Back in September, Nick Clegg said he would block any attempt by George Osborne to freeze benefits in this week’s autumn statement. This put the chancellor in something of a quandary. He had been hoping to save several billions with the move, as well as winning the support of a public that is increasingly hostile to people who are claimants.
Another option remains on the table, however, is to allow benefits to rise, but not by as much as they would normally do if the link with inflation is kept. New analysis from the Institute of Public Policy Research suggests there could still be a fair amount of savings to be gained, for example, by increasing them by just 1 per cent.
The IPPR has produced a table of savings from possible options open to the chancellor: Read more
Mark Hoban, the employment minister, has just suffered a bit of a torrid press conference with the assorted ranks of the British press after the Department for Work and Pensions admitted its £5bn back-to-work scheme has fallen well short of its own targets.
The government’s figures show the scheme had found sustained employment (six months for most, three months for those most difficult to help) for just 2.3 per cent of people. The department had set a minimum performance level for itself of 5.5 per cent.
Why is it failing? There are many reasons, but here are the main ones:
1) The economy is worse than expected. The original assumptions built into the scheme were that the UK economy would be growing at 2 per cent. Of course, it is not, which means there are fewer jobs around to be had.
2) The targets were too high. As a way of getting the Treasury to cough up the cash needed for the scheme, the department for work and pensions set very aggressive targets for providers. This has been a concern right from the start of the scheme, as the FT’s former public policy editor, wrote last year. Read more
Ministers have been urged to consider imposing severe restrictions on new out-of-town retail developments to save town centres against a backdrop of mass closures of high street shops.
David Cameron and Mary Portas
The radical suggestion was first put forward nearly a year ago by Mary Portas, the government’s retail tsar, in a review into how to stem the decline of Britain’s small shops.
The government has accepted many of the report’s 28 recommendations, including setting up a Distressed Retail Property Taskforce that will be unveiled on Monday to combat growing numbers of boarded-up shops.
Yet ministers shied away from her idea that all out-of-town applications should automatically be called in by ministers.
Chris Wade, chief executive of the charity Action for Market Towns, urged ministers to revisit the idea. “That was quite a bold recommendation, but it was never accepted,” he said. “We would want to see that happen.”
For now, the government has reaffirmed its previous “town centre first” policy in its recently condensed national planning policy framework – namely that retailers should only be able to consider edge-of-town or out-of-town locations if town centre options are not possible. Read more
This morning’s research from the IPPR lays out in thorough detail just how difficult George Osborne will find it to meet his fiscal rules when announcing his spending review for the period 2015-2017 next year.
The think tank has analysed the forecasts from the OBR and the Treasury and calculated the cuts needed to make sure the current structural deficit is cleared by the end of the five-year period and debt is falling as a ratio of GDP by 2015.
Firstly, let’s assume no cuts are made to welfare. If that is the case, the chancellor needs to make average savings of 3.8 per cent from departmental budgets. If spread equally among the departments, that would mean hugely controversial measures such as cutting the NHS budget by nearly £8bn a year and education by nearly £4bn.
The Lib Dem conference, which starts on Saturday, could be an awkward affair for the party leadership. It is the first conference when Nick Clegg has been faced with members of his own parliamentary party calling for his resignation, and the second successive one where the party has been languishing in the polls.
The agenda for the conference shows the party leadership willing to give the faithful some red meat in the form of Tory-bashing motions. There is a motion insisting on national pay bargaining, one recommitting the party to Lords reform and one resisting any attempts to expand Heathrow.
But the biggest problem could come during the debate on the economy, when an amendment will be discussed calling for the government to rip up its fiscal mandate and take immediate measures to stimulate the economy. Read more
As I reported today, the Treasury is looking seriously into the idea of adopting German-style “mini jobs”, a scheme long championed by free market Conservative MPs. The model is that workers can earn up to €400, or £314, tax free each month, while their employers benefit from flexible labour with minimal bureaucracy: they pay a flat rate of wage taxes, insurance and pension contributions.
It is easy to see why companies and jobseekers might be clamouring for the government to pick this up, but there is actually a serious political case as well. Tories who were frustrated by the Liberal Democrats’ opposition to radical labour market reforms put forward by Adrian Beecroft have been calling for ministers to come forward with some new deregulation measures for some time.
