‘Science cracks code to feed world’, says the headline on page three of The Times today. Now I know the first rule of journalism is that the headline should grab the reader’s attention, but even so, this is a bold claim. Nevertheless, this article reports that a team of British scientists have, for the first time, read the genetic code of wheat. This means that genes which control critical traits such as drought and salt tolerance, disease resistance and grain production can be identified. Across the world, wheat is a staple crop second in importance only to rice. This breakthrough will allow the development of hardier and higher yielding strains of wheat and so could lead to greater food security and lower prices. ‘Feed the World’, which those of us of a certain age remember as the Live Aid slogan, could be about to take on a whole new meaning.

So it is ironic that this article appears on the same day that leading scientists argue that planned cuts of 25% in their budget could lead to big cuts in the UK’s scientific research capacity.
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   Filed under: Financial crisis, Science | 1 Comment »

I was struck by two items in the news that happened to appear on the same day. In the UK, Eric Pickles, the Secretary of State for local government, has announced plans to give the public the power to veto Council Tax increases. From 2012, MPs will decide each year on a maximum increase local authorities will be allowed to introduce, and increases over that limit will be subject to a referendum and a ‘shadow budget’ the Council would also have to produce. If the electorate voted against the Council’s budget, there would be a refund or a credit against next year’s Council Tax. (There will be no right to a referendum on cuts in services.)

On the same day I saw a report on California’s budget crisis, with Governor Arnold Schwarzenegger declaring a “fiscal state of emergency.” Read more »

   Filed under: Financial crisis, Public services, Public spending, Tax | 2 Comments »

We are now three days into the FT’s excellent series, ‘The austerity debate’, looking at the pros and cons of an early repayment of the fiscal deficit. The issue of deficit repayment is the main political divide of the moment and the FT has performed a valuable service, bringing together commentators from both sides of the argument to thrash out this question. It is time for a TUC comment and Kenneth Rogoff’s article, ‘No need for a panicked fiscal surge’, published today, provides me with a hook.

Rogoff speaks of a “growing chorus for indefinitely sustaining aggressive post-crisis fiscal stimulus”. He adds: “Governments that instead propose gradually reducing deficits and ultimately stabilising debt to income levels – such as both Germany and the UK – are accused of pig-headed fiscal conservatism.”

Hmm. I accept that Kenneth Rogoff is a professor at Harvard and this may be the way things look to a conservative across the Pond, but nobody in the UK is calling for “indefinitely” sustaining the stimulus, or against “gradually” reducing deficits. The issue is simply one of timing. Read more »

   Filed under: Economics, Financial crisis | 1 Comment »

Sometimes, two separate news stories are presented in the same news bulletin and, taken together, make a wonderful statement about the world we live in.

This was my experience this morning as I watched BBC Breakfast. Today’s programme contained the worrying news that, according to figures from the university admissions service, Ucas, universities have received more than 660,000 applications and a record 170,000 students are thought likely to be denied a place this autumn.

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   Filed under: Financial crisis, Politics, Skills | 3 Comments »

European governments and the European Parliament have cut a deal to allow for a cap on bankers’ bonuses, expected to be adopted by the European Parliament next week. Welcoming the decision, the Robin Hood Tax campaign said that the extra money saved by the banks could be recycled, through a Robin Hood Tax, towards preventing cuts and tackling the challenges of climate change and global poverty.

   Filed under: Financial crisis, Transactions tax | 2 Comments »

The Chancellor announced a levy on banks’ balance sheets “to ensure our banks make a fair contribution to reflect the risks they pose.”

But the cut in corporation tax from 28% to 24% by 2014 is expected to negate the impact of the levy on bank profitability. Banks could be better off as a result of as a result of tax changes announced in the Budget.

Headlined as raising £2 billion, in fact the levy is set at the low rate of 0.04% initially, rising to 0.07%. In truth, the levy on balance sheets will not reach £2 billion until 2012. Read more »

   Filed under: Budget, Financial crisis, Tax | 1 Comment »

The ITUC World Congress has seen universal trade union support for the idea of financial transaction taxes. So it was good news that IMF head Dominique Strauss-Kahn confirmed that despite the IMF backing an alternative, no decisions had yet been made.

