Britains economy

Along with a national rail strike for three days coinciding with the tube strike…

Yes, I think we can expect more unrest as the economy contracts and prices rise. People will always try to protect their families and standard of living.

The chaotic way this government has been run has so far covered up much of what the Americans call "lack of probity". The American January 6th Committee is about to reveal not only Trump's part in the attack on the Capitol but "the continuing threat to a democratic government that he and his supporters represent." [economist.com]

At some point, we must surely do the same. The Gray report noted that leadership in Downing Street was ‘fragmented and complicated…and this has sometimes led to the blurring of lines of accountability". Lack of accountability must be challenged, not swept under the, no doubt very expensive, carpet in Johnson's flat.

The Presidential style Johnson has cultivated can, in many ways be seen as anti-democratic. It is time we saw a strengthening of accountability and capacity where this government is concerned.

Many posters will no doubt want to tell us there are economic problems around the world. But our appear to be much worse. On the headlines this morning we heard about rail strikes, flight problems, and taxes to be cut not for economic reasons but to sweeten those rebelling against Johnson.

The headlines continued with facts about "levelling up". In the first round of this spending, government handed out £1.7billion. The Public Accounts Committee has shown that ministers failed to monitor how this money has been spent. They also note that ministers finalised the principles for awarding the money after they knew what bids had been shortlisted. Was this how Rishi Sunak's constituency came to be awarded? We have a government of chaos and, I would question, perhaps gross dishonesty. It will require a complete "drains-up" to discover where the money has gone and who has benefited.

What I don’t understand about the forecast that we are going to suffer stagflation is that I understand that for this to be the case you need 3 indicators
High unemployment
Rising prices
Contracting economy

So we have 2 out if the 3. The U.K. has full employment.

So not sure our situation can be described as stagflation.

daisyanne yes we know that governments and economists worldwide are watching events and government action in the U.K. and making judgements on the back of the chaos that continues to put a drag on our economy.

Whitewavemark2

Yes, I think we can expect more unrest as the economy contracts and prices rise. People will always try to protect their families and standard of living.

You're right.

And Johnson will have to come up with something more practical for both businesses and ordinary, working people, other than mantras and slogans. Additionally, this is not the time for an escalation of the burgeoning trade-war with Europe either.

He said he wants to "get on with the job of delivering what the British people want" (or words to that effect). Apart from what he reads in the media and what his advisors tell him - how well is he really acquainted with the ordinary 'man in the street'? He will note the increase in energy prices from his bank statements on a personal level - is he aware (or does he even care) that for a great many people this will mean making some stark economic choices?

He once - allegedly - said "f**k business" at the leadership hustings (in relation to a no-deal Brexit). Was this just a stray remark made on the spur of the moment without any real meaning? He resented the criticism of the comment, that's for sure. And went on to say that he'd stuck up for business at every conceivable opportunity - quoting how he'd "stuck up for the bankers" after the 2007 crash !

Johnson's not responsible for the global hike in energy prices, but he's very much so in respect of how his government deals with the fall out from it. There has at least been a U-Turn on the loan-that-wasn't-really-a-loan, and that will certainly ease the burden for many people. But what happens in October?

I just hope he doesn't now squander his time in running down the Opposition as a means to shoring up his support. Corbyn's gone, the far left are gone. Starmer may be a lot of things, but he's not far left nor advocating a communist take-over, so I don't think frightening the general public with the left alternative to Toryism is going to cut it.

It has not come as a surprise though has it.
The populace in the form of the local facebook page are complaining constantly about the high petrol prices and seem not to follow the news at all. Carry on as usual is the motto.
I despair.

I did feel slightly amused that having survived a no confidence vote he gets energetic and wants a re shuffle, but fails to recognise what the best re-shuffle would be

Whitewavemark2

What I don’t understand about the forecast that we are going to suffer stagflation is that I understand that for this to be the case you need 3 indicators
High unemployment
Rising prices
Contracting economy

So we have 2 out if the 3. The U.K. has full employment.

