Budget

[BillyStubbsTears]

Big one coming up this week. This will set the political agenda for the rest of this Parliament.

But here's a sign of how things have changed. Leaking Budget secrets before the formal announcement to the House used to lead to Chancellors resigning in disgrace. Now it is just routine...

https://www.bbc.com/news/amp/uk-56218952?__twitter_impression=true

[Donnywolf]

All I can offer is "Hi risk anus" as an anagram

[BillyStubbsTears]

Something to consider when Sunak starts talking about balancing the books. The standard argument for Austerity from the right is: what happens if interest rates go up and we have to start spending more to service the debt? Get the debt down now! (Aside: They said that all through the 2010s - Govt bond rates fell. But the argument keeps coming back.)

Yes, the Govt has taken out eye watering amounts of debt over the past year to deal with COVID. £485bn to date (which dwarfs what Labour borrowed in 2008-09, when the Tories were accusing them of being totally irresponsible - none of that nonsense politicking going on this time I see).

Thing is, who has it been borrowed from? The numbers are out now. £450bn of that has been borrowed from the Bank of England. So there is no danger of use being held over a barrel by foreign capital markets. Anyone using the hypothetical interest rate argument is conning you.

[BillyStubbsTears]

Useful primer here by the BBC economics correspondent. https://twitter.com/andyverity/status/1366398494114799619

Like he says, Attlee's Govt faced the biggest debt in our history at the end of WWII and it dealt with it by spending even more, to get the economy turbocharged. That set us up for one of the best thirty years of economic performance in our history, transforming the lives and prospects of genenrations. That is precisely what we should be planning to do now. Not playing games with tax,

[big fat yorkshire pudding]

But we should tax a little surely? Not so much because of debt (though it helps) but to rebalance parts of the economy. Even for someone of a more centre right low tax persuasion, I am absolutely sure that your Amazon's, ASOS etc are getting away with minimal obligations.

[ravenrover]

Wonder whete the funds came from for Sunaks little smug video?

[redwine]

Isn't it from his campaign fund for party leader?

[MachoMadness]

"The BBC is just leftie propaganda!"
https://twitter.com/BBCPolitics/status/1367059443939225602?s=20

I mean, this is just shameless isn't it? Last budget they literally showed cartoons of him as Superman, now this - they're not even trying to offer analysis, just fluff him.

[BillyStubbsTears]

That's just beyond belief MM. For the BBC to be pushing a propaganda video.

[BillyStubbsTears]

On a related note, this is a useful crib sheet for considering the Budget speech.

https://mobile.twitter.com/georgeeaton/status/1367067924457005058

Just a few weeks ago, Kuenssberg was doing her job of being a spokesperson for Govt propaganda by insisting on TV that we had maxed out the national credit card. Utter, ignorant, politically slanted bullshit parotted out as intellectual fact.

[drfchound]

I suppose the budget must be half decent for the country seeing as no one has been slagging Sunak off on this thread.

[BillyStubbsTears]

I've spent a little time absorbing the big picture of the Budget.

Frankly, it is awful. Hidden away in the small print, Sunak is saying that day-to-day Govt spending is going to be cut by £15bn per year in 22/23. At precisely the time when we need to be growing our way out of the crisis.

https://mobile.twitter.com/PJTheEconomist/status/1367166712500658180

The OBR report accompanying the Budget says that we are accepting that we don't get back to the (already tepid) trend of GDP that we were expecting before the crisis. We are planning to have an economy about 5% smaller throughout the 2020s than were were expecting it to be 18 months ago. That'll be £1trn of lost economic activity over the decade.

Just gobsmacking lack of ambition.

[belton rover]

Bloody hell, Hound!

[albie]

Absolute crock of shite, to put it simply.

Significant cuts in everyday public spending (min £4 billion and counting), and it is clear austerity will be the ground on which the next election is fought.

The discussion will be that we cannot afford to keep essential public services (like the NHS) in the public accounts.

This letter in the Times sums up the standard of debate and reportage;
https://twitter.com/michaelujacobs/status/1367041675760197633/photo/1

If anyone talks about "credit card limits" being maxed out.....just shoot them!

[big fat yorkshire pudding]

Yes cuts to come in a year and a half.  By which point they'll trumpet a better than expected recovery and no need to do them.

Jury is out on some of the measures for me.  The tax changes are ok but not revolutionary.  Some of the things are good, free ports, green investment banks, fixing the tax brackets, all ok to me.  Corporate tax change, questionable, will need to read the details (can't wait to read up on that).

But again they could go further.  No business rates review, no online sales taxes. Those are needed to match the different economy.

[belton rover]

Yes cuts to come in a year and a half.  By which point they'll trumpet a better than expected recovery and no need to do them.

Jury is out on some of the measures for me.  The tax changes are ok but not revolutionary.  Some of the things are good, free ports, green investment banks, fixing the tax brackets, all ok to me.  Corporate tax change, questionable, will need to read the details (can't wait to read up on that).

But again they could go further.  No business rates review, no online sales taxes. Those are needed to match the different economy.

A well balanced view, Big.

[drfchound]

It was never going to be an easy budget to put together when considering what has happened in the last year.
Not everyone will be happy I guess.

