The euro could could collapse by the weekend!!

Dear Reader, the European single currency could collapse by the weekend! Or maybe not that soon but maybe by the beginning of 2012. The game is up if the Chinese and Japanese don't want to lend ten year money at very low rates to Germany. In today's Daily Mail an article on the U.S by Max Hastings described German leader Angela Merkel as an adequate city mayor. I think that it is a bit harsh.

While a recent article in the Times by the so-called economics expert Anatole Kaletsky shows him to be a bit deranged. OK it looks like a German takeover of Europe but if national governments want their budgets to be approved first in Berlin (Ireland, Greece etc) then it is up to them. For instance, nobody asked the Irish banks to massively expand their balance sheets and go bust taking the country with it. I read once that a Irish bank took a big group of local property developers to Chicago on a jolly as a way of getting loan business.

Apparently, Ireland wants to review its bail-out package since the country looks stupid trying to pay back its debts with the Greeks getting debt relief (sovereign bond haircut) of at least 50 pct from the commercial banks. If Ireland leaves the euro, I don't think Royal Bank of Scotland and Lloyds Bank would be too impressed!

What can we do in the UK? Cutting personal and business taxes (perhaps slowly) would would help (the Laffer curve). Hope more companies follow the example of European aircraft manufacturer Airbus and Swiss food group Nestle in
announcing new jobs. Sack Chris Huhne and rethink the windpower programme.

To protect social cohesion/integration, if things get really nasty, one idea would be to reintroduce some kind of conscription focusing on green projects, looking after the elderly etc without the military angle. If you are paying benefits to the hoodies, you might as well get them doing something useful.

UK chancellor George Osborne might talk up infrastructure projects but we are where we are. The infrastructure projects are too smaill and they will take too long. Expecting rich sovereign wealth funds to invest in "Boris Island" is just pie in the sky!!

Columnist Peter Oborne opines that the collapse of the euro will completely discredit the European elites. As long as it shuts up that EC idiot Jose Manuel Barroso I would be happy. He has been European Commission president since November 2004, so it is time for a change.

It looks like Dave and Gideon are feeling the heat.

Dear Reader, it looks like the Old Etonian mafia are feeling the heat. The Royal British Legion has accused the government of breaking the military covenant while increased job losses in the pipeline are not going to help stimulate economic confidence. Some public sector workers (and I say this with a heavy heart) will not find private sector conditions very conducive. Lower holidays, can't go on sickies and no pension plan (although we will have this stuff and nonsense called NEST coming your way soon)are not particularly attractive to some people in the UK public sector (especially amongst Catholic public sector people in Northern Ireland, I suppose it is part of a Gandhi-style disobedience campaign).

I am sure disaffected public sector voters will vote for Labour at the next election but if this is four years away then it would be simply too late for them. New Labour had already initiated cutbacks in the National Health Service (NHS)such as the planned closure of A&E departments like Enfield Chase Farm. (See Note***)

Changing the subject it is a shame NEST was not up and running a few years ago and we would still have some more British companies, which have been since swallowed up by foreigners, to invest in. The roll-call includes Cadburys, Smith & Nephew, Wellstream and British Oxygen (BOC). Here, everything is up for sale. The City is like Wimbledon. We host the tournament but don't win it. Even the Spanish bought up Bristol Water, Luton Aiport, BAA and O2. While our major investment was the massive amount of money wasted on the Vodafone acquisition of the German company Mannesmann Telecom.
Makes you glad to be English!!

Gawd knows why the London Stock Exchange (LSE) wants to merge with Toronto Stock Exchange. I suppose it is to get rid of the threats from the French and Germans.


Note*** Chase Farm was originally a profitable hospital then it was shunted into a joint operation with Barnet General. Now it is threatened with closure because greedy w***ers see a nice little earner selling off the site for houses

Are we going for the double dip recession?

I don't think David Cameron and George Osborne will be happy bunnies with today's
disappointing quarterly GDP's figures. I suppose blaming the bad weather is a pretty lame excuse. With a limited manufacturing sector it would always be a big ask. The 0.5 pct fall in GDP joins the shocking inflation figures with economic commentators saying the Bank of England has lost the plot. The British central bank is certainly behind the curve and can only keep its fingers crossed.

UK chancellor George Osborne gambles our future - papers.

I have been reading quite a few of the commentaries on the public spending review announced by UK chancellor George Osborne published in the newspapers today. Quite a few make the point that in nominal terms public spending will still go up while others say that Osborne is gambling that the net drain on disposable incomes in Great Britain (with the onslaught on welfare bills) will be offset by new private sector jobs.

His figures do not really add up. I doubt if the government will cut welfare fraud by
£5bn and I doubt that a new aircraft carrier will actually cost £7bn. I suppose there will be more spending cuts and tax increases down the line.

Will UK spending cuts work??

I wonder if the UK public sector spending cuts will actually work? Chancellor George Osborne highlighted the various elements of the £83bn package yet at the same time the Bank of England is considering printing more money (quantitative easing) to get the economy moving. I suppose it makes some kind of sense to build an aircraft carrier with no planes and launch a money saving assault against the disabled classes. But I was more impressed with the Irish government, which pushed through pay cuts for the country's public sector.

If the massive public sector pension liabilities are true, then the imperative is to cut more than the possible 500,000 jobs, which won't be fun. The jobs are to go over four years and Mr Osborne hopes most of the strain will be taken by natural wastage.
A hope in vain I am afraid.

In the early 1990s the Tory administration got rid of a major budget deficit without scaring everybody to death. It took a few years but it allowed my old friend Gordon Brown to go on the splurge later, since he inherited such a good fiscal situation. Any improvement in the public finances will take time. I don't think private job creation will be enough to offset the public sector job losses. Together with quite
a few of the disability living allowance and incapacity claimants moving to other benefits, then you could increase the British unemployment total by a cool one million without breaking sweat.

