All posts filed under: Economy

What are the key issues for the British Economy?

The state of the economy has consistently ranked among the top two or three issues for the British electorate during the general election. In a populus poll, 69% of voters said that the economy was ‘very important’, with 92% saying either it was ‘very or fairly’ important. There are several issues that are the main focuses and concerns of the Chancellor and the government as a whole (as well as the shadow chancellor and the opposition).

To what extent was prioritising deficit reduction a successful policy choice since 2010?

The Coalition government from 2010 until 2015, made up of the Conservatives and the Liberal Democrats, sought to prioritise deficit reduction above all other considerations. This was in the wake of the 2008 global banking crisis which strained the UK economy and heralded the policy of austerity connected closely with the Chancellor Osborne. It was partly successful in creating jobs and some growth but the policy has been controversial. Labour have argued it has not served the least well off, some conservatives have argued it had not reached its intended aim of removing the deficit altogether and it is claimed the government, without acknowledging it publicly, did slow down deficit reduction and prioritise growth after 2013, which stands today at just 0.3% in the last quarter.

The coalition government’s deficit reduction programme

The coalition agreement states that “the deficit reduction programme takes precedence over any of the other measures in this agreement”. Deficit reduction is the raison d’être of the coalition government, and so it is always important and relevant to analyse how far this flagship policy has been achieved. The Labour opposition have often criticised the coalition for cutting “too far, too fast”, and failing to find a healthy balance between the need for growth and the desire to cut. Although it must be considered that it is the Labour government who ultimately left an economic mess behind them, it can certainly be argued that the Conservative and Lib Dem coalition’s deficit reduction programme has gone too far and too fast in order to deal with the problem.

Is the UK economy rebalancing?

Is the economy rebalancing as proposed?   It is coming up to 4 years since Osborne decided the UK economy needed to be rebalanced. By ‘rebalancing’, he proposed a self-sustainable and largely export led economy. An economy that no longer relied on the financial services of the City, which appears to benefit suited men who know better how to ruin an economy better than those on Downing Street know how to fix one. Moreover Osborne pleaded for an economy with a higher propensity to save as opposed to one which will pay the price for further unsustainable private and public debt. Four years on, there seems to be a lack of policy aimed towards accomplishing a rebalanced economy. When the economic recovery began in 2009 the conditions seemed to be in place for a manufacturing exports-led resurgence. The pound depreciated significantly during the financial crisis, providing UK manufacturers with a competitive edge. And with domestic spending still slow, it wouldn’t have been surprising for UK firms to look to overseas sales for growth. Manufactured goods …

AlevelPolitics Economy Update: March 2014

*** Economy update – March 2014 *** The tide has somewhat turned in the Conservatives favour. Less than 18 months until the General election and the economy seems to be resuscitating. Better late than never I suppose. With Mr Osborne revealing his last budget for this Parliament next week, the Tory party are trying to map out their economic stance. It is clear that the 2015 general election will be laden with tax and spend policies, as the main parties not only try to prove that they are economically credible but that their policies seek to benefit the hard working. The first three years of the coalition were characterised by flat lining growth, missed targets, a loss of Britain’s AAA debt rating and a triple-dip recession scare. However, the latter part of 2013 saw improvements in almost all macroeconomic sections. Economic growth for 2013 measured up at 1.8% compared to the sluggish 0.3% of 2012. Osborne insists that his “long term economic plan is working”, with economic growth complemented by increased investment and fast pace …

The Split Coalition

Coalition United? I think not When the Conservatives and the Liberal Democrats formed a coalition in the aftermath of the general election of 2010, it was uncharted territory for the UK. Not only was it the first ever Coalition government between the Lib Dems and the Conservatives in history but  was also the first time the Lib Dems gained some real political power in decades – poor Lib  Dems. So the people of Great Britain were naturally curious to see whether the new government would last. Leading members of the Coalition David Cameron and Nick Clegg have continuously said that they support the Coalition and that it is ‘getting things done’, but today, the cracks are appearing within this partnership of parties.   Firstly, one of the big cracks is this issue about the European Union. Now this causes a huge divide already within the Conservatives as they are naturally sceptical about the European Union. The fact that Tory backbenchers want to leave the EU is quite drastic compared to the leading Tory MPs such …

Would an A&E visiting fee be a ‘clear departure from the traditional NHS vision’

