Why have Osborne and Balls neutered themselves?

  • 26 March 2015
  • From the section Business
George Osborne and Ed Balls at the Queen's Speech 2014

Over the years I have spoken to more chancellors and shadow chancellors than most people of my age (that is not a boast, just a sad fact about my preoccupations).

And typically they say it is a very bad idea to rule out changes to tax rates when making manifesto commitments prior to a general election.

Their point has been that it is impossible to know when the global or indeed domestic economy will go into some kind of spasm that would see a chancellor boshed on the noggin with a wet fish, that would see tax revenues suddenly undermined. And in those circumstances, it is best to retain the ability to boost taxes in whatever way seems appropriate.

However, whichever of Tory or Labour is in power after 7 May, the new government's chancellor will have his or her (surely got to be possible) hands bound and tied when it comes to fiscal matters.

Because both parties have now ruled out increasing the basic and 40% rates of income tax, the rate of National Insurance and the rate of Value Added Tax.

Read full article Why have Osborne and Balls neutered themselves?

How low can interest rates go?

  • 25 March 2015
  • From the section Business
Bank of England
Bank of England might could "cut Bank Rate further towards zero"

The Bank of England's website says that the "effective lower bound" for the interest rate it sets, Bank Rate, is the current rate of 0.5%.

This is the level, according to the Bank, "below which it cannot be set" - the lowest practicable official interest rate.

Read full article How low can interest rates go?

Zero inflation means lower interest rates for longer

  • 24 March 2015
  • From the section Business
People shopping

Last week the Bank of England's chief economist Andy Haldane told us that the next move in the official interest rate was at least as likely to be down as up - because of the growing risk that inflation would remain well below the 2% target for longer.

So what do inflation figures for February tell us about whether the greater danger is prices that are falling, deflation, or prices that are set to rise too fast?

Read full article Zero inflation means lower interest rates for longer

Why Greek default looms

  • 23 March 2015
  • From the section Business
Euro towels in Greece

I have used the metaphor before of Greece and Germany being a feuding married couple, not really wanting a divorce but so unable ever to understand the other's point of view that terminal rupture remains a significant probability.

So for the Greek prime minister, Alexis Tsipras, it must have been personally humiliating to send his "please-send-cash-soon" letter to Angela Merkel, the German chancellor (the letter has been obtained by the FT).

Read full article Why Greek default looms

Can Osborne get off the rollercoaster?

  • 19 March 2015
  • From the section Business
Rollercoaster

The Chancellor told Jim Naughtie on the Today Prog that the scale of austerity in the opening years of the next parliament would be broadly the same as in the current parliament - and that, by implication, the Office for Budget Responsibility (which he created) was wrong to warn of a "rollercoaster' of public-service spending after the election.

So why are George Osborne and the OBR apparently disagreeing on something so important to all our lives - namely over whether the OBR's projection that between 2016 and 2018 public service cuts will be more than twice as deep as anything we've experienced since 2010?

Read full article Can Osborne get off the rollercoaster?

Osborne's famine followed by feast

  • 18 March 2015
  • From the section Business
Money in hand

Here are the big numbers in the Budget that caught my eye.

The national debt will now reach a peak in the current year, a year earlier than we were told only in December, at 80.4% of GDP or national income.

Read full article Osborne's famine followed by feast

A £6bn Budget windfall

  • 17 March 2015
  • From the section Business
Man's hand with £20 notes

Wednesday's Budget will show that by the end of the next Parliament, public spending cuts are expected to be £3bn or £4bn less than was forecast in December and the annual surplus could be around £2bn bigger.

Or to put it another way, the fall in inflation expectations generates an annual windfall for the Treasury of around £6bn.

Read full article A £6bn Budget windfall

How generous is the minimum wage increase?

  • 17 March 2015
  • From the section Business
Man's hand with £20 notes

For those of us fortunate enough to earn considerably more than the national minimum wage, a 3% rise to £6.70 may sound pretty derisory.

It is equivalent, for example, to just two and half flat-white coffees in a famous coffee chain, and would allow the recipient of that wage to rent a one-bedroom place in a dowdier part of London, so long as he or she didn't eat, use power, pay council tax or wear clothes.

Read full article How generous is the minimum wage increase?

Productivity is almost everything

  • 16 March 2015
  • From the section Business

In the Today Prog's Christmas Mastermind of 10 weeks ago, I notoriously - and typically - forgot that just a few weeks earlier I had written that improving the UK's lacklustre productivity performance is central to improving almost everything that matters in the UK economy.

Maybe it is a good thing that I don't take myself so seriously that I can actually remember my own analysis. Or perhaps not.

Read full article Productivity is almost everything

The power of Le Pen

  • 13 March 2015
  • From the section Business
Marine le Pen

If you think growth has been pretty lousy since the crash in Britain, until the recent spurt, it may be small comfort that the UK has done well relative to the European Union as a whole.

On the basis of latest published data, the British economy is now a little bigger, 3% or 4%, than at its previous peak in 2008, whereas the EU in the round is still a bit smaller.

Read full article The power of Le Pen