Inflation and Public Borrowing Add to Budget 2011 Headaches
THE GUARDIAN: • Consumer price index hits 4.4% for February • Public sector net borrowing for February at £10.3bn • Hopes dashed of big cut in deficit • News increases chance of cautious budget package
George Osborne was handed a double dose of unwelcome pre-budget news on Tuesday when official figures showed inflation leaping to 4.4% and public borrowing hit its highest February level since modern records began in 1993.
With the chancellor putting the finishing touches to his second package of fiscal measures, the rise in inflation put additional pressure on the Bank of England to raise interest rates while the deterioration in the public finances put paid to City hopes that borrowing in 2010-11 would significantly undershoot the government's £148bn target.
The disappointing economic news increases the chances of a cautious package from Osborne on Wednesday. The setback to the public finances gives the chancellor even less scope for budget giveaways and he will see a tough fiscal stance as necessary to prevent the Bank from raising interest rates.
Higher heating costs, the soaring price of oil and mark-ups from clothing and footwear retailers were mainly responsible for the increase in the consumer prices index measure of inflation from 4% to a 28-month high of 4.4%, according to the Office for National Statistics. » | Larry Elliott, economics editor | Tuesday, March 22, 2011
Millionaire Bankers' Message to Britain: We're All Right, Jack
THE INDEPENDENT ON SUNDAY: Britain’s bankers are celebrating bumper bonuses. Whatever happened to the Government’s pledge to tackle them?
After umpteen calls for restraint by ministers, weighing the public relations impact, and consulting colleagues and advisers, Barclays chief executive Bob Diamond has made his most difficult decision. The multi-millionaire is set to accept a £9m bonus, one of the largest in the world, and will be followed by the bosses of the other major banks. This shows that they are all in something together, even if it's not what the rest of us are in.
Mr Diamond canvassed close City friends before deciding to take the bumper bonus which he fears will reignite the row over bankers pay. Sources close to him said: "Bob's been in a real dilemma as he can't stand this country's culture of banker-bashing and finds our attitude to bonuses extraordinary. But he is also aware of public opinion, so sounded out people about whether he should turn down his bonus again for the third year, take less or give some to charity."
Despite rising public anger about the scale of City payouts, David Cameron insisted last night that he was not interested in "headlines satisfying people today and tomorrow that I've given the banks a good kick in the pants. Can we do more on bonuses, particularly on those banks we own? Yes we can, and yes we will," he told The Sunday Telegraph. "But look, we've just been talking about growth. I don't believe actually in the long run, you can deliver the enterprise-growth agenda while having a running war with the British banking industry at the same time."
Some of those whom Mr Diamond – or his advisers – have consulted counselled him to show restraint. But the American decided that when he is offered the pay package – somewhere between £7m and £10m – he is minded to take it. >>> Margareta Pagano, Business Editor | Sunday, February 06, 2011
George Osborne: Budget Cuts Keep Down Interest Rates
George Osborne has said the Government's austerity package will keep down interest rates for borrowers after economists questioned his strategy following a sharp contraction in the economy
Terry Murden: Bank Bonuses Are Back as Politicians Roll Over
THE SCOTSMAN: NO-ONE should be surprised that the banks are expected to defy public opinion and once again pay multi-million pound bonuses.
Difficulties in controlling the bonus culture have been made plain by the frustrations felt by politicians across the spectrum and were highlighted here as far back as August 2009 after the then shadow chancellor George Osborne demanded that bonuses should be banned altogether in banks that had been bailed out by the taxpayer.
Well, he's moved a long way from that particular argument and now doesn't even see eye-to-eye with the bite-your-legs business secretary Vince Cable, who has found himself muzzled over the issue.
The bankers believe the Lib Dems who have been making most of the noise on this issue are now a bit of a spent force in the debate and that the slightly more banker-friendly tone emanating from Osborne and Prime Minister David Cameron will leave them free to award themselves the sums they see as their right.
The banks argue that they contributed towards the £53.4 billion paid in taxes last year by the financial services industry, equal to 11.2 per cent of Britain's total tax receipts. No wonder the Treasury should consider it inappropriate to bite the hand that feeds it.
Before Christmas there were more threats of a new bonus tax, an idea revisited by Deputy Prime Minister Nick Clegg, and warnings from Cable that the banks would be punished if they didn't change their ways. But opinion in the City is that there is not much substance behind them.
The bankers are now said to feel so confident of getting away with paying large bonuses that they see no further need for Project Merlin, the initiative led by Barclays former chief executive John Varley to repair relations with the government. Expect the next round of bonuses to be trimmed, but only marginally, and as an acknowledgement of, rather than a concession to, public outrage. >>> Terry Murden | Sunday, January 09, 2011
Mervyn King Told US Cameron and Osborne Were 'Out of Their Depth’
THE GUARDIAN: Diplomatic memos reveal Bank governor thought top Conservatives lacked experience to deal with deficit
WikiLeaks cables reveal that Mervyn King was worried about David Cameron and George Osborne's lack of economic depth. Photograph: The Guardian
The head of the Bank of England privately criticised David Cameron and George Osborne for their lack of experience, the lack of depth in their inner circle and their tendency to think about issues only in terms of their electoral impact, according to leaked US embassy cables.
Mervyn King told the US ambassador, Louis Susman, he had held private meetings with the two Conservative politicians before the election to urge them to draw up a detailed plan to reduce the deficit.
He said the pair operated too much within a narrow circle and "had a tendency to think about issues only in terms of politics, and how they might affect Tory electorability". He also predicted that economic recovery would be "a long drawn-out process", since Britain had not been through an economic restructuring.
