Category: UK economy

Autumn statement: Live blog

November 29, 2011 12:00 pm by FT

Welcome to the Westminster blog’s live coverage of chancellor George Osborne’s autumn statement. One of the most eagerly anticipated statements since the coalition government took power was expected to offer a gloomy prognosis on the economy. Michael Hunter and Gordon Smith from the FT main newsdesk covered the statement live from 12.30 with additional comment from FT colleagues.

14.10 Thanks for joining us. You can find much more, including the full text of the chancellor’s speech and comprehensive analysis, including video interviews, at www.ft.com/autumn2011.

Continue reading: “Autumn statement: Live blog”

Tags: Autumn statement, Budget, Chancellor, economic crisis, George Osborne
Posted in David Cameron, Home affairs, Tax, Treasury, UK economy, UK politics, Unions | Permalink

Who will suffer from a cut in tax credits? The squeezed middle

November 28, 2011 5:40 pm by Kiran Stacey

Unless there is a last minute U-turn in Whitehall tonight, one of the ways which George Osborne will pay for the various jobs and infrastructure schemes in Tuesday’s growth review will be to squeeze tax credits.

This is a result of protracted bargaining – Osborne wanted to freeze benefits, but the combined efforts of the Lib Dems and Iain Duncan Smith put a stop to that. Eventually the compromise was made that credits would come under the axeman’s blade instead.

So who suffers if these are frozen or cut?

Continue reading: “Who will suffer from a cut in tax credits? The squeezed middle”

Tags: Benefits, George Osborne, Iain Duncan Smith, tax credits
Posted in Coalition, Conservatives, Deficit, Lib Dems, Nick Clegg, Recession, Tax, Treasury, UK economy, UK politics | Permalink

Exclusive: Byrne writes to Clegg to demand answers on jobs fund

November 25, 2011 3:43 pm by Kiran Stacey

The controversy over how Nick Clegg’s £1bn jobs fund is to be paid for has overshadowed the announcement itself, much to the annoyance of the Lib Dems. This morning, John Humphrys spent most of his interview with Clegg asking him whether tax credits were going to be squeezed to pay for his plan.

I should point out that no tax is hypothecated: we should not think the tax credits money is going directly into the jobs fund. However these things are true:

Continue reading: “Exclusive: Byrne writes to Clegg to demand answers on jobs fund”

Tags: Liam Byrne, Work programme
Posted in Coalition, Conservatives, Lib Dems, Nick Clegg, UK economy, UK politics | Permalink

PMQs: Cameron somehow wins on youth unemployment

November 23, 2011 12:40 pm by Kiran Stacey

Ed Miliband had some good lines ready for today’s prime minister’s questions. He decided to focus on youth unemployment, which recently topped 1 million people for the first time since records began.

Sensibly, he focused on long-term youth unemployment (over 12 months out of work, which is now at 260,000 people): both because Cameron would probably misinterpret the question and try to answer on overall youth unemployment (he did), and because the longer young people stay out of work, the harder it is for them to get back into the jobs market when the economy recovers.

Miliband decided to focus on the effect of scrapping Labour’s Future Jobs Fund, but Cameron was able to bat that away by referring to the Work Programme:

Continue reading: “PMQs: Cameron somehow wins on youth unemployment”

Tags: pmqs, Youth unemployment
Posted in Conservatives, David Cameron, Ed Miliband, Labour, UK economy, UK politics | Permalink

Osborne could meet his target even with a £1 trillion deficit by 2015

November 17, 2011 2:18 pm by Kiran Stacey

The unemployment stats on Wednesday triggered a new round of speculation about whether George Osborne was likely to meet his two fiscal targets: balancing the structural current deficit and having debt falling as a ratio to GDP by the end of the parliament.

Neither target is quite as tough as you might think, however, as the Guardian has pointed out today. On the debt target, technically, the government could borrow billions more than it is currently planning and still not breach it, as long as it slowed borrowing towards the end of the parliament and showed debt was falling by 2015. This is unlikely to happen (partially because it could breach the other target), but it is possible.

Continue reading: “Osborne could meet his target even with a £1 trillion deficit by 2015″

Tags: Automatic stabilisers, George Osborne
Posted in Coalition, Conservatives, Deficit, UK economy, UK politics | Permalink

Introducing Wilbur Ross, new co-owner of Northern Rock

November 17, 2011 10:50 am by Jim Pickard

Eagle-eyed readers may have noticed a discrepancy in the press releases issued this morning by UKFI and by Virgin on the sale of Northern Rock.

In the UKFI announcement there was no mention of Wilbur Ross, the US billionaire, or his company. By contrast the press release from Virgin Money says explicitly: “The acquisition is funded by an investment consortium led by Virgin Group and WL Ross & Co.”

It seems ministers are keen for Sir Richard Branson to be the smiling face of the deal, rather than the man dubbed by Fortune Magazine the “King of Bankruptcy”.

So who is Ross? He is a very canny financial investor who has made a speciality out of distressed assets. Recently he was part of a consortium which saved Bank of Ireland from full state ownership by taking a combined 35 per cent stake through rights issues: that consortium was made up of Fidelity Investments, Fairfax Financial Holdings and WL Ross & Co.

