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Rise in number of working women could improve GDP inboth UK and Jaqpan

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Rise in number of working women could improve GDP inboth UK and Jaqpan

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Rise in Number of Working Women will improve UK GDP

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Rise in Number of Working Women will improve UK GDP

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BBC news article - June 2013

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Increasing the number of women in the workforce would dramatically boost the UK's economic growth, according to a government-backed report.

If women were represented in the same numbers as men in the workforce, GDP growth would be up to 10% higher by 2030, the study claims.

The study, carried out by the Women's Business Council, estimates 2.4m more women want to work, while 1.3m want to boost their hours.

The government set up the body in 2012.

"There is an overwhelming business case for maximising women's contribution to growth," the Women's Business Council says.

It has identified key life stages including early education, parenthood and middle age when intervention could help to lift the number of working women.

'Raising aspirations'

Key recommendations

Girl's subject choices at school leave them under-represented in higher-paying jobs such as science. It suggests regular visits to schools from businesses to provide female role models.

Becoming a parent can hamper women's progress. The report suggests flexible working allowing work both outside typical hours and from home.

Firms should offer flexible working to older women to allow them to care for ageing parents, as well as children and grandchildren.

Women are only half as likely as men to set up and run their own business. It says the government should help to raise awareness of entrepreneurship.

It recommends that before women even enter the workplace, businesses and government need to work with schools to broaden girls' education choices and aspirations.

In addition, it suggests more flexibility for working mothers, promoting the benefits of employing older women and offering better support for female entrepreneurs wanting to start their own businesses.

It calculates that two-thirds of women over the age of 50 work in just three sectors: education, health or retail and recommends retraining to enable them to work in other areas.

"By creating opportunity for all, raising aspirations and enabling people to maximise their talents, we will deliver stronger economic growth," said Ruby McGregor-Smith, chair of the Women's Business Council and chief executive of outsourcing firm MITIE.

Sir Roger Carr, president of the CBI employers group, commenting on the report, said maximising women's contribution to the UK's economy was "vital."

The Women's Business Council will produce a second report next year, looking at the progress that has been made on increasing women in the workplace since its recommendations.

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Increasing the number of women in the workforce would dramatically boost the UK's economic growth, according to a government-backed report. If women were represented in the same numbers as men in the workforce, GDP growth would be up to 10% higher by 2030, the study claims. The study, carried out by the Women's Business Council, estimates 2.4m more women want to work, while 1.3m want to boost their hours.

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Article from the Telegraph

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The official figures confound fears that the UK is falling behind in the global trade race and come as the TUC warned that government policy is "dragging down" the economy, with Britain suffering the second lowest export growth of the leading seven economies in the past two years, after Japan.

Exports to Brazil, India, China, Russia and South Africa - the so-called BRICS - have jumped from £12.7bn in 2007, the last full year before the recession struck, to £27.1bn in 2012, according to the Office for National Statistics (ONS). The BRICS now account for 5.56pc of total UK exports, compared with just 3.34pc in 2007.

"The structure of our exports is changing," said Gerard Lyons, economic adviser to London mayor Boris Johnson and the former Standard Chartered chief economist. "It just takes time to change. Small firms can't be jumping on planes the whole time."

The UK's comparatively weak performance has been due to its legacy dependence on western demand, Mr Lyons said, with the US and Europe alone accounting for 64pc of total exports. Since the crisis struck in September 2008, imports by developed economies have "barely risen", while those in the emerging nations have soared 23pc.

"The TUC has a point - export growth has been slow, but it needs to be put in context. The structure is changing and progress is being made," Mr Lyons said. He added that the trade data excluded gains made in the developing world by big businesses, which tend to invest directly rather than export.

"Big British companies are investing. And that comes back to the country through profits and dividends," he said. UK company dividends for last year are estimated to have hit a record £78bn, according to Capita Registrars.

David Cameron today arrives in India with a 100-strong trade delegation, hoping to drum up new opportunities for British companies. Tesco is pushing for a new deal to open supermarkets under its own brand, and the Prime Minister will make one final push to convince the Indian Air Force to switch an £11.5bn defence contract from French jets to the Eurofighter, made by a British, Spanish, German and Italian consortium.

The UK, which is the world's sixth largest manufacturer, has been making progress in India, with exports rising from £2.95bn in 2007 to £4.67bn last year.

There is huge growth potential in the emerging markets for Britain. According to the Institute for Public Policy Research think-tank, the UK would get an immediate £27bn boost if it increased its share of exports to BRICS countries from current levels to the UK's global average of 3.7pc.