1/3 of GPs BACK £10 CHARGE OF A&E A poll carried out by Press Association for Doctors.net.uk with more than 800 family doctors found that 32% were in favour of the charge seeing it as the most cost effective way of cutting down on the people who could have gone to their GP or a pharmacist. One doctor argued: ‘If patients had to pay a £5 charge to attend A&E – that could be refunded for appropriate attendances – they would be more inclined to take their coughs to the pharmacist where they belong.’ Recent overcrowd and increased demand  of A&E have prompted some doctors to back the charge of either 10 or 5 pound to significantly reduce the number of  unnecessary visits where people are in no need of urgent medical attention. If the condition of a patient is shown to need attention then their money would be refunded to them. Around 30% to 40% of all visits to A&E could have been seen elsewhere because illnesses were minor or not urgent believed by A&E specialists.   …

Weekly Parliament Roundup: 13th-19th January 2014

Parliament Roundup – 13/01/14-19/01/14   Labour Speech This week, Labour leader Ed Miliband and his shadow ministers will make speeches for the electorate in order to announce Labour’s upcoming plans. The speeches are designed to broaden the debate away from spending and the deficit. Shadow Housing Minister Emma Reynolds made a speech on Tuesday reemphasising on Labour’s plans to build more than 200,000 homes a year by the end of the next Parliament in 2020 by stressing that we need to increase social housing. However, this might prove tricky for Labour as they will have to allow more borrowing in order to reach this ambitious goal. This goal in particular might be seen as Ed Miliband’s way of proving that Labour is not just about short term goals such as his established energy price freeze. Euro sceptics unsatisfied   95 of Conservative backbenchers have recently signed a vote for the law to be changed for the House of Commons to veto new EU regulations. There has been much recent disagreement with this vote and William …

The Coalition Welfare Reforms Explained

Coalition Welfare reforms Job Seekers Allowance (JSA): The Department for Work and Pensions have set up schemes aimed at getting unemployed people back to work, it has caused much controversy Critics have dubbed the programmes as “Workfare”, likening them to unpaid labour, or forcing people to work for their benefits. To get people back to work by either Work Experience (November 2011, 34,200 people had started a Work Experience placement), Sector-based work academies, Mandatory Work Activity, Community Activity Programme and the Work Programme. JSA has been cut to at least £56.80 a week, varying on an individual’s situation. Universal Credit: A new in- and out-of-work credit, which integrates six of the main out-of-work benefits. The aim is to increase incentives to work for the unemployed and to encourage longer hours for those working part-time. “The main differences between Universal Credit and the current welfare system are: Universal Credit will be available to people who are in work and on a low income, as well as to those who are out of work most people will …

Weekly Parliament Roundup:4th-11th December 2013

Parliament Roundup: 4/12/13-11/12/13 MPs to receive 11% pay rise: Click for a video explanation IPSA(Independent Parliament Standards Authority) have recently proposed to provide MPs with a pay rise of 11% which will increase their salary to £74,000. They have stated that there will be changes to the pension scheme which will save tax payer 2.5 billion pounds if the rise is to take place. Even though this might be seen as a great thing for the MPs, lots of them are scared to state publicly that they think it is a good idea. The main issue with this proposal is that it might be the wrong time to make such high rises in MP’s salaries when other public sectors are facing difficult freezes. However, of this proposal is to go ahead, it will take legislation in 2015 to stop this from occurring. The public might not like the sound of the proposal at first because many might feel that the MPs don’t deserve such a high pay rise as they have failed to improve costs …

Weekly Parliament Roundup: 13th-20th November

Weekly Parliament Roundup – 13/11/13-20/11/13 Geneva II Conference November 2013   Over the last few weeks, the Geneva conference has taken centre stage in the news, in regards to Iran’s nuclear projects. The conference was postponed to the 20th and has resumed over the past few days. Even though definite decisions have not yet been made, following his visit to Geneva, Foreign Secretary William Hague states that Britain’s aim is to create a “Interim first step agreement with Iran that can then create the confidence and the space to then create a comprehensive and final agreement”. The main question is however, is it too late for Britain to step in and try to give Iran guidance on the decision that it should make? The country seems set on making the brave choice to go ahead with their plans without the restrictions from America. Hopefully, Hague will make an influential effort to try and impose financial and energy sanctions against Iran, with the help of other countries such as France and Germany. Increase in Tax Thresholds …

