UK News

Insights from the UK and beyond

from The Great Debate:

Britain’s austerity experiment is faltering

It was the Welsh sage Alan Watkins who remarked that a budget that looked good the day it was delivered to the British Parliament was sure to look terrible a week later, and vice versa. The avalanche of new information dumped by the Treasury is simply too much to grasp at a single sitting, and governments tend to bury bad news in a welter of statistics. And so it proved with finance minister George Osborne’s budget served up last week.

The immediate headlines stressed that rich Brits would pay less income tax – down from 50 percent to 45 percent – but it only took a day before even traditional Conservative cheerleaders like the Daily Mail were condemning Osborne for funding tax breaks for bankers and billionaires by stealing from those living in retirement. The paper’s cover screamed: “Osborne picks the pockets of pensioners.”

Osborne insists he is sticking to his “Plan A” to reduce the public deficit by sharply cutting state spending by 25 percent over the five-year parliament and imposing severe austerity. Because he believes his “Plan A” is on target, all he needed was a touch on the tiller. He therefore designed his budget to be fiscally neutral – that is, for every tax cut there was a corresponding tax increase. He put up tobacco and alcohol duties and sliced a little off corporation tax.

Osborne’s broader economic experiment, however, is fast faltering. If it were a drug trial, doctors would be urgently taking patients off the snake oil and feeding them the placebo. In 2010, he inherited from Gordon Brown’s Labour government a fast-rising recovery in economic growth, but now, after two years, GDP is headed south, and Britain is teetering on the edge of a government-inspired double-dip recession. In the last quarter of last year, GDP shrank by 0.3 percent.

from The Great Debate UK:

EU stress tests: for banks or governments?

- Laurence Copeland is a professor of finance at Cardiff Business School. The opinions expressed are his own.-

Worries about Europe’s banking system go back at least to 2007, but whereas the U.S. (and UK) banks appear to have weathered the storm, there are fears that for European banks the worst may lie ahead.  Concerns centre on four areas.

from MacroScope:

Some good econ reads from the Blogosphere

From the econ blogosphere:

UK BUDGET
-- The libertarian Adam Smith Institute says here that the UK government should look at every government job, programme and department, and ask whether they are really needed. "Do we really need new school buildings....? Should taxpayers really stump up for free bus passes, or winter fuel and Chistmas bonuses for wealthy pensioners?"

CHINESE FX
-- VOX publishes this post from senior research fellow Willem Thorbecke of the Asian Development Bank on China's latest move on the dollar peg. "China's action may facilitate a concerted appreciation in Factory Asia, helping the region redirect production away from western markets and towards domestic consumers."

from The Great Debate UK:

A history lesson for lenders

GREECE

-Laurence Copeland is a professor of finance at Cardiff University Business School. The opinions expressed are his own.-

Anyone looking for a broader perspective on the events of the last three years could hardly do better than choose for bedtime reading “This Time is Different” by Carmen Reinhart and Kenneth Rogoff.

from Global News Journal:

Should Norway bail out Iceland?

icesaveWhile not exactly pocket change, Iceland’s $5.5 billion Icesave debt to Britain and the Netherlands amounts to just 1.2 percent of the value of Norway’s offshore wealth fund. For Iceland, it's more than $15,000 per citizen.

Given the two countries’ close historic links -- Norwegian Vikings discovered the Atlantic island where people still speak a version of “old Norwegian” -- speculation about Oslo coming to the rescue has Reykjavik licking its lips.

from Global News Journal:

Cometh the hour, cometh Van Rompuy?

van rompuy2Three months ago, Herman van Rompuy might have struggled to be recognised on the streets of his native Belgium, let alone Paris or London. The bookish former prime minister, a fan of camping holidays and Haiku poetry, was nothing if not low-key; a studious consensus builder in the world of Belgian politics.

Three months on and Van Rompuy, 62, may not outwardly have changed much, but his title and the expectations surrounding him certainly have. In November he was chosen to be the first permanent president of the European Council, the body that represents the EU's 27 leaders, and on Thursday he will host those heads of state and government at an economic summit in Brussels -- the first such gathering he has chaired.

from Reuters Soccer Blog:

UEFA to call time on loss-making clubs

MALTA/Half Europe's leading professional clubs are losing money, according to UEFA, and the forthcoming Financial Fair Play initiative will be a concerted attempt to tackle the problem.

The new financial framework will mean that from the 2013-14 season, clubs must break even or face the threat of exclusion from European club competition.

from MacroScope:

Punctured Britain

If British chancellor Alistair Darling now occasionally tires of being reminded of his party's erstwhile promise of  "no more boom and bust", he won't thank British accountancy firm Grant Thornton  for sending journalists a bike puncture repair kit.

Billed as "Darling's economic repair kit -- fixes deflation in all business cycles", the marketing gimmick highlights the serious challenge facing Darling as he prepares to deliver his annual budget to parliament on April 22.

Tools to help you get out of debt

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Financial website Unbiased.co.uk announced this week that as a nation we spent the first 83 days of the year working just to pay the interest on our debts. Personal loan levels increased to 11.4 billion pounds in 2008, up by over 1.6 billion pounds on the previous year and mortgage debt from equity release loans also increased by 6.5 billion pounds. Credit card debt, on the other hand, decreased by just over 4.9 billion pounds.

If you are struggling to pay off your debts, here are some useful online resources to help you out.

from The Great Debate UK:

Deflation? It’s inflation you need to watch

-- David Kuo is a director at the financial Web site The Motley Fool. The views expressed are his own. --

david-kuo_motley-foolWhat are consumers supposed to make of the latest inflation numbers? Do we have inflation, deflation or a bit of stagflation?

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