UK News

Insights from the UK and beyond

from The Great Debate UK:

Budget day: Politics not economics

--Sam Hill is Senior UK economist at RBC. The opinions expressed are his own.--

The headlines generated by the forthcoming UK budget are likely to be political rather than economic; the general election is next year. Despite a faster than expected fall in unemployment and inflation, macroeconomic developments since the December autumn statement present limited scope for forecast revisions to government borrowing. But come the post-budget analysis, some of the seemingly esoteric revised economic assumptions may have important consequences for how the budget is perceived politically.

The modest changes we do expect to the economic forecasts would be seen as positive in essence. Small upgrades to the growth outlook should translate into borrowing reductions of  between £3 billion and £6 billion per year throughout the five-year horizon. That would leave the underlying measure of borrowing at £332 billion for the six years to 2018-19, down from £358 billion in the existing forecast from December, which itself represented a significant improvement on last year’s budget.

In these terms the presentation of the budget maths looks, on the face of it, to be a good news story for the government. It can claim deficit reduction is getting back on track. The complication comes though in the assessment that is made by the Office for Budget Responsibility (OBR) about the responsible way to approach tackling the rest of the deficit from here.

The risk for the government is that the OBR’s updated outlook leads to the conclusion that further tax hikes or spending cuts are needed – despite those falls in the overall borrowing forecast. Whether or not this happens depends on how much below its capacity size the OBR thinks the economy is operating, both now and in future. The further below full potential the economy is judged to be, the more of the deficit it is safe to assume will disappear naturally as the economy grows. Conversely, if the OBR say there is no spare capacity, the entire remaining deficit from that point must be dealt with by announcing further policy tightening. This portion of the deficit is the structural deficit.

from The Great Debate UK:

Budget preview: Don’t expect pyrotechnics

--Nick Beecroft is Chairman, Saxo Capital Markets, Saxo Bank. The opinions expressed are his own.--

Those expecting a rivetingly exciting spectacle when the chancellor announces his budget next Wednesday will be in for disappointment, but that doesn’t mean that this won’t be an intensely political budget, given this really represents his last chance to make changes which will be fully appreciated by the electorate by the next general election. Having said this, his room for manoeuvre is limited, and the effect on the overall fiscal balance will be minimal.

from The Great Debate UK:

Budget background: Dark with light patches

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

Spring has sprung.

The grass has riz.

I wonder when the Budget is….

On 19th March actually or, more importantly in this age of nonstop campaigning, six weeks before the European elections and barely a year away from the general election. Since the 2015 Budget will be too late to affect our wallets before we go to the polls, this is George Osborne’s last chance to reassure us that the economic situation is under control. Will he be able to resist the temptation to give us a reward for our patience through four years of austerity and to reassure us that the misery is nearly over?

from The Great Debate UK:

Thinking outside the budget-shaped box

BRITAIN

- Dave Coplin is national technology editor at Microsoft UK. The opinions expressed are his own.-

The emergency budget was announced recently as a means to tackle the country’s deficit and Britain's current economic situation.

Does class matter in politics?

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borisThree big speeches have been delivered at the Conservative Party conference so far — by party leader David Cameron, the mayor of London and national bumbler, Boris Johnson, and the party’s spokesman on the economy, George Osborne.

What do all three men have in common apart from their membership of the Conservative Party? They were all educated at elite public schools (Johnson and Cameron at Eton and Osborne at St Paul’s) and all went to Oxford, where they were members of the same dining and social set, the secretive and selective Bullingdon Club.

Tories keep their powder dry for a 2010 election

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Like Labour’s in Birmingham a fortnight ago, the overall tone of the Conservative Party Spring conference in Gateshead this weekend has been pretty low-key.

Tory strategists say they are not expecting an electionDavid Cameron until 2010 — they argue that Gordon Brown might want an 2009 contest but will be constrained by a deficit in the polls and an economy that in all likelihood will still be reeling from the global credit crunch.

George Osborne and rabbits in hats

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Shadow Chancellor George Osborne talks to Tim Castle at the Conservative Spring Conference in Gateshead about the prospect for tax cuts under a future Tory government.

Click on the video below.

Interview: George Osborne on Northern Rock

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Shadow Chancellor George Osborne answers criticism that the Tories offered no credible alternative for the rescue of Northern Rock in this interview with Tim Castle at the Conservative Spring Conference at Gateshead.

Click on the video below.

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