The Lib Dems themselves are keen not to be seen as too obstructionist on this issue given the drive for growth, and party officials have assured me that they are not pushing back against the mini jobs idea. Could this be the middle way? Read more
Prime ministers aren’t supposed to engage in reshuffle speculation. Once they answer one question about a reshuffle, not only have they admitted it is going to happen, they invite a whole load of others.
But David Cameron seems to have been sufficiently spooked by recent speculation surrounding his chancellor that he felt moved to say the following to Sky’s Kay Burley:
KB: The economy will pick up, and George Osborne, his job will be safe?
DC: George Osborne is doing an excellent job in very difficult circumstances and he has my full support in going on and doing that job.
KB: And he’ll still be the chancellor at the next election?
Stephen Hester, chief executive of RBS
We reported this morning on high-level discussions in the government about the possibility of buying out the remaining 18 per cent of RBS that taxpayers do not already own.
The argument for doing so runs like this: we are already exposed to the vast majority of the bank’s hugely damaged balance sheet, and the losses only look like getting worse as we find out more about its distressed debt.
Given that, would it not be better to take advantage of our holding and actually use the bank to pump some credit into our stagnating economy?
At the moment, the problem with doing this is that it means making loans the bank does not currently consider commercially viable. That would be a dereliction of duty to the remaining private shareholders, who would have every reason to sue. The answer therefore is simply to buy them out, and actually use the government’s stake to achieve what it is trying to do. Read more
David Cameron’s interview with the Telegraph this morning was interesting for lots of reasons. But the main one was his big hint of having to cope with austerity until 2020. Asked if there was likely to be a decade of cuts, the prime minister said:
This is a period for all countries, not just in Europe but I think you will see it in America too, where we have to deal with our deficits and we have to have sustainable debts. I can’t see any time soon when…the pressure will be off.
I don’t see a time when difficult spending choices are going to go away.
Bleak words, which echoed what Sir Jeremy Heywood, the cabinet secretary, said last month. He told an audience at the Institute for Government:
Welcome to our live coverage of Marcus Agius’ testimony to MPs. The outgoing Barclays chairman faces questions on rate-rigging by the bank’s traders and his defence of Bob Diamond. By Tom Burgis and Ben Fenton in London. All times are London time.
12.53 That’s that for our live coverage of Agius’ evidence. That was brutal — even if the outgoing Barclays chairman somehow contrived to compare himself to Donald Rumsfeld and his bank to Roger Federer.
Three key nuggets from what we heard today:
- After points in Agius’ testimony contradicted Bob Diamond’s comments to MPs, some members of the Treasury select committee are convinced that Bob Diamond misled them
- Diamond will walk away with £2m in salary and cash in lieu of pension, inlcuding being paid double his contractual entitlement of six months’ notice. He has waived bonuses worth up to £20m
- FSA chairman Lord Turner wrote to Agius in April and told him that the regulator’s “cumulative impression” is that “Barclays has a tendency continually to seek advantage from complex structures or favourable regulatory interpretations”
12.41 Here’s a last thought from Chris Giles, the FT’s economics editor:
12.37 And with that, after two and a half hours in the hot seat, Agius is
ejected into the Thames allowed to depart. Read more
Welcome to our live coverage of Paul Tucker’s testimony to MPs probing the Libor scandal. The deputy governor of the Bank of England faces questions about his actions at the height of the financial crisis. By Tom Burgis and Ben Fenton in London with contributions from FT correspondents. All times are London time.
19.00 That’s that for our live blog. There are three main points from Tucker’s testimony.
- Did Labour ministers lean on him to get banks to lower Libor in the middle of the financial Crisis, as alleged by George Osborne? “Absolutely not.”
- Was Libor considered an ideal measure of interbank lending, even before the rigging revelations? Nope.
- Is the FSA board engaged in contingency plans should Libor collapse? Yes.
Thanks for reading. See FT.com through the evening for anaylsis of Tucker’s words. Tomorrow its the turn before the committee of Marcus Agius, Barclays’ outgoing chairman. Read more