IMF head Dominique Strauss-Kahn addressed the World Congress in Vancouver this week and spoke of the global trade union movement’s support for a financial transactions tax (FTT). Noting that the IMF had expressed its preference for a different kind of financial activities tax based on profit and compensation, he agreed with the ITUC that a substantial contribution from the financial sector is justified to pay for the cost of the crisis and to dampen overly risky behaviour in the financial sector. He stated that the specific choice between the FTT and another type of tax is “a technical discussion” that needed to take place.

   Filed under: Financial crisis, Tax, Transactions tax | Comments Off

On Friday 4 June, a joint delegation of European trade unions and employers met with the President of the European Commission to discuss the impact that cuts in public expenditure across Europe will have on employment. Unions and employers had agreed a joint declaration on the issue, which saw agreement that growth is the only sustainable solution to the problems of the budget deficits caused by the global financial and economic crisis. It is incredibly important that employers were willing to join the ETUC in calling for growth, thus rejecting the prevailing orthodoxy in Governments, the Commission and bodies like the OECD and IMF that cuts are the main priority. On the eve of the meeting, ETUC General Secretary John Monks  warned that the current path risks repeating the errors of the 1930s, when co-ordinated cuts in public expenditure around the developed world turned the global recession into a profound depression. AS well as supporting growth and a sustainable industrial strategy, the ETUC is arguing for financial sector re-regulation, fiscal co-ordination and a financial transactions tax.

   Filed under: Beyond Crisis, Employers, Europe, Financial crisis, Public services, Public spending, Recession | 2 Comments »

The G20 Finance Ministers meeting this weekend in Busan, South Korea has just decided to turn its back on the unemployed and the poor, and retreat to the economic orthodoxies that led to the last recession and the Great Depression of the 1930s. Chris Giles,  writing for the Financial Times, reports that the communique just issued abandons the idea of a co-ordinated bank levy (although allowing it to go ahead in individual countries), and abandons support for fiscal stimuli, preferring instead to advocate public expenditure cuts . The market has won, and we will all suffer an age of austerity as a result. The only strongly dissenting voice was the US, which is still worried about growth. US Treasury Secretary Tim Geithner wrote to the G20:

“Concerns about growth as Europe makes needed policy adjustments threaten to undercut the momentum of the recovery,” he wrote, adding that fiscal tightening won’t “succeed unless we are able to strengthen confidence in the global recovery.”

Ahead of the summit, the International Trade Union Confederation called for no withdrawal of fiscal stimuli (ie no to cuts in public expenditure) until the unemployment crisis is over, as well as re-regulation of the finance sector and a financial transactions tax, and greater transparency and consultation with civil society on behalf of the Financial Stability Board.

   Filed under: Economics, Financial crisis, G20, Recession, Unemployment | 1 Comment »

I very much respect the detailed analysis prepared by the OECD on international economic issues. However, I’m afraid the Paris-based think-tank has got it so very wrong in its call for UK interest rates to rise by the final quarter of this year, as reported on the Guardian website today.

Incredibly, the OECD is calling for base rates of 3.5% by the end of next year, a move that would strike a major blow to businesses and homeowners.

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   Filed under: Economics, Financial crisis | 1 Comment »

One major Bill included in this morning’s Queen’s Speech was the Office of Budget Responsibility Bill. The principle behind this is simple enough. An Office of Budget Responsibility will become the official forecaster for growth and borrowing. After assessing government liabilities, the OBR will make recommendations for fiscal loosening or tightening in order to have a better than 50% chance of achieving the Government’s targets for the public finances. Read more »

   Filed under: Economics, Financial crisis, Politics | 1 Comment »

Lovely presentations of data on the UK public finances since the war by The Guardian here.  Scroll down to the table near the bottom and you notice something interesting: the period between 1946 and 1979, when the post-war social democratic consensus reined, saw only five years when the public finances were in deficit.  However, since 1979  there have only been seven years when the public finances weren’t in deficit.

Unlike orthodox neo-classical economists, I prefer empirical evidence and history to theoretical models and I think that counts as a pretty strong data set. It suggests two things: Read more »

   Filed under: Economics, Europe, Financial crisis, Politics, Public spending, Recession | 1 Comment »