So not sure our situation can be described as stagflation.

I don’t think we do have full employment. I think there is significant hidden un- and under-employment (those who would or could work if possible but who don’t claim unemployment benefits). Sheffield Hallam produced some research that suggests counting these people doubles the unemployment figures.

Also, employment is not evenly distributed across the country. In some areas the official unemployment rate is around 4%, in others it’s double that, and the latter areas probably have the highest numbers of hidden unemployment too.

The report is here shura.shu.ac.uk/30252/

The other thing I don’t understand is that there is less demand in the economy from those with average wages - I assume the wealthy are not feeling the pinch. The economy has come to a halt and yet the BoE has raised interest rates. Why? Even those with any savings that might benefit will be dipping into their savings over the next months/years in order to try to maintain their standard of living, and so demand will fall even further.

Zonne

Whitewavemark2

What I don’t understand about the forecast that we are going to suffer stagflation is that I understand that for this to be the case you need 3 indicators
High unemployment
Rising prices
Contracting economy

So we have 2 out if the 3. The U.K. has full employment.

So not sure our situation can be described as stagflation.

I don’t think we do have full employment. I think there is significant hidden un- and under-employment (those who would or could work if possible but who don’t claim unemployment benefits). Sheffield Hallam produced some research that suggests counting these people doubles the unemployment figures.

Also, employment is not evenly distributed across the country. In some areas the official unemployment rate is around 4%, in others it’s double that, and the latter areas probably have the highest numbers of hidden unemployment too.

The report is here shura.shu.ac.uk/30252/

That is interesting because it doesn’t explain why businesses are having such difficulties in finding staff.

However it also doesn’t suggest a high level of unemployment which is one if the key factors in stagnation.

Whitewavemark2

Zonne

Whitewavemark2

What I don’t understand about the forecast that we are going to suffer stagflation is that I understand that for this to be the case you need 3 indicators
High unemployment
Rising prices
Contracting economy

So we have 2 out if the 3. The U.K. has full employment.

So not sure our situation can be described as stagflation.

I don’t think we do have full employment. I think there is significant hidden un- and under-employment (those who would or could work if possible but who don’t claim unemployment benefits). Sheffield Hallam produced some research that suggests counting these people doubles the unemployment figures.

Also, employment is not evenly distributed across the country. In some areas the official unemployment rate is around 4%, in others it’s double that, and the latter areas probably have the highest numbers of hidden unemployment too.

The report is here shura.shu.ac.uk/30252/

That is interesting because it doesn’t explain why businesses are having such difficulties in finding staff.

However it also doesn’t suggest a high level of unemployment which is one if the key factors in stagnation.

I’m not sure how many of the people in these categories would ever realistically want to, or be able to return to work. It must for example include everybody under the age of 66 who isn’t disabled but doesn’t work, and there are lots of us on here who are that category, but we have enough to survive on and don’t want to return to work?
I do think it’s a very worrying situation at the moment, and unemployment is bound to increase as people spend more of their income on transport, heating and food. I’m glad I’m not a small business owner, it’s very difficult times for a lot of them - after the summer things look set to become pretty dire.

Based purely on what I see around me I think there could be three main reasons why businesses are having problems finding staff. I live in a small country town so my experience may be skewed.

Firstly I see local businesses unable to open/function properly as they can no longer rely on a steady stream of transient, especially seasonal staff because they no longer want to travel to Britain post Brexit.

Secondly, during lockdown many people who don't really need to work but had jobs for interest, company and 'pin-money' have got used to not working and now are happy not to.

Lastly - a lack of skilled workers/tradespeople due to underinvestment in training/short termism by employers and the government over recent years.

These are my unscientific observations.

I think that the inflation we are experiencing at the moment is being created by supply issues, and not excess demand. One thing that may help is to lower taxes- but they must be the right ones that help the average person. So I think lowering Vat and excise duties on fuel would be a good start. It will help create demand. Raising interest rates suppresses it.

Lower tax for the better off will do zero for the economy.

