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Steel shrivels while Britain’s balance of payments crisis grows

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The publication of the worst figures since the war should set alarm bells ringing. This is the deficit the austerity chancellor should have been concerned about

A record balance of payments deficit of £96.2bn (5.2% of GDP) for 2015, and £32.7bn (7% of GDP) for the fourth quarter alone – both higher in percentage terms than in any year since the second world war – and the first, instinctive reaction of the government is to let what is left of our steel industry go hang, so that imports can be boosted even further.

These latest figures are horrifying in both cash terms and as a percentage of GDP. During the war, when this country was, economically, on its uppers, the balance of payments deficit reached some 10%, financed by the Lend Lease arrangements with Washington and by running down our overseas assets.

Related: Steel crisis: builders, manufacturers and carmakers urged to buy British

The crunch has now come with the impact austerity has had on business investment and the export sector

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Devaluation is a dangerous game. But Britain may have to try it

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Our balance of payments situation is so poor that a 10% weakening in sterling would be no bad thing – if there were not such a risk of things getting out of hand

Ever since his first written evidence to the Treasury committee, the governor of the Bank of England, Mark Carney, has hinted that he understands the UK’s real deficit problem. This is not the budget deficit, of which chancellor Osborne has made such a fetish, but the balance of payments deficit.

Indeed, that distinguished former permanent secretary to the Treasury and cabinet secretary, Lord Turnbull, recently pointed out that debt owed to citizens of this country is not a problem – and that by not borrowing more for infrastructure at such low rates, Osborne is actually impoverishing future generations. He is, said Turnbull, “playing a dirty game”.

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Labour needs a leader who stands up to George Osborne’s cuts agenda

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Jeremy Corbyn has been criticised as a throwback, but he is a timely reminder to his party of its values. And history has hardly been kinder to the Conservatives

As CJ, the managing director in a famous bygone BBC television series, might have said: I did not get where I am today forecasting the outcome of elections for the Labour leadership. But we have certainly moved a long way from 1976, when there were no fewer than six heavyweight contestants, namely Jim Callaghan (who won), Denis Healey, Roy Jenkins, Tony Crosland, Michael Foot and Tony Benn.

Now, for all the badmouthing of Jeremy Corbyn, my hope is that in due course he will be seen to have been a beneficent influence, forcing the other candidates to do some serious soul-searching – for the soul of the Labour party, no less.

In 1979, the Thatcher cabinet was replete with ministers who claimed manufacturing did not matter

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Labour leadership races can change fast; interest rates, not so much

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Jeremy Corbyn looks like a racing certainty. But whatever happens, the election will be more definite than the endless false alarms sounded over the base rate

That bookmaker Paddy Power had not only stopped taking bets on Jeremy Corbyn for the leadership of the Labour party but was actually paying out was, shall we say, hot news. While it did not exactly spoil my holiday, it did make me kick myself that I had not placed a small wager on Corbyn a month or so ago, when the quoted odds were 100-1 against him.

I am something of a horseracing man, although I hasten to add that I only bet in tiny amounts. As the presenters of the Today programme’s tips know, the old music-hall joke applies all too often: “I follow the horses. The trouble is that the horses I follow also follow the horses… ”

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John McDonnell lands a blow on our chancer of the exchequer

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George Osborne’s kowtowing to China has landed him on weak ground when it comes to opposing Jeremy Corbyn’s rail policy

While the Conservatives and many members of the media go on and on about the putative need for Labour to apologise for the deficit that was caused not by Gordon Brown but by the banking crisis, an apology has come from an unexpected quarter.

In a recent interview with Margaret Thatcher’s biographer, Charles Moore, for the Policy Institute at King’s College, London, the man who ran Thatcher’s press office for 11 years, my old friend Sir Bernard Ingham, said about Thatcherism: “I’m sorry, desperately sorry, that so many people had to suffer the consequences.” Now, it is true that this admission was made in the context of Ingham’s claim that those years he worked for her “produced very substantial improvement in the country” – a debatable point – but it is interesting that he made the apology. He also had the good grace to add: “I wish some privatisation had been carried out better [sic].” I’ll say!

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It’s hard being shadow chancellor. Howe and Healey knew it

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John McDonnell’s U-turn was typical of the peril that can befall the treasury opposition brief. At least he knew, as his predecessor did, when to stop digging

It is proving quite a month for chancellors and shadow chancellors. The symmetry with which Geoffrey Howe, chancellor 1979-83, followed Denis Healey, chancellor 1974-79, both in life and in death (they died within a week of each other) was remarkable.

They both lived to a ripe old age – Healey to 98 and Howe to 88 – and got on famously, despite the oft-quoted jibe by Healey that being attacked by Sir Geoffrey (as he then was) in parliament was like being savaged by a dead sheep.

