Showing posts with label Austerity Policy. Show all posts
Showing posts with label Austerity Policy. Show all posts

Wednesday, 1 July 2020

Johnson vows ‘new deal’ to rebuild post-virus UK

Reprising spending pledges he made before December’s general election, the prime minister will announce the acceleration of £5bil (US$6.2bil) of investment in roads, schools and hospitals and promise to publish a strategy for further capital spending in the fall.
Wednesday, 01 Jul 2020
LONDON: Boris Johnson will commit to spending on infrastructure to rebuild the coronavirus-ravaged UK economy in a major policy speech and say that balancing the books must wait until recovery is secure.
Reprising spending pledges he made before December’s general election, the prime minister will announce the acceleration of £5bil (US$6.2bil) of investment in roads, schools and hospitals and promise to publish a strategy for further capital spending in the fall.
“We will build build build. Build back better, build back greener, build back faster and to do that at the pace that this moment requires, ” Johnson will say, according to extracts of the speech released by his office.
What is needed is “a new deal” and “a government that is powerful and determined and that puts its arms around people at a time of crisis, ” he will say.
Johnson won a commanding 80-seat Parliamentary majority by promising to “level-up” left behind parts of the UK with spending on infrastructure and skills, but his plans were blown off course as ministers battled the pandemic, which has killed 43,575 people and plunged the economy into recession.
As lockdown restrictions are lifted, he is seeking to regain the initiative and deliver on his pledges as the centerpiece of his rebuilding plans.
The prime minister, who has said he will not repeat the austerity policies his party imposed after the 2008 financial crisis, will compare his programme to President Franklin Delano Roosevelt’s “new deal, ” which used government spending to help the United States out of the Great Depression in the 1930s.
And he’s prepared to increase borrowing to make it happen. In a briefing note about the speech, Johnson’s office said decisions over increasing taxes or cutting services to pay for the debt will have to wait.
“While in the long-term the government must set a path to balance the books, the prime minister is clear that we will not do so at the expense of investing now in the productive potential of the economy, or at the expense of the resilience of the UK’s public services, ” it said.
With debt higher than GDP for the first time since 1963, Chancellor of the Exchequer Rishi Sunak will “provide an update” on the economy next week. The announcement angered the opposition Labour Party, which wants a full redrawing of the budget to focus on employment.
“Unemployment has climbed to its highest level in a generation, and our country is suffering the worst economic hit of all industrialized nations, ” Anneliese Dodds, Labour’s economy spokeswoman said in a statement.
“Instead of the Back-to-Work Budget our country needs focusing on one thing – jobs, jobs, jobs – the Chancellor will only be providing an ‘update’ on the economy.”
The £5bil Johnson will allocate to hospital maintenance, school repairs and road improvements is not new money and is a fraction of the infrastructure spending announced in March.
Then, Sunak committed to increase total infrastructure spending across the next five years by £100bil to a total of £600bil. While much of that investment was designed to help reduce the UK’s long standing regional inequalities in growth and productivity, there are questions over whether such spending is the best way to stimulate the economy’s recovery from coronavirus.
“Infrastructure spending can get the biggest bang for the buck over the longer term, if projects are chosen carefully and boost productivity, but it is hard to find a large number of worthwhile shovel-ready projects that can boost demand quickly in the short term, ” Julian Jessop, economics fellow at the IEA, said in an email Monday.
“There is also a risk that the government simply takes jobs away from other priority areas, such as house building.”
A delayed National Infrastructure Strategy, which was originally scheduled for March, will be published in the fall, Johnson’s office said. The document will outline plans for “core” services including roads, energy networks, rail, flood defenses and waste.
The economic impact of restrictions to control the virus has been unprecedented, shrinking the economy by 20% in April alone and leaving officials fretting over the long-term scarring effects of what could be the deepest recession in more than 300 years.
While the government’s furloughing plan has ensured the UK has so far avoided a wave of unemployment, data suggest the labor market is also weakening, and opposition parties have warned joblessness could soar to levels not seen since the 1980s unless support is extended beyond its scheduled end in October.
There was a reminder Monday that the UK’s path out of the crisis won’t necessarily be smooth when Leicester, a city in the English midlands, reimposed recently eased lockdown restrictions and closed schools amd non-essential shops after a spike in cases.
The British Chambers of Commerce welcomed Johnson’s infrastructure spending plans, though said he will need to move fast to achieve his goals.
“The infrastructure delivery plans announced by the prime minister are welcome, but they must take shape on the ground swiftly to give a real confidence boost, ” BCC Director General Adam Marshall said in a statement.
“In his first inaugural speech, Franklin Delano Roosevelt said, ‘We must act, and act quickly.’ The same holds true in Britain today.” — Bloomberg
https://www.thestar.com.my/business/business-news/2020/07/01/johnson-vows-new-deal-to-rebuild-post-virus-uk

