UK News

from MacroScope:

‘Ken Clarke for Chancellor’ is no joke

Ken Clarke shouldn’t underestimate how strongly the city economists polled by Reuters last week want to see him serve as Britain’s finance minister next term.

The Conservative shadow business secretary and one time ex-Chancellor gleaned a few laughs from Thursday’s BBC Question Time audience when asked about the poll, saying: “There’s a limit to how much of a glutton for punishment you’re going to be.”

But economists would dearly like to see the 69-year-old’s appetite for punishment return soon. No-one came close in the Reuters poll to touching Clarke for popularity. Some 16 out of 29 economists picked him as their first choice for Chancellor.

This was more than twice the number of economists who want to install second-placed Vince Cable, the experienced Liberal Democrat treasury spokesman whose quick wit has made him a public favourite.

For Clarke to serve, Conservative leader David Cameron would first have to dump the party’s likely choice for finance minister George Osborne – a decision that would mean Cameron had gone “slightly off the rails”, according to Clarke.

On Question Time, Clarke was loyal and wholesome in his support for Osborne, who fared poorly in the Reuters poll. He finished fourth from the five choices on offer and behind the current Labour incumbent, Alistair Darling.

Budget for votes riskily delays UK debt pain

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

Alistair Darling promised no election “giveaways” and in one sense he delivered. The UK finance minister’s budget is about not giving away the election. It might have been worse — if Darling had acceded to his boss Gordon Brown’s even more populist instincts. But there are vote-seeking swipes at high earners and banks, as well as a crowd-pleasing but misguided tax cut to first-time house-buyers. The UK’s budget-balancing pain is being postponed and concealed. And that’s risky.

The headline measure is a tax cut. First time buyers of properties costing up to 250,000 pounds won’t have to pay anything to the government. Many voters will like that. They will like it, too, that people buying million pound properties foot the bill. A further bout of bank-bashing was part of the electioneering approach. Given the scandal of City rewards, few will blame Darling.

The economic impact, however, will be limited. The wobbly housing market may be helped slightly. But the UK economy needs to be buoyed by production and exports, not house price inflation.

Even so, Darling was able to present slightly better borrowing figures. VAT revenues have picked up strongly so far this year. Unemployment has not risen as much as feared. The budget projects a 167 billion pound deficit for this year, an 11 billion pound reduction on the previous forecast. And over the next several years a similar improvement is retained. But in 2010-11 the projected government deficit remains a colossal 163 billion pounds, 11 percent of GDP.

Thereafter, the deficit shrinks more rapidly as spending cuts start to take effect. But financial markets may not give much credit to these medium-term forecasts, because Darling has neglected to say where the cuts will fall — presumably because he thinks it will be too distasteful for voters to see. What’s more, he only reduces the red ink by projecting fairly rapid GDP growth of 3.25 percent next year and an average of 3.5 percent in 2012 and beyond. As the UK restructures, growth is unlikely to be high.

It is probably only a matter of time before financial markets signal, through interest rates, that their patience has run out. That moment could come soon if Greece or other troubled euro zone economies cause a new wave of risk aversion. But Labour’s hope that the budget will get it through to the election will probably be fulfilled. Then it will be up to either an incoming Conservative government to tighten its belt or re-elected Labour to spell out where the spending axe will fall.

Hug a politician: the new election strategy

You know an election campaign is in full swing the world over when pictures start appearing of politicians kissing babies. But with a general election now just two months away, UK politicians seem to be have found new targets for their displays of affection: each other.

It started with Gordon Brown and Alistair Darling. After stories that the Prime Minister and his Chancellor had fallen out with one another over an interview in which Darling accused Brown aides of having “unleashed the forces of hell” at him, the two popped up at the weekly Prime Minister’s questions almost arm in arm.

As Brown and Darling chuckled away together on the front bench, Conservative leader David Cameron snorted: “Any closer and they’ll start kissing.”

The quip was met with approving guffaws for the Tory benches. But their appearance at a Thomson Reuters event on Tuesday shows Cameron and his team are not averse to a bit of metaphoric kissing and cuddling themselves.

Ken Clarke, the genial party elder whom Cameron brought in to give some senior clout to his economic team, said repeatedly how “delighted” he was to be working with Dave and George.

“It is a very united team and a very united party that is eager to get into government,” he gushed.  It was a “relaxed and easy atmosphere,” he continued and working with the pair gave him a “great deal of confidence.”

Getting the message?

What is Alistair Darling up to?

Normally regarded as a safe pair of hands, Chancellor Alistair Darling raised hell on Tuesday night by confirming on live television what everyone in Westminster has believed for some time.

That was that there were people who worked for the prime minister who briefed against him after he told a magazine interviewer in 2008 that the country was facing the worst economic conditions in 60 years.

“The forces of hell were unleashed,” Darling said on Tuesday, referring to the media operation against him from both Number 10 and the opposition Conservatives.

Brown was forced out early on to the airwaves Wednesday morning to say that he had never instructed anyone to brief against the Chancellor.

One explanation offered by Darling aides is that their boss was so used to explaining his version of events to journalists on background that he forgot he was on live TV.

The Conservatives say he is just so angry at the way he was treated that he cannot contain himself and feels he now has nothing to lose.

Brown loyalists just shrugged their shoulders when asked what they thought. Darling can be pretty blunt but surely he must have realised the storm his words would cause just when Labour was trying to put talks about splits and Brown’s personality behind it.

Has Alistair Darling done enough to revive Labour’s electoral hopes?

So how was it for you?

Chancellor Alistair Darling threw the dice in his pre-budget report in an attempt to bolster Labour’s chances of winning the general election in 2010.

From hitting bankers with a one-off bonus tax to lowering bingo duty, Darling played to the Labour heartlands, while hoping to win back voters who have been telling pollsters that they are done with Gordon Brown.