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Cameron falters but Canada understands: we need Keynes

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George Osborne’s come-uppance in the Lords and Trudeau’s victory in Canada suggest austerity may be losing its grip on the popular imagination

Those of us who have opposed George Osborne’s austerity policies throughout can take some comfort from two successive events on either side of the Atlantic. The first was the resounding victory of Trudeau the younger’s Liberal party in Canada on an unashamedly Keynesian, anti-austerity electoral platform. The second has been the way that the chancellor (indeed chancer) of the exchequer received his come-uppance from the House of Lords over his dishonourable programme of drastic reductions in tax credits.

First, some background. Hardly anybody can be found these days who will say that they ever thought the Labour party stood a chance of winning under Ed Miliband. Yet David Cameron was sufficiently concerned to call a referendum on our membership of the European Union in order to ward off a threat from Ukip that might well have let Miliband in.

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A stiff letter to the council won’t stave off David Cameron’s next crisis

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The sight of the PM complaining about cuts is remarkable. But it underlines how misguided the Tories’ appraisal is of the real threats to the economy

You could not make it up. Our ultra-smooth prime minister has complained to the Conservative leader of Oxfordshire county council about the cuts to local authority services being made in David Cameron’s constituency, which is itself in Oxfordshire. We owe this great story to the Oxford Mail, to which organ a certain exchange of letters, or possibly emails, was leaked.

Welcome to the real world, Dave! When a prime minister finally wakes up to the consequences of the ideologically driven austerity policies of his own chancellor, then perhaps he should be tempted to follow the example of his hero, Harold Macmillan, and sack him.

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Beware the balancing act in George Osborne’s false economy

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The chancellor’s doctrinaire insistence on a surplus in both current and capital accounts is truly astonishing in a looming worldwide economic slowdown

The more one sees of George Osborne – and this is not a chancellor who keeps himself to himself – the more he appears to be a practitioner of the false economy.

Everyone knows what a false economy is: you make a shortsighted saving which only serves to postpone the agony and leads to the need for greater expenditure in the future. In Osborne’s case, this criticism applies at both the macro level (policy that affects the workings of the economy as a whole) and the micro level (policy that affects individual sectors, both public and private, and the household).

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Austerity, injustice and the forces of callous Conservatism

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Cameron and Osborne blame their spending cuts on the Blair/Brown legacy, when really it’s all about their obsession with tax cuts

I did not get where I am today predicting the future of the Labour party’s electoral prospects; nor, for that matter, by forecasting the outcome of a referendum called by a prime minister prepared to gamble with the future of the United Kingdom in order to keep his party in office.

For, although it may now be conventional wisdom that Ed Miliband was never going to win an election in a thousand years, it did not seem such an odds-on bet to David Cameron at the time, when, frightened by the threat to his position by Ukip and his Conservative colleagues, he committed himself to the coming referendum.

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The most dangerous cocktail is the chancellor’s own recipe

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George Osborne is now warning of ‘dangerous complacency’ just months after his notably complacent performance in the autumn statement

Dangerous cocktails were in evidence in many a bar during the Christmas and New Year holidays. I do not know how many the chancellor might have sampled, but his demeanour appears to have been transformed from one of blatant complacency in his autumn statement to pre-budget nerves. He now warns of “a dangerous cocktail of new threats” and, yes, “creeping complacency” in the British economic and political debate.

This is not, of course, anything to do with him and the complacency he was fostering as recently as before Christmas. No, this is mainly because of threats to the global economic recovery emanating from a manifest slowdown in China and the impact the collapse of oil prices is having on the economies and finances of oil-producing nations – with the obvious exception of the oil-producing country known as the United States, whose “fracking” boom has made no small contribution to oversupply and falling prices in energy markets.

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We are perfectly positioned within Europe. Why change it?

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Being in the EU but outside the euro and Schengen is highly advantageous - and far better than anything that could be achieved by leaving and renegotiating

‘We should miss Britain a lot. But Britain would miss the European Union even more.” The speaker was a senior member of the Italian government, in response to a question about the attitude of Italians to the thorny issue of Brexit. The occasion was the annual Venice Seminar, where members of the Italian government speak frankly, but not for direct attribution, on the political and economic scene.

For many years the views expressed at those seminars about the Italian economy have been a triumph of hope over experience. For example, the Italian economy managed, after the initial impact of the great recession of 2008-10, to contract further in 2011 and 2012 when even the British economy was beginning to recover.

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Whitehall, where the view is clear and the doubts are secret

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The corridors of power contain sceptics about everything from Europe to austerity. But nothing flickers on the imperturbable Treasury facade

One of the key negotiators of the terms of UK entry to the European Economic Community in the early 1970s went down in history as a loyal servant of prime minister Edward Heath, but himself had doubts about the entire venture.

The man in question, who is, as they say, no longer with us, would no doubt have been of great interest to the present band of Eurosceptics whom David Cameron is trying, if not exactly to win over, at least to pacify. His view was simple, and could be broadly paraphrased as: “Why did we fight the second world war if we end up doing this?”

