BBC - Andrew Neil's blog

Moving on

2011-05-24T08:58:32Z

As stated in the last message, my blog now has a new home on the BBC site, and you can follow me and all future posts here, so please update your favourites in your brower.

The old blogs, and your comments, will stay here for now, but they will not be updated.

Wage increases catching up with inflation?

2011-05-18T09:38:19Z

A government short of good economic news is pouncing on the latest unemployment figures.

The latest stats from the Office for National Statistics show that unemployment fell by 36,000 on the three months to March to 2.46 million, cutting the overall unemployment rate a tad to 7.7 per cent.

For 16-24- year-olds not in education (ie excluding students looking for part-time work) unemployment fell 40,000 on the quarter to 646,000.

Of course it's not all good news. The number of people claiming Jobseekers Allowance (the claimant count), for example, increased by 12,400 between March and April 2011 to reach 1.47 million.

So let's take a look at the stats in more detail:

The number of people in employment aged 16 and over increased by 118,000 on the quarter and by 416,000 on the year to reach 29.24 million. That will give ministers some comfort that private sector job creation can outweigh public sector job losses.

But the employment total is still 332,000 lower than the pre-recession peak of 29.57 million for the three months to May 2008, which shows the UK economy is still a long way from recovering from the economic consequences of the financial meltdown.

Full-time employment increased by 94,000 to 21.30 million, which continues of the trend of the private sector switching from creating largely new part-time to more new full-time jobs.

The number of people unemployed for up to 12 months fell by 56,000 to reach 1.61 million. But the number of people unemployed for over 12 months increased by 20,000 to reach 850,000, the highest figure since January 1997.

Why did the claimant count rise while the wider measure of unemployment (the labour force survey) falls? I suspect that's something to do with the government's welfare reforms

The economy is growing by enough to reduce the overall unemployment total by a bit but more people who were on other forms of welfare are moving on to unemployment benefit as the rules for disability and lone-parents' benefits are tightened.

There are also a few glimmers that wages are beginning to chase rising prices. Earnings (including bonuses) grew by 2.3 per cent for the three months to March 2011, up from 2.1 per cent for the three months to February. A small change to be sure but an upward tick and perhaps the start of a trend. Also, that global rise includes the public sector, where there's a pay freeze.

Total pay in the finance and business services sector increased from 4.6 per cent to 6.2 per cent, which is quite a rise and one that will worry the Bank of England.

Private sector pay has been in the doldrums for a while but these pay stats suggest companies now have the money to give pay rises closer to the inflation rate.

If that is happening, the Bank's oft-repeated claim that current inflation is just a blip will turn out to be wrong.

This is Andrew's last blog in this format - future entries will appear with a new look at a different web address: more details when the new site is live.

UK avoids a double-dip

2011-04-27T09:30:26Z

So it's back to the future at the British economy: it grew by 0.5 per cent in the first quarter of 2011, recovering from a contraction of 0.5 per cent in the fourth quarter of last year.

In other words the economy was effectively stagnant over the past six months: gross domestic product (GDP) was same in the first quarter of this year as it was in the third quarter of last year.

The latest official growth figures are broadly in line with City expectations but, interestingly, below the predication of the Office for Budget Responsibility, which had expected 0.8%. Of course 0.5% for Q1 is an early estimate which could be revised (up or down 0.2%, says the Office for National Statistics).

Manufacturing is still growing nicely (+1.1%) and construction had another bad quarter (-4.7%), probably reflecting the cuts in public investment begun by the last government and continued by the current one.

Some of the growth in transport and other areas reflects a bounce back from the Oct-Dec slump.

Probably a mistake to read too much into these latest growth figures, especially since they're preliminary.

I think we can safely say a double-dip has been avoided. But growth this year is unlikely to be no more than lacklustre.

And with retail sales in the doldrums, living standards squeezed, house prices still falling, inflation still strong and the economy no bigger than it was six months ago, pessimists will not be ruling out stagflation (ie little or no growth and rising prices).