[albie]

Decent summary of what is known so far, with more detail still to come;
https://www.mirror.co.uk/news/politics/budget-2021-11-surprises-hidden-23602576

On the matter of free ports, the evidence I have seen shows they tend to draw in activities from elsewhere in the economy, rather than create new employment.

Does anyone know of data showing they provide a net gain to the UK, rather than a redistribution?

[BillyStubbsTears]

Albie
Jim O'Neill the ex-Tory Treasury minister and vice-Chair of the Northern Powerhouse was scathing about Freeport's on R4 this evening. He said exactly that about them just pulling in business from elsewhere. He said it was a politically motivated policy to help particular Red Wall seats.

There's a big controlled experiment now going to happen. The stimulus spending that Sunak is now proposing is about 4% of GDP. Biden is commiting to over 8% in the USA, even though the OECD reckons America's economic damage from COVID is less that ours.

Anyone want to bet which economy looks in better shape by 2025, compared to where we are now?

[big fat yorkshire pudding]

I'll pick up on the first point.  Here in the north it's oft complained that everything is too focussed on the south east.  The government now clearly is making steps to address that and people complain about it.  I don't believe they are going far enough at all but at least some steps are being made.  What I don't understand is why we complain about them.

[SydneyRover]

I'd want to see a business plan with detailed projections, expected goods and countries that would trade through the port and why, who are the winners and if workers within any freeport have the same standard of protections as those on the rest of the country for what they are worth.

[redarmy82]

South Yorkshire missed out on the freeport bid, Doncaster rejected for money from the New Town's scheme and High Street Fund.

Added to this Donny being rejected for a new hospital and the airport rail link. And that's with a new Tory MP.

[BillyStubbsTears]

I'll pick up on the first point.  Here in the north it's oft complained that everything is too focussed on the south east.  The government now clearly is making steps to address that and people complain about it.  I don't believe they are going far enough at all but at least some steps are being made.  What I don't understand is why we complain about them.

O'Neill is vice Chair of Northern Powerhouse. He said the Freeport's will do nothing to help the North overall. They'll just move economic activity from one place in the North to another.

[selby]

  Well Billy, that is just a guess from O'Neill, as only time will tell whether he is right or wrong, not something to hang your hat on as fact, or wishful thinking which seems to be the undercurrent of your post.

[albie]

Selby,

The UK has had Freeports before, until 2012 when the Tories under Cameron ended them for the reasons given.

The question is what difference is there between 2012 and 2021......Brexit is one big change.
So who will be the winners and losers once they come back in, and how will the trading partners in the EU respond to tariff free zones as a point of international trade exchange?

[Glyn_Wigley]

Freeports are just glorified Bonded/Excise Warehousing. They'll help with throughput periods and therefore help businesses cashflow if used properly, but that's about it. If controlled properly they're useful to have but they won't really generate any extra trade for the UK that Bonded Warehouses can't already handle.

It could be argued that they could attract goods to be warehoused on hold to be transhipped elsewhere but the only place goods are likely to be transhipped to afterwards is the EU, and they've already got several well-established Freezones.

[Filo]

Levelling up eh?

https://twitter.com/pickardje/status/1367165382314835974?s=21

[selby]

  So the EU have got free zones Glyn, and they will be of no use to us?
   We need to get used to the EU is no longer the centre of our world, in fact our imports from them is already plunging lower and the Germans don't like it one bit

[Glyn_Wigley]

  So the EU have got free zones Glyn, and they will be of no use to us?
   We need to get used to the EU is no longer the centre of our world, in fact our imports from them is already plunging lower and the Germans don't like it one bit

Why are you saying Freezones are of no use to us? The UK isn't proposing to have any, so I certainly didn't say that.

[Not Now Kato]

  So the EU have got free zones Glyn, and they will be of no use to us?
   We need to get used to the EU is no longer the centre of our world, in fact our imports from them is already plunging lower and the Germans don't like it one bit

Seems you know something the Financial Times doesn't selby....
 
From the FT.

As pre-Brexit stockpiles wind down, we are now entering the next phase of post-Brexit trade adjustment and the early signs are that EU-UK trade volumes are falling.
There are further signs this week that the frictional barriers and uncertainty created by Brexit have impacted trade, with figures published by Germany’s federal statistical agency showing a consistent fall in German exports to the UK.
My colleague in Frankfurt, Martin Arnold, emails to say German exports to Britain in January were down about 30 per cent year-on-year, continuing a trend of declining trade between the two countries since the Brexit referendum. (Separately, Italy reported a 38 per cent drop in exports to the UK and a 70 per cent drop in British imports in January.)
The UK is the fifth-largest market for German goods and services, but exports to Britain from Germany have fallen from a high of €89bn in 2015 — the year before the Brexit referendum — to €66.9bn last year. Crucially, in that five-year period, overall German exports rose 1 per cent.
The federal statistical agency said in a statement that based on extrapolations, exports “will continue to decline in January 2021 due to the effects of the completed Brexit”.
Brexiters often expressed confidence that German trade surpluses with the UK would force Berlin to argue for a more cake-ist deal for the UK, but that always overlooked the fact that German exporters had 26 other EU markets to choose from, and trade takes the line of least resistance.
 
Maybe cheese to Japan will fix the decline?