Why aren't UK pay rises delivering votes to Cameron?

  • 17 April 2015
  • From the section Business
David Cameron

David Cameron may look at today's stats on unemployment and wonder why on earth his party is only neck and neck with Labour in the opinion polls, and not benefiting from record employment levels and a significant rise in inflation-adjusted pay (before tax and benefits).

Probably the most interesting stat for me was that regular pay - excluding bonuses - saw a 2.2% increase in February and a 1.8% rise in the three months to Feb. And for the first time since serious records began, that headline rise is the real rise - because CPI inflation is 0%.

It is striking that fears of employers significantly shrinking pay rises with the disappearance of inflation have not materialised: there is no sign in the UK of so-called bad deflation (which of course means the Bank of England remains on course to push up interest rates, rather than cut them).

Here is the thing: regular pay has been growing at a faster rate than inflation since last October, after years of lagging inflation. And what is more, pay rises in the private sector, which provides more than four-fifths of all employment, are even greater, at 2.6% in one month and 2.2% over three months.

Also, the employment rate of 73.4% is the highest since comparable records began in 1971. And the unemployment rate of 5.6% is down from 8% in early 2010 and is only a fraction higher than it was before the great crash and recession: it was 5.2% in February 2008.

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How serious for us is the Greek tragedy?

  • 16 April 2015
  • From the section Business
Tragic masks, detail from a mosaic of the Triumph of Dionysus uncovered in Daphne, Antioch, Turkey. Roman Civilisation, 2nd to 3rd century.

There is something a bit too deja-vu-ish about this election campaign, especially the tragic Greek economic backdrop.

Just like five years ago, Greece is on the brink of default. But 2015 is very different from 2010 in one important respect: other eurozone countries and the IMF are signalling they won't be panicked into rushing through another bailout.

Read full article How serious for us is the Greek tragedy?

IMF says UK still in deficit in 2020

  • 15 April 2015
  • From the section Business
Budget box

The International Monetary Fund has today highlighted the challenge to be faced by the next government in returning the public finances to balance.

Its new official forecast is for the gap between spending and taxes still to be a deficit of £7bn in 2019-20, compared with the Office for Budget Responsibility's forecast made at the last budget for a surplus of £7bn.

Read full article IMF says UK still in deficit in 2020

How SNP tests Labour's economic credibility

  • 15 April 2015
  • From the section Business
Sturgeon and Miliband

Earlier this week, Deutsche Bank said there were few positive outcomes for financial markets from the general election, based on what polls are saying.

It thought the most likely of its two so-called "good" outcomes was a Labour-led government supported by the SNP and the Liberal Democrats. This it saw as leading to increased taxes, less austerity and a slower reduction in the deficit.

Read full article How SNP tests Labour's economic credibility

Tories’ curious message on work

  • 14 April 2015
  • From the section Business
Sterling cash on payslip

I am a bit puzzled by some of the economic messages sent out by David Cameron and the Tory manifesto.

Take his eye-catching initiative that those working on the minimum wage will be permanently taken out of paying tax by legislation guaranteeing that the tax-free allowance will rise in line with the national minimum wage.

Read full article Tories’ curious message on work

Can Tories increase supply of affordable housing?

  • 14 April 2015
  • From the section Business
North London housing stock

As the election looms, David Cameron - who in his early leadership days seemed to present himself as more the heir to Blair than Thatcher - wants a bit of Margaret Thatcher's election-winning magic dust.

So he has nicked and reworked her totemic policy of flogging council houses to their working-class tenants - some of whom redefined themselves as a new generation of aspirant Tories.

Read full article Can Tories increase supply of affordable housing?

Is Ed Miliband constrained by budget responsibility lock?

  • 13 April 2015
  • From the section Business
Ed Miliband

So how constraining on Labour is its self-imposed "Budget Responsibility Lock"?

Well the first part of it, that there are no commitments in the manifesto that require additional borrowing, is binding up until May 7 - in the sense that Labour is not offering goodies to voters without saying what services or benefits will be cut or which taxes will be increased to pay for those goodies.

Read full article Is Ed Miliband constrained by budget responsibility lock?

Why aren't Labour and Tory rowing about growth?

  • 13 April 2015
  • From the section Business
House of Parliament

There is something a bit surreal about a Labour manifesto whose first page is a promise to borrow and spend as little as possible, in contrast to the Tories' weekend claim that they would spend £8bn more on the health service but won't say how to finance that spending.

This counter-intuitive contrast is all about the parties' own perceptions of their respective weaknesses - that the public finances would return in short order to chaos under Labour, and that the NHS would collapse under the Tories.

Read full article Why aren't Labour and Tory rowing about growth?

Labour manifesto to promise 'Budget responsibility'

  • 12 April 2015
  • From the section Business
Ambulance
The Tories have promised to increase NHS spending by £8bn if they win the election

It is a topsy turvy fiscal battle between Labour and the Tories.

Hard on the heels of the Tories promising to increase NHS funding by £8bn a year in real or inflation-adjusted terms, without announcing spending cuts or tax increases to pay for it, Labour is characterising itself as the party that won't make any unfunded spending increases.

Read full article Labour manifesto to promise 'Budget responsibility'

Who wins from inheritance tax giveaway?

  • 12 April 2015
  • From the section Business
Houses in Derbyshire
Rising house prices have put more people in the inheritance tax bracket

Like me, you may have been puzzled why the Tories think that promising to increase the effective threshold for inheritance tax (IHT) from £650,000 to £1m, for a married couple, is a big vote winner - in that in 2010, only 2.6% of estates paid the tax.

Well, it's because the surge in house prices, even after the great crash and recession, increased the proportion paying IHT to 6% in the past year. And the OBR currently forecasts the share of taxpayers among estates to continue rising to 11.6% in 2019.

Read full article Who wins from inheritance tax giveaway?