Continue reading: “Introducing Wilbur Ross, new co-owner of Northern Rock”

Tags: northern rock, Richard Branson, Virgin, Wilbur Ross
Posted in UK economy, UK politics | Permalink

Is PFI dead? Don’t be so sure

November 15, 2011 11:21 am by Nicholas Timmins

The private finance initiative – or at least the PFI as we know it – is dead. That’s what the fiercest critics will hope given the Treasury’s announcement of a “fundamental reassessment” of the model.

But don’t be too sure.

George Osborne, the chancellor, is looking for a model that “is cheaper, accesses a wider range of private sector financing sources, and strikes a better balance of risk between the private and public sectors.”

Continue reading: “Is PFI dead? Don’t be so sure”

Tags: George Osborne, PFI
Posted in Coalition, David Cameron, Treasury, UK economy, UK politics | Permalink

How to tackle youth unemployment

November 14, 2011 3:33 pm by Kiran Stacey

This Wednesday, unemployment among 16-24 year-olds is expected to top 1m people, its highest since records began in 1992. This has triggered a lot of anxiety and head scratching in government circles, prompting a whole week of events this week focusing on young people. That began today with David Cameron’s article about schools that are not failing but neverthless are “coasting” and need to be improved.

Why is youth unemployment so high? The first thing to say is obvious: there is a recession. It is true that youth unemployment has risen faster than overall unemployment, but this always happens in a recession, for two reasons: 1) employers are reluctant to lay off older workers, because of higher redundancy payments and “last-in-first-out” policies; 2) the first thing many organisations in difficult times do is stop recruiting, especially younger people.

Continue reading: “How to tackle youth unemployment”

Tags: Youth unemployment
Posted in Coalition, David Cameron, UK economy, UK politics | Permalink

Cable: Benefits will rise in line with inflation

November 13, 2011 3:58 pm by Kiran Stacey

We revealed earlier this month that George Osborne was considering slashing the benefits bill by linking them to earnings (which are stagnant), rather than inflation (which is rising fast).

Since then, the chancellor has been locked in a battle, not only with Nick Clegg, but also Iain Duncan Smith, the Tory work and pensions secretary, about whether the government should do this, having previously said benefits would rise in line with CPI.

If Vince Cable is to be believed, it looks like IDS and his Lib Dem allies have won this one. The business secretary told the BBC’s Politics Show:

Continue reading: “Cable: Benefits will rise in line with inflation”

Tags: Benefits, Iain Duncan Smith, Inflation, Vince Cable
Posted in Coalition, Conservatives, Lib Dems, Nick Clegg, Treasury, UK economy, UK politics | Permalink

It’s hard to draw up a growth review with no money

November 13, 2011 11:43 am by Kiran Stacey

We reported last week that George Osborne and Vince Cable were pushing for a new toll road scheme on the heavily congested A14 near Cambridge. Today, the Sunday Times suggests that road tolling will play a central role in the government’s growth review on November 29.

The paper says Osborne and Cable want £50bn from the private sector, mainly pension funds and insurance companies, to fund new infrastructure, including roads, homes and power stations. In return they will get a share of tolls, rents and energy bills.

The problem is that ministers can’t force private companies to spend their money on such schemes: all they can do is put the incentives in place for them to do so. But these carry their own risks.

Continue reading: “It’s hard to draw up a growth review with no money”

Tags: George Osborne, growth review, Vince Cable
Posted in Coalition, Conservatives, David Cameron, Deficit, Lib Dems, Nick Clegg, Treasury, UK economy, UK politics | Permalink

How much does each benefit cost?

November 7, 2011 1:13 pm by Kiran Stacey

UPDATE: I have now added in housing benefit – apologies for the omission, and thanks to Paul Treloar for pointing it out.

The brains over at the Treasury are currently trying to work out if there is a way to cut billions of pounds of public spending by freezing benefits in a way that would also be palatable to most voters. As we reported last week, it looks like pensions will be exempted from any freeze to avoid accusations of punishing older people. But what else is up for grabs, and how much could be saved?

Here is a table of each of the most significant benefits paid out by DWP and how much each one costs. I’ve done one column for how much was spent last year, one for how much is forecast to be spent next year, factoring in various policy changes, and one for how much they would cost next year if there were no spending cuts and they were allowed to rise with 5.2 per cent inflation.

Continue reading: “How much does each benefit cost?”

Tags: Benefits, DWP, Pensions
Posted in Conservatives, David Cameron, UK economy, UK politics | Permalink

Labour attacks Osborne for hurting pensioners

November 3, 2011 12:50 pm by Kiran Stacey

Labour is in a slightly difficult position about how to respond to the news in the FT today that the Treasury is looking to slash benefits by linking them to earnings or even freezing them temporarily.

Although Cameron said he wouldn’t “balance the books on the back of the poor”, Labour knows that attacking the government for hypocrisy on this point could make it look like they are standing up for benefits’ claimants – or “scroungers” as they are thought of by many people.

Instead, the opposition will want to pick its battles. At the moment, the Treasury is still actively considering applying this change to all benefits and pensions, which would affect a lot of people who don’t fall into the “scrounger”.

Continue reading: “Labour attacks Osborne for hurting pensioners”