 16 March.The Bank used two emergency interest rate cuts at the onset of the pandemic in Britain to sink borrowing costs to the lowest level in its 326-year history, while also ramping up its quantitative easing programme with £200bn in fresh stimulus.Threadneedle Street announced a further £100bn injection into the British economy last week to take the overall size of the bond-buying stimulus package to £745bn.Launched during the 2008 financial crisis, the policy of quantitative easing was maintained over the past decade as the country only gradually recovered from the last recession, with the central bank preferring instead to slowly raise interest rates.Bailey used an article for Bloomberg on Monday to announce a switch in the Bank’s policy, saying that in future it would wind down QE first before raising interest rates.

Economy
Simon Quin obituary

My father, Simon Quin, who has died aged 77, was an economist with a long career at the International Monetary Fund (IMF). Simon’s passion was helping developing countries, especially in Africa, to improve their economic management in support of growth and alleviation of poverty. He travelled extensively, advising officials in central banks, ministries and statistical offices on data required to make better-informed economic policy decisions. He believed income inequality was the root of many of society’s ills.His contributions enhanced the quality of statistical work at the IMF and countries worldwide. His way of addressing issues from a different, often provocative angle was a signature, as was his delivery – with a quiet, mischievous smile – of some new insight which he knew would require his colleagues to think again.Born in north London to Marion (nee Joyce) and Peter Quin, both civil servants, Simon had a sister, Gerda, and a half-sister, Rhian, whom he discovered later in life, and to whom he became close. He attended grammar school in Burnt Oak, and studied economics at Leeds University, graduating in 1965. That same year he was awarded a commonwealth scholarship and went off to the University of Ghana, Legon.Two years later a military coup forced him to move back to the UK, where he began working at the Bank of England. In London he met Abena Dei-Anang, whose father, Michael Dei-Anang, was a Ghanaian writer and member of Kwame Nkrumah’s cabinet. They married in 1972.To be in an interracial relationship at the time was nothing small. My father told me about a time he took my mother to a garden party. When they entered together, the party fell silent. Perhaps, my mother suggested, he ought to have warned his colleagues he had a black girlfriend. But this never occurred to Simon. He wouldn’t have understood why it mattered. In 1977, a secondment came up at the IMF. I was born a year later, and Washington became our home.His job at the IMF took him on missions to many countries to help them assemble better data on their balance of payments and their international investment position. He was also involved in teaching concepts and methodology to participants from all over the world. One period of his career saw him working with countries in the Caribbean, agreeing terms for borrowing and then monitoring progress.My father introduced me to the theatre. We were season ticket holders at the Washington Shakespeare Theatre. When I was eight we saw a Royal Shakespeare Company production of the Tempest and I resolved I would work in theatre as an adult – which I now do. When I came out to him by email aged 24, his reply was accepting, aware and kind. When he retired in 2005, my parents retired to Crowborough, East Sussex. A lifelong butterfly enthusiast, Simon went on rambles to photograph his favourite species in the countryside, which he would meticulously catalogue. He was a proud member of his local butterfly conservation group. He is survived by Abena and me, and his sister Rhian.

Economy
Former chancellor Alistair Darling calls for emergency VAT cut

The former chancellor Alistair Darling has urged the government to consider an emergency cut in VAT amid growing speculation that the Treasury will make a tax cut on consumer spending the centre of a plan to boost Britain’s post-Covid-19 recovery.Rishi Sunak will announce a package of measures in early July intended to help those sectors of the economy, such as retailing, recover from the impact of a three-month lockdown.Options being considered by the chancellor include a repeat of Darling’s decision in November 2008 to reduce the standard rate of VAT, which then stood at 17.5% and is now 20%.Darling, who was responsible for the economy during the global financial crisis of 2008, said in the foreword to a report from the centre-right thinktank Policy Exchange that a tax cut to stimulate consumer spending made sense.“After the Covid-19 crisis subsides, we will enter a new period of recovery. Increasing taxes will not be the answer here, even as the budget deficit and government debt rises. If anything, emergency tax cuts – slashing VAT to 15% for instance, as I did in November 2008 – should be considered to boost consumer spending.”A five-point cut in the standard rate of VAT would cost £35bn in lost revenue, and Sunak’s immediate predecessor, Sajid Javid, said the Treasury should be thinking about a three-point cut to 17%, which would cost £21bn.Official figures released last week showed a 12% increase in retail sales from the trough hit during April but Sunak is anxious to support spending as the Treasury’s furloughing scheme is tapered.Other ideas being considered include cutting employers’ national insurance contributions to encourage businesses to hold on to workers as the wage subsidies come to an end.Plans for a summer package of measures have been under discussion for weeks but the government has been waiting to see if lockdown restrictions would be further eased before going ahead.With an announcement imminent that social distancing will be reduced from 2 metres to one, Sunak will outline his plan in early July. The Treasury said the statement would not amount to a mini-budget or include fresh economic forecasts, but would contain some eye-catching measures.The Policy Exchange report, co-authored by Gerard Lyons, Boris Johnson’s chief economic adviser when he was mayor of London, said higher public spending on infrastructure projects was needed to secure economic recovery and deliver on the government’s “levelling up” pledge.Amid evidence that seats in older industrial towns – many won for the first time by the Conservatives in the last general election – have been hardest hit by Covid-19, Policy Exchange said there should be no repeat of the cuts in capital spending imposed by David Cameron’s coalition government in 2010.Lyons, a senior Policy Exchange fellow, said: “The economy is experiencing a paradigm shift and increased capital spending is the way forward.”Policy Exchange’s paper says after Covid-19, the government should prioritise:Electric vehicle-charging infrastructure investment, a rare example of a “shovel-ready” project.
Gigabit-capable broadband, due to probable changing patterns of working in future.
Investment in energy R&D, notably hydrogen, to help the UK decarbonise.
Health-related infrastructure such as green walking and cycling routes.
Transport upgrades, including support for local authorities, national parks and landowners such as the National Trust to encourage walking and cycling.
Improving (and where possible adding to) public parks, sport, leisure and swimming facilities.
The report said infrastructure projects costing less than £500m should be devolved to metro and local authorities. The priority should be smaller projects that were shovel-ready, it added.

