Apparently Labour is closing the gap on the Tories.

Apparently, Labour is closing the gap on the Tories in opinion polls. Perhaps, we will be on for a general election in June 2009. Then, the Gordon Brown administration will retain an element of surprise rather than waiting for 2010. Last time when there were rumours of an early election, the British premier ignored the advice of his younger Cabinet members.
I suppose it will be fought on class lines by Labour on class grounds pointing to the
Old Etonians Cameron and Osborne conveniently ignoring the private/selective education of quite a few of their ministers. It is a shame that Ruth Kelly is departing the political scene. She has had more Labour government portfolios than hot dinners.
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Labour will be campaigning on future tax increases following their (hopefully)
successful rescue of the economy. They will try and not mention spending cuts but will argue that Tory cuts will be more.
The Conservatives will at least have to mop the Lib Dem seats in the south such as Winchester but with a manifesto that will not frighten the children. Both these tasks will be difficult. One problem is the lack of support from certain sectors of the Tory party for Cameron and Osborne and this contrasts with the Labour Party looking more unified and getting behind Brown. Perhaps, the appointment of Lord Mandelson was a master stroke. Miliband has been sidelined into going to places like Syria and into criticising countries such as Russia and Israel.

The British government looks a bit shifty again!!

The British government, under the premiership of Gordon Brown, looks a bit shifty again a last-minute omission in the pre budget report (PBR) to recoup the temporary reduction in VAT from 17.5 pct to 15 pct with a rise to 18.5 pct. Apparently, analysts are finding a £100bn hole in the public finances. They are also homing in the changes not highlighted by British chancellor Alistair Darling such as increased fiscal drag whereby more taxpayers will be sucked into paying the 40 per cent rate.
Perhaps the best strategy for Brits is to get a public sector job with a nice pension and the ability to take time off sick when you want. If that does not appeal then if you got some transferable skills then Australia and New Zealand would like to hear from you.
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I think it is Derbyshire where they pay more for pensions covering retired firemen than for the actual fire service itself. Unless we go bankrupt too quickly, then there might be a moment when we realise that the public sector just has to be reformed. The Gershon review wanted to outsource some civil service jobs to India but
I don't think we need to go that far. Pulling out of Iraq and Afghanistan would help reduce costs a bit. I am still aiming to get on a Quango, so we don't want those cut.

Poor old Alistair Darling gets battered!!

Without actually being there, it looked like British Chancellor Alistair Darling got battered yesterday by his counterpart on the opposition benches, George Osborne. Poor old Darling looked pretty glum when Osborne described him as a gambler. The VAT reduction to 15 pct represents an administrative headache to companies but is unlikely to get the consumer buying. If gas and electricity bills were exempted from VAT, it might not get the "Green" vote but it would make a major difference to low income groups.
The public borrowing figures are alarming and our gilts (government bonds) will have to have some attractions to bond investors, who will be able to choose from a wide pool of countries such as the U.S and Germany. One probable attraction is a relatively high interest rate to offset the currency depreciation.
One reason why the Great British Public got into such a debt mess is that its income was overtaxed. So that to keep an illusion of progress and to buy the good things in life people resorted to borrowing.
The Darling statement had the positive feature of being relatively candid. It paves the way for the forthcoming general election, which is likely to be in June 2009,
and will be fought on a social fairness agenda.
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VAT nightmare for everybody!!

Written before Alistair Darling's pre-budget statement, if the worst-kept secret is carried out, a reduction in British VAT to 15 pct, then there will be quite a bit of administrative angst for UK companies. This compares with the current rate of 17.5 pct. To pay for the reduction, there is talk of quite an increase later.
The British Chancellor has been caught out on his previous forecasts. He did not expect 1 pct growth for 2008 for example or recession in 2009. This shows more the perils of forecasting rather than the competence of Mr Darling. We are living in extraordinary times. Last week saw the humbling of U.S banking giant Citibank and this week is seeing the rescue.
Lower interest rates and a weaker pound might get the British economy going again but they also hit groups like pensioners, who rely on income from banks and building societies. The weaker pound has offset some of the falls in the oil price for petrol purchases.
For a government that has never built a power station, it will be interesting to see if the public works programme succeeds or not. British prime minister Gordon Brown has often spoke about public investment but when you look around in Britain it has not really happened.
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How bad will the UK downturn be?

It was a bit of a shock to have Marks & Spencer carry out a one day sale with 20 per cent off. So how bad will be the downturn in the UK economy? Comparisons range from 1990-91 to 1973-74, when we had the three day week etc. The UK economy has been over-reliant for growth from the City of London, which is now in freefall. We will be paying for New Labour's neglect of manufacturing and for the use of an overvalued exchange rate to keep inflation down with cheap imported goods.
Inflationary pressure has always been high with the government's penchant for increasing things such as vehicle excise and fuel duty. However, the scope for raising these are limited due to opposition by the Great British Public. The drop in oil prices might help produce artificial deflation figures but living in the United Kingdom is still not cheap.
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The textbook theory is that the collapse of the pound should help exports but these will be difficult to achieve with recession in the United States and in Europe. At least it will encourage people to take domestic holidays or go to destinations such as Turkey and South Africa.
The Sun today says that UK premier Gordon Brown should go for a June general election. It is probably sound advice since the higher unemployment gets then it might be more difficult to win.

