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Check FAQAbout David
David Smith has been Washington correspondent of The Guardian since October 2015, reporting on the presidential election campaigns of Donald Trump, Hillary Clinton and other candidates. He has travelled to the US naval base in Guantanamo Bay, Cuba, and reports from the White House and State Department in Washington. He was previously Africa correspondent, based in Johannesburg, South Africa, where he wrote about the 2010 football World Cup, death of Nelson Mandela and murder trial of Oscar Pistorius. He travelled to countries including the Central African Republic, the Democratic Republic of the Congo, Ethiopia, Eritrea, Ivory Coast, Libya, Nigeria, Rwanda, Somalia, South Sudan, Zambia and Zimbabwe. David studied at the University of Leeds and edited its student newspaper before joining the Daily Express as a graduate trainee in 1997. He moved to The Observer in 2003 and reported from countries including Afghanistan and Iraq. David appears as a commentator on NPR, the BBC, CNN, Sky News and other media and has more than 100,000 followers on Twitter. In 2014 he was runner-up in the UK's Frontline Club Awards and shortlisted for the Society of Editors foreign reporter of the year, and has been longlisted twice for the One World Media Awards and twice for the Orwell Prize for political writing.
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Whatever happened to the UK’s self-employed?
The article examines the significant decline in the number of self-employed individuals in the UK, which has dropped from 5.03 million before the pandemic to 4.27 million. Factors contributing to this decline include the lack of furlough-type support for many self-employed during the pandemic, changes in the labour market with an increase in non-UK born workers, and the impact of IR35 tax regulations. The decline in self-employment is seen as detrimental to the economy, as self-employment often leads to the creation of small businesses that generate wealth and employment.
How the Bank of England lost that £45 billion
The Bank of England's quantitative easing (QE) program, initiated in response to the Global Financial Crisis and later expanded during the Brexit referendum and the pandemic, has led to significant financial transfers between the Bank and HM Treasury. The Bank's asset purchase facility (APF) peaked at £895 billion, but recent quantitative tightening (QT) efforts have reduced this to £690 billion. Rising interest rates have caused the Bank to pay more to commercial banks than it receives in dividends, resulting in a £44.5 billion shortfall for the Treasury in 2023-24. The Treasury has transferred nearly £61 billion to the Bank to cover these losses. The article discusses the implications of these financial mechanisms and the potential for future reductions in APF losses through lower interest rates.
How can we get 80% of Britons into work? What history tells us
The article discusses the challenges and potential strategies for increasing the employment rate in the UK to 80%, up from the current 74.4%. Historical employment trends, particularly the rise in female employment, are examined. The article highlights the need to address long-term sickness and better integrate work, health, and skills. The Learning and Work Institute suggests that improving employment for people with disabilities and enhancing childcare provision could significantly boost employment rates. The government's role and the importance of efficient use of human resources are emphasized. Additionally, the article briefly touches on the inefficiencies in the UK's infrastructure projects, particularly smart motorways.
How Labour can get the economy working again
Liam Byrne's infamous note, 'I am afraid there is no money,' written in 2010, has haunted him ever since. The note, intended as a joke, was used by the coalition government and mentioned by Rishi Sunak during the election campaign. Byrne, re-elected recently, follows a tradition of outgoing officials leaving notes for their successors, as Reginald Maudling did for Jim Callaghan in 1964. The article explores the Labour Party's economic strategies and historical context.
How serious a threat to France — and the eurozone — is Macron’s gamble
Emmanuel Macron's decision to call a snap National Assembly poll backfired, with Marine Le Pen's National Rally emerging as the largest party in the first round and poised for another strong showing. Macron's strategy aimed to shift voters back to the mainstream after their support for National Rally in the European Parliament elections, but it risks a split vote between far-left and far-right factions.
Labour will preach stability – so the EU will have to wait
The article reflects on past Labour Party actions and speculates on future economic policies under Keir Starmer and Rachel Reeves, emphasizing stability over radical changes. Historical references include Gordon Brown's announcement of Bank of England independence. The EU is mentioned as a secondary consideration.
There’s a wall of money to invest in the UK, and it may already be here
The concept of a 'wall of money' from international investors has been influential in UK general elections, particularly during Margaret Thatcher's era. Post her 1987 victory, Chancellor Nigel Lawson's economic policies, including interest rate cuts and the UK's membership in the European exchange-rate mechanism, had significant impacts, including increased inflation and economic challenges.
Rachel Reeves and why an economist becoming chancellor is rare
Rachel Reeves is poised to become the first female chancellor of the exchequer in the United Kingdom, marking a significant milestone in gender equality within British political offices. The article highlights the historical context of the role, noting that all previous chancellors have been men, and emphasizes the importance of this change. The text reflects a positive sentiment towards Reeves' appointment and underscores the broader implications for gender representation in high political positions.
Interest rates will fall and better times lie ahead
The article discusses the trajectory of interest rates and inflation in the UK, highlighting the Bank of England's cautious approach to rate cuts despite a drop in inflation to 2%. It critiques the Conservative Party's handling of economic issues and the use of misleading statistics by political figures, including Prime Minister Rishi Sunak. The article also touches on the broader economic context, including consumer confidence and export performance, suggesting that while better times may lie ahead, significant challenges remain.
Teachers will be given protection from claims of blasphemy by religious groups under proposals set out in a government-commissioned report
Teachers will be given protection from claims of blasphemy by religious groups under proposals set out in a government-commissioned report. The recommendations include legal guarantees upholding teachers' rights to freedom of expression and barring schools from certain actions. This move aims to safeguard educational professionals and ensure their ability to teach without fear of religious backlash.
