Britain's Deficit-cutting Plans Are 'Oxymoronic' Says Former US Treasury Secretary Larry Summers
THE DAILY TELEGRAPH: Larry Summers, President Obama's chief economic adviser for his first two years in office, has labelled Britain's plan to revive growth by tackling its deficit as "oxymoronic", in an unusually outspoken attack.

"I find the idea of expansionary fiscal contraction in the context of the world in which we now live to be every bit as oxymoronic as it sounds," Mr Summers told a gathering of economists and policy makers at the resort of Bretton Woods in New Hampshire.

The analysis from Mr Summers, who also served as US Treasury Secretary under President Clinton, will be unwelcome to a Coalition government that's pushing through tax increases and cutting spending.

The government insists that tackling the budget deficit is required to prevent bond investors losing confidence in the country's fiscal policy in the way they did with Greece and Portugal and have threatened to with Spain and Italy.

In last month's Budget, George Osborne, the chancellor of the exchequer, outlined plans to cut the budget deficit, which has reached 10p of gross domestic product (GDP), to £29bn in 2015 from £146bn this year.

Though it has damaged the Government's rating in the opinion polls, the policy has won the backing of business leaders in the UK who are now tasked with helping to drive the recovery.

However, Mr Summers said he was sceptical that a policy focused on improving "fiscal hygiene" would generate the confidence a recovery needs. "I'd be happy to say that if Britain enjoys a boom for the next two years from increased confidence," I will change my opinion, he said.

The attack from Mr Summers underlines the extent to which many in Washington DC are watching Britain to see whether the government's effort drives the economy back into recession or helps lays the foundation for a lasting recovery. » | Richard Blackden, US Business Editor | Saturday, April 09, 2011

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

THE GUARDIAN: Inflation hits 4.4% in February: Retail prices index, which includes housing costs, hit 5.5% - its highest level since July 1991 » | Graeme Wearden | Tuesday, March 22, 2011

UK Economy Contracted by 0.6% in Last Three Months of 2010
THE GUARDIAN: Office for National Statistics stuck to its view that the harsh winter weather in December - the coldest December on record - contributed 0.5 percentage points to the decline

Britain's economy shrank by 0.6% in the final quarter of last year, a sharper fall than previously thought.

The surprise downward revision, from a 0.5% drop reported last month, was blamed on industry and service sector firms whose performance was worse than originally estimated. Consumer spending also slipped and the economy was kept afloat by higher government spending, which will see sharp cuts in coming months.

The Office for National Statistics stuck to its view that the harsh winter weather in December – the coldest December on record – contributed 0.5 percentage points to the decline, so without the snow GDP would still have shown a slight fall.

The pound slipped to the day's low of $1.6110 against the dollar. >>> Julia Kollewe | Friday, February 25, 2011

Bank of England Chief Mervyn King: Standard of Living to Plunge at Fastest Rate Since 1920s
Households face the most dramatic squeeze in living standards since the 1920s, the Governor of the Bank of England warned, as he reacted to the shock disclosure that the economy was shrinking again

THE DAILY TELEGRAPH: Families will see their disposable income eaten up as they “pay the inevitable price” for the financial crisis, Mervyn King warned.

With wages failing to keep pace with rising inflation, workers’ take- home pay will end the year worth the same as in 2005 — the most prolonged fall in living standards for more than 80 years, he claimed.

Mr King issued the warning in a speech in Newcastle upon Tyne after official figures showed that gross domestic product fell by 0.5 per cent during the final three months last year. The Government blamed the unexpected reduction — the first since the third quarter of 2009 — on the freezing weather that paralysed much of the country last month.

But there were fears that the country was poised to slip back into recession, defined as two successive quarters of negative growth. Economists said the situation was “an absolute disaster”. Read on and comment >>> Robert Winnett, Deputy Political Editor | Tuesday, January 25, 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

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UK Economy Shrinks 0.5pc
THE DAILY TELEGRAPH: Britain's economy shrank unexpectedly in the final three months of last year as heavy snow compounded a slowdown in growth.

Gross domestic product fell 0.5pc in the fourth quarter, the most in more than a year, the Office for National Statistics reported on Tuesday. The decline compared with growth of 0.7pc in the third quarter.

George Osborne insisted that the Government will press ahead with planned cuts to public spending, despite warnings from forecasters that the economy may be too weak to withstand the package.