In its submission for next month's Budget, the TUC called for a publicly-owned business bank to be set up with £40bn over four years to help to kick-start a new industrial revolution to tap into demand in emerging markets as they increasingly urbanise.

Mr Lyons had some sympathy with the TUC strategy. "There is a good case for the UK thinking of whether we should be reindustrialising parts of the economy," he said.

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UK doubles exports to BRICS since crisis

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The official figures confound fears that the UK is falling behind in the global trade race and come as the TUC warned that government policy is "dragging down" the economy, with Britain suffering the second lowest export growth of the leading seven economies in the past two years, after Japan.

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BBC news March 2013

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Is this really as good as it gets?

Or could there be a yet-to-be-tried miracle cure for our economic malaise?

We are currently in the longest depression - with the economy failing to recover to its previous peak level of output - since before the 1920s.

At 7.8% of the workforce, unemployment remains uncomfortably high five years after the financial crisis. And this figure masks an even grimmer reality in which many of those in work have had to accept lower pay, part-time work and temporary contracts as they and their employers struggle to make ends meet.

Average household incomes in the UK have suffered an unprecedented period of decline dating back to before the financial crisis, with poorer households hit hardest.

Can't spend, won't spend

At the heart of our malaise is a massive overhang of debt left over from the property boom years, particularly the mortgages taken on by young families, commercial landlords and small businesses.

That debt built up in the decades before 2008, reaching five times our yearly economic output, and has not gone away since.

The chancellor will give his fourth Budget speech on 20 March at 12:30 GMT

There is full coverage of the Budget and how it affects you on the BBC News website

You will also be able to watch the event on a special programme on BBC Two and the BBC News Channel from 11:30 GMT
What would you do?
It has become an albatross around our collective necks.

Those with the debts - not least the government - are reining in their spending in order to get their finances back under control. These are the "zombie" businesses and households who are struggling to stay afloat.

Unfortunately, those without any debts also have little incentive to increase their spending.

Why, for example, should big businesses, sitting on huge piles of cash, invest in more production when the demand for their existing output remains so tepid?

Why should the baby-boomers, who benefited most during the boom years when the value of their old family home rose and rose, increase their spending now when their children face such hard times, and when the annuity income many can expect from their pensions has fallen to an all-time low?

All of which brings us to the central problem: If nobody wants to spend more, then nobody will earn more.

And if nobody earns more, our debts will not go away, no matter how hard we try to economise. It is a vicious circle.

But before you reach for the happy pills, read on.

Because there are a number of novel ideas currently doing the rounds at the Bank of England and the Treasury for how the UK could break out of this circle:

Negative interest rates

Promising to stoke inflation

Helicopter money

Old-school public works schemes

A debt jubilee

Option 1: Reversing the charges

Most economists will tell you the Bank of England's biggest headache is that it is running out of bullets.

Normally, when the economy gets into trouble, so long as inflation is under control, the central bank cuts short-term interest rates.

Economics textbooks say that doing this will discourage people from holding cash and make it cheaper to borrow and invest. In other words, it is a good way to get people and businesses to go out and spend more.

This time round, the economy has got itself into so much trouble that the Bank has cut interest rates as far as it felt safe to do so. Rates have been stuck at 0.5% since March 2009, the lowest since the Bank began setting interest rates 320 years ago.

So the Bank turned to Plan B - the much-vaunted and little-understood quantitative easing, or QE.

What this amounted to was the Bank of England buying up government debts, paid for with newly created "money".

The aim of QE was to push down longer-term borrowing costs, and to push up the value of financial assets, most obviously the stock market, making everyone feel richer.

How low can you go?

Shares in London have certainly risen, with the leading FTSE 100 index hitting a five-year high this month.

But, four years and £375bn later, QE seems to be running out of juice. The fall in long-term interest rates does not have much further to go.

Frustratingly, a lot of the newly-created money seems to have got stuck in the banking system. Banks have not been keen to lend it out. It has just sat there doing precious little.

That is because the banks, whose easy lending during the boom years created much of our debt in the first place, are trying to slim down, and are in no hurry to increase their lending.

What's more, to some extent QE has been counterproductive, because it has resulted in lower pensions for many baby boomers, hardly a way to boost spending.

All of which has led some economists to revisit plan A. Why not cut short-term rates even further?

The Bank's immediate concern with going below their current 0.5% was that it would hurt banks and building societies, many of whose existing loans earn interest directly linked to the Bank's rate.

