There is no economic silver bullet, but every little helps
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thetimes.co.uk This is an excerpt. Not to be reproduced without permission.

Every so often people start to think great thoughts about improving the performance of the British economy. Nearly 60 years ago, there was a flurry of such thinking. We would give our eye teeth for the UK’s absolute performance in those days, but relatively speaking it was weak, particularly compared with the big European economies.

So, in 1962, the National Economic Development Council (NEDC) was established, bringing together the “three sides of industry” – government, business and the unions. Three years later the Labour

The Covid debt isn’t going away. We will have to live with it
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thetimes.co.uk This is an excerpt. Not to be reproduced without permission.

Cast your mind back a couple of years, if you can, to the spring of 2019. At that time, most of the indicators relating to Britain’s public finances were flashing green. The budget deficit, which for the 2018-19 fiscal year came in at less than 2 per cent of gross domestic product, had ceased to be a source of major concern.

It had been a painful process, and some of that pain, such as the freeze on most working-age benefits, was still in place. But the public finances, to all intents and purposes, had been fixed. There

Pluses and minuses of the return to business as usual
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

My regular column is available to subscribers on www.thetimes.co.uk This is an excerpt. Not to be reproduced without permission.

Things are changing, and not so imperceptibly. If you have ventured out to the shops in recent days you will have noticed that there are people around. Not necessarily madding crowds, at least in the ones I have visited, but certainly what retailers would call decent footfall.

There is also another change underway. The talk is of a return to the office, even for people for whom over the past 12 months, a daily commute, sitting at a desk and face-to-face meetings have seemed about as likely as a trip down the Amazon.

Indeed, there

The virus cost trillions, but the world is bouncing back
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

Every six months by tradition, to coincide with its spring and autumn meetings, the International Monetary Fund provides an update on the outlook for the global economy. In recent years it has supplemented that with world economic outlook updates in January and late June or July.

Many things have changed as a result of the pandemic. The meetings these economic assessments are intended to inform have moved online, as has a lot else. Time will tell whether such gatherings resume, and in what form.

Nonetheless, these world economic outlooks provide a useful framework

Will Britain’s consumers splash their stash of cash?
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

Many conversations about the UK economy involve consumer spending, which is not surprising. In normal circumstances – counting 2018 and 2019 as normal – it accounts for 62 per cent of the country’s gross domestic product. Most of those conversations, over the years, have been about whether consumers are over-exuberant, and are taking on too much debt to fuel their spending habit.

Today, the situation is rather different. The health warning I have to provide at this point is that not everybody had the opportunity during the pandemic to build up savings – some have had a

Europe’s third wave will not derail the recovery
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

Boris Johnson is famously said to be an admirer of the mayor in the Jaws, who kept the beach open despite the shark, though that has not been reflected in his lockdown strategy. And, as the promotions for that film said, just when you thought it was safe to go back into the water … something big and scary looms into view.

The third wave of coronavirus in Europe, or more properly the second wave seen in the UK in recent months, with the “English variant” running amok across the Channel, is the new danger. The prime minister, in words reminiscent of previous change of strategy,

The deepest recession, but also easily the weirdest
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

This time last year, give or take a few days, I was giving a talk in Birmingham. I had arrived late the night before and had not been out that morning. A couple of members of the audience remarked, however, on how eerily quiet the streets were. A lockdown had not been announced but people had already started to change their behaviour. Little did we know as we exaggeratedly bumped elbows – something I have not done much since – how strange the next 12 months would be.

What was on the way, of course, were more than 125,000 Covid-19 deaths, tens upon tens of thousands of

Now the economy braces for the shock of the new normal
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

Normal life is slowly resuming, with the return of schools in England a few days ago and their partial return elsewhere earlier. Schools are not the economy, but they are clearly hugely important to the economy. It is possible to see the light at the end of the lockdown tunnel, with all the usual caveats.

The January gross domestic product figures, released on Friday, which showed a monthly drop of 2.9 per cent, will with luck be the last such fall, though the drop in UK-EU trade that official figures also showed revealed a more enduring brake on the economy.

It cannot

Sunak’s budget judgment was right – but the economy still needs fixing
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

Budgets are a bit like Christmas, a huge amount of anticipation followed by the event itself, which can be a bit of a let-down, particularly if you know beforehand most of what you are going to get. Christmas, of course, is not all about presents. Four days on, however, the kids have got bored with or broken their toys, and I have to try to conjure something up from the leftovers.

Fortunately, there is plenty to say. This was a big budget, a big moment, and the first thing to say is that I have to applaud a budget that precisely met the central

Sunak must support the economy now and make us pay for it later
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

It is worth remembering, as we await Wednesday’s budget, that it was not supposed to be like this. A few months ago, Rishi Sunak, basking in the warm glow of his Eat Out to Help Out scheme in August, was looking forward to presenting his second budget in November. By then, the Treasury hoped, Covid-19 would be in retreat, and the spring 2020 national lockdown would be a fading memory, and it would be time to embark on the task of paying for the pandemic.