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George Osborne’s austerity budgets show ever-diminishing returns

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The chancellor is becoming increasingly hamstrung both by his political propaganda and his own self-imposed rules

It would be interesting to know if George Osborne, while preparing last week’s budget, had time to see the first instalment of Norma Percy’s television series on the Obama White House. If so he might have been reminded of something historically interesting, namely a matter about which the chancellor, who fancies himself as a historian, has not been straight with the public.

More or less from his arrival in the Oval Office in 2009, Barack Obama’s first year was dominated by the financial crisis. And, curious though it may seem to the many who have swallowed Osborne’s propaganda, the banking crisis in the US, rather like the banking crisis in the rest of the developed world, was not caused by Labour.

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Steel shrivels while Britain’s balance of payments crisis grows

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0
The publication of the worst figures since the war should set alarm bells ringing. This is the deficit the austerity chancellor should have been concerned about

A record balance of payments deficit of £96.2bn (5.2% of GDP) for 2015, and £32.7bn (7% of GDP) for the fourth quarter alone – both higher in percentage terms than in any year since the second world war – and the first, instinctive reaction of the government is to let what is left of our steel industry go hang, so that imports can be boosted even further.

These latest figures are horrifying in both cash terms and as a percentage of GDP. During the war, when this country was, economically, on its uppers, the balance of payments deficit reached some 10%, financed by the Lend Lease arrangements with Washington and by running down our overseas assets.

Related: Steel crisis: builders, manufacturers and carmakers urged to buy British

The crunch has now come with the impact austerity has had on business investment and the export sector

Continue reading...

Devaluation is a dangerous game. But Britain may have to try it

0
0
Our balance of payments situation is so poor that a 10% weakening in sterling would be no bad thing – if there were not such a risk of things getting out of hand

Ever since his first written evidence to the Treasury committee, the governor of the Bank of England, Mark Carney, has hinted that he understands the UK’s real deficit problem. This is not the budget deficit, of which chancellor Osborne has made such a fetish, but the balance of payments deficit.

Indeed, that distinguished former permanent secretary to the Treasury and cabinet secretary, Lord Turnbull, recently pointed out that debt owed to citizens of this country is not a problem – and that by not borrowing more for infrastructure at such low rates, Osborne is actually impoverishing future generations. He is, said Turnbull, “playing a dirty game”.

Continue reading...

Gordon Brown could knock out Boris Johnson in a Brexit bout

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A vintage performance by the former PM on the EU referendum was in marked contrast to that of his buffoonish rival

Extraordinary, is it not? The political, financial and media worlds are obsessed by a referendum we could do without, called to sort out problems of Conservative party management that will almost certainly not be resolved, and masterminded by a prime minister who is desperately dependent on the support of the Labour party to avoid humiliation.

On a typical day last week we had the menacingly mendacious Alexander (Boris) Johnson being taken far more seriously than he should – what do you make of a man who tells his close friends we must stay in the European Union and then, for nakedly ambitious reasons, goes back on his word?

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Whoever wins, the EU vote has been a disastrous diversion

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The economic challenges facing Britain will not go away, whether we stay or leave after 23 June

This is all absurd; yet it is also very important, with serious implications for the future of the UK and the rest of Europe. Yes: in or out, we shall still belong to the continent of Europe. Moreover, given that the rest of the world also seems to be taking an interest, the outcome of the 23 June referendum can hardly be invested with too much importance.

Apart from anything else, a Brexit vote would almost certainly add to the growing dissatisfaction with the EU in many continental countries. There are even fears of a domino effect.

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Brexit voters don’t listen to elites. But they might listen to Labour

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Economic discontent over globalisation leaves many voters wavering. Corbyn and McDonnell could make a decisive intervention for Remain if they chose

Brexit is pointless – utterly pointless. It cannot even be distinguished by the label “project”, because the Brexit people are unable tell us with an ounce of conviction what they have in store.

The essence of their campaign is entirely negative: keep out immigrants – although some of the more prominent Brexiters, in common with so many of us, are descended from immigrants – and take a leap into the economic and trading unknown. The supply chains of so much business are now trans-European, but these would be needlessly disrupted as the nation turned in on itself. No wonder the markets are unsettled; and those of us with long memories know that when markets become seriously unsettled, it is difficult to prevent things from getting totally out of hand.

So far the impression is that the Labour leaders have been half-hearted about their conversion to the European cause

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First the Suez crisis, then the invasion of Iraq. And now this referendum

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In the catalogue of catastrophic misjudgments made by prime ministers, what David Cameron has done to Britain ranks very high

‘Here we are, and the question is: where do we go from here?” Thus spoke one of David Cameron’s (and my) political heroes, after a crisis that bore little comparison with the ordeal that our prime minister has recently put us all through.

The speaker was Harold Macmillan, a true one nation Tory; Cameron claims to be one too, but he has often been sidetracked by the appalling, rightwing, Eurosceptical element in the party he has now given up trying to lead.

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