I wish Gordon Brown was'nt enjoying himself!!

Not long ago British Prime Minister Gordon Brown was fighting off major criticsm of his performance. There were calls within his own Labour Party for a change. However, Brown's opinion poll ratings have gone up sharply. I think the Prime Minister and the Chancellor Alistair Darling did well to rescue the UK banks. However, the banks are not responding to their demands to keep lending at last year's levels.
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However, I wish Gordon Brown was enjoying himself so much!! The more miserable the state of the British economy is, the more happy he looks. I would wonder if the interest rate cuts and the putative tax cuts will work. They would take time to take effect and would possibly be helpful by the end of 2009. It seems that people are talking of a two year recession.
Brown and Darling have talked of bringing forward public sector investment projects.
Yet the government's schools programme has had pitiful results. Projects such as Crossrail seem to fall in the black hole of planning. Apparently, the government deficit could reach £67bn without really trying and this is despite a rise in tax revenues.

What do you prefer? Downturn or recession?

The British economic stats are all gloomy. However, the BBC prefers to call the recession the downturn. Does that make it any better? Today's Independent does a great article on the painful economic situation. One interesting comment in the article was that the BBC's Robert Peston did not help much when he revealed the Northern Rock crisis saying that deposits were safe. Obviously, the depositors took the reverse message and began a run on the Newcastle-based bank. I think the son of a Labour peer had to go with the story. If there was a better deposit protection scheme in place, then the run might have been avoided. I would have lost a little less money as a Northern Rock shareholder as well!!
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The Independent article refers to a couple of suicides over house repossessions. Perhaps these tragic events could have been avoided by better income protection products. Most of these are designed not to pay out. I had one once with the Abbey National until I read in the Daily Telegraph that the venerable organisation, pre Banco Santander, did anything to get out of paying out.

The 90th anniversary of First World War armistice.

For today's blog I am going to touch on a more serious issue. Today is the 90th anniversary of the end of the First World War. Although it is a long time away, it seems only yesterday when my grandad was regaling me with stories from the conflict. He was lucky and did not serve on the frontline but was one of the ground staff of
the air wing of the Army. He used to tell me how he loaded up Lewis machine guns.
The worst episode was when he accidentally burnt down a hangar and he thought he was
going to get shot for that.
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After the Great War my grandad managed to get a job on the railways. To get a bit extra money he joined the Territorial section for railway workers. This meant rather
than missing out on the Second World War he was in France within days of hostilities
breaking out.

Costa fugitives will have to go on the run!!

Apparently, the UK authorities are to make more of an effort in apprehending British criminals, who fled to Spain. This country became the destination of choice when there was no extradition treaty between the two countries. Extradition has been made easier and lets hope the project will be a successful one for SOCA, aka the British FBI, which has been hit by a heavy overtime bill.
The Spanish prisons have been filling up with municipal politicians, who benefited a bit too much from the property boom in the Costas. These coastal districts have not just attracted British criminals but also ones from Italy and Russia. So, the Spanish authorities are probably spoilt for choice over who they want to arrest.
www.searchaccountant.co.uk It will be the Spanish police, which will make the arrest.
http://news.scotsman.com/scotland/On-the-run-four-Scots.4666029.jp

Barack Obama will have to manage expectations.

Barack Obama is an amazing speaker and his message of "change" has struck a chord both in the United States and elsewhere. The senator will now have to manage expectations because the challenges are pretty tough. For instance, the extension of health insurance to all Americans defeated the Clinton administration. The imposition of an NHS style solution would be defeated by the size of the U.S population. Health schemes throughout the world are coming under pressure of increased costs and longevity whatever their funding model.
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The president-elect of the United States will benefit from Democrat majorities in the Sentate and in the House of Representatives. If he brings the same competence to bear as he did for the election campaign, which raised a record amount of money, then Obama could be well-placed to reach his goals. He can make quite a few changes to Bush policies by executive order.

Gordon Brown passes round the hat in the Gulf.

I am not too sure if the Saudis and the Gulf states want to invest in countries like the Ukraine and Hungary. They would prefer domestic infrastructure projects or companies such as Barclays. It must have been a surprise for them to see Gordon Brown coming round with the hat. The Middle East countries want productive investments for their oil wealth. We are wondering what would happen if Qatar tries to take over Sainsbury's. Years ago HM Government blocked the Kuwaities when they tried to build up a major stake in BP.
Western governments much preferred the old investment destinations of Middle East oil wealth such as arms and London casinos. Sarkozy now wants the European Union to repel any boarders such as sovereign funds, if they move for European companies.
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This contrasts with the attitude of Barclays, which has been actively courting these funds. People think it is a shame that the UK government did not set up a sovereign fund similar to Norway endowed by oil revenues.