The Good Times are Over………. (Continuing Old News)
Mini-boom in living standards is over, says think tank.
A "mini-boom" in living standards has ended according to a report by the Resolution Foundation. The think tank says living standards improved significantly between 2014 and the beginning of 2016, as subdued inflation coincided with rising wages and employment. But a rise in inflation late in 2016, coupled with slower income growth, has ended that boom, it argues. The conclusions are part of its annual report, published later this week. The Resolution Foundation estimates that incomes in working-age households have grown just 0.5% in the current financial year, the slowest pace since 2012-13. "After a tight squeeze during the [financial] crisis, working-age households have enjoyed a living standards mini-boom in recent years," said Stephen Clarke, economic analyst at the Resolution Foundation. "But fast-rising inflation this year has brought this all too short mini-boom to a sharp halt as pay rises have not kept up," he said. The most recent official measure of UK inflation, released earlier this month, showed a sharp rise in inflation to 1.6%. Higher costs for imported materials and fuels were behind the rise.
Sir Ivan Rogers: Brexit talks to be on humongous scale.
Brexit talks will be on a "humongous scale" involving "difficult trade-offs", the UK's ex-EU ambassador says. Sir Ivan Rogers predicted much of the talks would be "conducted very publicly" with "name-calling" and an "extremely feisty atmosphere". He added that EU Commission chiefs were saying the UK should pay 40-60bn euros to leave and thought a trade deal could take until the mid-2020s to agree. Sir Ivan, who had been due to leave his post in October, resigned last month. In December he attracted criticism from some MPs when his warning to ministers that the European consensus was that a deal might not be done until the early to mid-2020s was revealed by the BBC. Giving evidence to the Commons European Scrutiny Committee, he said this had come from a briefing he had written for Prime Minister Theresa May in October, based on the views of key figures in the EU and the remaining member states. He said he did not know how it became public. The government says it can conclude all separation negotiations, including a new free trade deal, within two years, having given notice of the UK's departure from the EU by the end of March. Asked about the anticipated timescale, Sir Ivan said a comprehensive free trade agreement such as the one Mrs May was seeking would be the most comprehensive ever negotiated by the EU, and previous agreements have taken "an awful lot of time". He said he believed an agreement with the UK could be concluded more quickly, but said the Brexit negotiation would be "unprecedentedly large" covering "huge tracts of Whitehall". "It's a negotiation on the scale that we haven't experienced ever, certainly not since the Second World War." Sir Ivan said there was a "big financial debate coming up" about the amount to which the UK should be expected to pay as it leaves the EU. EU commission chief negotiator Michel Barnier and other key figures were "openly" saying the UK's total financial liabilities would be in the order of 40 to 60bn euros, Sir Ivan said, describing this as a "predictably hard line". From the EU's point of view, UK withdrawal will "explode a bomb" under its seven-year budget, he said.
UK economy to slow down this year and next, says think tank.
The UK economy may slow down in the next couple of years, even while the world economy picks up, a report says. The National Institute of Economic and Social Research (NIESR) revised up its forecasts for UK growth to 1.7% this year and 1.9% in 2018. However, both would still be a slowdown from the growth rate of 2% recorded for 2016, when the UK was the world's fastest growing developed economy. NIESR predicted inflation would rise too, hitting household spending. "Robust consumer spending growth was behind the economic momentum of 2016," said Simon Kirby, head of macroeconomic modelling and forecasting at NIESR. He said households would see their purchasing power "eroded" this year and in 2018 due to sharply rising prices. The NIESR, widely seen as the UK's oldest independent research body, thinks inflation will jump from an average of 1.2% recorded over the course of 2016, to 3.3% this year then back down to 2.9% in 2018. Price rises will be stoked, the body argues, by the sharp devaluation of the pound after the UK's Brexit vote last June. The institute thinks the Bank of England will ignore this "temporary" pick-up in inflation and keep interest rates unchanged at their current historic low point, of just 0.25%, until the middle of 2019.
Brexit: Fresh legal challenge blocked by High Court
A fresh legal challenge to Brexit has been blocked by the High Court. A group of campaigners who want Britain to stay in the EU single market argued that Parliament must approve the UK's exit from the European Economic Area. But the judges refused to give the green light for the challenge, saying the judicial review was "premature". The Supreme Court ruled last month that Parliament must have its say before the government can trigger Article 50 and begin official talks on leaving the EU. Parliament is in the process of considering legislation which would give Theresa May the authority to notify the EU of the UK's intention to leave by the end of March. MPs overwhelmingly backed the bill on second reading on Wednesday. The latest legal challenge was brought by supporters of a so-called "soft Brexit" - which would see the UK remain a member of the EU's internal market.
Tax burden to be highest in 30 years, says think tank.
Tax is set to rise as a share of the UK's income to its highest level since 1986, according to a think tank. Higher income from taxes and relatively low growth will combine to create this effect, according to the Institute for Fiscal Studies. Austerity will continue into the 2020s, after Chancellor Philip Hammond's decision to scrap a target of balancing the nation's books, it said. The Treasury said it was committed to repairing Britain's finances. Forecasts by Oxford Economics, which contributed to the report, estimate the UK economy will grow by 1.6% in 2017. In 2018, growth in gross domestic product will slow to 1.3%, Oxford Economics said. Growth is expected to be dulled as a result of inflation prompted by the decline of the value of the pound after the EU referendum. While a weaker pound is likely to improve the performance of manufacturers and exporters, higher costs for consumers will more than erase this gain, said the report. "Though the UK economy has continued to achieve solid growth, it has been almost entirely reliant on the consumer," said Andrew Goodwin, lead UK Economist at Oxford Economics and co-author of part of the report. "With spending power set to come under significant pressure from higher inflation and the welfare squeeze, the consumer will not be able to keep contributing more than its fair share. Exports should be a bright spot, but overall a slowdown in GDP growth appears likely." The UK's economy could be 3% smaller by 2030 than if Britain had voted Remain, according to forecasts in the IFS's annual Green Budget.
[Unsurprisingly, since the electoral slap in the face for Teresa May and the Tory Party, the start of the Brexit negotiations are somewhat softer than originally planned. Without a clear mandate now the UK needs to step carefully to keep as many people as possible ‘on side’. There is even talk, heaven forbid, of……. Compromise. Any more of this and we’ll have logic and rationality. Oh, where will it end!]