https://www.klsescreener.com/v2/news/view/696415/johnson-vows-new-deal-to-rebuild-post-virus-uk



Tuesday, 30 June 2020

Absurd for Boris to compare to FDR’s New Deal his spending plans

Why it’s absurd for Boris Johnson to compare his spending plans to FDR’s New Deal

Johnson’s “infrastructure revolution” represents just 0.2 per cent of UK GDP; Roosevelt’s plan was 200 times more ambitious.


ECONOMY

By George Eaton
30 JUNE 2020



Boris Johnson visits a science room under construction at Ealing Fields High School on June 29, 2020 in west London.

TOBY MELVILLE - WPA POOL/GETTY IMAGES.

Boris Johnson visits a science room under construction at Ealing Fields High School on June 29, 2020 in 
west London.

Boris Johnson is far from the first UK prime minister to claim the mantle of Franklin D Roosevelt’s New Deal (Tony Blair and Gordon Brown also paid homage to the Democrat president). And judging by some of the coverage of Johnson’s announcement, one might assume such rhetoric is justified. 
The front page of today’s Times hails a “spending spree” that is “as bold as Franklin D Roosevelt’s New Deal”. But Johnson’s promise of £5bn of accelerated capital spending on hospitals, schools, roads, rail, prisons, courts and high streets is less impressive than the government’s spin suggests. 
The total announced by the Prime Minister amounts to just 0.2 per cent of the UK’s 2019 GDP (£2.2trn). By comparison, FDR’s 1933-39 economic stimulus, which supported the US economy through the Great Depression, is estimated by economists Price Fishback and Valentina Kachanovskaya to have represented 40 per cent of the US’s 1929 (pre-depression) GDP. As a share of the economy, Johnson's spending plan is 200 times less ambitious than the New Deal. It is also far outweighed by Germany’s recently-announced €130bn stimulus package, which accounts for nearly 4 per cent of the country’s GDP.
“It sounds positively Rooseveltian,” Johnson will declare of his programme in a speech in the West Midlands today. “It sounds like a New Deal. All I can say is that if so, then that is how it is meant to sound and to be, because that is what the times demand. A government that is powerful and determined and that puts its arms around people at a time of crisis.”
Yet despite UK GDP having fallen by 25 per cent since the Covd-19 crisis began, Johnson’s announcement includes no new money. The apparently heady sum of £5bn has merely been brought forward from the £600bn previously promised by Chancellor Rishi Sunak (a budget due to be spent between now and the middle of 2025). 
The government’s refusal to genuinely emulate Roosevelt’s boldness is a missed opportunity. Though the UK’s national debt now stands at 100.9 per cent of GDP, the highest level since 1963, borrowing has rarely been cheaper. Indeed, such is the appetite for UK debt from investors that the government has sold bonds at negative interest rates. Investors are paying the British state to borrow money from them.
Before Covid-19 struck, the government had already committed to borrowing for investment, repudiating George Osborne’s past pursuit of a budget surplus. But current plans will do little to compensate for years, and even decades, of underinvestment (even after recent increases, UK government investment remains 0.5 percentage points below the advanced economy average of 3.4 per cent of GDP). 
Johnson’s “infrastructure revolution”, then, is nothing of the sort. But even if it were, it would not be the sole test of whether the government has abandoned Hooverite austerity in favour of Rooseveltian stimulus. As well as total investment, the key number to watch is day-to-day spending on public services. Last year, the Institute for Fiscal Studies warned that even by 2023-24, current spending on services outside of health would be almost 15 per cent lower than at the start of the 2010s. 
Austerity has inflicted profound damage on the UK’s social fabric. Rough sleeping in England has increased by 165 per cent since 2010;  life expectancy has stalled for the first time in more than 100 years; and the number of people in poverty in working families has reached a record high. To truly reverse austerity, the government will need to spend far more on the services that have been so neglected over the last decade. 