Things have turned out differently. Two more lockdowns have happened and the current one is not over and

Sunak shouldn’t even think of doing a Geoffrey Howe
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

This is a time for momentous anniversaries. It is ancient history now, particularly for younger readers, but a few days ago we market the 50th anniversary of decimalisation. It is surprising, unless I have missed it, that we have not had a campaign to bring back pounds, shillings and pence, not that I am suggesting it would be a good idea.

And, while we have embraced metrication – not the same as decimalisation but part of the family – we still measure distances in miles, fuel consumption in miles per gallon, height in feet and inches (well I do) and beer, when we used to

Not Project Fear – but Brexit reality for firms and the economy
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

It takes something to break through the blanket coverage of the pandemic, on which the news is not as encouraging as it might be. I don’t think, a year ago, that many people would have been anticipating the introduction this month of the harshest travel restrictions so far, or for there to be a debate about whether even staycations will be possible this summer. I think they will, but I am an optimist on these things.

What is clear, I think, is that even with a successful vaccination programme there is not going to be a “with one bound we are free” moment.

Negative rates? No, the Bank should be starting to think of when to raise
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

Many is the Thursday lunchtime I have waited with bated breath for the Bank of England’s interest rate announcement, and many is the time when it has been much ado about nothing. So it seemed last week, when the eight men and one woman on the Bank’s monetary policy committee (MPC) left official interest rates at a record low of 0.1 per cent and opted not to increase its quantitative easing (QE) total from an already massive £895 billion, including corporate bonds.

The announcement was not without its moments, however. The Bank wants to add negative

Can this stuttering recovery still pick up the pace?
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

The International Monetary Fund’s January world economic outlook is always interesting. It normally coincides with the annual Davos jamboree in the Swiss mountains. This year, like many things, Davos took place virtually. But, having not been invited to attend the real thing for a while – it is a long story – I did not take part in the online version either, but I did devour the IMF’s new assessment.

It provides an interesting update on how the world’s economies fared during the pandemic last year, and how they are expected to do this year and next. The big picture is

Tax rises aren’t easy, so Sunak will have to proceed with stealth and reform
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

There are some traditions that, even in a pandemic, are being maintained. When March budgets were the norm, it was traditional at this time of year for tax ideas to be run up the flagpole to see whether they would fly. While gardeners can measure the approaching spring by the appearance of crocuses and daffodils, economy-watchers could see it in the form of budget stories.

Last Sunday this newspaper reported that government sources were still indicating that a corporation tax hike was still on course for the March 3 budget. The story was widely

In a post-Covid world, the UK can’t be a tech also-ran
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

It has always struck me as hugely impressive that even as the Second World War was raging, serious thought was being given to the post-war economy. The Beveridge report, which provided the foundations of the modern welfare state, was published in 1942. The Bretton Woods conference, which provided the template for the post war international financial system, including the International Monetary Fund and World Bank, was in July 1944.

The question is whether we are planning similarly, for the post-Covid world, or just trying wearily to get over the line to some kind of

With every lockdown we lose some more of our economy
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

Normally at this time of year not much happens and, during the period of limbo when most of the data refers to last year, it is sensible not to draw too many conclusions about what is going on. This year, however, not much is happening for a different reason. Lockdown 3 has followed hard on the heels of Lockdown 2, with only a few short weeks of tiers in between.Nobody wants this third lockdown but this is not to deny its necessity. Indeed, the main criticism of the government should be that it has been too slow to grasp the nettle, not trigger-happy. Governments in all

Five reasons to be cheerful – and two to worry about
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

Rarely, as we start a new year, has the gap between hope and reality been so wide. The reality, as far as the economy and business in concerned, is the prospect of weeks, maybe many months, of lockdown or near-lockdown restrictions. It makes it, by my reckoning, the worst start in the very many years I have been following these things.

You may ask, what about the start of 2009, when the economy was reeling from the collapse of Lehman Brothers the previous autumn and the teetering on the edge of much of the banking system? But gross domestic product (GDP) fell by “only”

A dire year for the economy – and for forecasters
Posted by David Smith at 09:00 AMCategory: David Smith’s other articles

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

The forecasting league table referred to in this piece is also available alongside my column on www.thetimes.co.uk

This extraordinary year is ending with as much to be worried about as at any time during it. People like me often bandy around words like uncertainty but in normal times, there is nothing like the doubt that we are experiencing at the moment. We worry about the health implications of the new Covid-19 strain, and we worry about the economic implications.

The Brexit deal finalised on Christmas Eve was better than a catastrophic no-deal and should be welcomed for

Inflation is back – but so far only for house prices
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 fearing that inflation will be one of the economic consequences of the pandemic, and the extraordinary measures introduced to combat it, the latest figures showed that it is not happening yet. Far from it. Consumer price inflation fell to just 0.3% last month, admittedly during the second national lockdown, when non-essential shops were closed.