The Bank of England does not especially care about how much profit these lenders make. But it does care that if their profits are squeezed too much, then they will simply cut back on how many new loans they provide to the rest of us.

In recent months, however, this particular concern may have receded, thanks to another innovation of the Bank of England - its Funding for Lending scheme. This pays the banks to provide more loans to homebuyers and small businesses, although the jury is still out on this one.

If the scheme does succeed, it should open the way for the Bank of England's Monetary Policy Committee to cut interest rates all the way down to zero.

Through the looking-glass

But why stop at zero? Why not go even further, as the Danish and Swedish central banks have done, and introduce negative interest rates? That was the recent suggestion of the Bank's deputy governor, Paul Tucker.

Negative rates would mean that the High Street banks end up paying the Bank of England to look after their spare cash.

The banks would then pass this cost onto us by charging us interest on our bank accounts and our savings.

This could however cause some technical problems.

For example, banks' computer systems may simply not be set up to start charging interest where previously they paid it. Or they may not have the contractual right to do so.

There may also be a psychological effect. If savers do start getting charged interest, they may simply withdraw their money and use it to buy gold, or just hoard the cash.

However, storing vast amounts of these assets is not so simple.

Banknotes stuffed under mattresses are at risk of theft and decay. As for gold, its price could go down just as easily as it has shot up in recent years.

Option 2: Mad about inflation

The job of a central bank used to be simple: Inflation was enemy number one.

Anyone who lived through the 1970s and early 1980s - when shop prices in this country were rising 10%-20% a year - will know why. Out-of-control inflation is disorientating, and can hurt your pocket.

More recently, the cost of living has experienced another nasty upward jolt, with inflation peaking at over 5% in 2011 thanks to the weak pound, VAT hikes and rising world food and energy prices.

So it may come as a surprise to learn that many economists now think the way forward is for the Bank of England to engineer more inflation, not less.

Thought experiment

The argument goes that things are very different now than in the 1970s.

Since the Thatcher government's tussle with the unions, workers have much less power to demand wage increases, which means that inflation is less likely to get out of control.

These days, what many workers have instead are huge mortgages. And higher inflation can actually make those mortgages more manageable.

To understand why, do a thought experiment.

Imagine that every price in the country doubled overnight, not just the prices in the shops and restaurants and factories, but also the price of everyone's labour, our wages.

In principle nothing would have changed. You would be earning twice as much, but you would also be paying twice as much.

The only thing that would not change is everyone's debts and savings. In effect, their value would have halved overnight. That is what inflation does, much more gradually, to savings and debts.

Sleight of hand

Inflation, when it is not offset by higher interest rates, makes debts easier to repay. And it creates an incentive for big companies and other savers to go out and spend their cash-piles before they lose value.

In other words - and this is how most economists would view it - raising the inflation rate is a cheeky way of achieving the same outcome as an interest rate cut. It's a bit like having Baldrick run towards your fist.

The fear at the back of many economists' minds, not just in the UK, but also in the US and eurozone, is that if they don't do this, they may end up like Japan.

Japan suffered its own debt-fuelled financial crisis in 1990, and ever since then the country has suffered from de- flation - falling prices.

As a result, the value measured in yen of everything produced by the country's economy in 2011 was exactly the same as it was in 1991.

Most countries hope eventually to outgrow their debts - that is what happened with the debts run up by the UK and US to finance World War II. Our economies grew rapidly in the 1950s and 1960s, but our debts did not, making them more and more manageable as time passed.

But, thanks to 20 years of falling prices, Japan has simply failed to do this.

Inflation bad

With all this in mind, the Bank of England's incoming Canadian governor, Mark Carney, has called for a debate about whether to change the Bank's job description.

Currently, the Bank is required to keep inflation as close as possible to 2% per year.

One option on the table is to target "nominal GDP" instead. In plain English, this would mean that if the economy does not grow fast enough, the Bank would be obliged to encourage faster price rises instead.

There are, however, many practical problems with this option, as the BBC's Stephanie Flanders has pointed out.

Other possible targets have also been mooted, but what they all have in common is that they would allow the Bank to pursue faster inflation.

But promising more inflation is not enough, the promise has to be credible. If people and businesses are to be convinced to go out and spend more, they have to truly believe that the Bank will do what it says on its tin.

The problem is that old habits die hard. After the bruising experiences of the 1970s, many central bankers throughout the Western world still fret about losing their straight-laced, inflation-fighting credentials.

This Pavlovian fear is even stronger in Germany, where the hyper-inflation of the 1920s is linked in policymakers' minds to the rise of Hitler.