Thursday, 28 November 2019

Boris Johnson says David Cameron government's austerity was a mistake

Boris Johnson has lashed the Cameron government for six years of austerity, saying the policy direction was a mistake.

Thursday 28 November 2019 1:26 pm
https://www.cityam.com/boris-johnson-says-david-cameron-governments-austerity-was-a-mistake/

BRITAIN-POLITICS-EU-BREXIT-VOTE-CONSERVATIVE
Britain's Prime Minister and Conservative Party leader, Boris Johnson visits Chulmleigh College while campaigning for the general election in Chulmleigh, Devon, southwest England, on November 28, 2019. - Britain will go to the polls on December 12, 2019 to vote in a pre-Christmas general election. (Photo by Dan Kitwood / POOL / AFP) (Photo by DAN KITWOOD/POOL/AFP via Getty Images)

The Prime Minister hit out at the keystone economic policy of the Cameron years, comparing it to post-war food-rationing by then-Labour chancellor Stafford Cripps.

Read more: Boris Johnson apologises to Muslim community

He told The Spectator: “I remember having conversations with colleagues in the government that came in in 2010 saying I thought austerity was just not the right way forward for the UK.

“I’ve always thought, ‘why use the language of Stafford Cripps?’”

The Prime Minister’s rebuke of austerity appears to be an attempt to distance himself from the legacy of the Cameron government.

The controversial policy – enacted through public spending cuts – has been blamed by some for increasing inner-city violence and homelessness, while also being blamed for worsening NHS outcomes.

Johnson, meanwhile, is campaigning on a less conservative fiscal policy platform and has touted his commitment to public services by promising to hire 20,000 new police officers and spend £34bn on the NHS.

Labour’s employment rights spokesperson, and Jeremy Corbyn ally, Laura Pidcock said the Prime Minister’s denunciation of austerity was “an outright lie”.

“We know that Boris Johnson thinks that single mothers should be subjected to ‘destitution on a Victorian scale’,” she said.

“The idea he was against vicious cuts that he previously demanded is an insult to people’s intelligence.”

Johnson, when he was mayor of London, had a public row with Cameron over cuts to police spending.

He criticised Cameron’s government for cutting spending in the wake of the 2011 London riots.

Read more: Boris Johnson promises ‘sensible’ spending increases at manifesto launch

“If you ask me whether I think there is a case for cutting police budgets in the light of these events, then my answer to that would be ‘no’,” he said.

“I think that case was always pretty frail, and it has been substantially weakened.”

Monday, 4 November 2019

General Election 2019: Public spending 'to rocket' in next parliament

Government spending is likely to head back towards 1970s levels over the next parliament whichever party wins the general election, research suggests.
MoneyImage copyrightGETTY IMAGES
Think tank the Resolution Foundation said both Labour and the Conservatives were planning big increases in the size of the state.
But it said they faced "huge questions" over how they would pay for it.
The Conservatives said they were focusing on people's priorities. Labour has been contacted for a response.
The 1970s are often described as a period of economic turmoil for the UK, with public spending soaring during the decade.
Manifestos for the 12 December general election have not been published yet.
But the Resolution Foundation, which aims to promote higher living standards for people on low and middle incomes, based its estimates on what the main parties have promised to date, as well as the underlying trends affecting the UK economy.

Conservative plans

It said that if the Conservatives won and simply maintained current spending levels - which were recently raised - then public spending as a share of the economy was likely to climb to 41.3% by 2023-4.
Sajid JavidImage copyrightLEON NEAL
Image captionChancellor Sajid Javid is pumping money into public services that were problematic for the Conservatives at the last election
That would be "well above" the average of 37.4% seen in the two decades running up to the financial crisis of 2007-8, and "marginally" below the 42% seen between 1966 and 1984.
However, any further spending increases on areas like the NHS would take it above the 1970s average, the Resolution Foundation said.