His apparent pressure on the Tories, a few months before the election, gives further credence to the claim that King was central in persuading leading coalition figures to back a far more dramatic deficit-reduction programme than any politician advocated during the election campaign. He has recently been criticised by members of the Bank's monetary policy committee for straying into politics. Read on and comment >>> David Leigh and Patrick Wintour | Tuesday, November 30, 2010
WikiLeaks: Mervyn King Should Quit Over 'Political Bias', Says Blanchflower
THE GUARDIAN: Leaked US cables show governor of Bank of England's 'thirst for power has clouded his judgment', former colleague says
David Blanchflower, a leading economist and former member of the Bank of England's monetary policy committee, has called on Mervyn King to quit as governor of the Bank of England following leaked US cables that he claims show King's "thirst for power and influence ... has clouded his judgment one too many times".
In his toughest attack on his former colleague to date, Blanchflower seized on revelations that suggest King may have been central in persuading leading coalition figures to back a far more dramatic deficit-reduction programme than any politician advocated during the election campaign.
Blanchflower, who stepped down from the policy committee last year and who has warned the coalition government's deficit reduction programme could lead to a recession, seized on the information revealed in the latest tranche of leaked US embassy cables released by WikiLeaks to say King's position was now untenable. >>> Hélène Mulholland, political reporter | Wednesday, November 01, 2010
David Blanchflower: Mervyn King Must Go
THE GUARDIAN: In showing his true party political colours, Mervyn King has compromised the Bank of England's independence
Mervyn King is one smart guy and that has always been abundantly clear. Unfortunately, it is his thirst for power and influence that has clouded his judgment one too many times. He has now committed the unforgivable sin of compromising the independence of the Bank of England by involving himself in the economic policy of the coalition. He is expected to be politically neutral but has shown himself to be politically biased and as a result is now in an untenable position. King must go. >>> David Blanchflower | Wednesday, November 01, 2010
Bank Chief Attacks PM's 'Lack Of Experience'
The head of the Bank of England criticised David Cameron and George Osborne for their lack of experience ahead of the General Election, according to the latest leak of US diplomatic cables
Tuesday, October 5, 2010
Are Cameron and Osborne Too Rich to Know How the Middle Classes Feel About Child Benefit?
David Cameron and George Osborne too rich to understand? Photo: The Telegraph
THE TELEGRAPH – BLOG – DAVID HUGHES: Out of the smouldering wreckage of the child benefit announcement is emerging a view of the Tory leadership that will, if it takes hold, be immensely damaging. It is that they are so well-heeled that they simply do not have a clue about how most people live their lives. David Cameron and George Osborne have never had to worry about money, ever. It has never impinged on their charmed existences. Read on and comment >>> David Hughes | Tuesday, October 05, 2010
Monday, October 4, 2010
Now That’s Really Dumb, George!
THE TELEGRAPH: Middle class parents who take time out from work to look after their children will lose out on thousands of pounds of Government handouts under a reform of child benefit announced by George Osborne.
In a move designed to save a billion pounds a year, the Chancellor annouced that higher-rate taxpayers will no longer be eligible for the benefits.
However the way the system is calculated threatens to put families with just one breadwinner at a disadvantage relative to households where both parents work.
This is because families with a combined income of £87,000 where both parents earn just under the higher-rate tax threshold of £44,000 are still entitled to the benefit while those with just one breadwinner earning £45,000 are not.
If the withdrawal of the benefit is not tapered, it could also mean that parents earning just below the threshold could be penalised if they get a pay rise.
The system relies on higher rate taxpayers declaring whether anyone in their household is claiming the benefit which can then be deducted from their earnings.
Mr Osborne defended the plan by pointing out that the costs of conducting a means test on every family would eat up much of the savings from cutting the benefit payouts. He claimed that the average income for households with one higher rate taxpayer is £75,000.
Speaking in an interview on ITV's Daybreak this morning he described the move as "a tough but fair decision."
He added: "It's just not fair to ask someone who's on £15 or £20,000 a year to be paying for the child benefit of someone who's on £50,000 or even more."
THE WALL STREET JOURNAL: Britain’s new government has tried to distance itself from Europe’s debt crisis by embarking on painful economic austerity measures. The U.K. pound’s rise against the dollar and euro suggests its strategy is starting to pay off.
The pound has advanced 6% against the crisis-racked euro this year, picking up steam after Britain’s newly elected coalition government announced public-spending cuts and tax rises that have quieted down talk of a much-feared cut to Britain’s credit rating.
Prime Minister David Cameron and Treasury chief George Osborne are betting that Britain’s first order of business is fixing the public finances to avoid a Greece-style debt crisis. Their opposition, the Labour Party, insists that massive spending cuts this year could throw a wrench in Britain’s fragile economic recovery.
But so far investors are giving Britain’s economy the benefit of the doubt. Even as some analysts rub their eyes in disbelief, the U.K. pound continues to experience a big bounce: We’ve gone from one pound buying $1.42 in May to $1.5280. That’s getting closer to the roughly $1.60 level where the pound started the year.
Just about everything is going sterling’s way Wednesday. Good profit numbers from the U.S.’s Intel is fueling optimism and encouraging investors to take riskier positions like the U.K. pound. Fresh figures Wednesday on U.K. unemployment showed Britain’s rate falling to a 15-month low of 4.5% in June.
A day earlier, government reports showed that Britain’s inflation rate remains too high for the Bank of England, with prices rising 3.2% annually. That is raising expectations that the U.K. central bank could move faster than currently expected to raise interest rates. Higher rates make the pound more appealing. >>> Neil Shah | Wednesday, July 14, 2010
THE GUARDIAN: • Consumer price index hits 4.4% for February • Public sector net borrowing for February at £10.3bn • Hopes dashed of big cut in deficit • News increases chance of cautious budget package
