Britannia Radio

A midnight round-up of the Telegraph’s leading regular columnists on finance and economics before the big story later on today.


Speculation and discussion on such guesses is futile so anything more weighty will have to wait till much later.


But you might like to know that there is a tacit embargo on discussing the economic crisis in Copenhagen right now. Money is so vulgar, doncha think?

Christina
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TELEGRAPH Blogs 9.12.09
1. Press the Tories by all means, but tomorrow should be Labour's judgement day


By Benedict Brogan


The more I hear from Westminster and Whitehall, the more I am certain that tomorrow is going to be a bad day for Labour. Things change at the last minute and some of the more outlandish suggestions I’ve recorded here and in my column in the past few weeks may have been ditched in the final hours before the pre-Budget report goes to the printers. I gather for example that common sense has prevailed and an idea to put a tax on sugared soft drinks has been killed off (that it was even being considered tells you so much about the desperation among some of those clamouring for Gordon Brown’s ear). But there will be plenty of horrors packed in there to confirm the death of New Labour.


When we see the pre-Budget report it will be impossible to present it as anything other than a set of political measures designed to wrong-foot the Tories and help Mr Brown’s survival strategy of appealing to the Labour core vote. On that basis you might think it should be easier for the Tories to respond. An openly Labour package must allow the Tories to look blue?


Yet consider the Dave and George position: if there was indeed a cross-party consensus on the seriousness of the crisis facing the country, then both parties could speak candidly about what should be done. But if Labour speaks with such a forked tongue, and acts in such a shamelessly political way, what reward can the Conservatives expect for being candid not just about the mess, but about what they will do? No wonder the vibe coming out of Team Dave suggests the super-tax – if it materialises – will stay, in particular if it is time-limited. There will be other horrors in the PBR, other reasons to ask George Osborne what his red lines are. The danger for the Tories is that they choose to sidestep every trap put before them for understandable political reasons, and by doing so encourage that feeling of uncertainty about where they stand which seems to be driving their poll ratings downwards. The challenge for them will be to focus our attention on the PBR itself, and what it tells us about Labour’s vision for Britain.
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2. Pre-Budget report: the most/least important in history


By Edmund Conway


I phoned the Treasury yesterday in order to remind myself whether we would have one of those Chancellor Outside 11 Downing Street With Red Suitcase photo-ops tomorrow.


“Certainly not,” said an official, slightly sniffily. “Because the Chancellor is not presenting a Budget.”


However, I reckon the solecism ought to be excused. In the olden days, the Pre-Budget Report (or, as it was known before Labour, the Chancellor’s Winter Statement) was supposed to be quite distinct from the Budget. While the latter was the big annual effort to sketch out spending and borrowing, to raise or cut taxes and present long-term forecasts, the former was really just an opportunity to update the economic forecasts and add a little detail to the Treasury’s plans.


But in the era of Labour, and particularly during Gordon Brown’s years as Chancellor, the PBR became a far more important event. As Brown took on more and more power in terms of social policymaking, the PBR became gained almost an even footing with the Budget itself. Indeed, recent PBRs, far from being mere updates to the forecasts, have brought with them full-blown tax changes, modifications of allowances, long-term spending plans, full-scale shifts in borrowing – pretty much everything you’d expect from a normal Budget.


At which point you would probably expect me to go on about how this means tomorrow’s event will be immensely important – the most important PBR yet. But this isn’t quite true either. Yes, there are some very important issues: the UK’s credit rating is under jeopardy, Britain’s credibility as a borrower is under question, the economic forecasts will be the worst in modern history – all of this is undoubtedly true.


But, in the first place, we knew all of this already; second, the Government will not have time to implement most of the measures it announces before the election next year*; and third, the ratings agencies which may help decide Britain’s economic fate have all stated that they are pretty much ignoring the PBR this year, focusing instead on the emergency Budget likely to follow the election, which will give a better indication of the likely direction of travel over the next few years. In a sense, given that no-one is taking the PBR all that seriously, Alistair Darling in fact has carte blanche to be as crazy with the public finances and his spending plans as he can be.


Now, I am obviously exaggerating for effect. Clearly, this PBR is important to some degree. Not merely because it sets out the dividing lines ahead of the next election (not that, when you look deep down at each party, it’s possible to detect much in the way of ideological dividing lines, as opposed to mere schoolboy tribalism), but because it will give us a clue about the extent to which the Government is taking seriously the threat of a possible fiscal crisis.


In a broader sense, there is a question mark over the wisdom of limiting the Chancellor’s announcements to twice yearly. Why not have quarterly economic updates (in which the forecasts both for borrowing and the economy could be changed)? This would prevent a needless amount of volatility in the gilts market in the run-up to the Budget and PBR and mean the forecasts would not become outdated so quickly, as they before this year’s Budget, when Alistair Darling had to slash his projections by more than any modern Chancellor. Then you could have one major tax policy announcement in the Budget. It would certainly be simpler Government, but despite the entreaties from Brown et al this week about efficiency, I suspect this is one reform that might prove a little beyond them.


This doesn’t include any instant taxes on bankers’ bonuses, and other hit-the-rich measures which, anyway, will probably be supported by the Tories as well


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3.Companies are wearily reaching the conclusion that the UK is a bad risk
Much of the regulatory initiative this year has been about forcing banks to take risk management more seriously.


Damian Reece


They have, and so too are most businesses. But how do you manage the biggest risk to your company – political risk?


If you're based in the UK the problem's becoming acute as we head for a general election. The issue was highlighted yesterday by Moody's which warned our national "triple A" credit rating could be tested as our public finances worsen. To combat the fiscal problem Labour is intent on raising taxes first and foremost and the Tories show little sign of reversing that trend should they win power next year.


If Alistair Darling unveils a windfall tax today in his pre-Budget report, the UK's riskiness will rise again. But not simply for banks. Many of the UK's largest companies are reluctantly and wearily dusting off contingency plans to move, if not their headquarters, certainly some of their top management.


Income tax and national insurance are bad enough, but it's measures such as much lower tax relief on pension contributions that group chief executives now tell me are tipping the balance. As more top management go abroad, the centre of gravity of an organisation moves too.


A report by Hay Group, the management consultants, on Tuesday showed how Britain's white collar class ranked 43rd out of 56 countries for spending power thanks to high taxes and the high cost of living here. It's the first part of a process that eventually ends up in companies moving out wholesale.


Which is why you won't see a stampede for the exit, but instead the process of other countries cherry picking our best assets will go on under the radar.
As an economy that's embraced globalisation (for good reasons) that process will happen faster here than elsewhere. As politicians bluster about bankers, something much more fundamental is happening as companies of all types take action to mitigate the ever rising risks of doing business from Britain.