Labour plans

If Labour won the election, by contrast, the think tank said government spending as a share of GDP was likely to rise to 43.3% by 2023-4.
That assumes the party would re-commit to the £48.6bn of extra spending it promised in its 2017 manifesto, while investing billions extra in capital infrastructure projects.
"This would mean the size of the state under Labour being significantly above the 1970s average," the Resolution Foundation said.
John McDonnell and Jeremy Corbyn at Labour's conferenceImage copyrightEPA
Image captionJohn McDonnell and Jeremy Corbyn want to invest more in infrastructure
Labour has argued that its spending plans will create a fairer society and continue to grow the economy.
Meanwhile, Chancellor Sajid Javid has recently signalled his desire to boost spending to end austerity.
He said: "We make no apologies for focusing on the people's priorities. At this election, we will set our plans in a fully funded manifesto, balancing the need to keep borrowing under control and investing in our future."

'Taxes will rise'

However, the Resolution Foundation said that given current economic uncertainty facing the UK - and the growing cost of an ageing population - both parties needed to explain how they intended to pay for their plans.
Matt Whittaker, deputy chief executive of the Resolution Foundation, said: "After an unprecedented decade of austerity, both main parties are gearing up to turn the spending taps back on.
"Whichever party wins is going to face huge questions about how they are going to pay for Britain's growing state. The fact is that whatever promises are made over the course of this election campaign, taxes are going to have to rise over the coming decade."
It said that Labour had specified £49bn of tax rises, but these were unlikely to be enough to fully fund its plans.
On the other hand, it said the Conservatives had placed more of an emphasis on tax cuts - leaving an "even bigger funding question" over their economic plans.


https://www.bbc.com/news/business-50283719

Thursday, 17 October 2019

Germany and the two-tier EU

Plans for a fiscal-stimulus programme will open old wounds.

TARRIC BROOKER



Germany and the two-tier EU

Ever since the Eurozone debt crisis began in 2009, Germany, as the most powerful EU member state, has consistently asserted that austerity is the only way forward for deeply indebted EU nations. If such nations want to revive their economies, so the reasoning goes, they have to get their budget deficits under control.

In the years since the Eurozone crisis broke, member states on the southern periphery have undergone varying degrees of social upheaval and political turmoil as a result of EU-enforced austerity policies. Indeed, with EU citizens growing tired of cuts to everything, from government-pension payments to essential health services, populist political parties, such as Italy’s Five Star Movement (M5S) and Greece’s Syriza, have ridden into government on the back of anti-austerity messages that have resonated strongly with their electorates.
In recent months, however, Germany has encountered economic problems of its own. Its manufacturing sector has entered recession and analysts predict that the slowdown in growth may drag the German economy as a whole into recession by the end of October.
Given the potentially severe effect of the slowdown on the German economy, there have been growing calls from within Chancellor Merkel’s own ruling coalition, and across the political spectrum, for the deployment of a fiscal stimulus programme to insulate the economy from the impending downturn. There are even suggestions the programme is already in play.
Berlin certainly has the means to run a large government stimulus programme. After five years of budget surpluses, and one of the lowest levels of sovereign debt in Western Europe, it has built a substantial fund ready for just this sort of eventuality.
But for the citizens of southern Europe still reeling from almost a decade of austerity enforced by the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF), German politicians’ claims that ‘we are different’ are likely to ring hollow.
To many observers of German or EU politics, Berlin deploying a government stimulus is rather the non-event. Which it is. No rules are being broken, EU or otherwise. A nation as wealthy and powerful as Germany is obviously going to try to protect its economy.
But in a Europe that has become increasingly divided by austerity, accusations of a ‘two-tier’ EU are likely to grow even louder. After all, Germany is planning on doing what it has told poorer EU members they cannot do: spend vast sums of public money.
Italy, for example, is in recession. And the Italian government isn’t allowed to protect its economy in the same way as the German government can, due to EU regulations on budget deficits. Berlin’s actions, therefore, will only rile the economically weak members of the EU.
Yes, the EU is meant to be a union of equals. But Germany, as the preeminent political and economic power in the EU, has continued to drive policy on everything from Eurozone debt to the response to the ongoing migrant crisis. As a result, it isn’t hard to understand the anger and frustration of those nations that didn’t sign up to consistently follow wherever Germany led.
German plans for a stimulus programme ought not to be a problem. But in the context of an austerity-ravaged Eurozone they could quite easily become one.
https://www.spiked-online.com/2019/10/17/germany-and-the-two-tier-eu/

Sunday, 7 August 2016

‘We’ve had ENOUGH Merkel’ Rest of Europe gangs up on Germany over crippling EU austerity

ANGELA Merkel cut an increasingly isolated figure in Europe tonight as the rest of the continent ganged up on Germany over its imposition of crippling austerity.