Keir Starmer criticised for axing Rwanda scheme — as it happened
Keir Starmer, the new UK Prime Minister, has faced criticism for scrapping the Rwanda migrants scheme, which was deemed ineffective and costly. His government has made several key appointments, including Jacqui Smith as a minister of state in the Department of Education and Patrick Vallance as science minister. Starmer has also held discussions with world leaders, including Joe Biden and Emmanuel Macron, and plans to visit the four nations of the UK. The Labour Party's victory marks a significant shift in British politics, with a focus on economic stability, NHS reform, and tackling crime. The new government faces challenges, including addressing prison overcrowding and maintaining border security.
Spring has sprung, but chill winds still blow through the economy
Spring appears to have arrived for the economy in the UK and Europe, with expectations of growth in the first quarter of the year. Economists are looking at surveys and the purchasing managers’ index (PMI) for early indications of business-to-business activity, suggesting that the recovery is gaining momentum.
A ‘soft landing’ for the economy looks harder to achieve
Rising tensions in the Middle East, combined with the ongoing war in Ukraine, pose a threat to the global economy, including the UK. Despite these challenges, the economic damage has been limited so far. The Russian invasion of Ukraine, which began over two years ago, contributed to high inflation but did not prevent a post-pandemic recovery. According to the International Monetary Fund, global GDP grew by 3.5% in 2022 and 3.2% in 2023.
Bank of England's Struggle with Inflation and Credibility
The Bank of England is facing criticism for its inability to control inflation, which has led to societal and economic consequences, including a mortgage crisis and strikes. Despite the Federal Reserve pausing rate hikes, the Bank is pressured to continue raising interest rates amidst high wage growth and a tight labor market. Governor Andrew Bailey has acknowledged the Bank's forecasting failures and an external review is underway. The Bank's credibility is at stake, with discussions about returning interest rate control to politicians and implementing price controls.
A slowing jobs market will be good news for the Bank of England
Upcoming figures on the United Kingdom's monthly gross domestic product will be pivotal for the government ahead of May's local elections. A slight increase is expected, which could allow ministers to claim economic improvement. A lack of growth might lead to attributing the stagnation to external factors such as the weather.
Industry is looking up, but don’t celebrate too much just yet
A recent survey indicated positive developments in the UK manufacturing sector, with the purchasing managers’ index (PMI) for UK manufacturing, published by S&P Global, rising above the key 50 level for the first time since July 2022, signaling growth. However, the sector still lags behind the UK services sector, which posted a PMI of 53.1.
Rishi Sunak got it right with the furlough scheme
Four years ago, Rishi Sunak, shortly after becoming chancellor, introduced the coronavirus job retention scheme (CJRS) during a Downing Street press conference. The scheme, commonly known as furlough, was part of his plan to support jobs and incomes during the COVID-19 pandemic. The article praises Sunak's initiative and its impact.
Housing crisis requires long-term solutions, not soundbites
The article discusses the UK's housing crisis as a long-term issue that predates the current Conservative government, emphasizing the need for lasting solutions rather than short-term rhetoric. It suggests reforms to the planning system to prevent local objections from delaying necessary housing and calls for developers to be compelled to build promptly after receiving permission. The article also advocates for the enforcement of developer agreements, particularly regarding the construction of social housing and services.
No 11’s revolving door has put tax policy in a spin
Speculation surrounds Chancellor Jeremy Hunt's potential decision to implement another 2p tax cut, possibly in national insurance or income tax. Encouraged by Treasury and Downing Street advisers, this follows a previous 2p cut announced in the autumn statement. The article highlights the uncertainty and strategic considerations in the UK's tax policy.
Economists were too gloomy about the UK— thanks to Liz Truss
The article discusses the annual forecasting league table for the UK economy, highlighting that economists were overly pessimistic about the UK's economic performance last year. It attributes the better-than-expected results to the policies of Liz Truss, suggesting that learning from past data can provide valuable insights for future economic forecasts.
Why we should embrace an ageing but active population
The article discusses the implications of an ageing population on economic factors such as debt. It highlights the increase in the number of people aged 65 and over in the UK over the next 20 years, which is projected to rise from less than 13 million to more than 20 million. The discussion is framed as a companion piece to a previous column on debt, suggesting that the ageing population is a significant driver of long-term debt.
What does recession mean for the UK? The economy in five charts
The UK entered a technical recession in the second half of the previous year, with GDP falling by 0.3% in the fourth quarter after a 0.1% decline in the third. The article suggests that GDP per capita is a more relevant measure for individuals, which has also been declining, with a 0.6% fall in the last quarter of the year following a 0.4% decrease in the third quarter.
If we play to our strengths, Britain can escape the dreaded doom-loop
The Bank of England's latest economic outlook is slightly more optimistic than three months ago but still offers little encouragement, with no clear signs of early interest rate cuts. A single vote for a rate cut was outweighed by two votes for an increase. The Bank predicts inflation will hit the 2% target by spring but rise to 2.75% by year-end. This follows the International Monetary Fund's latest world economic outlook, which was only marginally more positive.
Interest rates will stay high until the pay juggernaut slows down
Pay is a central issue in ongoing industrial disputes, with train drivers and junior doctors striking over inadequate pay offers. The article suggests that the rapid growth in pay is contributing to high interest rates.
Will British shoppers ever be big spenders again?
The UK economy, traditionally reliant on consumer spending, is facing a change in narrative. While exports and investment are still necessary for healthier growth, the economy could benefit from an increase in consumer spending, which accounts for about 60% of GDP. The concern over household debt, which peaked at 156% of income in 2008, has subsided as it fell to 126%.
Even after Brexit, the UK is getting pulled closer to Europe
Four years after formally leaving the European Union, the UK remains closely tied to Europe, with over half of its trade still conducted with EU countries. This finding from the UK in a Changing Europe think tank highlights the ongoing economic interdependence between the UK and the EU, despite Brexit advocates' hopes for reduced reliance on the single market.
Will the UK economy recover in 2024 or is No 10 in dreamland?