Crazy promise

In fact, so ingrained is the aversion to inflation, that some economists argue that the credibility of central bankers is the problem.

The outspoken left-wing economist Paul Krugman has called for the US Federal Reserve to "credibly promise to be irresponsible" - to say that it will continue stoking inflation even after the US economy has already recovered.

According to Prof Krugman, that is the only way that the central bank could convince everyone that they really ought to go out and start spending their money right now before prices start rising.

Others have gone further, saying the Fed chairman Ben Bernanke should don a Hawaiian shirt and smoke a bong, to make the crazy promise more credible.

Across the Pacific, many have blamed Japan's central bankers for being too half-hearted about tackling deflation. In 2000, and again in 2006, the Bank of Japan was all too ready to raise interest rates at the first sign of a return of rising prices.

Japan's newly-elected Prime Minister Shinzo Abe has sought to tackle this credibility problem by doubling the central bank's inflation target to 2%, and - perhaps more importantly - by trampling all over its independence.

He has certainly convinced the financial markets that Japan will finally break its deflation habit.

The central bank's new head, Haruhiko Karuda, has promised to do "everything possible".

But, with interest rates already at zero and the Bank of Japan having already engaged in the biggest quantitative easing effort on the planet, it could be that even with all the will in the world, the task may simply prove impossible.

Option 3: Money for nothing

Both options considered so far are in reality just clever ways of pursuing traditional monetary policy.

In other words, they involve penalising savers and making it cheaper to borrow.

But some argue that traditional monetary policy is what got us into so much trouble in the first place.

The argument goes that since the 1980s, inflation and interest rates have fallen steadily across the Western world. Every time our economies got into trouble, central banks came rushing to the rescue by making it cheaper to borrow.

This culminated in a period dubbed the "Great Stability", more than a decade of stable growth and inflation from the early 1990s up until 2007, during which the US Federal Reserve Chairman Alan Greenspan was elevated to the status of a demigod.

In reality, the cheap cost of borrowing and the expectation that the monetary authorities would always come to the rescue, ( the "Greenspan put"), simply encouraged everybody to take on far too much debt, especially the banks.

And all that cheap money fuelled financial bubbles, first the emerging markets and dotcom bubbles of the 1990s, then the far more devastating global housing bubble of the noughties.

Now that the debts have got out of hand, perhaps it is a good thing that traditional monetary policy has reached its natural limit.

Easy as one, two, three

There is, however, a more direct monetary solution to our malaise that does not involve creating even more debt. The Bank of England could just give money away.

On the face of it, the policy sounds irresponsible.

But, it has been backed by many economists, including the former City regulator Lord Turner, the Financial Times' resident economist Martin Wolf, and - many years ago - by the US Federal Reserve chairman Ben Bernanke.

The idea was originally proposed by the famous monetary economist Milton Friedman, who in 1969 suggested tongue-in-cheek that the Fed could simply fly around the US dropping bundles of $100 bills.

Of course, it would be crazy to literally hand out billions of dollars in banknotes with no oversight of where it ends up - although the US did try this in Iraq, with predictable results.

Indeed, in the UK the Bank of England lacks the authority to give money away. That is the Treasury's prerogative. So the option of "helicopter money" would involve a collaboration between the two.

The actual monetary mechanics are a little hazy, as Stephanie Flanders has explained at length.

But they would work something like this:

1. The Treasury issues a £100bn-IOU to the Bank

2. In return, the Bank hands over £100bn in newly-created money to the Treasury

3. The Treasury spends the money

Note that step 3 is the critical one that differentiates helicopter money from QE, and it requires a Treasury willing to engage in more spending.

In theory, there is no debt created.

So long as you consider the Bank to be part of the government - which, incidentally, official measures of the government's debt do not - then the £100bn-IOU is just money that the government owes itself.

But if you wanted to be totally sure, you could say that the IOU never pays interest and never has to be redeemed.

Hyper-reality

Whether the Bank should do this is a far more vexed question.

Despite its many fans, helicopter money also has plenty of opponents, including the departing Bank of England governor Sir Mervyn King.

The policy is also known as currency debasement, and lay behind the many hyper-inflations in history, including those of Weimar Germany and Zimbabwe.

It would certainly give the currency traders in the City, whose job it is to value the pound day after day, something to think about.

When investors lose confidence in a currency, they can lose it very quickly. The pound had one brief scare in late 2008, when its value plummeted to almost one euro.

