Archive for the 'Economy' Category


ComRes Indy/SMirror poll finds sharp rise in the economic trust lead for May/Hamond over Corbyn/McDonnell

Saturday, November 12th, 2016


In March the LAB pair were a net 16% behind CON leadeship – that’s now 33%

Ahead of the Autumn statement, May & Hammond are seen as much more trusted on the than both Corbyn & McDonnell and Cameron & Osborne.

    The brutal fact is that the twice elected leader hasn’t got an earthly with numbers like these. The vast influx of new members into the party since GE2015 have made the main opposition party unelectable

As is repeated so often an opposition leader and party cannot be behind on both personal ratings and the economy.

Ahead of Hammond’s first autumn statement more than half of sample say that the government should delay major spending decisions until after the UK has agreed the terms of leaving the European Union, while three in ten think the government should go ahead with these decisions (53% v 30%).

A majority say that the government should prioritise increasing public spending over the next few years rather than cutting it (53% v 23%).

There are gloomy view about the world with Trump as president.


Mike Smithson


Alastair Meeks on How Conservative Leavers could gift Labour the next election

Tuesday, June 7th, 2016

The 2015 general election result was a surprise to almost everyone.  After the event, those who had not predicted the Conservative overall majority hastened to explain why it had happened.  One of the prime underlying causes alighted upon after the event was Labour’s catastrophic reputation on economic competence.  Labour’s own pollsters found that Labour had a 39% deficit behind the Conservatives on this topic among those who voted.

That Conservative lead was hard-won.  The Conservatives had for many years made a virtue of taking difficult decisions, of having the bottle to stick with austerity and bring down the deficit, even when individual decisions were unpopular.  Ed Miliband’s retail offer politics, while individually popular, did not comprise an election-winning platform when the public believed that keeping the purse strings under control was of vital importance.

Jeremy Corbyn has made no attempt to try to change public perceptions of Labour’s reputation for spending.  So at present Labour is no doubt as far adrift of the Conservatives as ever in this key battleground.

If Leave wins, however, this is likely to change – not because of anything that Jeremy Corbyn does but because the Conservatives are likely to throw away their hard-won reputation for economic competence.

There is near-universal agreement among economists, even those supporting Leave, that there will be an economic shock in the event of a vote to leave the EU.  There is less agreement about the size of the shock, of course, with Leave-supporting economists inclined to minimise it and Remain-supporting economists inclined to maximise it – funny that.  But whatever way you slice it, if there is an economic shock it will come at a time when Britain continues to run a high deficit, even after years of austerity.

This potential cost can and has been estimated (unlike Michael Gove, I haven’t yet had enough of experts).  The IFS, for example, has put the figure at £20bn to £40bn.  That can and has been doubted by the Leave side, who in their usual charming way took the opportunity to suggest that the IFS were in the pay of the European Union when putting their estimate together.  But for present purposes it will stand as a mainstream estimate.

Such an economic shock would not go unnoticed by the populace.  It would coincide with a lot of market turbulence.  And then those abstract numbers would need to be converted into cuts in services or tax rises.

It would not take long for it to dawn on the public that instead of leaving the EU they could have had countless new hospitals and far more spending on schools with the money that had been foregone by that economic shock.  It will not take long because Labour politicians will be pointing it out relentlessly.  The economic shock will be portrayed as a Conservative choice to waste untold billions on a hobby horse rather than the everyday problems that the general public face.  Any suggestion that Labour is profligate with money would have an instant answer.  The Conservatives would have thrown away their single biggest advantage over Labour in an instant.

Trust is hard-won and quickly-lost, as the Conservatives found out in 1992 when the UK was ejected from the ERM.  If Leave win the referendum and the economic shock that most economists expect comes to pass, the Conservatives might very well come to look back on 23 June 2016 as Black Thursday.

Alastair Meeks


The economics of discontent

Sunday, June 5th, 2016

Alastair Meeks on why Leave is prospering

Where did it all go right?  The bare statistics are breathtaking.  Even looking in percentage terms, employment rates are at all time highs, unemployment rates are at 10 year lows and the economic inactivity rate is also at a joint all time low (tying with 1990).  Job vacancies are hovering just below their all time highs.  Most of the economically inactive are students, stay-at-home mums or the retired.  So why are so many voters so angry?

Wage rises have been subdued for years. This is routinely blamed on immigration levels. We are told that there is hostility to immigration because it sets rich against poor, improving the purchasing power of the rich while taking jobs and wages from the poor, creating an underclass who are thrown on society’s scrapheap.  It’s a potent theme.

