UK News

Insights from the UK and beyond

from Anatole Kaletsky:

Learning budget lessons from Japan and Britain

While the world is transfixed by the U.S. budget paralysis, fiscal policies have been moving in several other countries, most notably in Japan and Britain, with lessons for Washington and for other governments all over the world.

Let's start with the bad news: Shinzo Abe’s decision to increase consumption taxes from 5 to 8 percent next April. This massive tax hike, to be followed by another increase in 2015, threatens to strangle Japan’s consumer-led growth from next year onwards, since Abe looks unlikely to offset this massive fiscal tightening with stimulative measures that would maintain consumers’ spending power. Even if Abe delivers on his vague promise to compensate with business tax reductions, these will only aggravate the over-investment and corporate cash hoarding that have long distorted the Japanese economy. Meanwhile, the government’s willingness to risk economic recovery in the cause of fiscal discipline implies that those of us who believed Abe was making an unconditional commitment to do whatever it takes to achieve economic recovery were simply wrong. Now that the forces of budgetary austerity have reasserted themselves, Japan’s probability of ending its decades of stagnation is much reduced.

Now for the good news: a change of attitude to debt and borrowing is transforming Britain from the second-weakest G7 economy (after Italy) into a world champion of growth. As recently as last April, the British government was attacked by the International Monetary Fund’s chief economist for “playing with fire” by trying too hard to reduce its budget deficits. This week the IMF World Economic Outlook praised Britain’s rapidly improving economy and upgraded 2013 growth projections by 0.5 percentage points, to 1.4 percent. That may not sound like much, but this improvement comes when almost every economy is being downgraded -- and compared with last year’s miserable 0.2 percent growth rate, it feels almost like a boom.

Does this experience prove that David Cameron was right to persist with his unprecedented program of spending cuts, tax hikes and fiscal austerity? The answer is no, for two reasons.

from Breakingviews:

UK banks need government to solve funding squeeze

By George Hay
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.The Bank of England is tooling itself up. The UK central bank announced on Dec. 6 a new facility to help domestic lenders if the euro zone crisis causes a fully-fledged freeze in short-term funding markets. But banks may still need more help.

The BoE already has two ways to combat liquidity squeezes. It allows banks to borrow against liquid collateral for three or six months through its Indexed Long-Term Repo (ILTR) auctions. And it allows desperate banks to swap illiquid collateral for gilts for up to a year via its Discount Window Facility (DWF) – in return for a fat fee and big haircuts.

from Breakingviews:

New London air hub plan needs public money to fly

By Robert Cole
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Heathrow is a jam-packed embarrassment for those who promote London as a global financial centre. A brand new four-runway hub in the Thames estuary east of the UK capital might relieve the squeeze. The idea is favoured by Boris Johnson, the mayor of London. Central government enthusiasm would be greater if all the funding could be raised from the private sector – although the UK government now says it will explore plans to maintain the UK’s aviation hub status.

from Africa News blog:

Must we see rape in Britain to understand rape in Congo?

I was left somewhat traumatised after going to see a screening of a controversial new Hollywood-backed short released this week, aimed at highlighting the link between minerals mined for British mobile phones and the use of rape and murder as weapons of war in Democratic Republic of Congo (DRC).

The highly graphic campaign video - appropriately called Unwatchable - starts with a little English girl picking flowers in the garden of her family’s multi-million pound mansion in a picturesque Cotswolds village.

from FaithWorld:

Who wants to live forever? Scientist sees aging “cured” by stem cells

(An elderly couple stroll through Tiergarten central park on a sunny autumn day in Berlin October 29, 2010./Fabrizio Bensch)

If Aubrey de Grey's predictions are right, the first person who will live to see their 150th birthday has already been born. And the first person to live for 1,000 years could be less than 20 years younger. A biomedical gerontologist and chief scientist of a foundation dedicated to longevity research, de Grey reckons that within his own lifetime doctors could have all the tools they need to "cure" aging -- banishing diseases that come with it and extending life indefinitely.

from FaithWorld:

British police avert clashes at Luton anti-Islamist rally

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(An English Defence League supporter with effigy of Osama Bin Laden mask during a rally in Luton, February 5, 2011/Paul Hackett)

About 1,500 far-right protesters marched through the centre of the British city of Luton Saturday to rally against "militant Islam," requiring a heavy police presence to avert clashes with 1,000 anti-fascist demonstrators. A sixth of Luton's population is Muslim, and past marches by the English Defence League have led to conflict with their opponents. The city centre turned into a virtual ghost town before the rally, with shops boarded up and pubs closed.

from Matt Falloon:

It’s snow joke

Snow or no snow, these GDP figures are a nightmare for the Conservative-Liberal Democrat coalition government and throw up the risk of a self-fulfilling spiral of gloom.

When the shock 0.5 percent drop in economic output at the end of 2010 hits television screens on Tuesday night as families sit down to dinner, already-cautious consumers will feel more than a winter chill.

from Reuters Investigates:

BP – Tough to price in the consequences

Two graphs tell an apparently conflicting story: analysts forecast a steady recovery in BP's dividends, but its valuation remains weak. Tom Bergin's close look at the potential costs facing BP as a result of its Gulf of Mexico oil spill helps explain the latter, but less so the former.

dividendsrange  pricebook

from Breakingviews:

Britain’s unkind cuts may help growth sprout

It was billed as a bloodbath, and it is. By slashing public spending by 81 billion pounds over five years, Britain's coalition government is reversing the big increases of previous years. The plan is billed as necessary pain to secure the country's financial future, but it is also ideological. The aim is to move from unaffordable levels of public employment and welfare to private employment and a balanced budget. The danger, however, is that the economy stalls.

The cuts to the civil service are drastic and will cause distress, even though most departments' budgets over the life of the parliament have been reduced by a fifth, not the threatened quarter. The BBC, the foreign office, the police, even the royal family: none have been spared. The government wants services to be delivered more cheaply -- which means by fewer people.

from Reuters Investigates:

This is going to hurt

In Britain, the coalition government is readying its “comprehensiveAUSTERITY-BRITAIN spending review” later this month. Rather than get caught up in chasing which government departments or bodies will be cut, two of our reporters focused on a single council – in this case, the City of Birmingham, which happens to be the biggest local authority in Europe – and explored what it’s doing to prepare for the change ahead.

For a lot of people, the most visible sign of cuts in Britain will be at a local level, as services are pulled back and jobs are lost. In the leadup to the spending review details,  lobbyists in London have been doing great business. Check out their tactics for survival – although if you’re worried about your government contract but haven’t done anything about it, you’re probably already too late.

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