Even though it has recovered since then, sterling has still lost a quarter of its value since the 2008 crisis. It is a tumble twice as big as our humiliating exit from the European Exchange Rate Mechanism on Black Wednesday in 1992 and one of the main reasons why our cost of living has risen so painfully.

But, if the process could be carefully controlled by the Bank, a further weakening of the currency would arguably do us quite a bit of good, by making our exports more price competitive at a time when our biggest export-earner, financial services, is in a long-term post-bubble decline.

But even if helicopter money could be distributed without panicking the markets - for instance, via a strict promise by the Bank of England to keep a lid on inflation - it also begs one other interesting question.

What exactly would the Treasury spend the money on?

Option 4: Concrete action

The solution proposed by the Depression-era economist John Maynard Keynes was for the government to hire the unemployed in public works schemes.

This puts wages in the hands of people most inclined to go out and spend it, providing extra oomph to the economy.

And those workers could be employed to build useful stuff. Traditionally, this meant things like roads, schools and hospitals.

Here are a few examples of useful things the UK government might consider building today:

What matters is that these are all things that increase the economy's long-term productive capacity. In other words, they should boost both sides of the equation - demand and supply.

Overspending problem

The subject is clearly a hot topic within government. That much is clear from a recent opinion piece by the Business Secretary Vince Cable, in which he appeared to express regret for the speed with which the government slashed its infrastructure spending after 2010.

But what about the deficit? Can the government afford to borrow and spend more. And if it does so, will it not scare off investors?

If it were financed by helicopter money, it would not add to the deficit at all.

But let's instead assume the government borrowed the money from the markets, taking advantage of the fact that it can currently borrow at an interest rate below the rate of inflation, and that now is a great time to hire construction companies on the cheap.

The chancellor's commitment is to cut the structural deficit within five years.

But infrastructure spending counts as "capital expenditure", and as such is not part of the structural deficit. That is because building useful things creates a tangible new asset that belongs to the government.

The distinction between capital spending and the structural deficit is important.

It is a bit like the difference between your mortgage and your credit card. Generally speaking, you can always repay your mortgage by selling your house. But if your credit card balance is snowballing, then you have a serious overspending problem to deal with.

For the same reason, the financial markets should be reasonably comfortable with lending the government the money it needs to build, say, a new high-speed rail link. The government can always privatise the railway line to repay the debt.

In fact, it is even better than that. A lot of the benefit of new infrastructure is not captured directly by the owner.

That is because the value to the economy of connecting two cities together is far greater than the amount any private company could make from a toll road.

But the government does ultimately see most of the benefit, because a more productive economy is one that produces more tax revenues. So, in the long-run, the new road - if it is genuinely useful - should more than pay for itself.

In fact, as Vince Cable points out, the government may even recoup a large part of the cost right away.

Hiring unemployed construction workers and engineers to build a new line from Euston to Birmingham creates wages and profits on which taxes can be levied. And when those construction workers and engineers go out and spend their wages, that creates even more economic activity and even more tax revenues.

Political will

But George Osborne has done conspicuously little to boost infrastructure spending.

The total increase in capital expenditure and guarantees announced in the Autumn Statement was just £45bn over the next two-and-a-half years, or about 1% of economic output.

Besides his perennial concern about not appearing to increase the government debt burden, the chancellor may see several other limitations with the public works option.

Firstly, infrastructure projects are notoriously expensive on our densely populated island.

The cost of designing and building a new sewerage system or waste incinerator can be made prohibitive by the high price of land, the need to work around existing buildings, roads, electricity cables, pipes, and so forth, and of course the need to respect the rights of residents and landowners.

Moreover, even if the government did decide today to push ahead with, for example, doubling the size of Heathrow, the delays caused by the UK's cumbersome planning process - which the prime minister has promised to streamline somewhat - and the logistics involved mean that little spending would actually happen before the next election.

Vince Cable counters that the very anticipation of this government spending would stimulate more spending by private sector businesses.

But then there are examples of governments throughout the world simply wasting much of the money by building what is politically valuable, not what is economically valuable, as Spain has discovered to its cost in recent years.

And it may be reasonable to ask whether the civil service has the capacity to handle a massive increase in the number of complex and expensive infrastructure projects it must handle, given the recent experience of the aborted award of the West Coast Main Line franchise.

Option 5: Off the hook

Perhaps the most direct solution to Western economies' debt problems has been proposed by Australian economist Steve Keen.

Just get rid of the debt.

He has advocated a modern version of the biblical debt jubilee, in which the government eliminates a big portion of everyone's obligations as a one-off measure.

