The top 1% pay a lot of tax – will they stay or go?
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Today I want to lift my sights high. So high, in fact, that it takes me to the very top of the income distribution. These are the people who earn many times the average salary, are mainly not Premier League footballers (though they clearly do), and who are endlessly fascinating.

I do so for three reasons. The very well-off, the top 1%, and even more so the top 0.1% will become even more important as a source of income tax revenues if Boris Johnson carries out his leadership pledge to reduce the tax burden on those slightly lower down the income scale.

That pledge,

This sterling slide has logic on its side
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

The new government is less than a fortnight old but already we have seen a flurry of announcements and, it seems, cash pouring out of the Treasury as if there is no tomorrow. So, on your behalf, I have been trying to make some sense of this, by reading Boris Johnson’s speeches and pronouncements since he became prime minister. Somebody had to.

He has, as you would expect, a nice rhetorical flourish. Whether that is all he has, we will find out in coming months. So, he suggests, “we will look back on this period as the beginning of a new golden age for our United Kingdom”.

He

Tricky times call for a lucky chancellor
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

There are three ways of viewing Boris Johnson’s first few days as prime minister, and in particular his “fire and hire” approach to his new cabinet. Apart from demonstrating that no job is as insecure as that of a cabinet minister and their special advisers, it was curious man and woman management from a new leader apparently committed to Tory unity, and needing the loyalty of his MPs in coming weeks.

The smart money in the markets and the view of many in Westminster is that stepping up no-deal preparations and insisting that the Irish backstop be removed from the withdrawal

Counting the cost of a Johnson government
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

When a new prime minister is about to take over, there is normally a sense of excitement, even optimism. In the case of Boris Johnson, however, assuming the polls are right and he is duly elected by Tory party members this week, there is also a powerful sense of trepidation.

New prime ministers normally take office as a result of a general election. On the road to victory, their policies, as set out and costed in manifestos, will have been subject to the closest scrutiny, from the opposition and from the media. Before even making it into the manifesto, they will have been

Friendless pound needs the kindness of strangers
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Even before Sir Richard Branson offered his opinion on the pound, I was intending to write about sterling this week. This is a time of year when many people think about the exchange rate more than at other times and encounter the reality that businesses and the markets have been dealing with for the past three years. The pound, unsurprisingly in the light of the current uncertainty, has taken on a weaker tone recently.

Branson thinks sterling will go to one-for-one parity with the dollar in the event of a no-deal Brexit this autumn, from $1.25 now, and, while that is a

Brexit bluster comes home to roost as growth hits the buffers
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Sometimes a figure comes out which really pulls you up short. Just such a figure was published a few days ago. The purchasing managers’ index (PMI) for Britain’s construction sector slumped last month. Already weak at 48.6 in May (levels below 50 signal a decline in output), it plunged to 43.1 last month. Not only was this exceptionally weak, but it represented the biggest fall in output since April 2009, when the economy was still mired in the 2008-9 recession, the worst since the Second World War.

The details of what IHS Markit,, which compiles the survey,

Ten years of recovery, yet not a happy anniversary
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

This is an important moment. Ten years ago, 10 years tomorrow to be precise, Britain’s economy began to crawl, bleary-eyed, out of the deepest recession since the Second World War. The anniversary brings with it questions. How strong, or weak, has the recovery been? What kind of recovery, in terms of sectors of the economy, was it? And, the question I get asked most often, how long can it last?

The recovery itself was slow to get going. I well remember the concern, in those dark days of 2009, when it appeared that other economies had begun their post-crisis recoveries

Our export prospects can burn bright – as long as we dodge a no-deal Brexit
Posted by David Smith at 09:00 AMCategory:

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

What will lift us out of the doldrums, this period of very weak growth and flatlining productivity Britain’s economy is stuck in? It will not, I judge, anything to do with Brexit. A survey of economists by Consensus Economics shows an average expectation of 1.35% growth this year and next, even in the context of a “smooth” Brexit; leaving under a withdrawal agreement,

A no deal Brexit would see growth drop below 0.5% next year, according to the survey, which was carried out among the 37 economists on Consensus’s UK panel, a prediction that is likely to encompass a

Johnson’s dead cat tactics on tax and a no-deal Brexit
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Now that Boris Johnson has decisively won the first round of the contest among Tory MPs, and is runaway favourite to win among the membership, we have to take seriously the prospect of a Johnson premiership. In this strange tribal mating contest, in which those who have the biggest and most colourful tail feathers to shake do best, he will be hard to beat.

There are two things that, so far, define the Johnson pitch. One is a stonking great tax cut for higher-rate taxpayers, by means of raising the basic rate limit, the higher rate threshold, from £50,000 to

As growth stagnates, we yearn for the go-go days of the 80s
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Sometimes these days it feels a bit like the 1980s. Younger readers will not know, and older readers need reminding, that back then the toll of jobs being lost, mainly in industry, was sufficient for ITN’s News at Ten, to be able to run a nightly map.

The headlines for manufacturing jobs are bad again. Ford’s announcement of the closure of its engine plant at Bridgend, a town I know, will be devastating for the up to 1,700 people whose jobs are directly affected and the thousands more in the supply chain.

