The Great Debate UK
–Darren Williams is European Economist at AllianceBernstein. The opinions expressed are his own.–
On July 1, former Bank of Canada Governor Mark Carney will replace Sir Mervyn King as Governor of the Bank of England. For many observers, this will herald a new dawn in the conduct of British monetary policy. The process, however, will be more evolutionary than revolutionary.
Don’t expect any fireworks at Mr Carney’s first Monetary Policy Committee (MPC) meeting on July 3 and 4. Neither the prevailing view of the MPC nor recent strong economic data support an immediate change in policy.
But this doesn’t mean that important changes aren’t coming—and the reasons aren’t hard to find. Notwithstanding recent figures, the UK’s economic performance since the credit crunch has been dire. Many independent forecasters expect the economy to be operating below full capacity for at least the next five years.
from Anatole Kaletsky:
It’s cynical, manipulative and hypocritical – and it looks like it is going to work. How often do you hear a sentence like this, to describe a government initiative or economic policy? Not often enough.
The media and a surprisingly high proportion of business leaders, financiers and economic analysts seem to believe that policies which are dishonest, intellectually inconsistent or obviously self-interested in their motivation are ipso facto doomed to fail or to damage the public interest. But this is manifestly untrue. The effectiveness of public policies and their ultimate desirability is in practice judged not by their motivations, but by their results.
It is clear Britain got a ‘bounce’ from the Olympics, but much more is needed to secure long-term economic legacy
–Andrew Hammond is an Associate Partner at ReputationInc. He was formerly a UK Government Special Adviser, and a Senior Consultant at Oxford Analytica. The opinions expressed are his own.–
Six months since the London 2012 games began, a flurry of research has indicated that the UK’s international image has received a boost from hosting the Olympics and Paralympics. Most recently, the latest Anholt GfK Roper Nation Brands Index, released on January 17, showed that the United Kingdom edged up from fifth to fourth place since July 2012 in the survey’s overall country reputation rankings; only the United States, Germany and France currently have a more favourable nation brand.
Following the Autumn Statement last week, pressure remains on Chancellor George Osborne to tackle the continuing fall in living standards and the growing divide between the UK’s highest and lowest earners.
While battles rage about the nature of the Government’s welfare reforms, it was refreshing to see a growing number of commentators acknowledge that it is not just those out of work that are struggling to get by. Indeed those in work will feel the greatest impact from the Government’s upcoming benefits cap, as tax credits, maternity pay and other in-work benefits are affected.
The Autumn budget is one of two scheduled statements the Chancellor gives each year to inform the public about tax and spend plans and provide the latest growth forecasts. These budget statements are useful not only for the public, but also for investors in our debt, rating agencies and global businesses. Hence they are a big deal, and it is important that they are accurate.
However, the latest statement delivered by George Osborne didn’t quite ring true. Let’s look at growth forecasts first. The Office for Budget Responsibility (OBR), who creates this forecast, revised down 2012 GDP for the second time to -0.1% from the original forecast of 0.8%. So rather than grow at a modest, but positive, rate the economy is now expected to contract this year. If you invested in the UK partly based on this data, you could be forgiven for being rather cheesed off that your investment had yet to bear fruit.
The government’s latest plan to boost growth by relaxing planning permission rules has attracted a mixed reaction. In fairness, allowing homeowners who have detached houses to build an 8 metre long-extension is never going to get the UK economy out of the bolt hole it has found itself in. Likewise, the perceived U-turn on the plan to build another runway at Heathrow is unlikely to happen in time for Cameron and Osborne to take credit for the growth boost.
But all is not lost for the government. All it needs to do is to continue its policy of gently loosening the Treasury’s purse strings. “But we are going through a period of fiscal austerity,” I hear you cry. Indeed that is what the government wants us to think, but the economic data just doesn’t support that assertion. The latest GDP data reported that government spending was flat in the second quarter. That is down from the large 1.9% increase in the first quarter. However the UK’s fiscal consolidation effort looks fairly meagre when you consider that government spending has only fallen once in the last six quarters.
–Daniel Tarling-Hunter is an economist at Euromonitor International. The opinions expressed are his own.–
The 2012 Budget has highlighted the divide between the richest and the poorest. Two standout policies have come under scrutiny; a reduction in the top rate tax, and support for the lowest income groups by raising the personal allowance. Though these changes don’t shift the fiscal position of the government, Euromonitor International forecasts that the UK’s existing income inequality is set to widen further with more pressure on the poorest consumers.
–Dr Richard Wellings is Director of the Transport Unit at the Institute of Economic Affairs. The opinions expressed are his own.–
The British government is finally recognising the strong link between transport infrastructure and economic growth. The Budget set out plans for a national road strategy while earlier this week the Prime Minister announced that motorways and trunk roads could be operated by the private sector.
–Tim Knox is Director of the Centre for Policy Studies. The opinions expressed are his own.–
Next year, the British government will spend £680 billion – or just under £2 billion a day, every day of the year. Remember that when considering all the noise – in both Parliament and the media – about yesterday’s Budget.
–Sheila Lawler is Director of Politeia. The opinions expressed are her own.–
The 2012 Budget seemed to have something for everyone. For low earners there are tax cuts; for business there are cuts in corporation tax; for well-off families fearing the loss of child benefit, a reprieve; and for all who recognise that the public finances and public spending must be brought under control, there is the comfort of a ‘fiscally neutral’ budget.