Browsing: Economy

Economy
Ministers’ game of chicken with people’s jobs will only slow the recovery further

Britain’s economic recovery is running out of steam. Even before the launch of tough new restrictions as the second wave of Covid-19 spreads across the country, the rebound from the first lockdown appears to have fallen significantly short.Figures released last Friday showed that gross domestic product (GDP) in August rose by 2.1% on the previous month – half the rate expected by City economists. Despite a rapid rebound earlier in the summer, and a boost from the “eat out to help out” scheme, the UK economy remains some 10% below its pre-pandemic level.Earlier this month, the Bank of England’s chief economist, Andy Haldane, said there were two ways to look at Britain’s economic outlook: either as a sharp bounceback, much faster than the worst forecasts made earlier in the pandemic, or as “Chicken Licken” would see it.Using the children’s story character to warn of a self-fulfilling prophecy in which excessive gloom would lead to weaker growth, Haldane criticised the media for focusing on negative news.On the upside, the sky has indeed not fallen in. A month-on-month growth rate of 2.1% is barnstorming by historic standards. An economy only a tenth off its pre-crisis peak four months into the deepest recession

Economy
Debt may be cheap, but the UK's poor productivity will cost us dear

The strangely easy agreement between economists of right and left that the chancellor should set aside concerns about Britain’s rising debt levels still holds seven months after the first Covid-19 lockdown was imposed.Thatcherite free-market thinktanks sing the same carefree song as Keynesian academics when debate turns to the size of this year’s public spending deficit. There are differences in tone and it goes without saying that all would want money spent wisely, but their efforts focus on competing proposals for growth.If only that were true inside the Tory party, be that members or backbenchers. Listen to what they say about the economy, and it is like the 2008 financial crash never happened. Public sector spending is still being likened to a household’s finances, where the aim must be a balanced budget.Even worse, the household analogy has another group of subscribers and they sit inside the Treasury. Much of the pressure on Rishi Sunak to cut back support for the economy and limit borrowing also comes from officials in the department’s Great George Street HQ. They wring their hands in terror remembering how the rocketing deficits of the past 100 years have left the nation in hock to foreign governments or

Economy
Coronavirus: UK workers to get two-thirds of wages if firms told to shut

UK job furlough scheme Rishi Sunak announces new furlough scheme as tough curbs loom in parts of England Coronavirus – latest updates See all our coronavirus coverage Play Video 0:54 Rishi Sunak announces expansion of coronavirus job support scheme – video Rishi Sunak has attempted to head off mounting anger over plans for imminent new Covid restrictions by announcing a new furlough scheme that will pay two-thirds of workers’ wages in hospitality firms ordered to close their doors. The hastily arranged announcement was made in a video message from the Treasury, as Downing Streetbriefed local leaders in the north-east and north-west of England about tough curbs set to be introduced next week. The Guardian understands that under the new regime pubs and bars in Merseyside and other parts of northern England will be ordered to close but restaurants will be allowed to

Economy
Sunak serves up more politics than economics | Letters

Rishi Sunak is not the first Tory chancellor to claim he has a “sacred responsibility to balance the books for future generations”, while doing nothing to ease graduates’ debts, improve young people’s chances in the housing market, increase social mobility, close pay ratios, or increasing spending on all aspects of state education (Rishi Sunak: hard choices ahead to tackle debt from Covid crisis, 5 October). Future generations would benefit far more if the need for food banks was eradicated and there were guarantees of jobs and decent pay.The International Monetary Fund’s advice to increase state spending (Editorial, 5 October) is likely to be ignored, just as it was in 2013. Then, just two months before his March budget, George Osborne was told by the IMF of the need for a “reassessment of fiscal policy”. Work by the IMF’s chief economist, Olivier Blanchard, on fiscal multipliers had shown the devastating effects tax and spending cuts were having on economies. Naturally, Osborne ignored the advice and went on to continue with spending cuts, reducing corporation tax to 20% and capping public sector pay awards to 1%.When it comes to a choice for the Tories between a Roosevelt-like New Deal, as Larry Elliott

Economy
Democrats outraged as Trump halts Covid stimulus talks until after election

