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Chase Bank Limits Cash Withdrawals, Bans International... Before you read this report, remember to sign up to http://pennystockpaycheck.com for 100% free stock alerts Chase Bank has moved to limit cash withdrawals while banning business customers from sending...

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Richemont chairman Johann Rupert to take 'grey gap... Billionaire 62-year-old to take 12 months off from Cartier and Montblanc luxury goods groupRichemont's chairman and founder Johann Rupert is to take a year off from September, leaving management of the...

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Cambodia: aftermath of fatal shoe factory collapse... Workers clear rubble following the collapse of a shoe factory in Kampong Speu, Cambodia, on Thursday

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Spate of recent shock departures by 50-something CEOs While the rising financial rewards of running a modern multinational have been well publicised, executive recruiters say the pressures of the job have also been ratcheted upOn approaching his 60th birthday...

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UK Uncut loses legal challenge over Goldman Sachs tax... While judge agreed the deal was 'not a glorious episode in the history of the Revenue', he ruled it was not unlawfulCampaign group UK Uncut Legal Action has lost its high court challenge over the legality...

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Chancellor to stay on economic path

Category : Business

Chancellor George Osborne tells business leaders at the CBI that he will not deviate from the government’s economic road to reducing the deficit.

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TUC warns of ‘lost decade’ as IMF arrives to scrutinise UK economy

Category : Business

Officials to investigate economic outlook as unions argue austerity policies are causing UK to lag behind in global recovery

International Monetary Fund officials arrive in London today for their annual health check of Britain’s economy as the government faces a fresh warning its austerity drive is causing a “lost decade of growth”.

Echoing the IMF’s recent warning that George Osborne, the chancellor, needed to ease up on austerity cuts in the face of a stagnant economy, the Trades Union Congress (TUC) has argued that the UK is being left behind in the global recovery.

It said the UK is experiencing a slower economic recovery than 23 of the 33 advanced economies monitored by the IMF. The TUC report, issued to coincide with the arrival of the IMF mission, also claims the vast majority of eurozone countries are performing better.

TUC general secretary Frances O’Grady said: “We truly are experiencing a lost decade for growth. While other countries are already seeing a rise in economic output, the UK won’t return to its pre-crash level for another four years.

“The chancellor’s commitment to self-defeating austerity has prolonged people’s suffering and put the brakes on our economic recovery – so much so that escaping a triple-recession is considered by some to be a cause for celebration. Even George Osborne’s favourite economic institution, the IMF, is calling on him to change course.”

Looking at income per head, the TUC warned the UK would not return to its pre-crash level until 2017. By contrast, income per head in Germany and the US would be more than 10% higher a decade on from the financial crisis.

The TUC said the figures, based on the IMF’s latest GDP forecasts, also revealed how the UK is emerging from recession at a slower rate than at any time in recent history. The report says: “In 1985, UK income per head was 6% higher than it was before the 1980 crash. In 1995, UK income per head was 7% higher than it was before the 1990 recession. UK income per head is today still 6% below its 2008 level.”

Over the next two weeks IMF officials will be gathering information on the UK’s economic prospects from the Treasury, Bank of England, private sector economists, trade union officials and the government’s independent forecaster, the Office for Budget Responsibility. The IMF deputy managing director, David Lipton, is then expected to hold a news conference on or around 22 May at the end of the discussions.

IMF officials caused embarrassment for Osborne last month when, alarmed at the flatlining of the British economy in 2011 and 2012, they urged him to do more to boost growth and to rethink plans to cut the structural budget deficit by 1% of national income in 2013-14.

The Washington-based organisation was initially a strong supporter of the coalition’s approach to tackling the UK’s record peacetime budget deficit. But its chief economist, Olivier Blanchard, singled out the UK as a country that had the scope to ease fiscal policy to boost growth. Osborne was particularly irritated by Blanchard’s comment that the UK was “playing with fire” by refusing to change tack.

Osborne, however, will stand firm at meetings with the IMF delegation. Treasury officials intend to show that any change to the strategy they have followed for the last three years would damage the government’s credibility in the financial markets and the subsequent increase in long-term interest rates would outweigh any benefits from cutting taxes or increasing spending.

