UK economy

Kiran Stacey

HMS Ark Royal on a farewell tourLast month, we mapped out what each department could expect to face in the June spending review given the Treasury’s promise to keep cutting at the same pace as it has done before.

That study showed some of the most sensitive departments were in line for the steepest cuts. Local government was in line for £1.3bn of cuts, the business department, just over £1bn, and most sensitively of all, defence, nearly £700m.

Those calculations, however, only got us up to just over £7bn of cuts. We decided to take a cautious view, sticking to the idea of spending falling at the same trajectory as it has been so far, rather than striving to hit the £10bn figure. Read more

What was your response to the Budget? We asked readers on social media what the most important decisions were for them.

For Peter Curnow-Ford it was the stamp duty cut: Read more

Elizabeth Rigby

David Cameron and Nick Clegg were this morning falling over themselves to claim the credit for helping “hard working families” with news of a new voucher scheme that could be worth up to £1,200 per child.

After weeks of wrangling, the coalition was finally ready to press the button on a tax-free childcare scheme to replace the current “employer supported childcare” system. The new scheme will eventually reach up to 2.5m families – compared with the 450,000 who access the current voucher system – and include the self-employed. Read more

Kiran Stacey

George OsborneSome fascinating economic research by Ipsos Mori, published today, shows that George Osborne is the least popular chancellor in nearly a decade, with net approval ratings of -33. Nobody has had such bad ratings since Ken Clarke in the early 1990s.

At first sign this is unsurprising: this is the first recession we’ve had since the early 1990s (if you take 2008-now as one recession). But actually when you plot the popularity of chancellor’s against economic growth, the two are surprisingly unconnected.

Plotting chancellors’ approval ratings since 1976 tells us a few things: Read more

Kiran Stacey

I’ve updated this post at the bottom in light of this afternoon’s parliamentary debate on the issue.

As the Tories contemplate the fallout from coming third in the Eastleigh byelection, different ministers have been floating different ideas for recapturing the votes lost to Ukip. One such idea is banning newly-arrived migrants from accessing certain benefits and NHS services.

Polls suggest immigration is a major reason for voters choosing Ukip, and Conservatives worry that trend will only accelerate when limits on movement from Bulgaria and Romania to elsewhere in the EU are removed.

A cabinet sub-committee has been convened to look into the policy options, but in the face of EU rules forbidding discrimination between citizens of different European countries, is there anything they can do, or is this empty populist rhetoric? Read more

Kiran Stacey

George Osborne and Danny Alexander

George Osborne and Danny Alexander

This June, George Osborne will unveil his spending review for the financial year 2015/16. The chancellor is expecting to have to make around £10bn of cuts to Whitehall departments, which, as we revealed in the FT a few weeks ago, would mean some departments taking a particularly heavy whack.

Our figures show that cutting at the same pace as the government has done so far, which is what Osborne has promised, would mean another £1bn taken out of both the business department and the money that goes to local government. The defence budget, possibly the most sensitive of budgets, at least within the Conservative party, would fall by nearly £770m. Read more

Kiran Stacey

Ed Miliband’s announcement that Labour backs a mansion tax on properties over £2m, with the money used to fund a new 10p rate of income tax, has left the two coalition parties scrambling to trump the opposition with their own progressive tax plans.

For the Lib Dems, this meant leaking a tax document* being prepared in advance of the party’s spring conference. The paper proposed extending the mansion tax from people’s first properties to apply also to additional properties and any other land they may own. It also suggested the more radical idea of taxing assets such as paintings, jewellery and even record and book collections – although this was quickly dismissed by Vince Cable.

The Tories offered their own response on Sunday evening, when Tory chairman Grant Shapps appeared on BBC 5 Live’s Pienaar’s Politics. Shapps told the programme the Tories were considering pushing the income tax allowance beyond the £10,000 level currently planned – something that could go into the party’s 2015 manifesto.  Read more

Kiran Stacey

Today’s exchanges at PMQs sounded fairly hackneyed and well-worn. Ed Miliband chose to ask about the economy, and the usual argument took place – the Labour leader accused the coalition of stifling growth, the prime minister said it was all Labour’s fault for borrowing too much.

But Miliband did give one revealing answer during the debate. The Labour leader pointed out:

[Cameron] is borrowing £212bn more than he promised.

 Read more

Kiran Stacey

We reported this morning that Tory MPs are trying to make sure that the MoD doesn’t suffer further cuts at this year’s spending review. Mark Pritchard, a Tory backbencher, summed up the feeling of many of his colleagues when he told us:

Colleagues have, to date, reluctantly backed reductions in the MoD budget. However, any additional cuts to the defence, beyond those already agreed, will create a substantial political backlash. In short, the MoD budget has been cut enough, and the Treasury needs to look elsewhere for savings.

Pritchard and his colleagues should be on safe ground: the prime minister himself said that the defence settlement signed in 2010 would require “year-on-year real-terms growth in the defence budget in the years beyond 2015”. Read more

The UK government has revealed the planned route of the second stage of the proposed high speed rail link from London to the north of England. Lex’s Stuart Kirk and Oliver Ralph discuss who’ll invest in a project where any returns would be a long way off.

Kiran Stacey

North Sea oil - how much of a loss will this be?Amid all the debate about the economic viability of an independent Scotland, one element of the debate has been left behind, namely what Scottish independence would mean for the rest of the UK.

Martin Beck of Capital Economics has sought to remedy that today, putting out a 12-page briefing note on whether the rest of the UK would suffer if Scotland went it alone. Many of the conclusions are speculative: an awful lot depends on what the independence settlement looks like and what happens to the economy after 2014. But there are some interesting points definitely worth pulling out: Read more

Jim Pickard

Drivers on the M6The coalition’s mid-term “mid-term” parliamentary programme – which is hogging the headlines today – may seem rather thin compared with the original coalition agreement of 2010, which ran into hundreds of pledges.

What’s striking is today’s PR stunt (sorry, renewal of political vows) also includes one or two areas where an agreement is by no means pinned down between the Tories and Lib Dems.

One of these is the attempt by George Osborne and others to inject billions of pounds into the road network, preferably by a privatisation of the motorways and trunk roadsRead more