Britannia Radio

The crisis fails to ease
Today’s updates on the economic front follow. They make grim
reading, I’m afraid. The euro is reported to be falling against the
dollar as is the pound.

People don’t realise how major things like the fall in the pound’s
value interact on other things. Take harvesting. A large part of
our harvesting has been done for years by young foreign temporary
staff. Now the regulations have been tightened to prevent illegal
immigration and the amount they can earn here has fallen with the
valuie of the pound. So they go to France, Holland and Belgium
instead. And because of insane bureaucracy the British unemployed
lose all housing and welfare benefits if thery take temporary jobs.
So the crops may in many cases be left to rot.

However, for comic relief Polly Toynbee in the Guardian today is
positively foaming at the mouth at the dreadful thought that someone
might possibly be forced to cut taxes! It’s “Feeble Labour folds in
the face of anti-tax paranoia” . She invents specific spending cuts
[not] promosed by the Tories. She talks of Brown’s tax cuts in
income tax while ignoring bigger increases in National Insurance
(same thing - different name, for most). But the language is rich!
Try these on for size “(Labour) cowering in its caves all summer,
sheltering from the rain of enemy arrows” - “ behind the charm gleam
the old wolf's teeth” - “ Though suspicion is strong, an energy
company cartel is hard to prove” - “It's time for a fair tax campaign
to fight off this dangerous anti-tax assault.” But perhaps the
most telling of all is her debunking of facts in favour of paranoia
in - “The TaxPayers' Alliance is in effect another Tory front pumping
out anti-tax paranoia. Yet both these are used regularly by the BBC
and others as if they were above the fray.”
xxxxxxxxxxxxx cs
====================
TELEGRAPH 25.8.08
Disposable income falls for first time since 1997
Disposable income has fallen for the first time since Labour came to
power, according to a survey.
By Stephen Adams


The study by uSwitch.com, a price comparison website, found that the
figure – gross income minus taxes, social contributions and essential
bills – fell £2,582, or 15 per cent, from £17,102 last year to £14,520.

The average household's disposable income is just £2,491 higher than
it was in 1997, according to uSwitch. The fall wipes out much of the
gains made in the 11 years since Labour took office.

Ann Robinson, uSwitch's director of consumer policy, said people were
in "a lose/lose situation where everything is shooting up except
their income".

Although average pay has risen by 3.4 per cent in the past year, that
has been more than wiped out by inflation in the shops and tax rises.

The study concluded that the cost of living has risen by eight per
cent – almost double the 4.4 per cent registered by the Government's
preferred measure of inflation, the Consumer Price Index (CPI).

The increase means families have to find an extra £145 to cover
essential bills. Among the biggest rises are gas (up 28.3 per cent),
unleaded petrol (27.9 per cent) and food and drink (24.9 per cent).

The overall tax burden on households has risen by six per cent in the
past year, the study found.

Since 1997, the Government's tax take has risen from 9.6 per cent of
gross household income to 12.1 per cent. Miss Robinson said: "The
shock increase in the CPI – which has more than doubled in the past
six months to over twice its official target [two per cent] – will
impact everyone this year."

"It's a Catch 22 situation – struggling consumers need pay rises to
help them meet the mounting cost of living, but the Bank of England
and the Government wants to keep pay rises to a minimum to dampen
inflation."

Despite Office for National Statistics data showing the economy
stopped growing in the three months to July after 16 years of growth,
Gordon Brown has privately predicted that it could soon turn a corner
and start to recover.

Children's average pocket money has fallen for the third year in a
row, down nearly 25 per cent to £6.13 a week, research from Halifax
bank shows.
====================
TELEGRAPH 26.8.08 .....10.20am
1. Sterling tumbles as markets eye interest rate cuts
By Angela Monaghan

The pound fell further today as the market reopened after the bank
holiday as foreign-exchange traders intensified bets that the Bank of
England is likely to be the only major central bank to cut interest
rates by the end of the year.

Sterling, which is already almost 10pc weaker against the greenback
than it was a month ago, fell more than a cent to below $1.84 - its
weakest level against the dollar in more than two years. Negative
sentiment toward the currency has hardened in recent days.



TIMES reports “London shares follow Wall Street downwards
after the pound declines and German business confidence plunges”
==============

2. Economic recovery still a long way off, Bank of England chief warns
By James Kirkup, Political Correspondent

The world economy has a "long way to go" before it recovers from the
worst crisis since the 1970s, the deputy governor of the Bank of
England has warned.

Charles Bean said that there is little prospect of an economic
recovery until well into next year, meaning households' income will
remain under severe pressure for months to come.

Professor Bean's bleak assessment of the economic outlook follows
figures last week that confirmed that UK economic growth has ground
to a halt after 16 years of unbroken expansion.