Major EU nations including France, Italy and Spain are clubbing together to form a new alliance with the aim of wrestling back economic power from the German leader. 


Mediterranean economies have been devastated by an EU-wide policy of austerity enforced from Berlin, which has led to massive youth unemployment and soaring poverty. 
Fiscally conservative Germany, which is the EU’s largest economy, is reluctant to loosen the purse strings and authorise the huge injection of cash many other member states need to kickstart their fortunes. 





But policies which have benefited German industry and exports have caused economic oblivion in many parts of southern Europe, and now the rest of the continent seems to have had enough. 
The leaders of France, Italy, Spain, Portugal, Cyprus and Malta are planning to meet in Athens next month to forge a new anti-austerity alliance with the aim of wrestling back control of the European Central Back (ECB), which sets Eurozone fiscal policy, from Berlin. 
It is being headed up by Greek premier Alexis Tsipras, who has frequently clashed with both Mrs Merkel and Brussels over the crippling austerity which has brought his country to its knees. 
Greek PM Alexis TsiprasGETTY
The new group is being fronted by Greek PM Alexis Tsipras
People queue up at a job centre in MadridGETTY
It has been prompted by huge economic stagnation in southern Europe
Preliminary discussions on how to outmanoeuvre the all-powerful German leader had already taken place, with Mr Tsipras and his Italian counterpart Matteo Renzi having held informal talks about the possibility of setting up an “Alliance of Europe’s South” on the sidelines of June’s EU summit. 
The leaders want the group to push for a pro-growth agenda and will now hold their first meeting in the Greek capital on September 9, according to the Athens News Agency. 
During the talks they will focus on the “common” challenges facing southern EU countries on an economic, political and institutional level and particularly on austerity, fiscal discipline and migration.
Mr Tsipras is looking to spearhead a relaxation of crippling austerity and the introduction of more “flexibility” into EU budget surplus requirements set by Brussels. 
The participation of France - traditionally seen as the EU’s second most powerful member - will lend huge weight to the project and may make it difficult for Mrs Merkel to continue to resist calls to loosen the purse strings. 
Countries such as France, Italy, Greece, Spain, and Portugal face similar challenges
French social democrat MEP Gilles Pargneaux
The French economy has been in the doldrums for years, suffering from sluggish production and growth, and president Francois Hollande has indicated he would like to see an end to EU austerity. 
But any move to unleash massive spending to kickstart southern European economies could prove very unpopular with German voters, who would ultimately be required to foot the bill. 
Pressure is now growing from across the continent though. In April, Mr Tsipras and the Portuguese premier Antonia Costa signed a joint declaration claiming that EU austerity-driven policies are “wrong”.
The two left-leaning leaders said that “austerity policies are keeping economies depressed and societies divided” as they upped their rhetoric against German fiscal conservatism. 
It is believed the recent Brexit vote has accelerated the plans for an alliance with French social democrat MEP Gilles Pargneaux saying it had made politicians “rethink the way we do things in Europe”. 
He told Euractiv: “Countries such as France, Italy, Greece, Spain, and Portugal face similar challenges - migration, security, proximity of an unstable neighborhood…issues that justify enhanced cooperation between them.” 
On France’s relationship with Germany he offered a coded rebuke to Berlin, saying that while it was “essential” Paris must also be prepared to “assume its contradictions where they exist”.
Italy’s economy has been in the doldrums from years and is the same size now as it was when the Euro was first introduced more than 15 years ago. 
The country is facing a resurgent far-right and a crippling banking crisis, with standards of living falling and unemployment rocketing. 

Meanwhile in Portugal and Spain joblessness amongst the young has reached epidemic levels with both countries backing anti-austerity parties in recent elections.