Forecasting more inflation

2011-04-12T19:41:01Z

On March 31 this Blog claimed that the "retail boom is well and truly over". And it is -- with a vengeance.

Retail sales in March were down 3.5% on a like-for-like basis and almost 2% down overall. Both figures are the worst in recent memory. The later Easter is a factor but not the most important one.

The retail slump is almost certainly the result of the current vicious squeeze in living standards (see past Blogs). Since that is set to continue for the foreseeable future retail sales are likely to be in doldrums for some considerable time.

Two brighter points, kinda. Inflation surprisingly dipped in March: the government's favourite measure the CPI by 0.4% (to 4% -- still double the official target) and the public's more relevant measure the RPI by 0.2% (still leaving it over 5%).

The fall is largely due to food prices coming off recent highs. But the inflation trend is still up and there is still every chance that the CPI will reach 5% before the year is out. City forecasters, who were caught short by the March fall, still see more inflation to come.

The other bright spot is unqualified good news: exports are up 15% year on year. With British consumers going on strike the economy badly needs an export-led recovery or there will be no recovery at all. Too soon to talk of anything like a German-style export boom.

But at least exports are moving in the right direction.

Not available for service

2011-04-06T15:14:48Z

Mea Culpa! Today I suggested to Defence Minister Nick Harvey, when he didn't seem to know the whereabouts of HMS Illustrious, an aircraft carrier, that it had been mothballed and was therefore unavailable for Libya.

I was wrong: it's not in mothballs. But it is unavailable for service.

Illustrious has been in Rosyth, Scotland since February 2010 for a £40m refit. It won't be completed until August at the earliest and after that will need to undergo sea trials. In fact, Mr Harvey's ministerial colleague Peter Luff told the House of Commons on 14th March this year that HMS Illustrious is scheduled to return to operational service in spring 2012.

And when it is it will no longer be able to carry fixed-wing aircraft: just helicopters.

Mr Harvey was unable to tell us any of this when he was on the show. But with Illustrious out of commission (for conversion) and HMS Ark Royal with a "for sale" sign on it on an MoD website, there are no aircraft carriers that Britain can deploy in Libya or elsewhere for the foreseeable future with fixed-wing aircraft.

Mr Harvey said there was nothing new about this: that fixed wing aircraft had not flown off a British carrier since 2003. Probably best that I refer you to the comments section of the Daily Politics website, where our viewers provided convincing and substantial testimony that Harriers were flying of British carriers as late as 2010 - but cannot now.

Click here to watch Andrew and Nick Harvey on Wednesday's Daily Politics.

Time for interest rates to rise?

2011-03-31T09:49:30Z

The fall in living standards is now moving centre stage in our politics and economics. I suspect it’s about to over take "the cuts" in political and economic significance.

Real disposable income fell almost 1% in 2010 -- the first "national pay cut" in over decades. Rising inflation and taxes (Vat up, NI about to go up) coupled with slow growth in wages (just over 2% annually when inflation is over 5%) mean it is almost certain to fall again in 2011.

The decline in living standards is already affecting consumer spending, which in turn is undermining retail sales, which are weak. Indeed the retail boom is well and truly over.

The country's high streets and supermarkets are already awash with discounts and two-for-one special offers. Around 40% of supermarket shelves now boast "special offers", an all-time record. Dixons has just issued a profits warning.

A new survey out today will show that consumer confidence has collapsed back to where it was at the height of the financial meltdown.

Rampant inflation has serious consequences for economic policy. When prices (and taxes) are rising much faster than wages -- as they are now -- then people feel the squeeze. They are forced to tighten their belts. They reduce their spending.

But consumer spending accounts for almost 70% of GDP. So when it slows, so does the economy. Hence the downgrading of growth forecasts in last week's Budget.

The normal response to rising inflation is a rise in interest rates. Many voices -- including that of the Bank of England Governor -- have resisted, on the grounds that it would slow the recovery. That is indeed a risk.

But rising inflation -- because of its squeeze on living standards -- is also slowing the recovery (as well as increasing government borrowing). So doing nothing is not with its risks to growth too -- and inaction now could mean much steeper rises in interest rates later.