Other measures included the return of full value added tax in January, a 2.5 percent rise in the basic state pension, a 1.5 percent increase in child benefit, as well as help for small businesses and various initiatives to boost the government’s green credentials.

All this while admitting that the recession was worse than he had predicted, with the economy shrinking by 4.75 percent in 2009.

Not surprisingly Darling’s Conservative counterpart George Osborne wasn’t impressed, accusing the chancellor of  “sleight of hand” and “sneaky fiddling”.

Let us know what you think of the Chancellor’s pre-budget report and whether it will resuscitate Labour’s electoral hopes?

Too big to fail? Guerrilla central banking and the last resort

Deciding it was safe to come clean because banks are now on a more even keel and the worst of the credit crisis is behind us, the Bank of England has told the nation that at the height of the turmoil it secretly lent Royal Bank of Scotland and HBOS a colossal £62 billion, which is more than the entire British defence budget.

Both banks faced the imminent closure of high street cash machines and the curtailment of normal banking operations across the country.

The Bank said “this was a dire emergency” and Downing Street called the secret lending of taxpayers’ money in the Autumn of 2008 “a powerful reminder of how close the banking system came to near collapse.”

In Westminster, some MPs were flabbergasted, even though the loans have now been repaid.

“It is astonishing that this was kept secret for over a year,” said Vince Cable, finance spokesman for the Liberal Democrats. “The government has treated taxpayers like children while expecting them to foot the bill.”

John McFall, Treasury Committe chairman, said the sum caused “a little bit of an intake of breath thinking how many universities, how many colleges, how many jobs you could support with this.”

“It’s Enought to Make Anyone Feel Queasy,” was Ian King’s headline in The Times. “Any More £62 bn Loans You Haven’t mentioned, Merv?” asked the Daily Mirror, addressing itself to Bank of England Governor Mervyn King.

from The Great Debate UK:

Send your questions to Alistair Darling

Do you have a question you would like to ask Chancellor Alistair Darling? Now is your chance.

At 1:30pm British time on Wednesday, October 21, Reuters is hosting an exclusive Web 2.0 interview with Darling and we want you to send us your questions to put to the top man from the Treasury.

From the crippling global recession to the debate over bankers' bonuses, it has been a tumultuous year at Number 11 Downing Street. You may want to quiz the Chancellor on one of these topics, ask him about the government's plans to prevent another downturn or how Labour plan to defy the polls and win the upcoming general election.

During the interview we will put as many of your questions as possible to the Chancellor and will be running a liveblog of the event, much like we did during this social media interview with Liberal Democrat leader Nick Clegg.

Leave your question in the comments box below or via Twitter (using #askdarling) and join us on Wednesday for our Web 2.0 interview with the Chancellor.

Financial regulation plan: white paper or white flag?

Chancellor Alistair Darling set out new plans to strengthen regulation of financial markets on Wednesday. The white paper proposes enforcing higher levels of capital for banks and increasing liquidity to prevent a re-run of the credit crunch.

Darling wants banking pay packages to be policed and for a new Council for Financial Stability to bring together the work of the Bank of England, Financial Services Authority and the Treasury.

Although the “tripartite” setup under which the finance ministry, Financial Services Authority and Bank of England supervise the financial markets was widely seen as failing to spot problems at Northern Rock and other banks early enough, Darling has decided not to scrap it.

Shadow Chancellor George Osborne called the Labour plans “more of a white flag than a white paper” in a rebuttal in parliament.

“The next Conservative government will abolish the tripartite system and will put the Bank of England in charge of the banks . . . and other financial institutions because you cannot separate central banking from the financial supervision system,” he said.

What do you think, are the new plans more of a white flag than a white paper? Are the Conservatives on the right track or should the tripartite system be retained?

Punters cash in on Darling’s budget tie choice

Smokers and top earners were clear losers in Britain’s budget this year, as the government hiked taxes on cigarettes and the highest incomes.

But a lucky few must have been cheering in front of their televisions during the 51-minute speech.

Budget-watchers who bet hard cash that the chancellor of the exchequer, Alistair Darling, would wear a grey or blue tie to his address got a welcome bit of stimulus from the budget.

Betting firm Ladbrokes was giving odds of 3/1 and 16/a for a blue and grey, respectively. Perhaps aware of the odds, Darling put on a blue-gray striped one, and Ladbrokes paid out for both colours.

What did you think of the Budget?

Chancellor Alistair Darling has made his second annual Budget speech to parliament. Among the measures announced to the House were an increase in petrol duty of 2p per litre in September and a 2 percent increase in alcohol and tobacco duties from tonight.

Darling also announced a scrappage scheme offering £2,000 to people trading in cars older than 10 years for a newer vehicle. From next April there will be a new top tax rate of 50 percent for those earning more than 150,000 pounds a year.

Meanwhile, the annual limit on individual savings accounts has been raised to 10,200 pounds and the Stamp Duty holiday on properties sold for less than 175,000 was extended until the end of the year. There was also money for wind farms and an extra 1 billion pounds to help homeowners and the construction industry.

Darling also forecast that the UK economy will shrink by 3.5 percent in 2009, saying “No country could insulate itself from the world downturn.”

David Cameron, leader of the opposition Conservative party, said: “He is planning to borrow 348 billion pounds over the next two years, that is more — over just two years — than every previous government put together, not just every government since World War Two … but since the Bank of England was first founded more than 300 years ago. This budget does not do enough to bring the public finances under control.”

What did you make of the Chancellor’s Budget speech? Will you benefit from any of the measures? What are your thoughts on the increase in fuel, alcohol and tobacco duties? Do you think the scrappage scheme and new tax rate are a good idea? Finally, do you think it will have a positive effect on the UK economy?