A speculative vision for the UK economy in 2024 includes a sharp fall in inflation to 2 percent, leading to increased real incomes, strong consumer spending growth, and the Bank of England reconsidering its inflation target expectations.
If you want to solve the productivity puzzle, here’s who to ask
The article explores the ongoing productivity challenges in the UK, emphasizing the need for multifaceted solutions including better investment, a skilled workforce, and effective infrastructure. It highlights the views of various business leaders and experts, such as Neill and Sir Jim Ratcliffe, on productivity strategies and the impact of working from home. The article also references historical productivity growth and government initiatives, stressing the importance of strong managerial vision and innovation to drive long-term improvements.
Five reasons the UK economy struggled in 2023
The UK economy faced significant challenges in 2023, marked by high inflation, volatile interest rates, and a stagnant economy. Food-price inflation reached its highest in 45 years, and interest rates rose to 5.25%, impacting mortgage rates and property market activity. The economy showed minimal growth, with a potential technical recession looming. Despite tax incentives, business investment declined, and public finances remained shaky with increased government borrowing. Strikes in the public sector, particularly in the National Health Service, contributed to poor public services. The government aims for economic improvement in 2024, with potential tax cuts to gain electoral advantage.
What the spring budget could mean for your finances and the UK election
Jeremy Hunt has sparked speculation with the announcement of his spring budget on March 6, raising questions about the timing of the UK general election and potential tax cuts. Historical precedents of spring budgets are noted, with comparisons to past chancellors, amidst concerns about the current state of the economy.
Inequality is certainly high — but it’s not necessarily increasing
The article discusses the state of income inequality in the UK and the US, highlighting that while inequality remains high, it has been relatively stable over the past few decades. Official figures from the Office for National Statistics and HM Revenue & Customs show that the Gini coefficient and income shares for the top earners have not significantly increased. New research from the US suggests that the after-tax income share for the top 1% has remained stable since the 1960s, challenging the views of economists like Thomas Piketty. The article also touches on wealth inequality, noting that the UK does not top international wealth-inequality tables due to factors like high owner-occupation and private pension provision. The piece concludes by questioning why inequality remains a significant issue in the UK despite its stability.
Can a resilient consumer keep the economy from recession?
The article discusses the apparent contradiction between visible consumer spending during the festive season and the broader economic concerns about recession risks. It highlights the seasonal nature of spending and suggests that while December's consumer activity is high, it may not be indicative of a sustained economic boom.
How inflation and higher rates snuffed out this year’s growth
The article discusses how inflation and higher interest rates have stifled economic growth in the UK for 2023. Despite the Bank of England's efforts, including 14 interest rate hikes since December 2021, the economy remains stagnant with weak GDP figures. The article criticizes the Bank's decision to potentially raise rates further and highlights the negative impact on consumer-facing services and industry. It also notes the contrasting approaches of the Federal Reserve and the European Central Bank. The sentiment towards key figures like Andrew Bailey and Rishi Sunak is largely negative, reflecting dissatisfaction with their economic policies.
The inflation outlook is gloomier – so will interest rates be cut next year?
Recent weeks have seen a resurgence of inflation concerns, despite a year of falling rates. Last year's inflation rate peaked at 11.1%, the highest since 1981, but has since dropped to 4.6%. The Bank of England's aggressive monetary policy and international factors have played significant roles in this trend. Rishi Sunak, although not directly influencing the process, has been a notable figure in the context of these economic changes.
We have record immigration. So why are we so short of workers?
The Office for National Statistics (ONS) releases key statistics on topics such as inflation, wages, and public finances, with some of the most consequential data, like pandemic GDP revisions and immigration figures, released at 9.30am. Recent figures revealed a significant net migration to the UK, raising questions about the labor market despite record immigration.
Forget the judge, just argue the case
Judges' personalities and backgrounds influence legal proceedings, with the UK Supreme Court predominantly composed of white men from Oxbridge with commercial law backgrounds. This homogeneity allows lawyers to tailor cases to specific judges, potentially skewing outcomes. A more diverse bench, in terms of gender, socio-economic factors, and legal experience, would ensure that legal arguments are the primary focus. Lady Simler's unique career path and her position as the youngest member of the bench are highlighted as steps towards greater diversity, though more varied career backgrounds among judges are needed for substantial change.
Investment badly needs a boost — can Jeremy Hunt provide it?
The chancellor aims to boost business investment, highlighting a 15% productivity gap between the UK and Germany. Jeremy Hunt attributes this gap to Germany's higher GDP investment rate and believes improving business investment can enhance productivity and disposable income.
Gaza could provide fear factor that finally pushes world into recession
Brent crude oil prices, which surged post-Russia's invasion of Ukraine, are now stable around $80s per barrel. The World Bank predicts a potential rise to $140-$157 per barrel due to the Israel-Gaza conflict, which could trigger a global recession under a significant disruption scenario. However, the main forecast suggests an average of $81 per barrel next year due to slower global growth. Confidence in the global economy is waning, with significant concerns from financial leaders like Jamie Dimon and Larry Fink about geopolitical risks. Oxford Economics' survey indicates a notable decline in business expectations for global growth, with the Middle East conflict seen as a significant risk. The global economy, already weakened by tighter monetary policies, faces sluggish growth, with advanced economies like Canada and the eurozone flirting with recession. The UK's economic outlook remains uncertain, with potential flatlining. A global recession might be avoided, but continued sluggishness is expected unless the Middle East conflict escalates.
Jeremy Hunt did well in the autumn statement, but history is against him
Jeremy Hunt's autumn statement included a 2p cut in national insurance and measures to boost business investment, but the economic backdrop is less favorable compared to the 1990s. The UK economy is growing slowly, with high inflation and reduced household disposable income. Hunt's measures are intended to have a long-term positive impact, but the current economic challenges and the legacy of Brexit pose significant hurdles. The abolition of Hunt's economic advisory council suggests confidence in financial stability post-Truss era. The article provides a balanced view of Hunt's efforts and the broader economic context.