It all depends on whether you think the current rise in inflation is a temporary blip -- or something that will be with us for a while. If the former, you might want to delay raising rates (though some rise is coming later this year whatever happens).

If the latter, then the sooner you start raising rates the better.

More inflation to come?

2011-03-22T10:42:34Z

Pretty grim set of economic stats on the eve of Chancellor Osborne's second Budget.

First, public borrowing was £11.8 billion in February, the highest borrowing for that month since records began and £2.3 billion higher than February last year. Tax revenues are more buoyant than expected but for a government committed to borrowing a lot less these figures show the heavy lifting hasn't even started.

Second, inflation as measured by the RPI, which is used as the basis of many a wage negotiation, rose to 5.5% last month from 5.1% in January. This is much more than expected. Even the more modest CPI, the government's preferred measure, rose to 4.4%.

At a time when most folks' pay is either static or falling in real terms, these inflation figures mean only one thing: a further squeeze on living standards, especially with January's rise in Vat and April's rise in National Insurance.

They also mean interest rates are more likely than ever to rise this year. The markets certainly think so: sterling jumped against the dollar this morning, trading at $1.6359 in the immediate aftermath of the data.

The markets also think there's more inflation to come: bonds fell, with the yield on the 10-year gilt rising 8 basis points to 3.61% as investors demanded higher yields to compensate for higher inflation.

According to Eurostat data out today, we now have the worst inflation in Western Europe, having overtaken Greece (now at 4.2% CPI). Only Romania, Estonia and Bulgaria in the EU have higher inflation than the UK.

Posh and posher indeed

2011-03-17T11:18:01Z

A new report from the much respected international think-tank of rich countries, the OECD, sheds light on some of the social mobility and education themes I touched on in my recent BBC2 documentary Posh & Posher.

It's a long report but worth the study and I look forward to your comments. Its main conclusion is that:

"Despite sharply rising school spending per pupil during the last 10 years, improvements in schooling outcomes have been limited in the United Kingdom."

How can that be, I hear you ask? The last Labour government doubled per capita spending on pupils and regularly pointed to improving exam results as the fruit of its investment. But the OECD confronts the controversial issue of grade inflation and comes to this conclusion:

"Official test scores and grades in England show systematically and significantly better performance than international and independent tests . The measures used by the Office for National Statistics (ONS) . show significant increases in quality over time, while the measures based on cognitive tests not used for grading show declines or minimal improvements ...

"The share of A-level entries awarded grade A has risen continuously for 18 years and has roughly trebled since 1980 ... independent surveys of cognitive skills do not support this development."

The OECD report gives cause to look again at the annually improving GCSE and A-level results. It concludes that pupils' actual performance has been "static" and "uneven".

The report also says that, despite the huge increase in resources devoted to state schools, success remains "strongly related to parents' income and background." The OECD concludes that:

"Incomes and educational outcomes are unevenly distributed in the UK compared to many other OECD countries and intergenerational social mobility is low ... schooling out comes in the UK are among the more unequal in the OECD area. This leaves many students from weaker socio-economic backgrounds with insufficient levels of competence, which hampers their chances in the labour market and higher education."

In plain English, the OECD is saying that despite increasing spending on education from £36 billion a year to £71 billion over the last 10 years or so, we are still seriously failing to open up opportunity to poor kids. Indeed, social immobility might even be on the increase:

"Disadvantaged children seemed to perform worse in 2006 than in 2001, while the impact of parents' incomes on six-year-olds' cognitive and non-cognitive skills has if anything increased recently."

Posh & posher indeed.

Andrew on the One Show (January 20) talking about Posh and Posher

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What Tories said about health in their manifesto

2011-03-15T17:13:54Z

Here's a pretty objective analysis of what the Tory manifesto told us about health reform from fullfact.org.

Based on my exchange with Tory backbencher Mark Simmons on the Daily Politics, if you read here you will see that the Tories did pledge GP commissioning but left vague the scale of the change.

Importantly for Lib Dems, it's also in the Coalition agreement, though that didn't stop them from voting against the reforms at their spring conference last weekend.

