Wednesday

21 Sep 2022
The Energy Price Guarantee may cost much less than is feared

Critics of ‘Trussonomics’ – and there are many – have been quick to claim that the new energy price plan puts its economic credibility at risk. Indeed, early estimates suggested that the ‘Energy Price Guarantee’ could cost the taxpayer £150 billion or more over two years, making it the most expensive economic policy in history. More than the furlough scheme, more than even the bank bailouts. Fortunately, the bill looks like it will be a lot smaller and sceptics are set to be proved wrong. The Prime Minister proposes to cap the unit price of energy for households for two years, starting next month, with the government compensating suppliers for any additional costs. Similar support has been offered to businesses and other energy users (such as schools) for an initial period of six months.

The Energy Price Guarantee may cost much less than is feared

Thursday

1 Sep 2022
The Edition
Drama queens: the return of Harry and Meghan
36 min listen

In this week's episode: We look ahead to Harry and Meghan’s UK tour next week, how will they be received? Freddy Gray and Tanya Gold join the Edition podcast to discuss (01:01). Also this week: In the Spectator magazine, our Economics Editor Kate Andrews sat down with the three economists, or 'Trussketeers', that are informing the would-be PM’s economic plan. She joins us along with Julian Jessop, one such economist that has been advising Liz Truss (13:51). And finally: can successful writers be friends with less successful ones? Cosmo Landesman asks this question in the magazine this week and is joined by the author Ian Rankin (27:07). Hosted by Lara Prendergast and William Moore. Produced by Oscar Edmondson.

Drama queens: the return of Harry and Meghan

Friday

26 Aug 2022
An energy price freeze is a very bad idea

The confirmation of the huge jump in the Ofgem cap on domestic energy bills in October, and forecasts of even worse to come, have fuelled more calls for prices to be frozen at current levels. This is not a completely daft idea, but it is not a good one either. There is no shortage of suggestions for how to solve the energy crisis. Labour has proposed a six-month bills freeze, financed by higher taxes on energy producers, the redirection of the £400 energy discount, and assumed (but largely mythical) savings on the debt interest bill due to lower RPI inflation. An alternative, being promoted by the energy suppliers, is to freeze bills for up to two years, with any shortfall covered by a ‘deficit fund’. The money here would be provided by government-guaranteed loans from commercial banks, paid back over a long period (perhaps ten to 15 years) from a surcharge on customer bills.

An energy price freeze is a very bad idea

Tuesday

12 Jul 2022
Cutting taxes isn’t irresponsible

Everyone is supposed to have their 15 minutes of fame. Perhaps I have just had mine, after the contenders for the Tory leadership were invited to endorse the ‘charter for tax cuts’ that I co-wrote for Conservative Way Forward. It was certainly pretty cool to be namechecked at the launch event on Monday both by the new Chancellor, Nadhim Zahawi, and by a strong candidate to be the next prime minister, Suella Braverman. The thinking behind the charter was simple. I wanted to summarise the case for tax cuts and respond to some of the arguments against; including that we cannot afford them, or that they would be inflationary. The timing, as it turned out, could not have been better. The changes at the top of the Tory party are a golden opportunity to rethink economic policy.

Cutting taxes isn’t irresponsible

Thursday

23 Jun 2022
Of course we can afford to cut taxes

The latest data on the UK’s public finances have provided more ammunition for those arguing that the government cannot afford to cut taxes. However, the economic reality is far more nuanced – especially when it comes to interest payments. The bad news is that the government borrowed another £14 billion in May, £3.7 billion more than forecast by the Office for Budget Responsibility (OBR). This reflected both lower-than-expected tax receipts, despite the increase in National Insurance contributions, and higher spending, including £7.6 billion in debt interest costs. This means that the government has already borrowed £35.9 billion in the first two months of the new fiscal year, or £6.4 billion more than forecast.

Of course we can afford to cut taxes

Saturday

4 Jun 2022
Are we heading for a Platinum Jubilee recession?

Occasionally I despair of my own profession. Even economists should be able to enjoy a long weekend. Yet some of us are stuck debunking commentary on the economic impact of the Queen’s Platinum Jubilee celebrations – much of which justifies the old tag of the ‘dismal science’. The long Jubilee weekend will indeed mean that economic activity, as usually assessed, is lower than it would otherwise have been. The output and income lost due to the temporary shutdown of most businesses will only partially be offset by increased spending in other areas, or recouped later. We have, of course, been here before. The monthly measure of UK gross domestic product (GDP) fell by 2.2 per cent in June 2002 (during the Golden Jubilee celebrations), and by 1.

