News on the UK Economy

I’ve previously blogged that I’m not yet absolutely certain that the recession is over.

Still more cuts to come, says IFS

So, I was interested to read that the Institute for Fiscal Studies (IFS) has warned us that the UK is still not halfway through spending cuts. This story is on accountancyLIVE. We are told that:

• There are even more dramatic spending cuts ahead, on the back of Chancellor George Osborne’s decision to extend the fiscal consolidation through to 2018-19.

• The end of 2014 will take the UK only up to the 40% mark on planned spending cuts, the think tank says, adding that even with £12bn a year in additional cuts to social security spending, there will be cuts of more than 30% in ‘unprotected public service budgets’ since 2010.

The stark news was revealed in the IFS Green Budget, published in advance of the Budget scheduled for 19 March. The IFS takes issue with government’s projections of growth from underlying revenues in capital taxes – which it says are ‘notoriously difficult’ to forecast.

Read the full story, here.

Views are more hawkish as BoE’s forward guidance is left in tatters

A story on City. A.M. today informs us that more hawkish views on the Bank of England’s stance are emerging from their panel of monetary policy experts, ahead of the Bank of England’s inflation report. The shadow monetary policy committee (SMPC) is still largely in favour of holding interest rates at their current low level, but more members are now indicating that rates should rise before 2015. Until summer last year, some members were still voting in favour of more quantitative easing – it demonstrates the rapid change in the British economy in recent months.

Unemployment fell to 7.1 per cent in November, as announced last month, only 0.1 percentage points above the Bank’s threshold for reassessing monetary policy. When the monetary policy committee revealed the terms of forward guidance in August, it projected that unemployment would not fall to such a level until the middle of 2016.

There’s a saying that you can confuse almost anyone with numbers and statistics, so caution is required.  The BoE is expected to review guidance in its inflation report next week, with the possibility of altering the terms as to make monetary policy less focused on the headline rate of unemployment.

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Martin Pollins

Managing Director at One Smart Place

Martin Pollins is a Chartered Accountant and MBA with wide experience in corporate finance and business management. He has served on the boards of several companies, including those listed on the London Stock Exchange, AIM and OFEX. He is Chairman and Founder of OneSmartPlace and was a Council member of the Institute of Chartered Accountants in England and Wales from 1988 to 1996. He was managing partner of PRB Martin Pollins, based in Sussex, the first Accountancy firm to advertise on British television.He went on to create and launch the CharterGroup Partnership (the UK’s first Accountancy network) and then LawGroup UK (at the time, one of the largest networks of lawyers in the UK). In recent years, he helped to raise several £millions to fund British films such as The Da Vinci Code, Bridge of San Luis Rey, Head in the Clouds and Merchant of Venice with actors such as Charlize Theron, Robert De Niro, Al Pacino, F. Murray Abraham. Kathy Bates, Gabriel Byrne, Geraldine Chaplin, Tom Hanks, Ian McKellen, Audrey Tautou, Penélope Cruz, Steven Berkoff, Lynn Collins, Jeremy Irons, Joseph Fiennes and many more.

He has written over 700 business publications (see Glossaries at http://onesmartplace.com/resources/glossaries/) and is editor of Better Business Focus (see http://onesmartplace.com/resources/better-business-focus-magazine). His Blog, on a wide range of subjects can be found at: http://onesmartplace.com/blog/

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