Similar considerations apply to the 4,000 jobs

London bankrolls the rest of the UK – and that’s not healthy
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Today I want to talk about something, based as always on statistical fact, that is guaranteed to raise the hackles. If you live in London and the southeast you will be even more convinced that your taxes are subsidising the ne’er do wells in the Midlands, the North, Scotland, Wales, Northern Ireland and even parts of the South.

If, on the other hand, you live in those other regions and countries, you will be confirmed in your view that the UK economy is dangerously London-centric and tilted towards the gilded south-eastern corner of the country, a situation

When China sneezes, the world catches a cold
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

It is said that we owe to Metternich, the distinguished 19th century diplomat, one of the most famous phrases used about the global economy. In an era when Europe dominated the world economy, he came up with: “When France sneezes. Europe catches a cold.” That was easily adapted, with the rise of the United States, to: “When America sneezes, the world catches a cold.”

It remains true today. The sneezing fit that began in America’s housing market in the 2000s gave us the global financial crisis of 2008-9.

There is, however, another country we should worry about in the

EU workers are returning – but maybe not for long
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Every so often some figures come along which change your perceptions. This happened a few days ago. We have got used to the idea that the number of European Union nationals working in Britain has been falling. Indeed, this fall has contributed to a tight labour market and recruitment difficulties across many sectors.

So, for example, during the course of 2018 there was a 61,000 drop in the number of EU nationals working in Britain, and the total was down by almost 90,000 from its 2017 peak. Having risen by an average of nearly 140,000 a year since 2004, this drop in the

There’s no need to sacrifice growth to save the planet
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

It is hard to get away from climate change these days. Most people would agree that it is a bigger issue, certainly for the long-term, than the one that has been unnecessarily preoccupying us for the past three years. Parliament has trouble agreeing on much these days but it has this month declared “a climate emergency”. The Environment Agency has warned that entire communities may have to be moved because of flooding and coastal erosion.

Climate change is also actively affecting policy. The Scottish government has just cancelled a planned cut in air passenger

Robots aren’t destroying jobs, but nor are they boosting productivity
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

The future is, by its nature, something that is yet to happen. In some ways though, what we think of as the future – things like artificial intelligence (AI) and robots – are already with us. So, without wanting to sound like some terrible advertising slogan, the future is now, and that allows us to make an early assessment of its impact.

To pessimists, new technologies like AI and robotics are always going to be a destroyer of jobs on a vast scale. People will be replaced by machines that, in many cases, will be a lot smarter than they are.

I have

This may be as good as it gets for the public finances
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

A few days ago we had an object lesson in how official figures can be simultaneously disappointing and very good. Not that many people follow these things closely, but for those who do, last month’s data for public borrowing – the budget deficit – represented a bit of a setback.

March’s borrowing total of £1.7bn was £0.9bn up on a year earlier, breaking a run in which the latest figures have tended to be lower. It was also more than £1bn above City expectations.

Thus, instead of coming in at or below the latest official forecast from the Office for Budget

The trade deficit soars, in a terrible time to be an exporter
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Now that the Brexit process is guaranteed to stretch on for many more months, if not years, there is a limit, which may be close to being reached, on how much new there is to say. I shall bear that very much in mind in my choice of topics. We may be neither properly in, nor out, for a very long time, and most probably beyond October 31, the latest departure date.

Business is relieved that a no-deal Brexit has been avoided, and will continue to be avoided. But it is alarmed that the limbo could go on fo0r a very long time. Make UK, which represents Britain’s

Britain’s minimum wage, 20 years old, is an unlikely success story
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Today, to take your mind off other things, which will do us all some good, let me talk about a British success story. It has helped prevent low-paid workers being exploited by the minority of unscrupulous employers, it has put a brake on rising inequality and it has not prevented a strong and sustained rise in employment.

It is also celebrating an important milestone; 20 years old this month. I refer to the national minimum wage, now the national living wage for those aged 25 and over. It has just risen, on April 1, to £8.21 an hour, with lower rates

A customs union beckons – and it won’t stop trade deals
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Another week on in the Brexit process and I am worried. I may have used up all my best adjectives too soon. This thing could get even madder. And, in a few weeks’ time, the short rein of Theresa May as prime minister will soon be over; the only former Bank of England official, as far as I know, to have made it to the top job. She lost heavily again on Friday.

For all her faults, there was always an element of “cling on to nurse for fear of something worse” about Theresa May. Who knows who the 100,000 members of the Tory party, one of the least representative

Britain shouldn’t be too glad to be grey
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

In recent days we have had another stunning demonstration of the potency of the job-creating machine that is the British economy. While surveys have suggested that employers are beginning to cut back on recruitment, there was no evidence of this in the official figures.