The Treasury will say that the economy is gradually on the mend and that the IMF’s anxiety about the weakness of growth has already been addressed in recent policy initiatives. They will also say that the sluggishness of the economy in 2012 was a result of the drop in exports to the crisis-hit eurozone, rather than weak consumer spending.

The TUC argues that many eurozone economies, including France, Germany, Ireland and the Netherlands, are recovering faster in GDP per head terms and so Osborne “cannot blame Europe for the UK’s economic woes”. It wants the chancellor to ease off on austerity and focus more on jobs and spurs to growth and confidence such as an extensive house building programme.

“He should start learning from countries like the US whose ambitious programme of investment in jobs is helping to turn its economy around,” said O’Grady.

A Treasury spokesperson said: “This is an own goal by Labour’s paymasters. This analysis starts in 2008 and so includes the biggest recession in modern history – which happened under Labour. Clearing up the mess we inherited won’t happen overnight.”

Chris Leslie, shadow financial secretary to the Treasury, said: “George Osborne should not arrogantly dismiss the advice of hte IMF team flying into London this week. It is time the chancellor listened to their warnings that his failing economic poilicies are plahing with fire and that Britian now needs a plan ‘B for jobs and growth.”

The IMF cut its forecast for UK growth in both 2013 and 2014 last month. Its publication – the half-yearly World Economic Outlook – said GDP would rise by 0 .7% this year and by 1.5% in 2014 – in both cases a cut of 0.3 points from its last set of predictions in January.

Help to Buy risks helping to create another housing bubble

Category : Business

In his ‘emergency’ budget in 2010, George Osborne pledged to create a less debt-fuelled economy. Where is that promise now?

The late Eddie George, in 2002, brought the phrase “two-speed economy” into common parlance, telling an audience in Scotland: “We have taken the view that unbalanced growth in our present situation is better than no growth – or, as some commentators have put it, a two-speed economy is better than a no-speed economy.”

But his words could just as well have been applied to last week’s GDP figures. While it was undoubtedly great news that the UK has skirted around a “triple dip”, the breakdown of the numbers suggested that, far from achieving the rebalancing George Osborne hoped for, away from consumers and towards industry, the mix of growth looks much as it did a decade ago. Manufacturing output declined; services expanded; government spending made a positive contribution. Industrial output is still 10% below its pre-crisis peak.

Yet far from acting to redress the balance, the coalition’s latest policies read like a desperate attempt to return to the unstable, unsustainable norms of the early noughties.

Help to Buy, announced in the budget, will offer taxpayer backing for up to £130bn worth of mortgage lending, while last week’s extension of the Funding for Lending scheme will allow banks to receive £10 of cheap funding for every pound they lend to small businesses in 2013 – and lend it back out again in any way they like, including to buy-to-let investors.

Back in 2002, George wanted to reassure consumers they would not face a runup in interest rates – because with other sources of growth, such as industry and exports, struggling, the Bank was willing to allow Britain’s shoppers to continue propping up demand with their buy now, pay later spending habits rather than risk economic stagnation.

When he spoke, the cost of the average home was less than £96,000, though prices were already rising at double-digit rates; by the peak of the boom, little more than five years later, it had all but doubled, to £183,959.

Alongside that extraordinary growth in house prices came an unprecedented explosion in household debt. But constantly rising prices bred a warm feeling of confidence among homeowners and fuelled a sense of entitlement to the unearned benefits of rampant housing-market inflation, creating a ready-made lobby group opposing changes to inheritance tax, council tax or any other method of sharing the windfall more widely.

In Osborne’s first, “emergency”, budget in 2010, he carefully laid out his intention of building a safer, more stable economy, less reliant on debt-fuelled spending. Yet three years on, scarred by the failure of the pound’s 20% depreciation to spark an industrial renaissance, he appears to be banking on the two-speed doctrine to lift him clear of trouble.

Osborne has insisted that Help to Buy is not aimed at pushing up prices. But encouraging first-time buyers to take out mortgages with high loan-to-value ratios – on properties whose value may be unsustainable even at current levels, let alone after another market bounce – is hardly a recipe for a fairer or more stable economy.