Donald Trump on Tuesday called off negotiations with Democratic lawmakers on coronavirus relief legislation until after the election, even as cases of the virus are on the rise across much of the country before flu season.“I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business,” Trump wrote on Twitter a day after emerging from a hospital stay for Covid-19 treatment.The news triggered an immediate stock market sell off. Following Trump’s announcement breaking off negotiations, US stocks were down more than 2% in late afternoon trading.Trump’s surprise move came after House speaker Nancy Pelosi on Sunday said during an interview with NBC’s Face the Nation that progress was being made in her negotiations with the Trump administration on a bill to build on the more than $3tn in coronavirus aid enacted into law earlier this year.Pelosi issued a thundering statement in the wake of the announcement, accusing Trump of “putting himself first at the expense of the country” by halting negotiations over a new coronavirus aid package from Congress.Pelosi said Trump “showed his true colors” in stopping the talks

Economy
Fed chair warns of 'tragic' consequences without further Covid relief

Failure to provide more support for households and businesses hit by the coronavirus pandemic could have “tragic” economic consequences, the Federal Reserve chair, Jerome Powell, warned on Tuesday.As Congress remains gridlocked over a new round of stimulus in the wake of the coronavirus recession, Powell warned: “The expansion is still far from complete.”“At this early stage, I would argue that the risks of policy intervention are still asymmetric. Too little support would lead to a weak recovery, creating unnecessary hardship,” he told a virtual economics conference.Republicans have warned against providing too much money for the unemployed, arguing the cash is a disincentive for people to return to work. But the risks associated with overly generous relief were smaller, Powell said: “Even if policy actions ultimately prove to be greater than needed, they will not go to waste.”In contrast a prolonged slowdown could exacerbate existing racial and wealth disparities in the economy, which “would be tragic, especially in light of our country’s progress on these issues in the years leading up to the pandemic”, Powell said.Despite repeated rounds of negotiation between the House speaker, Nancy Pelosi, and the treasury secretary, Steven Mnuchin, it remains uncertain whether Republicans and Democrats will break

Economy
Don’t forget Leslie O’Brien’s long Bank of England career | Letter

Your article (Andy Haldane: the funnyman central banker who’s not great at maths, 1 October) states incorrectly that if Andy Haldane became governor of the Bank of England, he’d be the first non-Oxbridge governor. How about Leslie O’Brien, governor from 1966 to 1973, who joined the Bank straight from school in 1927 and worked his way to the top through the ranks?I knew Lord O’Brien in his latter career as chair of the House of Lords committee for which I was clerk, in 1982. He was a delightful man to work for and his watchwords of integrity and prudence would serve many a banker, and indeed many an Oxbridge graduate in public life, very well.Caroline KayBradford-on-Avon, Wiltshire

Economy
Why are stock-market prices rising despite the Covid pandemic?

Why are stock-market valuations soaring when the real economy remains so fragile? One factor has become increasingly clear: The crisis has disproportionately affected small businesses and low-income service workers. They are essential for the real economy, but not so much for equity markets. True, there are other explanations for the lofty valuations, but each has its limitations.For example, because stock markets are forward-looking, current stock prices may reflect optimism about the imminent arrival of effective Covid-19 vaccines and radically improved testing and treatment options, which would allow for a more limited and nuanced approach to lockdowns. This outlook may be justified, or it may be that markets are underestimating the likelihood of a severe second wave this winter, and overestimating the efficacy and impact of the first-generation vaccines.A second, and perhaps more convincing, explanation for today’s stock market performance is that central banks have pushed interest rates down to near zero. With markets convinced that there is little chance that rates will rise in the foreseeable future, prices of long-lived assets such as houses, art, gold and even Bitcoin have all been driven upward. And because tech firms’ revenue streams are tilted far into the future, they have benefited disproportionately

Economy
A nine-point plan for the UK to achieve net zero carbon emissions

Guardian climate pledge 2020 Environment A nine-point plan for the UK to achieve net zero carbon emissions Author Chris Goodall says tackling the climate crisis is neither difficult nor expensive and can help boost the economy Support Guardian journalism today, by making a single or recurring contribution, or subscribing