Weekly Parliament Roundup: 6th-13th November 2013

Weekly Parliament review – 6th -13th November 2013 Commonwealth Summit Prime Minister David Cameron will still attend the Commonwealth Summit in Sri Lanka despite India and Canada boycotting the event. There have been calls for the PM to boycott the event, especially from Labour members who proposed that they would strongly support the Prime Minister if reversed his decision to attend. On the other hand, Foreign Secretary William Hague stated that if the Prime Minister decided not to attend the summit, it would damage the commonwealth without making any positive change in Sri Lanka. The summit will concern the country’s Human Rights records and Cameron has pledged to put ‘serious questions’ to the Sri Lankan President Mahinda  Rajapaksa  about his regime’s widely condemned Human Rights records and allegations of war crimes against the Tamil minority. Concerns over rise in personal debt in the UK The Conservative member of the Treasury Select Committee Mark Garnier has raised concerns over the level of personal debt in the UK. He recently stated on The World This Weekend on …

UKIP: U-keep Or U-Gone?

UKIP, the UK Independence Party is a right-wing political party that was established in 1993. Their views are often seen as being more radical than the other political parties, like their immigration policies and proposed EU referendum. There is constant controversy surrounding UKIP due to its proposal of radical changes to immigration, such as implementing a five year freeze on immigration for permanent settlement and disallowing immigrants to apply for public housing and benefits until they have paid tax for five years. Some argue they are racist, as they are exploiting immigrants’ rights. UKIP deny that, claiming they are not against race but against an ‘open-door’ policy. Nigel Farage stated that in the past 10 years, there has been more migration into Britain than between 1066 and 1950. Anna Soubry, the defence minister, said that Nigel Farage was ‘scaremongering’ and putting ‘fear in people’s hearts’ with his anti-immigration rhetoric and ‘prejudice’. Farage hit back at Soubry’s remarks by calling them ‘abusive’ and it showed how the Conservatives were ‘terrified’ about the rise of UKIP. Its policy to end …

Energy Bill Crisis: Cameron’s dilemma

Energy Bills – Is Cameron ‘panicking‘ yet? Over the past few months, we’ve witnessed politicians persistently speaking of energy prices rocketing and of the ‘Big Six’ making huge profits from the bills of their overcharged customer’s, of whom are without any knowledge of they came to be so high in price.  Many individuals who are unable to afford these high prices are left confused and deceived by their energy supplier and blame PM David Cameron for not taking action against this ever increasing issue. Recently, the problem has been addressed by Cameron in parliament and of who has even been in discussion with Neck Clegg in order to find a way to get household bills down and made sustainable. The “big” questions are;  how soon and how will he make changes to the British taxpayer’s energy bill? According to research by uSwitch, energy bill suppliers such as the likes of British Gas have a current bill at around £1,340 and the new bill is said to raise to a staggering £1,465 – an increase of £125 which …

Unemployment and Youth Unemployment

Recent figures have shown the UK unemployment rate dropped to 7.7% between May and June from 7.8% in the previous three months. The number of people claiming Jobseeker’s Allowance in July fell by 32,600 to 1.4 million, its lowest level since February 1992. In recent weeks, David Cameron and George Osborne have boasted about the UK economy “turning a corner”. It seems this statement holds some validity. When discussing unemployment, we must consider that this is a recovering economy and even the Prime Minister admits this government has “still a long way to go”. The economy is at least moving in the right direction which is good news for the unemployed. Mark Carney, The governor of the Bank of England has set a target rate of 7% before interests rates are likely to be raised. This is one of the main reasons why the unemployment rate has been brought to everyone’s attention lately. Mr Carney expects this target to be reached within the next three years. These figures suggest that the jobs market is recovering …

Global tax rules ‘need updating’

The Chancellor George Osborne has told the BBC that “concrete steps” to change tax rules would be seen at the G8 summit. Speaking from Enniskillen, he said leaders could “rewrite the international rules” that allow companies to shift profits away from UK and other territories to minimise tax payments. listen to ‘Global tax rules 'need updating'’ on Audioboo