The Treasury claims to hope the policy will stimulate housebuilding, helping to ease the chronic shortage of homes that has driven up prices; but as the Treasury select committee rightly pointed out in its report on the budget, if the government really wanted to kickstart building, it should act to do so directly. That might mean taking advantage of record low gilt yields to invest in council housing, for example. But as Pete Jefferys of Shelter put it in a blog last week, Help to Buy is a “Thatcher-style home ownership revolution, not a Macmillan-style housebuilding boom”.

Neither does pumping out a new generation of cut-price loans – which, remember, will be available to anyone buying a house worth up to £600,000 – tackle the problem of banks still saddled with shaky-looking mortgages from the boom years. It just postpones the reckoning – and risks making it worse when it comes.

There is agreement across the political spectrum that Britain faces a housing crisis: a generation of young people have little or no prospect of affording a place to live, and find themselves trapped in insecure, poor-quality rental housing owned by landlords out to make a quick buck.

But first-time buyers need cheaper homes, not bigger loans, and the chancellor’s argument is reminiscent of those who used to claim vehemently in the mid-noughties that allowing low-paid workers to borrow six times their income was socially necessary, because otherwise young people wouldn’t be able to afford a home.

A mass programme of publicly funded housebuilding, along the lines stirringly recreated in Ken Loach’s documentary The Spirit of ’45, could boost supply dramatically and help to rebuild the shattered construction sector, while tougher regulation of the rental market could ease the pain for those unable to afford their own home.

And taxing housing more heavily – whether through a more progressive council tax system, heftier inheritance levies or a land value tax, under which homeowners would pay a small percentage of the value of their property each year – could help to prevent the next bubble inflating. Instead, the government appears intent on subsidising it.

Martin Rowson on escaping a triple-dip recession – cartoon

Category : Business

George Osborne says Thursday’s growth figures are ‘an encouraging sign the economy is healing’

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Austerity: an idea on trial | Editorial

Category : Business

The past week has been a particularly bad one for George Osborne and advocates of the Reinhart-Rogoff approach

Over the past week, a series of blows have been dealt to George Osborne’s reputation. First, the IMF’s chief economist warned that the chancellor’s austerity programme was “playing with fire”. Then the latest unemployment figures indicated that the jobs market may be about to turn significantly for the worse. The week ended with another credit rating agency stripping Britain of its AAA rating. While all this was going on, a row raged about academic research that had been cited by the chancellor in support of his austerity.

In 2010, the Harvard economists Carmen Reinhart and Ken Rogoff produced a paper arguing that countries with public debt above 90% of their annual income hit a tipping point, experiencing much lower growth. The study had been used by the Treasury as a key excuse for its spending cuts. Except that on closer examination by economists at the University of Massachusetts Amherst, the Reinhart-Rogoff research was found to be riddled with errors, from inappropriate weighting of the statistics to a howler over the use of an Excel spreadsheet. As if to rub in the schoolboy nature of some of these errors, the key researcher in the Massachusetts trio was a 28-year-old graduate student yet to complete his PhD.

It would be tempting to describe this as a terrible week for Mr Osborne, were it not for the fact that that phrase now seems to fit most weeks with a decent amount of economic news. Still, the past week has been particularly bad. The IMF is normally too respectful of diplomacy to take a stick to powerful member-states. And it is usually far too mindful of its own reputation to publicly repudiate a strategy that very recently commanded its emphatic support. Visiting London last summer, IMF boss Christine Lagarde gave even stronger support to the chancellor: “When I look back to 2010 and what could have happened without fiscal consolidation I shiver.” Not immaterial in all of this is that Ms Lagarde counts Mr Osborne as a friend: he was the first major finance minister to back her bid to be head of the IMF. In the course of just a few days, the chancellor has decisively lost one of his key personal and institutional allies. He must now prepare for a showdown next month when Fund economists visit London to make their annual inspection.

We can imagine just how embattled the government will be this summer. Take this coming week; it may be that the GDP figures on Thursday show that the UK has narrowly avoided a triple-dip recession – a result that would once have provided rhetorical ammo for the Treasury but will now be easily deflected by any TV interviewer toting a couple of choice quotes from the IMF. Then there will be next month’s local elections. And the setting of a spending review for June is bound to provoke months of mutinous muttering from ministers in charge of unprotected departments (see Vince Cable, Theresa May and Philip Hammond). But the events of the past week also show up the rottenness of our economic policymaking process. The Reinhart-Rogoff argument about a tipping point for debt was influential around the world. Yet the idea that there could be a natural cap for debt, which, when breached, would usher in sharply lower growth, is absurd.