There are many ways in which it could be done.

For example, the Treasury could write a cheque for, say, £10,000 in newly-minted helicopter money to everyone in the country, on the condition that the cheque must be used to pay off existing debts.

Prof Keen says, to ensure fairness and political acceptability, and to give the economy a bit more of a kick-start, every citizen should get a cheque.

The lucky ones without any debts could just go out and spend the money.

Or, if that looked likely to unleash an unmanageable wave of car purchases, perhaps they could be told to put the cheque in their pension fund, or - if they are retired already - to buy an annuity.

Odious

It is worth taking a moment to understand Prof Keen's somewhat unorthodox view of the malaise the West currently finds itself in.

He contends that most borrowers currently stuck with unmanageable debts have been the victims of an enormous inadvertent swindle, or Ponzi scheme, carried out by the financial system.

The most obvious example of this is a homebuyer who took on a mortgage to pay, and help drive up, the overinflated price of a house during the property bubble.

When the bubble burst, the price of their house fell back to earth, but their debt did not disappear.

Even if the debts are not cancelled, Prof Keen says much of the debt is not ultimately capable of being repaid, although it may take years before this fact becomes apparent.

But besides the practical aspect, Prof Keen believes there is also a moral case. He thinks that much of the debt is illegitimate - or "odious" - to use the legal term, and ought by rights to be cancelled.

Whether or not you agree with his overall thesis, the idea of using helicopter money to repay debts does provide a way of stimulating the economy, whilst also putting our collective finances on a more sustainable footing.

Apart from the obvious benefit to the citizens receiving this manna from heaven, it would also be a boon to the banks, who would find £10,000 of every personal loan they had extended being repaid.

Defying gravity

There are, however, several objections.

First of all, it is not obvious that the UK has actually experienced an unsustainable housing bubble in the same way that the US, Spain, Ireland and many other economies have. This is a point made by Ben Broadbent of the Bank of England.

The UK actually faces a serious housing shortage, and, accordingly, property prices have not collapsed in the last five years in the way they have done in those other countries.

However, the apparent resilience of the UK property market could also be due to the very different approach taken by mortgage lenders to their struggling borrowers compared with, for example, their US peers.

In the US, homes were repossessed and then dumped on the market in their hundreds of thousands. This forced property prices down but kept total sales higher than they might otherwise have been.

In the UK by contrast, repossessions have been relatively modest. Our banks have been keen not to push their many overstretched borrowers over the brink, perhaps for fear of sparking a property market crash that could drag them down with it.

Instead, they have been allowing borrowers to delay their repayments. Up to 8% of homebuyer mortgages and a third of commercial real estate loans were estimated by the Financial Services Authority to be in this situation, known as forbearance.

And while these zombie loans remain a dead weight on their books, the banks have cut back their lending to everyone else, including perfectly healthy businesses.

But while forbearance may have succeeded in avoiding a collapse in UK property prices - at least in the South East - prices are stuck at levels that are unaffordable for many buyers, particularly first-time buyers. As a result, the total volume of sales has collapsed and barely begun to recover.

Short memories?

A second objection to the debt jubilee is that it could be inflationary.

The authorities would certainly run the risk of unleashing a massive and unmanageable surge in spending if they handed out too much debt and wiped out too much in one fell swoop. But this may just be an argument for carrying out the jubilee in small increments.

However, the sheer novelty of a mass debt write-off, let alone helicopter money, might be difficult for the financial markets to digest. So there may well be a risk of triggering a collapse of confidence in sterling.

Another concern is the precedent that the jubilee would set - the so-called moral hazard risk.

If people get it in to their heads that if they run up too much debt, the government will come running to their rescue, what is to stop them running up even more debt in the future?

Is it possible that people might unlearn the lesson of the past five years, that we cannot go on borrowing forever?

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Is this really as good as it gets? Or could there be a yet-to-be-tried miracle cure for our economic malaise? We are currently in the longest depression - with the economy failing to recover to its previous peak level of output - since before the 1920s.

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UK needs 850,000 jobsto regain pre-recession peak

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UK needs 850,000 jobsto regain pre-recession peak

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Article from the Guardian March 2013

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Employers need to create 850,000 extra jobs to reach the pre-recession peak, according to an in-depth report that undermines claims the jobs market has defied the recession.

An increase in the number of private sector jobs over the last four years has failed to keep pace with a steady rise in the UK's population of over-16s, leaving the proportion of people in work well short of the previous high, the Resolution Foundation said.