Banking reform

Banks contribute 9.4% to the UK’s economy and 3.6% to the UK job market in 2011. Because of this reliance, the sector is increasingly difficult to reform. Banks resist reform and there is fear that if reform doesn’t happen internationally then it can make domestic banks less competitive. This teamed with a historic ‘hands off’ approach has made banking reform an important issue for the Coalition 1. Dividing investment and retail banking. The 2011 Vickers report identified the need to ring fence high street banking from ‘casino’ investment banking. Osborne introduced the Banking Reform Bill to parliament by announcing he would ‘electrify’ the ring fence, giving regulators the option to break up the banks that undermine the ring fence. Consumer groups such as Which? believe that this goes the right way in protecting consumers but the British Bankers Association believes it will just create uncertainty for investors, leading to less capital and ultimately less lending. Labour has attacked Osborne for not going far enough in his banking reform and for not implementing all the changes …

Economic Policy differences and similarities – Labour and Coalition

1. Tax – Difference Labour argues that the Coalitions economic plans are hitting the ‘poorest, hardest’. The Conservatives have lowered the top rate tax to 45% and staged a decrease in corporation tax which is to be 20% by 2015. The corporation tax cut will cost the Chancellor 400m in 2015-16 and so he is taking a risk on business which links into a later point. The Labour party has said it would consider the mansion tax proposed by the Liberals. This was partly a political manoeuvre to appeal to the Liberals or cause tensions in the coalition but also to show they are the party on the side of the working class. Ed Balls claimed that the benefits of the rising of the personal allowance to £10,000 would be swamped out by the higher VAT and cuts to tax credits. Figures from the IFS supported this showing that one earner families would lose an average of just under £4,000. 2. The private sector – Difference Osborne went about such a strong cuts agenda believing …

Economic gloom

Upon entering office, Osborne said he wanted the UK’s AAA credit rating to act as a ‘benchmark’ for his performance as Chancellor.  Compared to Osborne, Chief Secretary to the Treasury Danny Alexander at the time described the credit rating as ‘not the be all and end all’. Moody’s downgrade of the UK’s credit rating to AA1 and many other services comes at a painful time for the Chancellor, for whom the Spring budget will be crucial in appeasing backbenchers and fellow ministers already looking around for a replacement. Following 2 years of u-turns and delays, with 70% of budget cuts yet to come into force yet, Osborne is reluctant to make another u-turn on the governments economic plans. Promising ‘we won’t change course’ Osborne seemed out in the cold among his Tory peers until Cameron came to his semi-rescue responding that the credit rating demonstrated that ‘we have to go further and faster on reducing the deficit’. However, recent discussions on the 2015-16 budget proposals have highlighted frosty relationships in the cabinet as Cable, May …

The LIBOR scandal explained

A question in many people’s minds is what is LIBOR? LIBOR is the acronym given to the London Interbank Offered Rate. It is the average interest rate estimated by leading banks in London that they would be charged if borrowing from other banks. The British Bankers Association (BBA) calculates the LIBOR rate on a daily basis, it is calculated using the estimates submitted by the major international banks based in London, and represents the interest rate they must pay in order to borrow cash from other banks. The rate a bank must pay is in a way, a reflection of their financial stability and strength, the banks rivals can also use this to see how much the bank is trusted. The Financial Service Authority (FSA) says LIBOR is a benchmark reference rate which is fundamental to operation of both UK and international banks. Since the 2007 global credit crunch, LIBOR has become somewhat an indicator of the amount of financial strain major London-based banks find themselves in. Prior to September 2012, LIBOR was both calculated …

Opinions on the UK economy this week

In the past few weeks a lot of opinions and perspectives on the state of Britain’s economy have been revealed. See the important bits from the important people/institutions: FSA Chief Lord Turner: FSA Chief Lord Turner has called for new ideas to kickstart the economy. Turner warned that quantitative easing, the electronic printing of money used to pump £375bn into the economy so far, might lose its usefulness. “We need to be ready if these measures prove insufficient to consider further policy innovations and further integration towards different aspects of policy, to overcome the powerful economic headwinds created by deleveraging across the developed world economies,” Turner said. He agreed with the chancellor, George Osborne, who has warned about creating “the stability of the graveyard” when reforming banks. Deputy Governor of the Bank of England: Paul Tucker has said the monetary policy committee, which sets interest rates, wanted to make credit cheaper, but was wary of adding to the £375bn of quantitative easing (QE) in case it triggers a rise in inflation. “I think Funding for Lending …

Sir Mervyn King Channel 4 interview

Some of it was on-message, helpful to the government, some of it not – Sir Mervyn King’s (Governor of the Bank of England) interview on Channel 4 News was fascinating. There had been a lot of media training – none of the academic essays he can sometimes speak in. He gave George Osborne the green light to dump the fiscal rule on debt reduction by 2015 – “if it’s the world economy” that’s the problem and slowing growth is missing the debt target OK? He said it was “arguable to move in that direction.” On banking reform though, the normally gnomic, rarely controversial governor effectively raised the flag of rebellion for the parliamentary stages of the banking reform bill. Sir Mervyn said he wanted the Vickers report implemented in its original, tougher form – and opposed the dilution of those reforms in the white paper.