Newport, we have a problem: how much can we trust ONS figures?
The Office for National Statistics (ONS) has released limited labor market data this week, including information on pay, which is outstripping inflation but showing signs of deceleration, and job vacancies, which have fallen below one million, decreasing by over 250,000 in the past year. However, the release lacked comprehensive employment data, which is traditionally the focal point of these releases.
Jeremy Hunt must stick to his guns and ignore pleas for ruinous tax cuts
The article argues that Chancellor Jeremy Hunt should resist calls for tax cuts, emphasizing the importance of reducing inflation and maintaining economic stability. It criticizes past fiscal policies under Liz Truss and highlights the challenges faced by the Conservative Party, including recent by-election defeats. The piece supports Hunt and Prime Minister Rishi Sunak's cautious approach, warning against the economic risks of hasty tax reductions.
Budget 2024: Jeremy Hunt must pass these three key tests
The article discusses the upcoming 2024 budget and the challenges facing Chancellor Jeremy Hunt. It outlines three key tests for the budget: realistic public finance outlook, measures to boost economic growth, and the political implications of the announcements. The article also reflects on past budgets, the impact of the pandemic on the economy, and the rising tax burden. Additionally, it touches on regional economic disparities and the need for a genuine levelling-up strategy.
Jeremy Hunt gets a fiscal boost, but don’t bet on tax cuts
Inflation is expected to fall, but growth has stalled, leading Chancellor Jeremy Hunt to rule out immediate tax cuts despite pressure from Tory MPs. The government has benefited from higher tax revenues due to inflation, but rising debt interest costs and public spending pressures complicate the fiscal outlook. Hunt aims to improve public sector productivity to create fiscal headroom, though experts are skeptical about the feasibility of significant savings. The next spending review and general election are likely to shape future fiscal policies.
Time to wake up to this damaging stealth tax
The article discusses the long-term effects of recent inflation and the government's decision to freeze income tax allowances and thresholds until 2027-28, which is described as a significant stealth tax increase. The Institute for Fiscal Studies (IFS) estimates that this policy will raise an additional £52 billion in revenue by 2027-28. The article also highlights the broader economic impacts, including rising government debt interest costs and a downturn in the housing market. Additionally, it notes a recent drop in consumer confidence and pays tribute to the late Professor Nick Crafts, a distinguished British economic historian.
Rachel Reeves will have bigger black holes to face yet — with tax rises likely
Rachel Reeves faces significant fiscal challenges, including a £22 billion black hole in public finances, with tax rises likely. The article discusses the political motivations behind fiscal decisions, the impact of government overspend, and the challenges of meeting fiscal rules. It highlights the need for increased borrowing and potential tax hikes, while avoiding austerity measures. The Bank of England's recent interest rate cut and economic forecasts are also covered, indicating cautious optimism for economic growth and inflation control.
Labour’s age-old question: how to pay for it all?
Sir Keir Starmer and Rachel Reeves of the Labour Party have been performing well in polls and won the economic debate during the party conference season, while the Conservative Party, with Rishi Sunak cancelling the northern leg of HS2 and Jeremy Hunt's critique of Reeves' speech, faced challenges.
When forecasts are too optimistic, they do nothing to promote growth
As the party conference season concludes, a common theme among UK politicians is the pursuit of economic growth. Rachel Reeves of Labour emphasized growth as the party's economic mission, while Rishi Sunak and Jeremy Hunt of the Conservatives and Sir Ed Davey of the Liberal Democrats also highlighted the need for growth in their respective speeches.
Rachel Reeves sets out Labour’s economic stall — but where’s the meat?
Rachel Reeves delivered the Mais lecture at Bayes Business School, critiquing past chancellors and outlining Labour's economic policy, termed 'securonomics,' which emphasizes stability, investment, and reform. However, the lecture lacked detailed policy proposals. The article also discusses the Bank of England's monetary policy decisions and the potential for interest rate cuts. Labour's economic approach aims to address insecurity and foster growth, but its effectiveness remains uncertain.
Northern Ireland may be getting ‘the best of both worlds’ after Brexit
Northern Ireland faces ongoing challenges post-Brexit, with new arrangements under the Windsor framework attempting to address issues created by Brexit. Despite these efforts, the Northern Ireland executive remains collapsed since February last year, with no signs of reassembly despite political pressure.
Immigration has been soaring – so how come we are still short of workers?
Net migration to the UK in 2022 reached unprecedented levels, driven by non-EU nationals and refugees, yet worker shortages persist in key sectors like hospitality and construction. The shift from EU to non-EU migrants, who have lower employment rates, and the influx of non-working migrants such as students and refugees, have contributed to this issue. Despite a recent rise in foreign national employment, the UK's labour market remains tight, exacerbated by increased economic inactivity among older workers. The article critiques the government's immigration policies and highlights the ongoing need for migrant workers to address labour shortages.
Outcry in Australia as three Aboriginal children aged between six and eight are filmed CABLE-TIED and sobbing after builder caught them swimming in his parents' swimming pool
A tradesman, Matej Radelic, was arrested for allegedly restraining three Aboriginal children with cable ties after catching them swimming in his parents' unoccupied pool in Broome, Western Australia. The incident, which was livestreamed on Facebook, sparked outrage as the children were seen sobbing and distressed. Radelic faces charges of aggravated assault and will appear in court. The event has drawn widespread condemnation from community leaders and officials, who emphasized the children's vulnerability and the disproportionate use of force. The local Aboriginal community has called for support and unity to ensure the safety of all children in Broome.