Is this the lull before the storm? Will the economy’s post-Covid bounce, coupled with the inflationary effects of this year’s huge public borrowing and quantitative easing (QE) bring higher inflation? This would not

Now investment prospects go from bad to worse
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 it comes to Brexit, definitions of what is last minute are pretty flexible. As I write this, we are still waiting to see whether it will be a no deal or the thin deal the two sides have been trying to negotiate. The pendulum has been swinging towards the former, though it is always capable of swinging back.

Brexit has now re-emerged as the main risk to recovery. Figures a few days ago showed that gross domestic product rose by a modest 0.4% in October, its smallest increase since the recovery began in May. That left it 1.9% above its third quarter average, which would

If the Scots want independence, they’ll have to pay a lot for 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.

These are heady days for supporters of Scottish independence. Fifteen polls in a row have shown net support for independence among those likely to vote, the latest from Ipsos-Mori for STV showing 56% support for Scotland breaking free from the rest of the UK.

Support for Scottish independence has risen as a result of the Covid-19 crisis. It could have gone either way. Scotland’s death rate per million people from the coronavirus in recent weeks has been higher than in England, although the cumulative total is slightly less, as it is lower than in Wales,

Sunak’s talk of emergency can only knock confidence
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.

You may have seen a report a few days ago which highlighted people’s lack of understanding of basic economic concepts. The report, based on a survey by the Economics Statistics Centre of Excellence and the National Institute of Economic and Social Research, showed that fewer than half of people knew what gross domestic product (GDP) was when presented with a range of definitions.

Most, 67%, knew that the government was running a budget deficit – I don’t know what the other one-third has been doing during this year – but only 40% knew that that meant government

In a deep fiscal hole – and the government is still digging
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.

November can be a cruel month for chancellors. The last thing Rishi Sunak wanted was a second national lockdown and on Wednesday we will all find out what the additional measures he has been forced to put in place, including the extension of the furlough scheme until March, will cost.

On Wednesday the chancellor will announce the results of his one-year public spending review, covering 2021-22, the fiscal year starting next April. Shortly after that the Officer for Budget Responsibility (OBR) will unveil its latest fiscal assessment and economic forecast.

Three Old Hacks
Posted by David Smith at 02:30 PMCategory: Thoughts and responses

With my very good friends Mihir Bose and Nigel Dudley, I have been recording the Three Old Hacks podcast. The third episode has just gone live, and the previous two are also available on the Chiswick Calendar website: https://chiswickcalendar.co.uk/episode-3-elections-we-have-known-and-loved/

Record growth disappoints -but the job market offers hope
Posted by David Smith at 09:00 AMCategory:

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

We will look back on this time with wonderment. Economists who are young now will be telling their grandchildren about the time that there was a 15.5% rise in gross domestic product in a single quarter, admittedly preceded by a 19.8% drop in the previous three months. We will never see figures like that again.

Explaining too that even a 15.5% quarterly rise in GDP – three times the previous record (recorded during the Barber boom of the early 1970s) – was disappointing, not least because growth faded over the course of the quarter, will add to the oddity of those recollections. From now on

After another handout from Sunak, how do we pay for 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.

Like a lot of other people, I am finding that there is something missing in my life at the moment. It is not just that, thanks to the second lockdown, I can’t browse in a non-essential shop, sit in a pub or restaurant, have a haircut or beauty treatment, or play tennis or gold. I haven’t played golf for a while but in my case it was always socially distanced, most of the time trudging through undergrowth in search of lost balls.

No, apart from all those, I am missing the budget. For people like me the run-up to the budget always provides plenty of material,

Sunak’s bridge to normality proves to be a rickety one
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.

Who would be a chancellor? As the second wave of the coronavirus intensifies, and national lockdowns are unveiled in France and Germany, albeit less strict ones than before, the direction of travel in the UK looks clear. Last night, as people will be aware, the prime minister announced a government U-turn and another national lockdown.

For the Treasury, this can only mean that the bill for responding to the crisis, which was already breaking records, goes up further, as does the challenge of restoring the public finances to health in the medium to long term.

Consumers will stay wary as long as the virus stalks us
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.

We enter a new period of uncertainty, in response to which the chancellor, Rishi Sunak, has announced another set of job support measures, which is becoming a regular occurrence. The Bank of England is heading for a Bonfire Night announcement of another £100 billion of quantitative easing (QE), which will mean almost as much of this kind of help for the economy this year as in the previous 10 years combined.A month ago here, I wrote about the importance of confidence in driving the economic recovery. This was after Boris Johnson had announced new restrictions,

How the ‘China virus’ hurt China less than most others
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.

As we approach the end of this Covid year, with new restrictions popping up all over the place, cast your mind back nine months to January, when we had barely heard of the coronavirus, and it had yet to be christened Covid-19, let alone SARS-Cov-2, its current scientific identifier.

Nobody at that time expected a world recession. The UK economy was set merely for weak growth. The International Monetary Fund (IMF), which has just released a new world economic outlook, predicted in January that the world economy would enjoy a slightly better year in 2020 than in