Government to alter benefits to cut welfare bill

The government has announced plans to alter annual benefit increases. Presently, the annual rise in benefits rises in line with inflation but the government’s plans could see it rise in line with wage increases instead. While it is unclear roughly how much it will save a year, Whitehall ministers have claimed that if these changes had come in 2008 then £14 billion would have been saved. This can be seen as since 2003 after inflation, real wage growth for someone in the middle of the earnings spectrum stands at 1.2% whilst inflation has remained above this. George Osborne cited the governments need for £10 billion worth of cuts to the welfare budget for this move and said that aggressive cuts in welfare would mean that other important areas such as healthcare and education would not be hit badly. We can compare this to 1979 where health and social security took up 1/3 of public expenditure while now it takes up 1/2. The huge savings the government could make lies in the value of inflation over recent years. …

Audio Report: BAE EADS merger

Today Programme: Friday 14th September An excellent report on the proposed merger between the British BAE Systems and EADS, a French and German company. This merger illustrates the tensions surrounding a strategically important company and Britain’s relationship with Europe and the US. http://alevelpolitics.com/wp-content/uploads/2012/09/Today-Prog-BAE1.mp3Podcast: Play in new window | DownloadSubscribe: iTunes | Android | RSS

Coalition deficit reduction, too far, too fast?

The deficit reduction program has been the flagship policy of the current coalition government- it was because of the need for such a reduction that the coalition was formed and it is of vital importance for the economic wellbeing of the county. However due to the unstable global economic situation the coalition must balance the need for growth with the desire to cut when reducing the deficit, and the Labour opposition has often accused the government of failing to achieve this balance and cutting “too far, too fast” thereby damaging the economy and stifling much needed growth. Overall the statement is correct, the deficit reduction programme goes too far and too fast despite coalition claims.

Why even Merlin can’t get the Banks’ lending again

Recent statistics revealed in the Bank of England’s figures, have shown that lending by banks fell by £10.7bn in 2011, otherwise put; banks received £10.7bn more in loan repayments than they gave out in new loans. This takes the total figure of fall in loan administration to just under £83bn since the financial crisis in 2008. Many have urged the Government and George Osborne to get tougher on the banks, especially Lloyds and RBS, which are part-owned by us the taxpayer, to force them to start lending again. Even Sir Mervin King has said “For a long period I have pointed out that the Governments own two of the biggest four lenders. If they own them, they can do something about it” The ‘potential’ lying in these banks and corporations suggested by the Director General of the CBI are all but currently lying stagnant. Government demands for more liquidity against loans administered by banks are not having the desired effect of financial stability, in that banks seek liquidity from external sources to shore up loans, …

UK unemployment at 8.4%

During Brown’s government, unemployment was on the decline, now figures published by the Office for National Statistics (ONS), show that UK unemployment rose by 28,000 to 2.67 million during the three months to January. The unemployment rate currently stands at 8.4%. Youth unemployment (16-24 year olds) rose by 16,000 to 1.042 million, a rate of 22.5%. In addition to this, the number of people claiming Job Seeker’s Allowance increased by 7,200 to 1.61 million in February. Regardless of these alarming figures, the government see this as an improvement with the rise of unemployment being at its lowest in a year, showing signs that the Labour market is stabilising. The ONS also showed a small increase in the number of people in work – up by 9,000 in the three months to January. The Coalition government believes that they need to encourage responsibility and fairness in the system, meaning providing help for those who cannot work, training and targeted support for those looking for work, but sanctions for those who turn down reasonable offers for work …

50p tax rate: Here to stay?

The top rate of tax (50%  tax rate on earnings over £150,000) has been a particularly controversial source of debate amongst the coalition and with the 2012 budget being drawn up soon, it has never been more important. Historically, the Conservative Party has adopted a low tax policy but they have been reluctant to push on to abolish it. Why? Simply because it would be too much of a high risk move with too many variables to consider.