Aussie billionaire David Droga spent $45million for a prime piece of real estate along the coast... but he's now locked in a bitter dispute with Waverley Council as plans for his dream mansion hit a m
David Droga, a New York-based Australian billionaire, is embroiled in a legal dispute with Waverley Council over the development of his $45 million oceanfront property in Sydney. The council rejected the design for his new mansion, leading Droga to take the case to the Land and Environment Court. The proposed design by architect Luigi Rosselli features unique 'cocoon' structures and various luxury amenities. Despite some local opposition, the design has received praise from architect Zoltan Kovac. The court's decision is pending.
The economy’s stronger, but its growth has been driven by government spending and debt
The article examines the UK's economic growth, highlighting that it has been primarily driven by increased government spending and debt accumulation since the pandemic. It contrasts the current economic situation with past periods, noting a significant rise in public sector debt and government spending. The article also discusses the implications of these policies, including the impact on private sector employment and traditional growth drivers like consumer spending and exports. It references the Conservative Party's economic strategies and historical context, particularly the Keynesian response to the economic crisis and the longing for tax cuts reminiscent of the Thatcher era.
The Bank of England must not be rushed into interest rates overkill
A reader questions the rationale behind the Bank of England's decision to raise interest rates to combat inflation, suggesting that higher rates could increase costs and prices. The article discusses the common misconception that raising interest rates adds to inflation and emphasizes the traditional economic understanding that higher rates reduce inflation by tightening monetary policy.
Jeremy Hunt needs to look at spending, not tax cuts, in his autumn statement
The focus of the upcoming autumn statement by Chancellor Jeremy Hunt should be on government spending rather than tax cuts. Despite discussions about potential tax cuts, the article argues that addressing the significant increase in public spending and the dissatisfaction with public services is more crucial. The belief that small tax cuts could improve the government's standing in the polls is deemed naive.
Inflation still feels very high but it will come down — and here’s why
Despite recent noticeable price increases in clothing, particularly with the introduction of autumn ranges, inflation is expected to decrease. Official figures show a 3.2% rise in clothing prices in September and a 1.6% rise in August, both higher than the previous year's increases. The article suggests that retailers have not yet adjusted to the anticipated fall in inflation.
How much must unemployment go up to keep a lid on inflation?
The article examines the relationship between unemployment and inflation, referencing historical economic theories like the Phillips curve and discussing current economic indicators. It questions whether the Bank of England will raise interest rates and explores how much unemployment needs to rise to achieve the 2% inflation target. The piece also delves into regional policy failures in the UK, citing a new paper co-authored by Ed Balls, which argues for more devolved powers and cross-party support to address regional inequalities.
If taxes had to pass the Adam Smith test, everyone would be better off
The article critiques various tax policies in the UK, arguing that many fail to meet Adam Smith's principles of good taxation. It highlights the unfairness and inefficiency of London's Ulez, the council tax system, and stamp duty. The text suggests that these taxes disproportionately affect lower-income individuals and hinder economic mobility. It calls for a comprehensive tax reform that aligns with Smith's principles to create a fairer and more efficient system.
We had an artificial recession, now we must avoid a real one
The article discusses the unique nature of the 2020-21 recession, describing it as artificial due to government-imposed shutdowns and fiscal stimulus. It highlights the challenges faced by the UK economy, including high inflation and a tight labor market, and criticizes the Bank of England for potentially exacerbating economic issues by keeping interest rates too high. The piece also touches on the political implications for Rishi Sunak and emphasizes the need for careful economic management to avoid a more severe recession.
After the productivity puzzle, now we have the inactivity puzzle
The 'inactivity puzzle' in the UK labour market is worsening, with over 9.4 million people economically inactive, a significant rise from pre-pandemic levels. The increase is attributed to various factors, including ill health, fewer students working part-time, and a rise in mental health issues post-Covid. Government officials, like Mel Stride, have faced backlash for their views on mental health's role in economic inactivity. The Office for Budget Responsibility highlights mental health problems as a major factor in rising health-related economic inactivity. The labour market's current state poses a significant challenge for the government.
Pay’s the issue, but don’t forget public pensions
The gap between private and public sector pay growth has narrowed, with public sector workers benefiting from more generous pensions. Defined benefit pension schemes are prevalent in the public sector, unlike in the private sector. The government resists public sector pay demands due to potential inflationary impacts and concerns over unfunded pension liabilities, which are significant. The Office for Budget Responsibility estimates that public sector pensions will account for just under 2% of GDP in the long run. There is a call for rebalancing public sector remuneration towards pay rather than pensions. Recent reforms have already made significant changes, but further adjustments may be needed. The article also mentions a visit to Emmanuel College, Gateshead, where the author delivered a talk on economic shocks and their impacts.
Why we must not give up on economic growth
The article discusses the challenges and uncertainties facing the UK economy, particularly in terms of public spending, tax policy, and economic growth. It critiques the spending plans of both the Labour and Conservative parties, highlighting the unrealistic nature of their proposals. The article references past economic forecasts and their inaccuracies, emphasizing the need for humility in economic predictions. It also mentions a letter from distinguished economists supporting Labour's economic approach, which calls for increased investment in skills, infrastructure, and innovation, as well as improved relations with the European Union. The article concludes that while achieving stronger growth and well-funded public services without further tax increases is difficult, it is not impossible, and giving up on economic growth would lead to a gloomy future.
What inflation’s surprise rise tells us about the UK’s prospects this year
The recent rise in UK inflation to 4% has mixed implications for the Bank of England, which may find some relief as it aligns with its cautious stance on interest rates. Core inflation remains stable, and energy prices are expected to drop, potentially bringing headline inflation down to 2% by April. However, uncertainties like global trade disruptions and rising freight costs could affect long-term inflation. Interest rate cuts are anticipated but likely delayed until the second half of the year. Economic growth is expected to remain flat, with modest improvements in real wages counterbalanced by the impact of past rate hikes. Fiscal policies, including excise duties on alcohol and tobacco, continue to influence inflation metrics.