Blaming the growth figures on the cold weather, Mr Osborne maintained that a weakening in efforts to tackle the deficit would pose a greater bigger threat to the nation's future prosperity.

"There is no question of changing a fiscal plan that has established international credibility on the back of one very cold month. That would plunge Britain back into a financial crisis," the Chancellor said.

"We will not be blown off course by bad weather." Read on and comment >>> | Tuesday, January 25, 2011

Interest Rates 'Will Have to Rise Sixfold in Two Years'
THE DAILY TELEGRAPH: Interest rates will have to rise almost sixfold over the next two years to cope with rising inflation, business leaders have warned.

It will bring financial pain to seven million home owners with floating interest rates who will see a jump of almost £200 on a typical monthly mortgage payment.

Charities have already warned that repossessions are likely to rise next year and the threat of a succession of quick interest rate rises will exacerbate their fears.

The Confederation of British Industry predicts that higher than anticipated rises in the cost of living will push the Bank of England (BoE) to begin increasing interest rates in the spring.

It predicted that the Bank base rate – the interest rate at which the BoE lends to other banks – will rise more than two percentage points by the end of 2012. Mortgage rates are expected to follow closely behind. Read on and comment >>> Myra Butterworth, Personal Finance Correspondent | Monday, December 20, 2010

UK Economy: Is It On The Up?
Mark Littlewood from the Institute for Economic Affairs and former treasury minister Kitty Ussher debate the financial prospects for the UK next year

'What Is This Talk Of Decline?'
SKY NEWS: On the day the OBR revised up forecasts, Sky's Jeff Randall hears what Lord Razzall and Lord Bell have to say on the UK economy. The Tory peer is optimistic about the recovery - and wonders why more public sector jobs weren't cut.

Interest Rates Set to Rise as Economy Recovers
THE DAILY TELEGRAPH: Interest rates will start to rise sooner than expected after official figures showed the economy growing at its fastest rate for a decade, economists have said.

Growth over the past six months reached 2 per cent, the fastest pace of expansion over two consecutive quarters since 2000, according to the Office for National Statistics.

The economy received a further significant boost when Standard & Poor's, the ratings agency, revised its outlook on Britain from negative to stable and confirmed the country's AAA credit rating[.] >>> Andrew Porter and Philip Aldrick | Tuesday, October 26, 2010

THE DAILY TELEGRAPH: Greece reignites Europe debt woes: Europe's debt woes have returned to the fore after Greek premier George Papandreou threw open the door to fresh elections and vowed to liberate the nation from "slavery and surveillance". >>> Ambrose Evans-Pritchard | Tuesday, October 26, 2010

We have remarkable recessions and depressions these days. They used to last for years. Now, if we listen to the so-called specialists, they last for a mere few months! It seems like only yesterday that the UK economy was in danger of losing its AAA credit-rating. Now, its superb credit-rating is not in any doubt. Hmm! What is going on here? Surely Osborne's economic remedies cannot have kicked in yet. They have barely been announced. Methinks the people are being manipulated; methinks they are trying to pull the wool over our eyes. Hype it up, why don't you? – © Mark

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UK Economy: Lending Slumps in August

Britain Distances Itself From Euro-Zone Crisis
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

UK Austerity Drive Threatens to Snuff Out Recovery, IMF Warns
THE TELEGRAPH: Britain's fledgling recovery may be nipped in the bud by the savage cuts planned to grapple with the mountain of public debt, the International Monetary Fund has warned.

Official figures on Thursay provided the first clear evidence of positive momentum in the economy, but forecasters warned of "headwinds" from planned tax rises and spending cuts to shrink Britain's £155bn budget deficit, and the IMF on Thursday slashed its growth forecasts for the UK.

Manufacturing posted its fastest annual growth in more than 15 years, according to the Office for National Statistics, while economic output in the three months to June was the strongest it has been since the recession struck, the latest monthly estimates from the National Institute of Economic and Social Research (NIESR) showed.

However, NIESR warned of "headwinds [as] fiscal consolidation both in the UK and the euro area restrict growth". "There is clearly a risk that this rate of growth will not be maintained through the rest of this year," the economic forecaster said. >>> Philip Aldrick and Angela Monaghan | Friday, July 09, 2010