As a result, Leave are pressing hard on the theme of controlling immigration.  Remain is struggling to respond effectively.  The polls on the subject suggest that Leave definitely has the upper hand on this specific question.

However, the evidence that immigration has reduced wages in aggregate is actually fairly weak: as a matter of common sense if employment rates are at an all-time high, job vacancies are near their all time highs and unemployment rates are at ten year lows, this cannot be anything like the only or even main explanation for low pay rises.

Reasonably enough, the public are less interested in the why and more interested in the fact that pay is struggling to keep pace with inflation.  But contrary to popular myth, people are actually feeling better off than they did a few years ago.  The tables at the top of the page show the most up to date ONS data on how people assess their financial comfort.  More people say that they are living comfortably or doing alright than did so four years previously and fewer people say that they are finding it quite or very difficult.  Far from most people being crushed, on average things are slowly getting a bit better.

Meanwhile, low pay is being targeted.  The government is introducing a much higher minimum wage.  The effects this will have are uncertain. When the minimum wage was originally introduced, Professor Patrick Minford predicted unemployment would rise by up to three million.  In fact, it was introduced without incident.  There is wider concern this time that the new rate is set at a level that would have an impact on jobs, but the precise impact is unclear.  At a time of such high employment and labour force participation, however, it seems as good a time as any to find out: if the impact is not too severe, those in work on or close to minimum wage will see a sharp increase in their earnings.

So if more people than ever before are in work, people are feeling better off and the government is looking at addressing low pay, what is all this discontent really about?

The key to this problem is elsewhere.  The government has been cutting spending, which affects the poor disproportionately.  It also adds pressure on the services that the poor use, making them less sympathetic to other users of those services.  This effect has been intensified because the government has protected spending on the elderly, meaning that other spending has been cut disproportionately hard. 

If the government stops looking like it is helping you, you might well decide either that it should start helping you again – the leftwing working class analysis – or that the government is part of the problem – the rightwing working class analysis.  Controlling the immigration that puts pressure on hard-pressed public services is a natural response.

If this is right, the seething discontent will continue for as long as austerity continues.  And this is hardly surprising.  Not all of that government spending was wasted.  Some of it was usefully helping some people.  If those people are seeing things deteriorate as a result of that spending being cut, they might well be disillusioned and angry.  Perhaps that is why they are.

Alastair Meeks


The next recession

Sunday, May 22nd, 2016


Trying to predict the next recession has the danger making you sound like The Ancient Mariner but William Hill have a market up if the UK is going to have recession by the end of 2017 if you want to bet on the timing of it. I’m not an economist, so this piece should be viewed in that spirit.

Most of the economic mood music seems to indicate backing a recession occurring before the end of 2017 might be the best option, for example, back in January George Osborne warned of a cocktail of threats facing the UK economy, whilst earlier on this week it was confirmed the manufacturing sector is already in recession. 

Unsurprisingly confidence in George Osborne’s stewardship of the economy has plummeted since the general election, the recent Ipsos Mori poll found “One year on from the election of a Conservative majority in Westminster, Ipsos MORI’s Political Monitor finds a fall in the public’s ratings on the government’s management of the economy. Just under half (47%) say the government has done a bad job over the past year compared with 42% who say they have done a good job. In March 2015, 56% said the Coalition government was doing a good job, and 37% were critical.”

All of the above is before the issues of  the predicted economic apocalypses that is Brexit or a Eurozone contagion which could impact negatively on the UK economy,  For the sake of the country, I hope this is a bet I don’t collect on, “the recent strong growth in retail sales dispels gloom around UK economy” may indicate that backing the other side of this bet is the wisest course of action.



A post Brexit vote recession could cost the Tories the next election

Sunday, May 15th, 2016

Brexiteers are in danger of being blamed for the next recession even if it has nothing do with Brexit

On one side we have, inter alia, the Prime Minister, the Chancellor, and the great and the good, from the IMF, the OECD, NIESR, The Bank of England, and their Governor, Mark Carney, who the polls suggest is political Kryptonite against Leave, forecasting Brexit as being somewhere from very bad to a visit from the Four Horsemen for the UK economy.

On the other side you have Leavers like Tory Priti Patel who said “The EU-funded IMF should not interfere in our democratic debate … It appears the chancellor is cashing in favours to [Christine] Lagarde in order to encourage the IMF to bully the British people.” Some Leavers say the Treasury’s figure that every household would lose £4,300 was a bargain, another said the ‘insecurity [of Brexit] is fantastic’, whilst another prominent Leaver said publicly he would would welcome the economic apocalypse of Brexit, and would be delighted to provide free accommodation to the Four Horsemen whilst they visited the UK*.