You can’t rebuild the economy just by building more houses
The article discusses the limitations of relying solely on housebuilding to drive economic growth in the UK. It highlights the Labour Party's ambitious housing targets and the challenges in meeting them, citing expert opinions and historical data. The piece also touches on the potential economic benefits of reinstating VAT exemptions for foreign tourists, a policy previously abolished by Rishi Sunak and later canceled by Jeremy Hunt. The article concludes that while housing is important, it alone cannot rebuild the economy.
Rachel Reeves is in a fiscal pickle — but there are ways out of it
The article discusses the fiscal challenges facing Rachel Reeves and the Labour Party, highlighting the economic situation inherited from the previous Conservative government. It critiques past fiscal policies and explores various strategies proposed by economists to create room for maneuver in public finances. Suggestions include revising debt definitions, introducing tiered interest payments, and rethinking fiscal rules. The article emphasizes the need for innovative approaches to make fiscal choices more palatable and avoid being constrained by traditional economic measures.
Will white heat of technology rescue public sector productivity?
Public sector productivity in the UK has stagnated, with current levels matching those of 2009. Despite improvements during the austerity years, recent declines have erased these gains. The NHS, heavily impacted by the pandemic, exemplifies this trend. Jeremy Hunt's plan to boost productivity through technology, particularly AI, is highlighted as a potential solution. The Productivity Institute and Tony Blair's Institute for Global Change advocate for digital transformation to enhance public service delivery. The article suggests cautious optimism, noting that technology could drive future productivity improvements.
Rachel Reeves will have bigger black holes to face yet — with tax rises likely
Rachel Reeves faces significant fiscal challenges, including a £22 billion black hole in public finances, with tax rises likely. The Labour Party's recent fiscal announcements, such as the abolition of winter fuel payments for certain pensioners and VAT on private school fees, have sparked backlash. The larger fiscal challenge remains, with increased borrowing and potential tax hikes on the horizon. The Bank of England's recent interest rate cut reflects cautious optimism about economic growth and inflation.
How Covid dealt another blow to productivity
The article examines the impact of the Covid-19 pandemic on productivity, highlighting the debate between employers and employees regarding remote work. It discusses the potential productivity gains from artificial intelligence, citing research and predictions from institutions like Goldman Sachs and the Brookings Institution. The article also touches on the economic recovery of Greece under Prime Minister Kyriakos Mitsotakis, noting significant growth and investment since 2019. The need for increased business investment, better skills, and innovation in the UK is emphasized to avoid falling behind other countries in leveraging new technologies.
How can the UK economy avoid being submerged by rising debt?
The UK economy faces significant challenges with rising government debt, which has reached nearly 100% of GDP. The debt interest bill is projected to remain above £100 billion annually for the next five years, posing a substantial burden on public finances. Experts suggest that improving productivity is crucial for achieving fiscal sustainability. The House of Lords economic affairs committee is investigating the sustainability of national debt, while the Bank of England's quantitative tightening policy raises concerns about market stability and potential losses. The Treasury is exploring ways to boost public sector productivity and increase labor supply to address these issues.
As elections loom, Sunak can only envy America’s economic growth
The article compares the economic growth of the United States and the United Kingdom, highlighting the significant gap that has emerged since the Brexit referendum. While the UK has experienced sluggish growth, the US has seen robust economic performance, including a booming job market. Despite this, President Biden's poll ratings remain low, with factors such as gas prices influencing public perception. The article also discusses the potential political implications for both Biden and UK Prime Minister Rishi Sunak, noting that the growth gap between the two economies is expected to widen further this year.
House prices won’t crash unless the jobs market does so first
House prices are unlikely to crash unless there is a significant rise in unemployment. Despite high mortgage rates and unaffordable housing prices, the current low unemployment rate and responsible lending practices are preventing a housing market collapse. Historical data shows that significant drops in house prices have coincided with recessions and high unemployment rates. The Bank of England's forecast suggests that unemployment will remain low, reducing the likelihood of a housing market crash.
Chancellor cannot afford to ignore the malaise in UK manufacturing
UK manufacturing faces a significant challenge due to a lack of demand, despite easing energy costs and supply chain improvements. The sector's contribution to GDP has been declining, with predictions of further drops in output. The article highlights the importance of manufacturing for productivity, exports, and investment, and compares the UK's situation with the eurozone and the US. The US benefits from government incentives like the Inflation Reduction Act, which the UK might consider replicating. The government is urged to adopt a meaningful industrial strategy to support the sector, with upcoming reports and advisory council appointments indicating potential future actions.
Why is the US more productive when the Treasury says it invests the same as us?
The article examines why the US is more productive than the UK despite similar levels of business investment. It highlights that while UK business investment has struggled to reach 10% of GDP, the US has similar figures but higher productivity. The analysis points to intangible investments like software and R&D, which are higher in the US. The article also discusses structural issues in the UK, such as weak intermediate skills and low public investment in infrastructure, exacerbated by events like Brexit and austerity. Experts suggest that improving the quality and quantity of investment, along with better utilization of skills, is crucial for enhancing productivity.
Fewer workers and low productivity need urgent fixes. One could be AI
The British Chambers of Commerce and the CBI express concerns over the persistent tightness in the UK labour market, exacerbated by demographic changes, Brexit, and Covid-19. A new analysis by the Institute for Employment Studies suggests that worker scarcity may persist for years, with employment growth among 20-64-year-olds expected to be significantly lower than in the past two decades. The report highlights the need for increased participation and productivity, especially as the population ages. Business investment, particularly in artificial intelligence, is seen as a potential solution to address worker scarcity and boost productivity.