Are we heading for a Platinum Jubilee recession?

Friday

20 May 2022
The good economic news about people’s finances

If you believe the media coverage of the latest consumer confidence surveys, household spending is set to collapse under the weight of the cost of living crisis, dragging the UK economy into a deep recession. But how reliable are these signals? As always, it is worth digging past the headlines. The GfK measure of consumer confidence did indeed fall to a record low in May. But people were less pessimistic about their own finances than they were about the economy as a whole. This distinction is crucial. It is no surprise that people are worried about the general economic situation: we are constantly being told that the country is going down the plughole. But when it comes to people’s own finances, things do not look quite as bad.

The good economic news about people’s finances

Sunday

15 May 2022
Are sanctions on Russia failing?

Sanctions are the West's key weapon in the fight against Putin, but there are signs that Russia’s economy and financial system is weathering the storm better than expected. The rouble has already bounced back and Russia has been able to continue to service its debts, with only minor hiccups. A closer look however reveals that sanctions are biting hard – and that Russia is losing the economic as well as military war. Take the rouble's resurgence, which is not what it seems. The ability of Russia's currency to bounce back reflects the fact that Russian imports have fallen by more than the country’s exports, as local consumers and businesses have cut spending. This means there is less demand to sell roubles to buy foreign currencies.

Are sanctions on Russia failing?

Friday

15 Apr 2022
Ignore the dollar doomsayers

So, it’s official. The global rating agency S&P has determined that the Russian government has defaulted on part of its international debt. In itself, this is not as big a deal as it may sound. Nonetheless, the circumstances have revived concerns about the future of the US dollar as the reserve asset of choice for central banks around the world. Russia is now judged to be in ‘selective default’ because it has attempted to repay holders of two US dollar-denominated bonds with Russian roubles. At the very least, this is a technical breach of the terms of the debt. It will also probably lead to some material losses for bondholders, even though the Russian currency has partially recovered from its initial collapse following the invasion of Ukraine.

Ignore the dollar doomsayers

Monday

14 Mar 2022

Thursday

27 Jan 2022
The ONS’s inflation measurement change isn’t ‘new’

The way we measure inflation is changing, and there could hardly be a less crucial time for it to do so. The ONS will be updating the method for collecting individual prices from supermarkets, and will also publish new figures on inflation rates for different types of household. The anti-poverty campaigner Jack Monroe has tweeted that the ONS ‘have just announced that they are going to be changing the way they collect and report on the cost of food prices and inflation to take into consideration a wider range of income levels and household circumstances’. But Monroe, who hope that the new metrics will show that inflation is hitting poorer families harder, will be disappointed. On Friday, the ONS will be resuming publishing data breaking down inflation for different types of household.

The ONS’s inflation measurement change isn’t ‘new’

Friday

3 Sep 2021
Scotland’s four-day week policy would be a disaster

A shock poll commissioned by the IPPR Scotland thinktank has revealed this week that more than 80 per cent of Scots would like to work fewer hours for the same pay. This may well prompt further revelations about the religious leanings of the Pope, or the toilet habits of bears, but in the meantime, the IPPR has called on the Scottish government to extend its financial support for companies who want to trial a four-day working week. This is still quite a modest proposal. The SNP manifesto for the May elections promised to establish a £10 million fund for companies trialling the shorter week, with the results used to consider a more general shift ‘as and when Scotland gains full control of employment rights’. There are no plans to introduce a four-day week straightaway, even if it were possible to do so.

Scotland’s four-day week policy would be a disaster

Thursday

1 Jul 2021
Ignore the gloomsters, the economy is roaring back

The horror! Yesterday we discovered that UK economic output — as measured by GDP — fell by 1.6 per cent in the first quarter of the year, 0.1 per cent worse than the 1.5 per cent originally reported. This is practically a rounding error. To put it in context, as recently as March the Office for Budget Responsibility, which crunches the numbers for the Chancellor, was forecasting that GDP would fall by 3.8 per cent in Q1. As well as still beating these gloomy expectations, the latest figures are also old news. But if anything, the detail is encouraging. The downward revision to headline GDP was largely due to a bigger decline in consumer spending than first thought, mirrored by an upward revision to household saving.

Ignore the gloomsters, the economy is roaring back

Thursday

4 Mar 2021