I think it's fair to say the Tories said they'd devolve more power and resources to doctors. It's probably also fair to say they did not spell out how radical this change would be in terms of switching the NHS budget to GPs.

This morning (watch the debate in video below ) we learned that the BMA is not too worried about GP commissioning but against the idea that health care can be commissioned from the private sector using NHS money provided the care is at least to the same standard and cost as the NHS.

But the BMA can't complain it wasn't warned: this policy is explicitly stated in the Tory manifesto.

BMA's Dr Mark Porter and MP Mark Simmons on health bill on Tuesday's Daily Politics

More turns in wide turbine debate

2011-03-14T18:36:33Z

In my previous blog I investigated the claim by Transport Secretary Philip Hammond on Wednesday 1st March's Daily Politics that "onshore wind [turbines] doesn't need subsidy anymore, onshore wind can pay its way."

I wrote that:

"Onshore wind turbine generators don't necessarily get a direct subsidy to build or operate the turbines (though some might) but under the government's Renewables Obligation electricity companies must buy power generated by onshore turbines at twice the market rate.

"This 100% higher price is then passed on to the rest of us in higher electricity bills may conclude that is as much a subsidy as a straight taxpayers' grant."

I concluded that readers were likely to think that enjoying twice as much as the market price, mandated by law, is as much a subsidy as a straight taxpayers' grant.

But I invited the Transport Department and the Energy Department to comment and promised to publish whatever they sent us.

Well, we've heard nothing from Mr Hammond's department but this is what we've had from the Department for Energy and Climate Change:

“The current high oil price, and the increasingly clear evidence on climate change, underline the need to move away from fossil fuels.

"Onshore wind is one of the cheapest forms of low carbon energy and the UK has a massive natural resource to exploit.

"There is no direct public subsidy, but wind energy does benefit from the Renewables Obligation.”

The first sentence is irrelevant to Mr Hammond's claim.

The second would suggest that onshore wind is so cheap and so plentiful that there is no need to subsidise it.

The third sentence confirms that there is indeed a subsidy to onshore wind turbine operators via the legal obligation of electricity companies to buy electricity at artificially high rates (and then pass on the extra cost to us, the electricity consumers).

Note that the DECC does not deny that the Renewables Obligation is a subsidy by any other name.

And remember the context of Mr Hammond's remarks: he was seeking to differentiate between onshore wind (not subsidised, he said) and offshore (which he conceded was subsidised).

In fact they are both subsidised in the same way but to different degrees. Onshore wind gets to charge twice the market price, offshore three times (because it is much more expensive).

Incidentally, I was told by senior sources last week that the Treasury thought it "daft" to be adding to our energy bills in this way at a time of soaring energy prices and was biding its time to "open a second front" against the strong wind power lobby within and around the government.

When is a turbine subsidy not a subsidy?

2011-03-06T14:10:42Z

I should have got round to this quicker but it's been a busy week! On Wednesday's Daily Politics Transport Secretary Philip Hammond said that "onshore wind [turbines] doesn't need subsidy anymore, onshore wind can pay its way."

I expressed scepticism when he said it, but didn't have time to probe his claim. Anyway, since then I've looked into it and here is my understanding.

Onshore wind turbine generators don't necessarily get a direct subsidy to build or operate the turbines (though some might) but under the government's Renewables Obligation electricity companies must buy power generated by onshore turbines at twice the market rate.

This 100% higher price is then passed on to the rest of us in higher electricity bills. (The price for offshore generated power enjoys, I'm told, an even higher officially-mandated mark up).

So it's not so much a subsidy in which government doles out billions of our money to keep the turbines going. It's an artificially high price they are empowered by law to charge to keep them going, which is then passed on the rest of us. Otherwise, as I understand it, the turbines would be uneconomic. You may conclude that is as much a subsidy as a straight taxpayers' grant.

That, I emphasise, is my understanding. It's a complicated business and Mr Hammond (or Mr Huhne at Energy) may be able to correct me. I know Whitehall departments read this blog so I look forward to the replies of either the Hammond or Huhne departments, whose responses we will of course publish. (see update below)

Readers will no doubt have plenty comments of their own to make.