The end of economic growth has strengthened predictions that Britain
will dip into a full recession this year.

Prof Bean, speaking to the BBC in a central bankers' conference in
Wyoming, did not explicitly mention a recession, but he made clear
that the tough economic times will continue.
"We've got our fingers crossed that things will improve. But there is
the recognition that there is still a long way to go yet," he said.
"It looks like it will drag on for some considerable time further yet."

Oil prices have tripled in two years, helping push up inflation
around the world.
"It's fair to say that if you look at the shocks impinging on us this
is at least as challenging a time as back in the 1970s," said Prof
Bean. "Some people have said it's as big a financial shock as the
Great Depression and as far as the oil shock goes the rise in oil
prices is in the same order of magnitude that we had to deal in the
1970s."

Soaring energy prices helped push UK inflation up to 4.4 per cent in
July, the highest since records began in 1997 and more than twice the
Bank of England's target of 2 per cent.

High inflation and failing growth has raised fears of "stagflation"
in the British economy, and the need to curb inflation without
further smothering economic activity has left the Bank of England's
Monetary Policy Committee split over whether to raise or cut interest
rates.

Prof Bean suggested that the dilemma will ease as prices gradually
fall from their current peaks.

He said: "On the assumption commodity prices remain stable and if
anything fall back, then inflation should drop back as we go through
next year.
"One would hope that the conditions in credit markets should
gradually start to improve and those two factors will help to ensure
growth will start to pick up as we go through next year.
But he added: "It's going to be a tricky period. Household real
income is very low. That will make it difficult for households and
there are difficult social issues that will arise."

The economic downturn is undermining Gordon Brown's Government, which
has come under fresh attack from a business leader over tax.

Miles Templeman, the director of the Institute of Directors, said
that corporate taxes are "unacceptably high" and warned that business
has lost faith in Labour.
"The government, in the last five years particularly, has not really
embraced the business agenda thoroughly enough," said Mr Templeman.
"The Brown premiership has carried on that trend. And then you've got
all the economic pressures and some of the tax cock-ups as well."

======================
FINANCIAL TIMES 26.8.08 - noon
Recession worries send euro to new low
By Ralph Atkins in Frankfurt and Shyamantha Asokan in London

The euro fell to a six-month low against the dollar after a survey
showed recent falls in the oil price and the eurozone currency failed
to halt a slide in German business confidence.

The Munich-based Ifo institute reported its business climate index
had fallen sharply from 97.5 in July to 94.8 in August, the lowest
level for more than three years. It was the third consecutive monthly
drop. The component of the index covering expectations tumbled to the
lowest since February 1993.

The results are likely to revive fears that, after contracting in the
three months to June, the country is falling into a technical
recession – two quarters of negative growth. “The German economy is
encountering an increasingly difficult situation,” said Hans-Werner
Sinn, Ifo’s president.
The euro fell 1.04 per cent to $1.4595 against the dollar, its
weakest performance since mid-February, and dropped 0.66 per cent to
Y160.22 against the yen.

The Ifo index had been expected to fall this month, but recent falls
in oil prices and the euro – which has dropped about 8 per cent since
its mid-July peak against the dollar – had been expected to boost
optimism about the future.

The latest weak data sent warning signals to the European Central
Bank, said Julian Callow at Barclays Capital. “Even Europe's biggest
economy, which had in recent quarters been supporting overall euro
area growth, is stalling - providing further evidence that the euro
area will require an easing in monetary conditions,” he said.

The ECB publishes revised eurozone forecasts next week but with
inflation in the 15-country region still double its target of an
annual rate “below but close” to 2 per cent, it is widely-expected to
keep its main interest firmly on hold for some time.

The turnaround in Germany’s fortunes was also shown in detailed
second quarter growth figures published by the country’s statistical
office. These showed that tumbling investment spending, especially in
construction, and in consumer spending largely explained the 0.5 per
cent contraction in GDP. Germany’s investment boom, which started
three years ago, “has come to an end,” said Ralph Solveen at
Commerzbank in Frankfurt.

Weakness in consumer spending - in contrast to investment spending -
has long been a weakness in the German economy. But consumer
confidence also continues to deteriorate, according to a separate
survey by the Nuremberg-based GfK research institute. It said its
consumer climate index for September was expected to drop to the
lowest level since mid-2003. Germany’s “subdued” economic prospects
and expectations that prices would continue to rise as lying behind
the gloomy mood among shoppers, were blamed.

“While licking the wounds of the second quarter, the pressing issue
is whether Germany will actually end in a technical recession,” said
Carsten Brzeski at ING Bank. “So far, sentiment and leading
indicators have painted a bleak picture for the third quarter. All
indicators have been plummeting for several months.”