Economy
Unemployment rose like a rocket but will only fall like a feather | Torsten Bell

We are in a jobs crisis with 600,000 fewer employees on payroll and 2 million more of us on universal credit. Tackling this economic and human tragedy will become the central economic challenge of the early 2020s.The Bank of England expects almost one in 10 of the workforce to be unemployed, the highest for 25 years. But will unemployment fall as swiftly as it has surged?Yes initially, but, beyond the immediate boost of shops reopening, history has some painful lessons for us. New US research tracking recessions and recoveries finds a consistent pattern: unemployment rockets in the crisis, but falls like a feather in the recovery (averaging falls of just 0.55% a year). Post-financial crisis, unemployment only came down 0.5% a year. The unemployment-heavy 1990s recession only saw slightly faster falls. Yes, unemployment fell faster earlier in the 20th century, but some major wars were involved. If our future looks anything like our past, we won’t see unemployment back below 5% until the late 2020s.We must throw everything possible at avoiding that catastrophe: job guarantees and creation, wage subsidies, training and big bang fiscal stimulus. We don’t get to choose the challenges the world throws at us, but we do get to decide if we rise to them. It’s time that we did.• Torsten Bell is chief executive of the Resolution Foundation. Read more at resolutionfoundation.org

Economy
Much will go up in smoke as ministers opt for fire sale of public land

A mix of enthusiasm and panic inside the government is set to produce a toxic trail of poor decision-making, probably just in time for the next budget. The enthusiasm flows from the potential for a broad and far-reaching revolution ministers can see in the worst health and economic crisis for several generations.This could be the best opportunity since the second world war to reshape Britain’s way of life, recasting the relationship between citizens and state. From a Tory perspective, ministers can champion self-reliance and sideline collective organisations that put barriers in the way of change.The panic relates to the way money is slipping through ministers’ fingers as dramatic spending to deal with Covid-19 flows out of the Treasury. With hundreds of billions earmarked for rescue schemes that run until at least October and probably into next year, the narrative gaining ground inside the finance ministry focuses on the enormous debts Britain will incur and the limit on spending this will bring.What does a Conservative government that thinks it is running out of funds for a prospective transformation do? It turns to the private sector to carry out the heavy lifting.What if the private sector responds that it, too, is short of funds? Them the focus switches to creating a framework that lowers the costs of private sector investment to the point where it becomes irresistibly attractive.Property developers are among the Tories’ biggest donors. They can’t wait to get their hands on land at knockdown pricesThis way of thinking unites chancellor Rishi Sunak, Grant Shapps in transport and Robert Jenrick in housing. They are free marketers who set aside their “private sector is best” preferences to join a Boris Johnson government that put state power to the fore. Johnson was going to spend his way to greatness with a series of grand projects that would transform the UK and its standing in the world.Now that the Treasury believes the nation’s spare cash will soon be spent protecting vital services and preventing mass unemployment, a different strategy is needed.The tax system is an obvious candidate for reform, which is why ministers are weighing up how to persuade a sceptical public that cuts to corporate taxes can encourage investment. More immediately, these ministers are wondering how to force local government in affluent areas and publicly owned bodies such as Transport for London to begin a fire sale of public land.Selling off collective assets cheaply is nothing new. Britain sold its public utilities in the 1980s and early 1990s. In the late 1990s and into the noughties, the nation’s mutually owned businesses – building societies and mutual insurers – were flogged off to City institutions. For decades councils have stayed afloat by selling playing fields and other assets to developers for a song.Officials inside No 10 are working on ways to reform the planning system to allow for an explosion of housing and property development – without trashing the countryside or allowing developers to fill their boots. They would deny the uglification of Britain will be the result.No doubt some of the experts drafted in by Dominic Cummings to plot yet another thrust to the heart of sclerotic England have noble intentions. Their problem will be that with no time or money left to develop a long-term and sustainable scheme, their plans will quickly be overtaken by the need to generate economic activity.Nothing will bring land into play more quickly than forcing public sector bodies to sell what they have without regulations or rules determining what private developers must do with it.A straw in the wind is Jenrick and Shapps’s coordinated attack on the mayor of London, Sadiq Khan. Jenrick rejected Khan’s housing plans as not ambitious enough – by which he meant they included too many affordable homes for rent and not enough units.Shapps has put a block on funds to Khan’s main fiefdom – Transport for London – forcing the capital’s transport authority to furlough most of its staff. This manoeuvre must surely end any chance TfL has of preventing land it owns from being sold for development without strict rules. It amounts to a coup that Londoners cannot see, mainly because the mayor won’t admit he’s had his legs and right arm chopped off. Maybe it’s too humiliating.What is more extraordinary is that other mayors – Andy Street in the West Midlands and Manchester’s Andy Burnham – haven’t reacted to this smash-and-grab and this undermining of local democracy.Property developers are among the biggest donors to the Tory party. They can’t wait to get their hands on extra land at knockdown prices. A fire sale beckons.

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