Watch Johnny Ball's film about climate change scares that prompted the debate

UPDATE:

We have now heard from the Department for Energy, who want to point blog readers to this link.

A spokesman said: "The current high oil price, and the increasingly clear evidence on climate change, underline the need to move away from fossil fuels.

"Onshore wind is one of the cheapest forms of low carbon energy and the UK has a massive natural resource to exploit.

"There is no direct public subsidy, but wind energy does benefit from the Renewables Obligation."

See the newest blog entry for Andrew's comments on this.

A new newspaper price war?

2011-03-03T20:32:03Z

Coverage of the government's go-ahead for Rupert Murdoch to buy the 60% of BSkyB he doesn't own has concentrated on the condition that he spins off Sky News. Reporting and comment has been devoted to whether or not the somewhat arcane mechanism proposed to house Sky News would be truly independent from Murdoch control/influence.

But I don't think that's what concerns the phalanx of British newspapers -- including such unlikely bedfellows as the Mail, Telegraph, Mirror and Guardian -- opposed to the go-ahead. I doubt they much care who controls or influences Sky News; they are not, after all, in the TV business.

They are much more worried about what Murdoch will do with the massive new resources at his disposal if he ends up owning all of BSkyB. Subscription TV is a massive cash generator and BSkyB is a pedigree cash cow. With 100% ownership, profits heading fast for £1 billion a year would all flow into the Murdoch coffers.

His newspaper rivals worry that it would take only a fraction of that to be diverted to his newspapers to make life very uncomfortable for them. He could use BSkyB cash, for example, to mount a newspaper price war (he's done it before) designed to drive his competition out of business. Less dramatically he could use the massive marketing reach of BSkyB to promote his papers cheaply -- perhaps even offering digital subs to his papers with a Sky sub.

Click here to watch Thursday's Daily Politics debate on the BSkyB debate and the future of Sky News

We clearly have an 'inflation problem'

2011-02-15T10:28:45Z

Mervyn King had to get out his impressive Bank of England headed notepaper this morning and write a letter to the Chancellor explaining why the Consumer Price Index (CPI) hit 4% in January -- 100% higher than the 2% inflation target the Bank is meant to hit.

I suspect it won't be long before interest rates come down the pike.

The Treasury is getting used to these little billet doux from the Governor -- last year Mr King had to write three of them. The Bank will no doubt stick to its line that it's really all a blip and that inflation will soon fall back. But even core inflation (stripping out short-term factors) is at 3% (50% higher than the Bank's target).

Mr King has had to concede that the CPI will stay at between 4 and 5% for the rest of the year ie it will get worse in 2011 before it gets better. The Retail Price Index (RPI), which includes housing costs and is seen as a better guide to rising prices for the average consumer, already hit 5.1% in January.

The usual suspects -- rising oil, commodity and food prices, the increase in Vat -- are being blamed. But (bar the Vat rise) all major economies are being battered by these trends. Yet compared with the US or the Eurozone, UK inflation is distinctly higher. Unlike our major competitors we clearly have an "inflation problem".

It will become more of a problem if these price rises are reflected in wage settlements, in which case inflation will become entrenched and the Governor's blip theory will be in shreds. There's a tight pay policy in the public sector -- but that will test the government's will if it leads to widespread strikes. Private sector pay rises are still muted. But big companies are flush with cash and might decide to meet pay demands rather than endure industrial disruption.

Mr King's reputation and credibility is on the line here, not just in Britain but abroad too. The New York Times Business Section recently published a less than complimentary analysis of his record. Meanwhile, back in Blighty, living standards are about to be squeezed even tighter, which means consumer spending is hardly likely to lead the recovery.

Oh yes, and the markets are pricing in a quarter-point rate rise by May, and at least one more by the end of the year.

Work experience matters more than ever

2011-02-13T12:18:25Z

In my recent BBC2 documentary, Posh & Posher, I explained how networking and contacts played a crucial role in giving those with the right connections an early leg up in their careers.

