The Great Debate UK

Crisis, what crisis?



– The author is a Reuters Breakingviews columnist. The opinions expressed are his own. –

 Crisis, what crisis? That could be motto for the election manifestos published by Britain’s main political parties this week. Neither Labour nor the Conservatives addressed the country’s fiscal crisis head-on.

Instead, they have sought to bribe the electorate with promises.

There are some good ideas in the manifestos. But there are too many promises to cut taxes and not to touch spending – as well as a general lack of urgency. Once one puts the pledges into categories of good, bad and ugly, there are too few in the former bucket.


The two parties are promising roughly the same fiscal squeeze over the course of the parliament. Labour says it would halve the deficit, which is standing at 167 billion pounds or 12 percent of GDP, over four years. The opposition Tories say they would reduce the bulk of the deficit over five years. But such cuts aren’t deep enough. What’s more, neither party has been prepared to say how they will achieve them.

UK election boils down to one issue for markets


JaneFoley- Jane Foley is research director at The opinions expressed are her own. -

Whether the financial markets will view the outcome of the UK general election as a positive or negative depends almost entirely on one issue: the budget deficit.

Three big myths about public sector cost-cutting


Wileman- Andrew Wileman is a independent business consultant and writer, most recently writing about cost management in the private and public sectors in “Driving Down Cost” (Brealey Publishing). The opinions expressed are his own. –

“We only need to cut cost because of the credit-crunch crisis.”

No, there is a deep structural problem that was there before the crunch. The public sector has been driving up its share of GDP for decades, in the UK, the U.S. and almost all advanced western economies. Its momentum will be painful to slow down, let alone reverse. This underlying trend was concealed in the nineties and noughties (when the talk was of “the end of big government”) by a debt-bubble-fuelled growth in the private sector. In the UK, we are already over a 50 percent state share of GDP.

from Global News Journal:

If Greece’s debt dam breaks, who gets wet?

The 16 countries that share the euro single currency have agreed they will help Greece out if it needs. So far so good. But only now is the nitty-gritty of how member states will go about paying for their contributions being hammered out. And suddenly things are getting a little complicated.

Italy announced on Tuesday it would have to issue government bonds -- known as BTPs --  to raise funds for its part in any Greek assistance. 

2010 Budget: Time to face the music


EdwardCroft- Edward Croft is CEO of Stockopedia, a UK-based website which aggregates research, commentary and analysis for investors and offers social networking opportunities. The opinions expressed are his own. He will participate in a Reuters Budget live blog at noon GMT on Wednesday, March 24, 2010. Please tune in and join the discussion. -

In his recent ‘New Economic Model’ speech,  Shadow Chancellor George Osborne rightly emphasised the need to restore a savings culture in this country. Investment to GDP is the lowest of any G7 country.

The phoney budget


Thomas StoryThomas Story is tax director at BDO. He will participate in a Reuters Budget live blog at noon GMT on Wednesday, March 24, 2010. Please tune in and join the discussion.-

The March 2010 Budget, to be held next Wednesday, will inevitably be highly political as it is effectively the starting gun for the general election campaign. In this context, further significant fiscal measures to tackle the 178 billion pound government deficit will almost certainly be postponed.

Budget 2010: How to thaw the economy


Anthony_Evans- Anthony J. Evans is assistant professor at ESCP Europe Business School. He will participate in a Reuters Budget live blog at noon GMT on Wednesday, March 24, 2010. Please tune in and join the discussion.-

We’re used to hearing how credit markets “froze” in the summer of 2008, and how the subsequent policy responses have been aimed at economic recovery. Indeed politicians often use terms such as “stimulate” or “kick start” to give the impression that intervention is a necessary prelude to growth.

from Breakingviews:

Currency buyers suffer from King Lear’s problem

Currency buyers are suffering from King Lear's dilemma. Shakespeare's monarch could not decide which of his two ungrateful daughters was less awful. What looked like a bad deal from one, permission to stay with 50 knights, suddenly seemed attractive when her sister's alternative was a mere 25.

Trading floors may not echo with Lear's desperate words -- "when others are more wicked, not being the worst stands in some rank of praise" -- but foreign-exchange dealers know the feeling.

from MacroScope:

Britain heading for rude awakening?



There is a divisive election ahead for Britain, the threat of a ratings downgrade on its sovereign debt and a deficit that has ballooned into the largest by percentage of any major economy.  UK stocks, bonds and sterling, however, are trundling along as if all were well. What gives?

For a fuller discussion on the issue click here, but the gist is that all three asset classes  are being support by factors that may be masking the danger of a broad reversal. UK equities have been driven higher by the improving global economy, bonds held up by the Bank of England's huge buying programme and sterling by valuation and the distress of others.

A year of austerity looms in 2010


david-kuo_motley-foolthumbnail-David Kuo is director at the Motley Fool. The opinions expressed are his own.-

If you thought 2009 was as bad as things will get, then think again: 2010 could be worse. It is likely to be a year of enforced austerity with both the government and households making obligatory cuts to their budgets.

High on the government’s agenda will be reducing the Budget deficit, if the UK is to avoid the embarrassment of having its sovereign debt rating cut by rating agencies. This will have a knock-on effect on households, which could see their disposable incomes slashed by hikes in both direct and indirect taxes.