The UK adult population has grown by 1.7m since 2008, leaving the employment rate - the proportion of people in employment - 1.7 percentage points lower today than in 2008.

The analysis is a blow to the government, which has pointed to the high level of employment as a sign that its economic policies are working.

Ministers have hailed an expansion in private sector jobs over the last year as offsetting the cull in public sector posts. Recent figures show that 29.73m people hold some sort of job, the largest number recorded, following a rise of 154,000 between September and December 2012.

George Osborne is expected to argue that an increase in full-time private sector jobs in the second half of last year, following several years when most new jobs were part-time, shows the economy is "healing".

However, economists have struggled to explain the expansion in jobs against a backdrop of double-dip recession followed by flat growth.

Only a week before the chancellor delivers his mid-term budget, the UK remains in a long depression and most forecasts show the economy is unlikely to regain its former peak level of output until at least the end of next year.

The Resolution report is an attempt to explain the jobs gap by showing that while many jobs have been created, there are even more people over 16 eligible for work.

The thinktank claims that concentrating on the total number of people employed in the UK, which reached a record in December, gives a misleading impression when the employment rate is well below the peak.

Much of the growth in population comes from the number of over-65s, reflected in a surge in the total to more than 12m.

Even when retired people are excluded, the population has risen following a decade of strong net migration.

That inflow makes the picture even gloomier for Britons struggling on the margins of the jobs market. The employment rate for workers who have arrived from nine EU accession countries, including Poland and Lithuania, is more than 80%, against an average 58.7% for the entire workforce.

To get back to the pre-recession employment rate of 60.3% by 2018 will need a faster rate of growth than is forecast by the Treasury's budget watchdog, the Office for Budget Responsibility. It is even more difficult once a predicted population rise of 340,000 a year for the next five years is taken into account.

The OBR forecasts a further decline in public sector employment of 500,000 to 2017, meaning the private sector would have to create 2 million jobs in the next four years if the employment gap is to be closed by late 2016.

Instead, the OBR believes private sector job creation will proceed at about half this pace and the jobs gap will still be 820,000 in 2018.

James Plunkett, Resolution's director of policy, said: "The employment growth we've seen in recent months has been remarkable given the continuing weakness of GDP and is a rare positive piece of economic news.

But focusing on today's record levels of employment underplays the fact that the employment rate is still far below its level in 2008.

"The UK needs to create around 50,000 additional jobs a quarter just to stand still. Moving back decisively towards fuller employment will be a long, hard road, especially as our workforce continues to age."
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uk unemployment and employment statistics

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UK needs 850,000 new jobs to regain pre-recession peak, report claims

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Employers need to create 850,000 extra jobs to reach the pre-recession peak, according to an in-depth report that undermines claims the jobs market has defied the recession. An increase in the number of private sector jobs over the last four years has failed to keep pace with a steady rise in the UK's population of over-16s, leaving the proportion of people in work well short of the previous high, the Resolution Foundation said.

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Balance of Payments figures make dis,mal reading

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Balance of Payments figures make dis,mal reading

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Article from the Guardian March 2013

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So much for rebalancing. So much for George Osborne's "march of the makers". So much for the idea that a more competitive pound would make the UK less dependent on consumer spending and the state for its growth.

The balance of payments figures for 2012 make dismal reading. They show that the UK ran a deficit of £57bn last year compared with just £20bn in 2011. As a share of the economy, the shortfall was 3.7% - the highest since 1989. More worrying still, on the three previous occasions since the second world war that the deficit has been higher as a proportion of GDP, a booming economy was sucking in imports. This time there is no such excuse.

Two big factors explain the deterioration in the balance of payments last year. Firstly, there has been a worsening in UK performance in trade in goods and services. The deficit on goods rose from £100bn to £106bn last year, while the surplus in services dropped from £76bn to £70bn. That left a trade deficit of £36bn up by 50% on 2011.

The situation in the eurozone - Britain's trading partner - has clearly not helped matters. It is not, however, the whole story. Britain's manufacturing base has been hollowed out by the three big recessions since the early 1980s, and that has resulted in a reduced capacity to take advantage of a falling currency. What's more, part of the competitive advantage from the 25% drop in the value of the pound from its pre-crisis level has been eroded by the UK's poor productivity record in recent years.

In the first half of the 2000s, the steady worsening of Britain's trade balance was masked by a strong investment performance. Put simply, foreign investors make money on UK assets, and UK investors make money on their overseas assets. In 2011, the return on UK assets held overseas exceeded the return on foreign assets held in the UK by £26bn. Last year, this had dropped to just less than £2bn.

