Friday 6th December: As 2013 draws to a close, the economy seems to be in recovery, but is it the right type of recovery? Dr Gerard Lyons reflects on a mostly positive Autumn Statement, but reminds us that there still are many economic challenges that have yet to be addressed.
After the wrong type of austerity do we now have the wrong type of recovery? That is the issue the morning after the 2013 Autumn Statement. The main message from the Autumn Statement was "growth matters". An improvement in growth allowed the Chancellor to announce a better outlook to his fiscal numbers, with a budget surplus projected before the decade is out, and the debt to GDP numbers trending down.
Friday 29th November: Britain's battle with Brussels is not just over who pays for indigent immigrants. It is a battle about two views of the state, writes Sheila Lawlor.
Many English people watching the latest battle with the EU may be asking how will it develop? The Prime Minister and an EU Commissioner have clashed over benefits for immigrants. Will Westminster or Brussels decide the rules for new EU immigrants arriving after January 2014 - the date when Romanians and Bulgarians are entitled to work and draw benefit here?
Friday 22nd November: This week it was reported that three women, held in slavery for thirty years, had walked free from an ‘ordinary house in an ordinary street’ in south London.
As the Home Office prepares to introduce a new Modern Slavery Bill, many will ask how, as the law stands, can traffickers be brought to justice? Oliver Heald, QC MP, the Solicitor General, explains that as well as continuing to work overseas, a wide range of legislation exists to prosecute traffickers in the UK:
The main offences of trafficking include the Sexual Offences Act 2003, Asylum and Immigration Act 2004 and the Coroners and Justice Act 2009. These offences attract maximum penalties of up to 14 years imprisonment on conviction and the first two are ‘life-style offences’ for the purposes of proceeds of crime, so the Criminal Prosecution Service (CPS) can deprive the defendant of the financial benefit that he or she has obtained from criminal conduct through a confiscation order.
As the debate on the future of England’s A & E units opens, another on prescription costs has closed. The pharmaceutical industry has now agreed a five year deal with the health department. For the first time the overall cost of medicines will be capped.
While the cap might help public spending cuts, it may not augur well for the country’s economic health, says Dr Tony Hockley.
The agreement to cap the NHS drugs bill for branded medicines from 2014 may have consequences for the economy beyond the implied saving. Over the past 15 years the imposition of a price-cut of branded medicines has become the norm every five years, when the pharmaceutical price regulation scheme is renewed. But the result has been that Britain, from being one of the most supportive European markets for new medicines (at least in terms of price, not usage) has slowly drifted towards the bottom of the league table. Should that trouble us? Do arbitrary price controls affect the location of pharmaceutical innovation?
Friday 8th November: As the Bank of England leaves interest rates unchanged, Professor David B Smith considers the wider economic picture. After a decade of big government spending, the UK’s potential output has shrunk well below its previous trend. Lax monetary policy could, he warns, lead to stagflation. A gradual rise in interest rates would bring few shocks and it would benefit the economy. It would also be helpful if the house buyers of today are to avoid negative equity tomorrow. As Professor Smith writes:
The Bank of England’s decisions on 7th November to leave the Bank Rate and stock of Quantitative Easing (QE) unchanged came as no surprise. The Bank Rate freeze was in line with the Bank’s policy of ‘forward guidance’ (its stated position on the likely path for interest rates) and both announcements were exactly what the financial markets expected. This policy of ‘no change’ by Britain’s monetary authorities contrasts with the European Central Bank (ECB) decision, announced shortly afterward, to cut its key discount rate from ½ per cent to ¼ per cent. Recent UK economic indicators have been doing better while there is growing concern in Continental Europe that the Eurozone may be heading for deflation, with annual consumer price (CPI) inflation down to 0.7% in October compared with the 2.7% recorded in the UK in September.1
However we must not forget that one unintended side effect of the ‘big government’ policies implemented in Britain, the US and many peripheral Eurozone economies since 2000 has been to reduce sharply aggregate supply – the total amount of goods and services that the economy can produce at full employment. As a result the danger now is that a lax monetary policy is more likely to produce stagflation than the healthy low inflation growth desirable in Britain and other mature industrial nations.