Overall employment rose by 222,000 in the latest three months for which data are available, November-January, and the employment rate for the 16-64 age group rose to 76.1%, a new record. The unemployment rate dropped to 3.9%, its lowest since November-January 1974-5. And, while only a minority of the net new

Views from the brink: how slow growth and uncertainty leave firms on the edge
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

What, amid the Brexit chaos – which grows ever more chaotic by the week – have we learned about the economy? Alongside Philp Hammond’s spring statement, the Office for Budget Responsibility (OBR), revised down its growth forecast to 1.2% for this year, the weakest since the crisis, and predicted that the economy will expand by an average of about 1.5% over the following four years.

That assumes a smooth Brexit, a brave but necessary assumption (the OBR is required to forecast on the basis of government policy) and reaffirms that, even if we get over the short-term hurdle, the challenge of lifting Britain’s growth rate to something like

Quantitative easing worked, just don’t make a habit of it
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

How time flies. It is hard to believe that it is 10 years since the Bank of England brought an entirely new type of monetary policy, for Britain at least, blinking into the sunlight. Quantitative easing (QE), a complicated name for something that many people do indeed find complicated, was launched then and is still with us.

The misunderstandings then were considerable. When the policy was launched in March 2009 Mervyn King, now Lord King, did a television interview with the then BBC economics editor Stephanie Flanders, to try to explain it.

His mission to

This sterling rally was built on shaky foundations
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

For those of you who like a fact to kick off the day, how did sterling, as in pound sterling, get its name? The answer, which is shrouded in the mysteries of Middle English, is that it could have come from starling, as in bird, which featured on early coinage, or “sterre”, Middle English for star, which was on some Norman coins in circulation in Britain.

I mention this because sterling has been in the news. Though it slipped a little towards the weekend, It has had a good week. Currency dealers have been watching the parliamentary shenanigans very closely, and decided

Housing is creaking – and not just because of Brexit
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Every month these days a little battle is played out. Downbeat data is released on the housing market, to be immediately followed by comments from estate agents and others in the property industry. Their general take can be summed up in the opening lines from that song in the musical Annie: “The sun’ll come out tomorrow, bet your bottom dollar that tomorrow, there’ll be sun!”

I do not begrudge them for trying to look on the bright side. If you are in a business which relies on housing turnover going up, and benefits from rising house prices, this is a testing time.

How to end austerity without breaking the bank
Posted by David Smith at 09:51 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Theresa May, by all accounts, is promising to splash the cash to deserving causes like some modern-day Lady Bountiful. Labour MPs in leave-supporting constituencies who support her withdrawal agreement are being promised more money, as are businesses kicking up about the consequences of a no-deal Brexit.

The government has already allocated more than £4bn for Brexit preparations, most but not all for getting ready for no-deal. Though some of that no-deal spending would have happened anyway, and there will be few examples quite as bad as the transport secretary Chris

Not just a slowdown – we’re stuck in a low gear
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Like all the best famous quotes, it is far from clear that Harold Macmillan, the former Tory prime minister, ever said when asked what he most feared: “Events, dear boy, events.” He certainly did not say another thing usually attributed to him, “you’ve never had it so good”, but a variation on it.

I could write a whole column on this. John Maynard Keynes probably never said: “If the facts change, I change my mind. What do you do, Sir?” Many of us have, however, written that he did. Fortunately these days we have an electronic record of what Donald Trump, or Donald Tusk,

Bogged down in Brexit while the economy festers
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

It is sometimes said that the gulf between businesses and ordinary folk has never been greater. People do not necessarily think that what is good for firms is good for them. An annual survey by Edelman, the public relations firm, just updated, found that 52% of people don’t think the way business is done is good for society, though they are even more damning of government.

On one thing, however, businesses and households are united. They are all feeling gloomy, thoroughly cheesed off with politicians and fed up with a Brexit process which goes around in ever decreasing

The jobs keep coming – but where are they coming from?
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

Britain’s labour market continues to both dazzle and puzzle. It dazzles because, as official figures last week showed, we have now have the highest employment level (32.5m) and employment rate (75.8%) on record and the joint lowest unemployment rate, just 4%, since the mid-1970s.

This is good news. Though as discussed here recently a job is no longer a guarantee of a decent standard of living, or even an escape from poverty, it is better than the alternative of not having a job.

In the latest 12 months, 328,000 more people are in work and 68,000 fewer are

After that defeat, even more reason to hug the EU close
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

I worry about the future of hairdressers in this country. I say so because, if business people continue to tear their hair out at the current rate over the political shenanigans over Brexit, there will be nothing left for them to cut.

The House of Commons landslide defeat for the withdrawal agreement negotiated by the government and the EU may have been predictable but was nevertheless depressing. Most depressing, perhaps, was the extent to which it was celebrated not just by hard Brexiteers, as expected, but also by hard Remainers. At both extremes of the Brexit

Record numbers in work, so why is poverty going up?
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thesundaytimes.co.uk This is an excerpt.

What are we worried about? Ipsos-Mori, the pollster, asks a sample of people every month what are the most important issues facing Britain. Its latest poll, released a few days ago, showed that the top two concerns, Brexit and the National Health Service, were as you might expect.

More surprising, perhaps, was the third biggest public concern; poverty and inequality, named by 21% of people, the highest in the more than two decades it has featured in the survey. It was ahead of the economy, unemployment and immigration, public concern over which has dropped to its