There seems no obvious reason why the UK should continue to make large surpluses on investment income. As the Office for National Statistics noted, the UK has a large negative investment position - £544bn at the end of 2012 - which means that foreigners own a bigger slice of Britain than UK investors own of foreign countries. So, Britain can only continue to make a surplus on investment income if a) the quality of its overseas assets is higher than the quality of the assets held here b) UK investors are intrinsically gifted at sweating their assets or c) Britain is prepared to take punts on riskier investments that offer higher returns.

In reality, there seems no reason to expect the big surpluses on investment income to return any time soon, exposing the structural deterioration in trade in goods and services. The latest data shows that the UK has not one but two serious deficits to tackle, and neither of them is getting any better. Progress on reducing the budget deficit has stalled, while Britain is finding that the speculative activities of the City can no longer disguise big deficits in manufactured goods, food and oil. There was a time when ministers used to wait anxiously for the latest balance of payments figures. Those days may be a distant memory, but the UK's inability to pay its way in the world should be setting off warning bells in Whitehall.
Topics

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March of the makers? Balance of payment figures make dismal reading

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So much for rebalancing. So much for George Osborne's "march of the makers". So much for the idea that a more competitive pound would make the UK less dependent on consumer spending and the state for its growth. The balance of payments figures for 2012 make dismal reading.

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Article from BBC March 2013

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The world's major economies will see stronger growth this year, but Europe's recovery will continue to be slow, an international organisation has said.

The Organisation for Economic Co-operation and Development (OECD) predicted stronger growth in the US, Japan and Germany.

But it said concerns remained over the recovery of the wider eurozone.

It said governments would need to keep special measures in place to boost economic growth.

Overall, the OECD forecast an average annualised growth of 2.4% among the seven biggest economies in the first quarter of this year.

That suggests a marked recovery from the last three months of 2012, when leading economies shrank at an annualised rate of 0.5%.

"The bottom line is that we are moderately more optimistic," the OECD's chief economist Pier Carlo Padoan told the Reuters news agency.

But the organisation paints a picture of contrasting fortunes in Europe, where German growth is expected to be relatively strong, while France and Italy are expected to stay in recession until at least the second quarter of the year.

Italy is expected to perform the worst among the seven economies covered, which do not include China.

The OECD said it was still too soon for governments to consider ending economic stimulus measures that are aimed at encouraging growth.

It welcomed recent policy changes by Japanese authorities aimed at tackling deflation and boosting growth.

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The world's major economies will see stronger growth this year, but Europe's recovery will continue to be slow, an international organisation has said. The Organisation for Economic Co-operation and Development (OECD) predicted stronger growth in the US, Japan and Germany. But it said concerns remained over the recovery of the wider eurozone.

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Article from Telegraph

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Boom times under Labour also saw the national debt fall to 29.8pc in the 2001/02 financial year, although several bank bail-outs meant net debt soared from 43pc of GDP in the 2007/08 financial year to 150.4pc twelve months later.

Excluding the bail-outs, net debt rose from 36.4pc to 44.5pc.

Under the Coalition Government, net debt excluding bank bail-outs has continued to rise from 57.1pc of GDP when they took power to 71.8pc last year.

When George Osborne became Chancellor, he set himself two targets.

His core "fiscal mandate" was to be on course to balance the books over a rolling five-year period.

His supplementary target was that net public-sector debt would fall as a share of GDP between 2014-15 and 2015-16.

In December, the Office for Budget Responsibility (OBR) said that Mr Osborne was likely to miss this second target

It forecasts that debt to GDP, excluding bail-outs will climb to 74.7pc of GDP in 2012/13, and will not begin to fall until the 2016-17 financial year.

Deficit

The Government deficit is the gap between what it spends and what it gets in income, mainly from taxes.

Since 1974, there have only been eight years when the Treasury has ended the year in the black.

Four of them were under Labour, and four under the Conservatives.

As a proportion of GDP, Britain's deficit ballooned in the wake of the financial crisis, jumping to 109pc in 2009 and 10.1pc a year later, according to OECD figures.

The latter number is bigger than bailed-out Portugal, at 9.8pc and close to Greece's deficit that year of 10.8pc.

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Boom times under Labour also saw the national debt fall to 29.8pc in the 2001/02 financial year, although several bank bail-outs meant net debt soared from 43pc of GDP in the 2007/08 financial year to 150.4pc twelve months later. Excluding the bail-outs, net debt rose from 36.4pc to 44.5pc.