UK News

Insights from the UK and beyond

from The Great Debate UK:

Banks, borrowing, bonds and Britain’s budget

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-Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. Join Reuters for a live discussion with guests as UK Chancellor George Osborne makes  an emergency budget statement at 12:30 p.m. British time on Tuesday, June 22, 2010.-

George Osborne must be thankful to Don Fabio and his boys for ensuring that Wednesday’s tabloids will have other things to think about than the Budget, because it is going to be one of the toughest ever.

There is every indication the advance billing is more than just news management. The pain is going to be frontloaded for two reasons.

First, if anyone thought the electoral cycle was dead, the run-up to the last election should have disabused them.

Rate cut round-up: “policy mistake” or “confidence boost”?

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The Bank of England’s decision to cut interest rates to a record low of 1.0 percent may have been widely predicted, but this did little to hold back the avalanche of commentary that began the moment the news came through at noon today.

Interest rates, which have now been cut five months in a row, are at the lowest level in the Bank’s 315-year history, and the list of people calling yet another easing pointless appeared to be getting longer.

How far will central banks go in 2009?

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The year 2008 has been filled with unprecedented events and all-time lows, a financial system overhaul and global turmoil. Could the New Year herald positive re-evaluation and a positive turnaround? And in what has been a year of sleepless nights for many, will a nation steeped in debt start to curb excess?

Rate cuts figured high on the news agenda as banks undertook radical measures to stabilise the economy. Within the space of one week, Britain saw the lowest base rate since the mid-1950s, the ECB took its rate to a two-and-a-half year low, the U.S. Federal Reserve aggressively slashed rates and a 175 point reduction was made by Sweden’s central bank.

The key question remains – will governments run out of weapons to boost the economy in 2009?

A lifeline or a time bomb?

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Chancellor Alistair Darling has delivered a 20 billion pound fiscal stimulus package to get the nation spending again and mitigate the worst effects of the downturn.

He cut VAT to 15 from 17.5 percent just in time for Christmas shopping – a move he said would put some 12.5 billion pounds in consumers’ pockets over 13 months. Other measures include well-leaked plans to help homeowners, small businesses, parents and pensioners.

A profound shift in party politics

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David Cameron’s decision to ditch a major Conservative pledge to match Labour spending plans pound for pound was hailed by commentators as an important step in the politics of the recession, opening up a clear gulf between the two main parties’ economic policies but exposing the Tories to considerable risk.

Labour is expected to cut taxes, accelerate public spending and announce more borrowing in Monday’s pre-budget report. Now their supporters can revive the spectre of “Tory cuts” to funding for schools and hospitals which helped the Conservatives lose the last two elections.

Media’s take on bank bailout

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Bank of EnglandThe Bank of England’s 50 billion pound credit swap for banks hit by the global credit crunch leaves a “sour taste ” for the Daily Mail, which accepts it is a necessary evil.

“How could allowing banks to swap their risky mortgage and credit card debts (amassed during years of lunatically-excessive lending) for cast-iron Government bonds be anything else?,” it asks. “So much for moral hazard.”

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