Such mechanical explanations don’t fit with history: in 1945, Britain had debt of 220% of GDP but no economic disaster struck. Nor do they fit with commonsense: why should high debt produce low growth rather than, as is happening now, low growth lead to higher debt? Yet this study and others of similarly murky worth were cited by everyone from Paul Ryan to the austerity crowd in Brussels, and heeded by institutions such as the IMF. Put all this together, and a picture emerges of academics overselling a simplistic argument that is conducive to ministers’ yen for austerity and so gets further simplified for political purposes. The past week has dented Mr Osborne’s reputation; but it should be a chastening one for economic policymakers in Brussels, Frankfurt and Washington, too.

Treasury dismisses SNP currency plan

Category : World News

UK Chancellor George Osborne believes the SNP “are tying themselves in knots” over plans to retain the pound in the event of a yes to independence.

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Osborne to extend lending scheme

Category : World News

George Osborne is set to boost lending to small businesses as he faces growing pressure over his austerity policies.

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VIDEO: MPs voice mortgage scheme concerns

Category : Business, World News

George Osborne’s flagship scheme to boost the housing market may not help first-time buyers and could cost the Treasury large sums, MPs have warned.

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Fitch downgrades UK credit rating

Category : World News

Fitch credit ratings agency downgrades the UK to AA+ owing to a weakened economic outlook, but Chancellor George Osborne defends his austerity plan.

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George Osborne’s tears draw Tory jeers – but will it help chancellor’s image?

Category : Business

Osborne was seen to be shedding a tear at Thatcher’s funeral, which prompted unkind remarks from some of his own party

In the space of a few minutes, the world was given a rare glimpse of a more complex side to George Osborne when the chancellor shed a tear during Lady Thatcher’s funeral.

Tory MPs, who regard Osborne as aloof and little too grand for their tastes, privately joked that the chancellor was showing his pain after it was announced yesterday that unemployment increased by 70,000 in the three months to the end of February.

But the chancellor suggested he cried for the simple reason that he found the service at St Paul’s Cathedral immensely touching. “A moving, almost overwhelming day,” the chancellor tweeted shortly after leaving the cathedral.

Osborne appeared emotional at Thatcher’s funeral after the Rt Rev Richard Chartres, the bishop of London, had said “our hearts go out” to Thatcher’s children, Mark and Carol, and the rest of their family.

He then blinked repeatedly, apparently fighting tears, as Chartres related a story about how a young boy wrote to Thatcher asking if she had ever done wrong. Osborne managed a brief smile before shedding a tear, prompting a mini-Twitter storm.

His tears contrasted with David Cameron, who smiled for a longer period during the bishop’s story and showed no other emotions at that stage. The prime minister has a better public image than the chancellor but lacks his humour and warmth in private.

The chancellor, whose father-in-law, Lord Howell of Guildford, was in Thatcher’s first cabinet, admitted last week in a Times article that he had little personal connection with the late prime minister. But he did recall taking his young son to meet Thatcher for tea. Howell, a Foreign Office minister for two years of Cameron’s government, also attended the funeral.

But Conservatives lined up to mock the chancellor. One said: “Perhaps George had just read what Oscar Wilde said of Little Nell.” Wilde reputedly said of Nell’s death in Dickens’ novel The Old Curiosity Shop: “One would have to have a heart of stone to read the death of little Nell without dissolving into tears … of laughter.”

Osborne has been under huge immense political pressure after admitting that he will fail to meet his two main fiscal targets – eliminating the fiscal deficit by the next election and ensuring that debt is falling as a share of GDP by 2016.

As the Tories’ main political strategist, Osborne knows he risks becoming a major liability for the party before the general election in 2015. He gave another display of unease this month in front of a group of workers at the main Morrisons distribution centre for the south of England in Sittingbourne, Kent.

But some argue that the tears may soften Osborne’s image. Andrew Lilico, former chief economist of the centre-right Policy Exchange thinktank, tweeted: “Shame on all of you that are mocking Osborne for crying at a funeral. Do you never cry yourselves?”