August is really in charge right now. So far in print it seems that only the Mail has picked up more dire warnings from both the IMF and from another ratings agency and George Osborne’s robust response. [The Telegraph got it online at 6.32pm last night but doesn’t rate its importance for the newspaper itself! I also give the online version below]
The USA appears to be easing its way out of the worst now but we are still digging ourself deeper in! It can’t go on - and it won’t.
The Telegraph has an article from its new columnist - Jeremy Warner acquired from the Independent. He writes mainly in the Business News which worries me, since his grasp of economics seems shaky though he has picked up some ‘populist’ and prejudiced views which don’t stand much examination. He alsoi echoes the Labour ‘line’. Is this the dreadful editor. Lewis - a close friend of Brown’s disgraced in-house spinner, McBride - taking personal charge of the jewel in the Telegraph , its business section, and dumbing it down like the rest of the paper? I shall keep a very wary eye on developments.
Christina
DAILY MAIL 1.8.09
Bad news for Brown [-and us! -cs] as IMF says Britain's debt crisis is the worst among major economies
By KIRSTY WALKER
Britain will have the biggest debt of any major economy next year, according to the International Monetary Fund.
The Government budget deficit will soar to £191billion, the Washington-based organisation has warned.
The figure - which equates to £7,600 for every family in Britain - is far higher than the Treasury's official forecast of £175billion.
Britain's position at the top of the G20 debt league will fuel fears that the country is facing decades of cuts to public services in a bid to rebalance the books.
The latest IMF report has revised its estimates for the scale of Britain's deficit upwards.
It predicts that by 2010, the UK's debt will equate to 13.3 per cent of gross domestic product - compared with 9.7 per cent for the U.S.
The forecast will reignite the political row over the Prime Minister's refusal to acknowledge the need for spending cuts. Cabinet Secretary Sir Gus O'Donnell has warned of deep reductions in departmental spending.
Meanwhile, Business Secretary Lord Mandelson and Chancellor Alistair Darling have both said plans will have to be tighter.
By contrast, Mr Brown has denied the need for huge cuts in expenditure.
The IMF's forecast comes as ratings agency Fitch warned the UK's top credit rating was 'under threat' unless the public finances are brought under control. [The Telegraph report below seems to miss this warning -cs]
The country currently has a gold-plated AAA sovereign credit rating, but the agency has warned that the Government needs to pursue more 'aggressive' policies to cut debt than at present.
It warned: 'The pace of consolidation set out in the latest Budget is not sufficient to put debt on a firmly downward path within five years.'
The IMF has previously warned that the UK is 'testing the limit of the market's confidence' by pushing the national debt towards 100 per cent of GDP.
It has called on Mr Brown do to more to tackle public spending if Britain is to avoid a collapse in sterling and a full-blown fiscal meltdown.
The Treasury insists the public deficit will be halved over the next four years and that the economy will begin to grow by next year.
Shadow Chancellor George Osborne said: 'It's now official - the debt crisis is worse in Britain than any other major economy.
'The IMF today says Britain's budget deficit next year will be bigger than anyone else's, and that our national debt has grown proportionately faster than anyone.
'We now face a 100 per cent national debt and the humiliation of the first-ever downgrade in Britain's credit rating, with all the higher debt costs that entails. Gordon Brown's denial of the truth about the debt crisis and the need to cut spending whoever wins the election is doing serious economic damage to Britain's recovery.'
Meanwhile, a report by the Centre for Economics and Business Research thinktank yesterday warned that national debt could soar to £2trillion.
The unprecedented borrowing programme has sparked fears that a generation of British workers face a lifetime of higher taxes to pay off the debt.
The CEBR's worst-case scenario forecasts put unemployment at 4million by the end of the recession. Even a 'moderate' scenario would put the figure at 3.2million, compared with the Treasury's prediction of 2.8million unemployed by 2011.
The report also found that public spending will have to be dramatically cut if the Treasury is to meet the target that its debt should began to fall by 2017-18.
TELEGRAPH
1.8.09
IMF puts UK banking bail-outs at £1,227bn
The total amount of support handed to Britain's financial sector by the taxpayer and the Bank of England now exceeds £1.2 trillion and is bigger than for any other major economy.
By Edmund Conway, Economics Editor
Fresh calculations from the International Monetary Fund have revealed the full scale of assistance meted out to Britain's collapsed banking system. The Fund said that when one combines all the support for banks, including capital injections, the buying of frozen assets, Government guarantees and Bank of England liquidity provision, the total bill amounts to 81.8pc of gross domestic product – equivalent to £1,227bn.
Although parts of this total are not strictly comparable since they incorporate amounts handed over in guarantees that are unlikely to be taken up, the figures will raise further concerns over the scale of the crisis and the impact it is already having on the UK's economic stability.
However, the calculations coincided with news that Fitch, one of the three major ratings agencies, had reaffirmed its AAA rating for the UK and given it a stable outlook. [The Mail report above reports that Fitch gave a severe warning too - QV - cs] In May, Standard & Poor's warned of the possibility that it may downgrade the UK's rating, raising the prospect of an exodus of investors from sterling and the UK.
The IMF figures also came as the FTSE 100 brought to an end its biggest monthly gain in six years. The index dropped 23.25 points to 4608.36, but was up 8.5pc compared with the start of the month. The last time it achieved such significant gains were in the weeks following the fall of Baghdad in 2003.
In its report, the IMF, which has repeatedly warned Britain over the size of its deficit, said that as a result of the global recession, Britain faces the biggest projected budget deficit of any G20 country, amounting to 13.3pc of GDP in 2010, compared with a deficit of 9.7pc in the US.
However, the scale of the support for Britain's financial system will attract as much attention – particularly since it comes as the major banks prepare to update the market on their profits next week. The Fund said that in the UK the support was divided between capital injections, comprising 3.9pc of GDP (£58.5bn), purchases of assets and lending by the Treasury, comprising 13.8pc of GDP (£207bn), guarantees, making up 49.7pc of GDP (£745.5bn), and central bank liquidity support of 14.4pc of GDP (£216bn).
Britain's total tally accounts for a fifth of the amount rich countries have spent supporting their financial systems, the total for which now amounts to $9.2 trillion (£5.5 trillion), according to the IMF research. The Fund said that although Governments would be likely to recover the initial outlay, they would still rack up large deficits in the coming years due to the economic repercussions.
George Osborne, the shadow chancellor, said: "It's official – the debt crisis is worse in Britain than any other major economy. The IMF today says Britain's budget deficit next year will be bigger than anyone else's, and that our national debt has grown proportionately faster than anyone. We now face a 100pc national debt and the humiliation of the first ever downgrade in Britain's credit rating, with all the higher debt costs that entails. Gordon Brown's denial of the truth about the debt crisis and the need to cut spending whoever wins the election is doing serious economic damage to Britain's recovery."
As well as affirming the UK's credit rating, Fitch said it expected the eventual cost of the financial sector bail-out to fall from an initial outlay of £145bn to £40bn, as banks recovered and the Exchequer reclaims the proceeds.
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