So the meme that Brexit is bad for the economy has been effectively seeded, and a stand alone UK recession in the short term after a Brexit vote could see that meme germinate in a way that is not optimal for the Tories, especially if a Leaver succeeds David Cameron.

In various polls, the voters generally sees Brexit as the worst option for the economy, and for them personally, than remaining in the EU, even in the polls that have Leave ahead, so it is easy to see that seed has been planted in the minds of voters.

At the last general election two of the Tory Party’s strongest assets were David Cameron and their stewardship of the economy, they will be fighting the next election without the former. A post Brexit vote recession means they could be fighting without the latter asset too. 

Sometimes perceptions matter more than the facts, Leavers shouldn’t complain, we saw it how badly the ONS report on National Insurance figures was reported this week, as this tweet  and this article show.

The events of Black Wednesday helped in part to keep the Tory Party out of power for thirteen years, and the legacy of the 2008 credit crunch has the contributed to Labour losing the last two general elections.

When the voters can blame the government for an avoidable economic disaster, they don’t forget it. They know politicians don’t have the ability to abolish boom and bust, that’s why for example the Tories didn’t lose the 1983 and 1992 general elections, which came shortly after/during recessions. 

As the mantra goes, oppositions don’t win elections, governments lose them. Labour could say a post Brexit vote recession was foretold, and the Leavers ignored their warnings, even if the recession is a normal cyclical recession. 

Inadvertently the Tory Party may have salted their own electoral ground during this referendum campaign, it’s almost like if after The Third Punic War, The Roman Republic had accidentally salted Rome instead of Carthage.


*That last one isn’t true, but with the way this campaign is going with talk of armed conflict if we leave and the EU being like Hitler, it is entirely possible for someone to say something that outlandish in the remaining forty days of this campaign.


Sentence first, verdict later. Rushing to judgement over BHS

Thursday, May 12th, 2016

Green photo

Sir Philip Green potentially makes for a good pantomime villain.  He has never gone out of his way to charm the public and he has contacts in elite political circles.  His wealth is fabulous and flaunted.  His tax management strategies have blazed across the front pages of the newspapers.  And now his former flagship company BHS has gone bust, leaving a pension scheme that is half a billion pounds short, and he has taken large dividends from the company over the years.  Parliamentarians and the press are out for blood.

Have the press nailed a new corporate predator or are they engaged on a witch hunt?  Disappointingly, the answer is that it is far too soon to tell either way – not that it will stop people from speculating according to their preferred agenda.  We can, however, look at what the story has to tell us about how this country handles dull but important subjects.

Employers have been offering pension schemes to their workers as far back as the seventeenth century but their current efflorescence dates from the first half of the twentieth century.  For many years the only government regulation concerned the tax breaks that employers got for offering pension schemes.

It was not until the 1970s that their integration with social security started and it was only after the Maxwell empire collapsed in 1991 that the DSS intervened to set minimum levels of pension scheme funding.  This was revised in 2003 following a series of highly-publicised cases where some employers had stuck to the bare minimum on winding up the scheme, resulting in some long-serving employees receiving almost nothing.  It was only from that point on that employers were placed under obligations to ensure that pension scheme funding was adequate to secure all benefits.

This may sound extraordinary but it had not been a significant problem until then.  Until the mid 1990s, securing pension scheme benefits with an insurer had been cheap (because of high interest rates and pessimistic assumptions about life expectancy).  With inflation remaining persistently low from the early 1990s onwards and life expectancy being repeatedly revised upwards, insurance company quotations soared in price.  It certainly did not help that for the first few years of this century the stock market was in the doldrums.  A theoretical problem only became live then.

The government also put in place as from 2005 anti-avoidance measures to seek to make sure that shareholders could not asset strip businesses to sidestep their obligations to the pension schemes that they sponsored.  The power to monitor and enforce this was given to the Pensions Regulator.  If everything went wrong, the government had set up a levy-funded lifeboat called the Pension Protection Fund.

Why am I labouring over the time frame of this?  First, to show that the current regulatory system is pretty new and hasn’t been tested much.  Secondly, to show that the obligations that BHS and Sir Philip Green were under changed considerably during his ownership of that company.

