Amazing fact from Hamish McRae’s column:
the individual components of growth this first quarter are surprising. Government output added nothing – it was flat, having either been flat or falling for the previous five quarters. Construction was down on the previous quarter. Hotels and restaurants were down too. Manufacturing was up, but as we have seen, from a low base. So what was the largest contributor to growth? Business and financial services. So we have a recovery led by the reviled financial sector, while the Government has not been a net contributor to growth for the past 18 months.
Repeat, repeat until your tongue is sore: this recession has not seen a Keynesian spending splurge ….Which for me rather negates the impact of this ad hominem letter to the FT:
Whatever the solution may be, it is not more consumer or government spending, lower savings, and higher personal debt. In short, it isn’t Keynsianism.
I love it when people announce their conclusions.
The FT explains the ‘balancing act’ of future fiscal policy as well as anyone, in today‘s leader:
Without growth, fiscal austerity would be excruciating. Even the most hawkish of governments would lose its nerve. So while the next government should unveil measures to cut the structural budget deficit, it should, at the same time, announce plans that it would deploy if the recovery were to be weaker (or stronger) than expected. That way, the authorities can respond appropriately if growth is sub-par without shocking bond investors with an unanticipated stimulus.
This echoes what I wrote for House magazine a month or so ago: “What the bond markets need to hear is a commitment to prudent behaviour in the good times, not vicious austerity regardless of the economic weather”.
Matthew Engel in the FT reflects on John Bercow’s campaign, and comes out with this interesting ‘Smell the Coffee’ insight:
The anti-immigrant, anti-establishment, roast-beef-of-old-England aspects of Ukip’s message have some resonance. But I don’t think I’ve heard a voter raise Europe on the doorstep to a candidate this century. Brussels to the British has become like the weather: a perpetual irritant, but something you live with.
Now from the FT about tax avoidance
Probes into the tax affairs of large companies generated £12.6bn of additional tax in the last four years, making big business the most profitable target for the Revenue’s compliance effort, according to figures that will fuel the debate over the Liberal Democrats’ promise to raise big sums from cracking down on avoidance.
Though later in the article, the scepticism about their numbers comes out. Finally, this from Smith, for you “public sector taking over the private” loonies.
One of the big fears is about jobs, an area where there is a lot of misunderstanding. On the face of it, the only thing that has stopped a much bigger rise in unemployment than the current 2.5m (widely expected to be 3m or 3.5m) has been public-sector employment, up nearly 350,000 to 6.1m during the recession, while private-sector jobs have declined by some 1m to 22.76m. Two-thirds of the apparent rise in public-sector employment, however, is the reclassification of employees of state-aided banks such as RBS and Lloyds from private to public sectors. Adjusting for this gives a more modest rise in public-sector jobs and somewhat less of a private-sector fall.
And he smacks down Ken in the nicest way possible:
Kenneth Clarke is one of my favourite politicians and I have never really seen him as an attack dog. I am prepared to believe, when he warned a hung parliament could mean Britain calling in the IMF, it was with a twinkle in his eye. He was in the Commons in the 1970s and knows that when Britain did call in the IMF in 1976 we did not have a hung parliament and that the balance-of-payments support Britain required then is not needed now. Economic crises in Britain are no respecter of majorities. Sometimes, as in 1931, a coalition government was the political solution to the crisis.