UK News

Insights from the UK and beyond

Do we need a bank bail-out?

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darling1.jpgEU leaders went to Paris at the weekend and vowed solemnly to co-operate in their handling of the credit crisis. By Monday all bets were off as different countries either broke ranks or strained at the leash in their desire to protect their own private savers first by offering blanket guarantees.

That spectacle has raised all manner of questions — should there be a continental banking regulator for example, to fill the gap between the various central banks and the global regulators like the IMF? 

For Britain it raises the immediate question of whether the government should move to stop any seepage of funds abroad by guaranteeing all savers’ deposits. At the moment deposits are guaranteed up to 50,000 pounds.

But the issue of guaranteeing savers’ deposits runs alongside the wider question for Chancellor Alistair Darling of whether Britain should bail out its banks in a blanket operation rather than just acting on a case-by-case basis — effectively buying a stake in the strugglers in a part-nationalisation.

Brown needs Darling in these troubled times

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    One thing looks certain after Alistair Darling’s speech to***the Labour Party conference on Monday — he’ll be Chancellor of***the Exchequer for a while yet.******    Prime Minister Gordon Brown is expected to reshuffle his***ministerial team next week and there’s been a lot of speculation***that Darling could lose his job and be moved to another***department.******    The silver-haired finance minister has had a rough ride***lately. The economy is on the brink of recession and his***comments in a magazine interview saying the economic challenges***were the greatest in 60 years caused a furore and were blamed***for sinking the pound.******    But delegates at the Labour conference today just loved him.***They stood and clapped and then they clapped some more after***Darling hit out at unfettered capitalism and the huge payouts***given to bankers that he said helped cause the credit crunch.******    Darling looked genuinely embarrassed. He called for them to***stop but the delegates just went on. Besides modesty, the***finance minister had another reason for wanting them to stop.******    He had another type of conference call to attend to. A G7***one. The finance ministers and central bankers of the rich***nations club were having a hastily-arranged telephone chat at***1230 London time to discuss the latest bout of market turmoil.******    Given London’s position as one of the world’s top financial***centres, Darling could hardly miss out and he rushed off the***stage to get on with his G7 buddies.******    The crisis also looks to have cemented Darling’s position.***It would seem odd to remove the finance minister when the whole***world financial system is in the middle of the biggest upheaval***in a generation.******    With Brown making his economic experience a key selling***point, he needs Darling on side.

A bigger role for unions?

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   *** For full politics coverage click here

The trade unions are getting tough and threatening a wave of strikes this Winter unless Gordon Brown takes action to ease the effect of the economic downturn on their members.

At Brighton this week, union leaders will attack the government’s policy of pegging public sector pay rises to the official 2 percent inflation target, when inflation is actually running at 4.4 percent and expected to jump towards 5 percent  as food and fuel prices rise.

Is the rates decision a good move?

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Bank of England policymakers have held rates steady at 5 percent for a fifth month running.

Inflation currently stands at more than double the central bank’s 2 percent target but any rise in rates to try to choke that off risks aggravating the overall economic slowdown caused by the credit crunch.BoE

Where is the economy headed?

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bank.jpgBritain’s second-quarter GDP growth was precisely zero, reflecting the country’s weakest performance since the recession of the early 1990s.

With growth in the services and manufacturing sectors equalling the dismal figures of 2005 and interest rate futures rising, it’s a double whammy, hitting both our pockets and, some would say, our morale.

Two sides to sterling’s tumble

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pound-coins-toby-melville.jpgSterling has extended its losses against the dollar to its lowest level in more than two years , trading just above $1.85. As recently as mid-July one pound would buy two dollars and there were plenty of tales of holidaymakers rushing to the United States to make the most of it.

It’s not hard to see why sterling is under pressure, even though inflation is currently well above target and the highest in years: rising unemployment, falling house prices, large trade and budget deficits, and slowing economic growth.

Has the Bank been too cautious?

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rtx71g6.jpgBattling with the twin evils of soaring inflation and weaker growth, the Bank of England has kept interest rates at 5 percent for the fourth month running.

With the risk of Britain possibly facing its first recession since the early 1990s, the MPC has clearly opted for caution.

Could house prices rise by a quarter?

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house-prices-sky-high.JPGForget everything you’ve heard about the looming property crash.

In the midst of dire warnings about collapsing house prices comes a lone voice offering a crumb of comfort for hard-pressed homeowners.

A report by the National Housing Federation says that far from falling off a cliff, house prices could actually rise by a quarter by 2013.

Wednesday’s front pages

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indycut2.jpgThe crucial poll win in Pennsylvania by US presidential hopeful Hillary Clinton came too late for many newspapers, who predominantly went instead with rising food prices and fears for a missing boy in Wednesday’s headlines.

THE INDEPENDENT: The Chilling Message From Zimbabwe’s Church Leaders

The paper runs a dramatic quote in red and black letters which says: “If nothing is done to help the people of Zimbabwe, we shall soon be witnessing genocide similar to that in Kenya and Rwanda.” Story here.

Brown fights fires at home while on U.S. trip

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brown.jpgFor Gordon Brown on his U.S. trip it has been a case of when the cat is away the mice will play. While Brown was at the White House working to shore up the “special relationship” with President George W. Bush, rebellion broke out in Labour ranks at home.

First, Labour peer Lord Desai launched an extraordinary attack on Brown, telling the Evening Standard: “Gordon Brown was put on earth to remind people how good Tony Blair was.”

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