You don’t need a Nobel laureate to say why the Bank’s forecasts failed
The article critiques the Bank of England's forecasting failures, particularly its inability to predict the significant rise in inflation and interest rates. It highlights the inherent issues in the Bank's forecasting model and the human errors in its application. The article also discusses the role of quantitative easing in contributing to inflation and the abrupt shift in the Bank's narrative regarding inflation. Economists George Buckley and Jagjit Chadha provide insights into the Bank's shortcomings, emphasizing the need for better risk communication and prompt action.
You can’t tax your way to stronger economic growth
The article discusses the challenges and implications of raising taxes in the UK, particularly under the Labour Party's current policies. It critiques the feasibility and effectiveness of potential tax increases, such as capital gains tax, pension tax relief, and national insurance, arguing that these measures may complicate the tax system and hinder economic growth. The piece emphasizes the need for growth-generating tax reforms and public investment to avoid economic stagnation. It also touches on the UK's trade and current account deficits, highlighting their long-term economic consequences.
Tinkering with the rules won’t stop debt from rising
Government debt in the UK has risen significantly over the past decades, with current measures showing it at 91.6% of GDP. The chancellor may switch debt measures to create more fiscal headroom, a move criticized by the Institute for Fiscal Studies as 'moving the fiscal goalposts.' The National Institute of Economic and Social Research argues that current fiscal rules hinder economic growth and suggests increasing public investment. The article also touches on recent revisions to economic growth figures by the ONS, which slightly improve the UK's economic performance post-pandemic but do not redeem the reputations of recent political leaders.
Don’t forget about ‘export or die’. Trade still matters
The article discusses the historical and current significance of trade figures in the UK economy, emphasizing the shift from goods to services exports and the impact of Brexit on trade intensity. It highlights the historical context of trade policies, the decline in goods exports, and the resilience of service sector exports. The article also mentions the recent appointment of Professor Alan Taylor to the Bank of England's monetary policy committee and critiques his past work on fiscal policy.
Growth’s back, but a ghoulish budget could be on the way
The UK economy has shown strong growth in the first half of the year, with GDP rising significantly and inflation rates improving. However, the government remains cautious, with concerns about the upcoming budget and its potential impact on taxes and business investment. Despite positive economic indicators, challenges such as low productivity and strained public finances persist. Businesses are wary of investing and recruiting due to domestic and international uncertainties. The article also touches on the car insurance market stabilizing and the mixed performance of new and second-hand car sales.
Infrastructure benefits us in the long run – but politicians focus on the short-term
The article discusses the long-term economic benefits of infrastructure investment and criticizes the short-term focus of politicians. It highlights the historical context of public investment in the UK, noting fluctuations in investment levels and the impact of political decisions. The Office for Budget Responsibility's findings on the potential output benefits of sustained public investment are emphasized. The article questions whether the Labour Party will differ from the Tories in prioritizing infrastructure, given their financial constraints. The National Wealth Fund is presented as a potential solution to attract private investment and stimulate economic growth.
Why public sector pay rises won’t increase the UK inflation rate
Public sector pay rises in the UK are unlikely to increase inflation due to three main reasons: they do not directly result in higher prices, public sector pay has been lagging behind private sector pay, and the awards are consistent with a continued fall in real wages for public sector workers. The Treasury hopes that private sector employers will temper their pay awards next year, and the government aims to end public sector strikes by accepting the independent pay review bodies' recommendations.
Work ethic may be made redundant
The work-from-home movement, which has persisted post-pandemic, is reshaping work-life balance but not necessarily improving productivity. Trends like 'quiet quitting' and 'bare-minimum Mondays' are gaining traction, reflecting a shift towards prioritizing mental health over career progression. In the UK, 'quiet ambition' sees many employees valuing mental health over higher salaries. Historical and current data show a cultural shift in work ethics, with more young adults living with parents despite low unemployment rates. The rise of AI is projected to impact 80% of jobs, with significant implications for various professions, including law.
As Brexit damage persists, a tale of two competing strategies
The article examines the ongoing economic impact of Brexit on the UK, highlighting three main areas of concern: underperformance in goods trade, weak business investment, and changes in immigration patterns. It critiques the Conservative Party's lack of a coherent post-Brexit strategy and explores two potential paths forward: becoming a technology superpower and developing closer economic ties with the EU. The article suggests that neither strategy alone is sufficient to restore the UK's economic dynamism, advocating for a combined approach while acknowledging the significant challenges ahead.
To QE or not to QE is the question when judging Bank’s independence
A committee chaired by Lord Bridges of Headley is investigating the impact of the Bank of England's independence on the UK's monetary, financial, and economic situation, particularly focusing on the controversial quantitative easing (QE) program. With inflation exceeding 10%, the committee is questioning whether QE compromised the Bank's independence and contributed to inflation. Ben Broadbent of the Bank of England defends QE, attributing inflation to external factors like the Russian invasion of Ukraine. However, critics like Tim Congdon and former governor Lord King argue that pandemic QE was a mistake, exacerbating inflation. The committee is expected to acknowledge the benefits of Bank independence while recommending that the Bank learn from its QE-related mistakes.
Our economy’s hung over, and there’s no obvious pick-me-up
The UK's economy is experiencing weak growth, with recent figures showing minimal improvement. The Bank of England and the National Institute of Economic and Social Research (Niesr) have both provided pessimistic forecasts, predicting near-stagnation and a high risk of recession. Key factors contributing to the economic downturn include the global financial crisis, Brexit, Covid-19, and the cost of living crisis. The article emphasizes the need for strategic investment and reform to address these entrenched issues and improve living standards.
Delaying energy efficiency was a win for bad landlords
Rishi Sunak's recent reversal on the UK's net-zero strategy included scrapping proposals to require private residential landlords to upgrade their properties to an energy performance certificate rating of C. Although the plans were still under consultation, some landlords had preemptively taken steps to comply, leading to frustration and sarcastic remarks from tenants on social media. The article suggests that proactive landlords should be supported, while the policy U-turn benefits those who delay making improvements.
