Economics

Economics
A change in tone from the G8?

18th June 2013 — Filed under: Economics, International

Duncan Weldon

The G8’s discussions on the economic situation have reached some interesting conclusions:

Promoting growth and jobs is our top priority. We agreed to nurture the global recovery by supporting demand, securing our public finances and exploiting all sources of growth. The fight against unemployment, particularly long-term and youth unemployment remains critical in our domestic and collective agendas.

The official communiqué puts jobs, growth and the need to support demand, front and centre. Something which is obviously welcome.

This a big shift away from the G8 statement of 2010 and closer to language of 2009 when the G8 decided that:

We will take, individually and collectively, the necessary steps to return the global economy to a strong, stable and sustainable growth path, including continuing to provide macroeconomic stimulus consistent with price stability and medium-term fiscal sustainability, and addressing liquidity and capital needs of banks and taking all necessary actions to ensure the soundness of systemically important institutions.

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Economics
Recovery Watch Top 10

14th June 2013 — Filed under: Economics

Duncan Weldon

Data out yesterday showed UK living standards at their lowest level since 2002, whilst this morning’s construction release from the ONS showed construction output at 1998 levels.

Both of these data points remind us that despite all the recent talk of recovery, we still have a long way to go.

The more one looks at the UK economic data, the more one sees a distinct lack of progress on wages, on exports, on productivity, on growth and on a whole range of different indicators.

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Economics
The UK’s Government Debt since WW2

13th June 2013 — Filed under: Economics

Duncan Weldon

Simon Wren-Lewis has written an interesting post on the fiscal record of the last government and Hopi Sen has written an equally interesting response. I’d recommend a look at both.

Simon criticises a recent article from the FT’s Janan Ganesh which argued that:

Of course, the fiscal crisis is mostly the result of the financial crisis. But it is worse than it should have been because of the prior failure to build surpluses, or at least run balanced budgets

To which Hopi writes:

This doesn’t seem to me to be inconsistent with Wren Lewis’s own view that it would have been better if Labour had held the debt-to-GDP ratio at the 2002 level.

I’m not so sure.

Indeed I find much of the focus of the current fiscal debate on running balanced budgets or/and surpluses to be quite misplaced.

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Economics
Pensions regulation under pressure from a government failing on the economy

12th June 2013 — Filed under: Economics, Pensions & Investment

Craig Berry

Starved of a genuine strategy for economic growth, the government is again looking for a favour from the world of pensions. The best example is the establishment of the Pensions Infrastructure Platform by several large pension schemes, to direct additional funds into infrastructure investment, at the government’s behest. This is a worthwhile endeavour by the schemes themselves, but the government is desperate that it also makes up for its own failings on capital investment.

We now have another example, with the Pensions Bill likely to compel the Pensions Regulator (TPR) to consider how its defined benefit pension funding regime can ‘minimise any adverse impact on the sustainable growth of an employer’.

This is a hugely controversial measure.

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Economics
Wage Growth 2003-2008: A reply to John Rentoul

12th June 2013 — Filed under: Economics

Duncan Weldon

The last few years have several big, landmark events in my life – getting married, buying a house, having my first child. This morning I experienced another whilst on my way to the IFS’s excellent presentation on their important findings on wages and productivity, when I became the subject of one of John Rentoul’s “Questions to Which the Answer is No” blog posts.

Yesterday I took issue with Rentoul’s claim that the current pressure on living standards is simply a result of the recession, pointing that the problem existed well before the crash. He has responded disputing this.

He again offers a chart on mean expenditure and questions the relevance the Resolution Foundation figures I cited. He also writes that:

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Economics
Mapping the decline in pay packets

11th June 2013 — Filed under: Economics

Nigel Stanley

Here’s a heat map of the decline in pay packets in the nations and regions of Britain that we reveal today, and which Rob has written about at more length here.

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Economics
Why Britain needs a payrise

11th June 2013 — Filed under: Economics

Rob Holdsworth

Across Britain people have been living through the tightest squeeze in living standards in nearly century. Since 2009 wages have failed to keep with rising prices to the extent that a worker on a median income of around £26,000 is around £4,000 worse off today than four years ago.

The sharp fall in the value of people’s wages has made life really tough for workers and their families. But the great living standards squeeze has also had an effect on the wider economy – people’s lack of spending power has hit the high street and local businesses hard.

What matters to local businesses is not just how much money people are spending but how many people are spending it. The TUC has combined average annual pay with the number of people in work to uncover the combined total of Britain’s annual pay packets – and how it’s fared since the recession.

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Economics
Changing the National Business Model

10th June 2013 — Filed under: Economics

Duncan Weldon

This morning, LabourList’s Mark Ferguson has summarised 8 things that we learned about the Labour Party’s position on the economy in the past week.

I was especially struck by his eighth point – that on social security, the media and others largely see what they want to see. As Mark writes:

Whilst the press viewed the speeches as Labour’s conversion to the austerity myth, Labour supporters on the whole welcomed the renewed focus on housing, and calls for investment in jobs and growth. That’s because both we, and the media, were seeing what we wanted to see. The truth is somewhere in between.

As Richard wrote last week on Touchstone, despite some of the “tough” rhetoric there was much in Ed Miliband’s speech to welcome – the commitment to tackling low pay, the problem of bad jobs, the shortage of affordable housing and the language of “social security” as opposed to “welfare”. (Although Nicola also warned last week of some of the potential pit falls of attempting to cap structural social security spending).

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Economics
Ten Big Questions for Economic Policy

4th June 2013 — Filed under: Economics

Duncan Weldon

In last couple of days better news from the construction and manufacturing sectors has fanned hopes that the UK economy may be ‘recovering’, but as I’ve argued before a real recovery is a long way off.

Much of the current debate around the economy seems to come back to two simple measures – growth and the deficit, but in reality the UK faces much wider challenges. It is also the case that the nature of any growth and the manner of any successful deficit reduction policy matters. Imagine for example we go through a credit and asset price boom in the next half decade – growth would appear strong and the deficit would fall rapidly, but the apparent success would be based on very flimsy foundations. It is always worth remembering the reason the UK ended up with such a large deficit in 2009 was due to a collapse in tax revenues and that really sustainable public finances depend upon a rebalanced economy.

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Economics
The Economics of the CSR & 2015

30th May 2013 — Filed under: Economics

Duncan Weldon

I’ve written before that I find the current political debate ahead of the spending review somewhat confusing.

The Government, and many of their supporters in the media, now appear to think that the way to gain “economic credibility” is to commit to a fiscal plan that has failed to achieve growth, deal with the deficit or even retain the UK’s AAA rating. The argument can be summarised as, “our plan has failed to achieve any of its goals and opposition parties will only be seen as credible if they agree to stick with it”.

As I say, I find the logic underlying this perplexing.

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