At this point, you might be asking why all pension schemes aren’t now kept fully funded on an insurance company basis.  That would indeed guarantee all pensions are paid in full.  This was a proposal touted by the European pensions regulator, which it has only backtracked on in the last month.  That would, however, require British industry to inject something like £250 billion into their pension schemes straight away (for comparison purposes, that’s more than three times the British government’s annual deficit).  Obviously, this was not particularly appetising to the private sector.

So pension schemes, overseen by the Pensions Regulator, have been seeking to get to full funding over appropriate timespans, having regard to the strength of their sponsoring employer.  The art is to get the schemes as secure as possible as quickly as possible without crippling their employer’s business.

This would be a tall order for even the nimblest regulator, weighing the risks of corporate insolvency over the proposed recovery period against the risks being run with the proposed actuarial assumptions, while keeping a close eye on external economic conditions.  The Pensions Regulator is not the nimblest regulator.

And now things have gone wrong for BHS.  Solid facts are quite hard to come by but it seems that its pension scheme was in actuarial surplus as recently as 2008 (quantitative easing was a hammer blow for pension scheme solvency).  That begs the question what assumptions were being used but actuaries have professional duties to be prudent.  Should the Pensions Regulator have insisted on greater prudence?  Don’t forget that it would have been looking at this at the time when the markets were going through a historic crash.  The Regulator at that time decided as a general principle that pension scheme trustees need not push employers too hard.  That seemed wise then and still does.  It was better to give companies a bit of breathing space than to force them into insolvency to no purpose.

The Pensions Regulator is still investigating what it might do about BHS.  That investigation looks likely to be complex and document-heavy (the Regulator is ploughing through 70,000 pages).  Already, however, some members of the DWP Select Committee seem to be grandstanding.  The Pensions Regulator’s chief executive was given little support on Monday afternoon from the MPs quizzing her.  Some of the questions looked inappropriate given that a quasi-judicial process is ongoing.

The Select Committee – which has the luxury of not being held to account for its decisions – should be focussing on the decision-making process.  The Pensions Regulator may well have made mistakes.  The Select Committee should be mindful that it is looking at events with the benefit of hindsight.

And perhaps we can break new ground and avoid a series of dramatic recommendations for upending the current system.  Changing the regulatory regime in response to the latest news story every few years is not good for consistency and doesn’t help the Regulator.  Whatever system we have in place, a balancing act between funding securely and giving business flexibility will need to be struck.  Perhaps we could try the current one out for a little bit longer?

Sir Philip Green may make for a tempting target for Parliament and the press.  But whatever the rights and wrongs of this particular case, our problems with our pensions system are much more deep-rooted.

Alastair Meeks


The referendum is currently much more about the economy than immigration

Monday, April 18th, 2016

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If it stays that way it’s good for REMAIN

Today’s been a huge one in the build up to June 23rd. The Treasury statement announced by Osborne this morning has met with a furious reaction from the LEAVE and looking at the above polling you can see why.

Detail from the ComRes/Sun poll shows responses to the question about which issue will be most important to voters in making up their minds. REMAIN backers the economy is twice as important as immigration and overall it is top, by a sizeable margin.

And it is on the economy that Osbo/Dave are clearly resting their hopes. ProjectFear will focus on this area more than anything else.

LEAVE really needs to find a way of pushing immigration into the narrative.

Mike Smithson


Concern about the economy at highest level since 2013

Thursday, January 28th, 2016

This could hinder the BREXIT campaign?

The January Ipsos-MORI economic optimism index is out and shows the lowest figure since 2013. This has been a regular tracker from the firm for decades and is calculated by taking the percentage of those saying they are optimistic about the economy and deducting those who are negative.

In the current context in the run up to the EU Referendum everything will be judged on its likely impact on that crucial vote which looks set to take place this year.

    There is an argument that people will be less reluctant to rock the boat by voting for change at a time of uncertainty.

If that is correct, and I’m only partially convinced, then BREXIT needs perceptions about the economy to be positive at the time of the vote.

From all the indications we know that security in latest its forms is going to be a big theme from Cameron/Osborne in the referendum campaign in order to ensure that the UK stays in the EU.

Some BREXIT commentators have suggested that Osborne will endeavour to play on economic worries in order to create the atmosphere in which people will be reluctant to vote LEAVE.

It’s a fair point. Osborne/Cameron are in power today because of their ability to raise fears about what would happen if the “other lot” got in. Maybe it’s the same strategy for the referendum except the other lot is not LAB but those wanting out of the EU.

Mike Smithson