Shielding firms from shocks has given them less incentive to change
Businesses and the economy are often encouraged to be dynamic and adaptable. A report by the Resolution Foundation and the London School of Economics' Centre for Economic Performance, titled 'Ready for Change: How to make the UK economy more dynamic,' suggests that the UK economy is currently stagnant. The report is authored by Richard Davies, Nadim Hamdan, and Gregory Thwaites.
Time for the Bank of England to take a pause on rate rises
Pay growth is finally outstripping inflation after a period of declining real wages, but other labor market indicators are weakening, with rising unemployment and falling employment and vacancies. Recent GDP data revisions show a flatlining economy, with a 0.5% decline in July. The Bank of England is expected to consider these factors in its upcoming decisions.
Jobs figures show the public sector juggernaut just keeps rolling along
Public sector employment in the UK has risen to 5.87 million, with significant increases over the past year and since the end of 2019. This contrasts with a decline in private sector employment. The NHS is a major employer, nearing two million employees. The article discusses different estimates of public sector employment and revisits historical debates on the economic impact of a large public sector. The current rise in public sector employment is seen as a factor in stabilizing unemployment rates amid private sector weakness, but concerns are raised about the sustainability and economic implications of this trend.
A strange Covid recession and recovery has just become even stranger
The article reflects on the historical context of economic reporting and the unique nature of the Covid-19 recession and recovery. It highlights the significance of traditional economic publications like the Blue Book and the role of the Bank of England in economic documentation.
Better news for the UK, but search for growth goes on
The UK economy showed better-than-expected recovery at the end of 2021, with GDP 0.6% above pre-pandemic levels. However, growth has stagnated since early 2022, with GDP rising only 0.5%. Higher interest rates are impacting current and future growth. International economic gatherings, including the G20 summit and meetings of the IMF and World Bank, are focusing on global economic recovery. China and India remain key players in the BRICS, with China facing economic challenges and India showing strong growth. Slow global trade growth is a significant concern, with world trade expected to grow only 2% this year. Inflation remains a critical issue for the UK, with upcoming figures likely to influence state pension adjustments.
The 8 things politicians should be talking about (but aren’t)
Political parties are expected to adopt a cautious approach in their upcoming conferences and the general election, avoiding controversial but crucial issues for the country's long-term future.
Tax reform makes sense whoever is in No 11, but don’t hold your breath
The next UK general election is anticipated to be more than a year away, with political parties already establishing their stances. Jeremy Hunt, facing pressure from his party, had to defend against early calls for tax cuts following recent public finance figures. Meanwhile, Labour's Rachel Reeves stated her party would not introduce a wealth tax, believing prosperity does not stem from taxation. Both Hunt and Reeves, who reportedly share mutual respect, are pressured to take actions they deem unwise.
Should we move the Bank’s inflation target to 3%?
The article discusses the ongoing debate about whether the Bank of England should adjust its inflation target from 2% to 3%. Despite a significant reduction in inflation from its peak of 11.1% to 6.8%, there is still a long way to go to reach the current target. The government is particularly concerned about the upcoming inflation figures, which will impact state pensions and benefits adjustments.
Retail losers feel like more than just the usual casualties of capitalism
Wilko, a homeware store chain, is facing the risk of vanishing from UK high streets, with ongoing sale negotiations that may result in a partial or complete rescue. The potential closure threatens the jobs of 12,500 workers and impacts suppliers, while also contributing to a broader sense of loss among consumers who recall past retail failures like Woolworths and have personal connections to brands such as Laura Ashley.
Zero-hours deals do a great job in luring people back to flexible work
The debate over zero-hours contracts highlights the divide between unions and employers. Unions, such as the Trades Union Congress, criticize these contracts for offering one-sided flexibility favoring employers, while the Irish government's legislation to restrict them was hailed as a victory for low-paid and insecure workers. Conversely, employers and organizations like the Chartered Institute of Personnel and Development view zero-hours contracts as beneficial for flexibility in the labor market.
Cash is no longer king but do we really need the digital pound?
The article discusses the decline of cash usage in the UK and the potential introduction of a 'digital pound' by the Bank of England. Sarah Breeden's appointment as a deputy governor is highlighted, with her role likely involving oversight of the digital currency. The shift from cash to digital payments, particularly contactless, is accelerating, with predictions that cash transactions will drop to 6% by 2031. The digital pound, unlike cryptocurrencies like Bitcoin, would serve as a medium of exchange rather than a speculative asset. The Bank of England and the Treasury are concerned about the diminishing role of 'public money' and the increasing dominance of 'private money' issued by commercial banks. The article also raises concerns about the 'unbanked' population and the potential exacerbation of the digital divide.
Jobs have held up well, but now the cracks are showing
Marshalls, a building materials manufacturer, announced the cut of 250 jobs and the closure of a factory in Scotland due to challenging market conditions and persistent weakness in new housebuilding and private home maintenance. This follows a previous reduction of 150 jobs last year.
The inflation nightmare’s over — time to cut interest rates
The article discusses the recent return of inflation to target levels and argues for the Bank of England to cut interest rates. It examines the causes of the inflation surge, including higher energy prices, supply shortages, and the impact of Russia's invasion of Ukraine. The article highlights the role of the Bank of England and its monetary policy committee in managing inflation and interest rates, with insights from Professor Jonathan Haskel. It also touches on the challenges of housebuilding and planning in the UK, as well as the debate over VAT refunds for foreign tourists.
Don’t mention the Germans when going for faster growth
The International Monetary Fund's latest growth forecasts predict the world economy will grow by 3 per cent this year and next, which is below the historical average. The UK is expected to see weak growth of 0.4 per cent this year and 1 per cent next year, which is better than a mild recession. Germany, however, is expected to be in a mild recession, contracting by 0.3 per cent.
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