Internships and work experience are proving increasingly crucial to opening doors and opportunities in later life. Many have expressed the view that the best intern and work experience opportunities in fields like politics, finance and the media are going disproportionately to those who are already privileged and well-connected. From what I've seen myself in recent years I suspect that to be true.

The Mail on Sunday gives a classic example (and a potentially embarrassing one for the Tories) of how it can work. At the Conservative Black & White Party (they don't call it a ball anymore) last week they had an auction to raise party funds. Fair enough. All parties do that.

But a number of the lots for auction included internships and work experience at some of the country's top financial institutions. The well-heeled Tory faithful bid around £3,000 each for their offspring to spend a couple of weeks at various prestigious hedge funds, City PR companies, trading houses and finance houses.

The experience and contacts made there will no doubt be invaluable to the youngsters lucky enough to have parents who won the bidding. But note how those from already privileged backgrounds -- attending the party cost a minimum of £400 per head -- are able to skew matters to their further advantage, not just in terms of the schools they can afford or the top universities they can get into but in something so basic as work experience.

In today's incredibly competitive labour markets work experience matters more than ever when it comes to securing that first rung on the ladder. Companies might like to think how they make their internships open to as wide a selection of the talented from all backgrounds as they can. I suggest that internships granted on the basis of parents who can afford £400 a head for dinner then £3,000 per internship cannot be regarded as entirely fair or meritocratic.

More about the Muslim Brotherhood

2011-02-03T18:29:32Z

On today's programme (Thursday, February 3rd) I promised to find out more about the Muslim Brotherhood (Egypt) and post it for you.

I did so because I was suspicious that our guest from the Brotherhood, London-based Kamal El Helbawy, was painting a misleadingly moderate picture of what the Brotherhood stood for.

Pinning down the Brotherhood's positions, however, is not easy because they don't put their own materials online and they hardly ever translate anything into English. But here's a very straight write-through of the Brotherhood's 2007 manifesto, from AP, the reliable and authoritative wire service, published in the Boston Globe.

Described as the Brotherhood's "first detailed political platform" the manifesto would "bar women and Christians from becoming Egypt's president and establish a board of Muslim clerics to oversee the government, reminiscent of Iran's Islamic state" -- something Kamal El Helbawy denied today (claiming the Brotherhood would be happy with an Egyptian Thatcher as leader!).

The article states that there were a minority of moderates in the Brotherhood who preferred a civic government which respected Islamic principles but that the "hardline trend" had won out. It explains the manifesto was a draft for a Brotherhood political party, which the Mubarak government never allowed to develop. This might explain why our guest claimed the manifesto was never adopted. But there seems little doubt it sums up what the Brotherhood thinks.

AP reports that the manifesto calls for "the formation of a commission of senior religious scholars, chosen in national elections, to advise parliament and the president ... The commission's position on government and parliament decisions would be the "recommended one," suggesting it could veto those decisions.

The platform says parliament could overrule the board but not in issues governed by "proven texts" of Islamic Sharia law, a vague phrase that could apply to a wide range of issues."

The president cannot be a woman, says the manifesto, because the post's religious and military duties "contradict with her nature, social and other humanitarian roles." The blueprint recognizes the "equality between men and women in terms of their human dignity," but also warns against "burdening women with duties against their nature or role in the family.

Here's another article on the draft manifesto that suggests the Brotherhood is not quite the beacon of Western liberalism that our guest would have us believe.

And finally here's a research paper which suggests the Muslim Brotherhood's attitude toward minorities is not exactly progressive. It reveals that when Alexandria's Administrative Court issued a ruling on April 4, 2006 instructing the Interior Ministry to allow a citizen's identity card to state that the holder was a Baha'i [a religious sect], the Brotherhood reacted with outrage.

In the May 3, 2006 parliamentary debate on the ruling, MB deputies said that the Baha'is were apostates who should be killed. Quoting a hadith attributed to the Prophet Mohammed to support their position, they declared that they would draft a law making Baha'ism a crime and branding the Baha'is apostates.