Tomorrow will see the UK's emergency budget.

Former Tory chancellor Norman Lamont says in today's Daily Telegraph that George Osborne has to be bold in tomorrow's budget so as to make a dent in the public sector deficit. We are certainly being softened up with stories of elimination of tax credits to relatively wealthy families and of civil servants having to contribute more to their generous pensions. However, if we are going to have a welfare system then there should be some universal benefits. Moving the goal posts on public sector pensions will be harder for the government to explain compared with the decimation of private schemes. This was due to the closure of defined benefit pension funds, which was not widely understood by workforces. Factors obviously include the Gordon Brown tax raid but there have been other problems such as the poor performance of equities and the increasing longevity of scheme members. Companies such as British Telecom and British Airways have become pension funds with operational subsidiaries attached.

Politically it will be a tough sell for a group of millionaires to advocate austerity. The Tories can blame Gordon Brown for economic mismanagement but I would not impose policies, which would deliberately increase UK unemployment from 2.25m to 3m. It is alright being critical of the fact that 60 pct of the workforce of the north-east depend on the public sector but it is unlikely the private sector could step in to improve matters.

Some of our problems are European-wide. The wheels are falling off in countries such as Spain and Portugal due to deficit problems, poor educational systems and weak employment formation. Much has been made of the collapse in Spanish property prices but our banks have also become property companies due to the weight of questionable loans to the sector. State pension ages have to be harmonised throughout Europe. However, there is little point us making transfers to the French economy via the Common Agricultural Policy (CAP), if the Frogs can retire at 60 while we have to soldier on until 66 plus.

On a more optimistic note the devaluation of the pound has given us some breathing space. Hopefully, families will be using the low interest rates to cut borrowings. Gilt yields are low so the financial markets are being sanguine about our prospects at the moment.

I miss Gordon Brown!!

I miss the former UK premier Gordon Brown, who is keeping a low profile.
There does not seem to be the same chaos in the internal workings of the government of Great Britain. His successor David Cameron has the herculean task of making a dent in the British public debt mountain. I would have gone for a gradual approach to cutting expenditure given that the UK economy has had the equivalent of a heart attack. Cameron has extolled the "Canadian approach" when there were major education and health cuts. These would be very, very unpopular here and if these areas are ringfenced, then the cuts will be worse for the other departments. I would merge the Foreign Office and International Aid departments, which could produce some cost savings.

Selling austerity will not be an easy task for the Old Etonian club. I thought Brown did well in the last election to play the class card, which ensured that the Labour vote did not completely collapse.

It will be interesting if George Osborne will come up with any surprises in the June 22nd budget. One Daily Telegraph columnist says the Chancellor of Exchequer would not know an economic theory, if it hit him on the head.

Sorry about the long delay since the last blog!!

I am sorry about the long delay since the last blog, which was perhaps an unfair diatribe (are'nt diatribes always unfair) against British premier Gordon Brown. Since the last blog Brown has survived the Chilcot waffle and a further decline in sterling. It appears Brown was less than transparent about his role as Chancellor of the Exchequer in the funding of defence expenditure. What was obvious was Brown was not going to take the blame for anything.
However, it looks like there could be a double dip recession in the United Kingdom with the rise in VAT to 17.5 pct and the end of the car scrappage scheme. The economy is still in a very fragile state and Brown is perhaps gambling on a return to growth to make a dent into the public sector deficit. Yet the markets fear that if Brown remains as prime minister, he would put Ed Balls as
chancellor.
The message of "blood, sweat and tears" from Tory shadow chancellor George Osborne has not really set Middle England alight. The Conservatives are obviously not going to attract too many seats in the Labour client regions of Scotland and Wales. They have got to win a battle against Lib Dems and Labour in English seats. The Lord Ashcroft affair makes David Cameron look weak.
Whatever party wins the forthcoming UK general election it will have to deal with a
National Health Service (NHS) sliding towards bankruptcy. The primary care trusts or PCTs are already running out of money and still the NHS is more geared towards its employees than its patients.
In London, there are proposals to cut A&E and maternity
services. In the north of the capital all roads seem to lead to the Royal Free at Hampstead with the plans for consolidation/centralisation of services.
There will have to be some real productivity improvements/changes in the NHS. A hard nosed attitude over missed appointments, staff absenteeism and treating tourists for free would make a difference at the margin. Labour has trumpeted its planned increase in NHS expenditure for the next couple of years but after accounting for the rise in national insurance (NI) payments, PFI charges etc this will leave little extra for the average patient.

Lib Dems attack Shadow Chancellor Osborne.

Liberal Democrat Treasury spokesman Lord Oakeshott has attacked the Conservative
Shadow Chancellor George Osborne. Apparently, in the City there is the feeling that Osborne is not interested in financial services and comes to meetings unprepared. Oakeshott was talking at his party's conference in Bournemouth. This is reported in the latest edition of Money Marketing.

Of course, Osborne is seen as a good friend of Tory leader David Cameron, which is probably viewed as something that will be tested in the future.

Tory politicians don't seem to have normal holidays.

It seems that Tory politicians are unable to switch off on holiday. Poor old George Osborne should have been putting his feet up and spending time with his family.
Instead he did not initially come up with the admission that he saw the Russian oligarch Oleg Deripaska quite a few times on his holiday in Corfu.
www.searchaccountant.co.uk
If Osborne was economical with the actualite, then we understand that because that it is what politicians do. Less understandable was discussing with the media what Peter Mandelson said at a private dinner party. I suppose Osborne could not resist it.
Anyway, the £50,000 donation request, which supposedly never happened, is worth a bit less with the decline of the pound. With interest rates poised to come down, sterling is on it own.