So not sure our situation can be described as stagflation.

A chap from the OECD, on Sky currently, agrees with you Whitewave. He also said that those in the know (my words) are more concerned with lack of growth than inflation. He said inflation in the US was believed to have petered out earlier in the year.

Yes from my pottering about - restaurants etc I think that staffing issues are a major problem.

Our last meal out when we popped into a pub/restaurant for lunch meant an hour wait for our first course. We chatted to the young waitress who described that there were only 3 staff and one chef on duty. Her shift was from 11am to midnight?. I’m not sure how many covers but it was quite a large restaurant. She said that staff had mostly returned to Europe, which makes sense as we were always served by folk with European accents in the service industries.

She also went on to say that customers were walking out and at the end of the day there will be open tabs where people have gone.

Businesses can’t survive in this sort of climate.

Thanks for posting that Zonne. There's a breakdown of unemployment figures by local authority. I knew I lived in an area of very low unemployment, but I didn't realise just how low it is compared with the rest of the country.

I'm reading the rest of the report now.

DaisyAnne

^So not sure our situation can be described as stagflation.^

A chap from the OECD, on Sky currently, agrees with you Whitewave. He also said that those in the know (my words) are more concerned with lack of growth than inflation. He said inflation in the US was believed to have petered out earlier in the year.

Yes, if you think about it, if inflation is being caused by supply issues, that will eventually be resolved (not in the near future unfortunately) because it always is. Supply=demand.

The U.K. will have a greater issue because of government policies that has imposed structural difficulties, like Brexit but it will eventually resolve.

Not sure about the contraction of the economy though.

Zonne

Whitewavemark2

What I don’t understand about the forecast that we are going to suffer stagflation is that I understand that for this to be the case you need 3 indicators
High unemployment
Rising prices
Contracting economy

So we have 2 out if the 3. The U.K. has full employment.

So not sure our situation can be described as stagflation.

I don’t think we do have full employment. I think there is significant hidden un- and under-employment (those who would or could work if possible but who don’t claim unemployment benefits). Sheffield Hallam produced some research that suggests counting these people doubles the unemployment figures.

Also, employment is not evenly distributed across the country. In some areas the official unemployment rate is around 4%, in others it’s double that, and the latter areas probably have the highest numbers of hidden unemployment too.

The report is here shura.shu.ac.uk/30252/

Thank you Zonne. There is so little academic insight in this are so a must read.

Thinking about it though to try to reverse the contraction of U.K. economy is to create greater demand.

It seems to me to be a sensible move to give serious consideration to joining the single market and customs union. At one stroke it would help business costs who in turn could lower prices and therefore create demand both from the U.K. and Europe.

What not to like in that idea?

Whitewavemark2

I think that the inflation we are experiencing at the moment is being created by supply issues, and not excess demand. One thing that may help is to lower taxes- but they must be the right ones that help the average person. So I think lowering Vat and excise duties on fuel would be a good start. It will help create demand. Raising interest rates suppresses it.

Lower tax for the better off will do zero for the economy.

Raising interest rates suppresses it.

You're absolutely right, Wwmk2, but the BoE Monetary Committee seem to have a Pavlovian response to rising inflation which goes: 'Ooooh, inflation! Quick, raise interest rates'

Though they must surely know that there are at least two causes of inflation, 'demand led' or 'cost led'.

With reference to the 'high employment' figures that people have mentioned, let's not forget that the figures are based on the definition of 'in work' as being employed for 2 hours in a fortnight. Let that sink in. I didn't believe it at first but I have checked this several times and it is absolutely true.

TBH, I find the whole situation difficult to apply any sort of logical thought to...High employment figures based on such a minimal definition of 'employment' coupled with labour shortages when you'd think that people working very few hours would be glad of the extra work isn't making any sense to me.

Perhaps someone whose brain is working at a better level than mine could explain it...

Re - brains my is only functioning at half cock these days as there is so much to take in.

I simply don’t have time to read as much as I’d like.

Meanwhile we are watching the slow disintegration of the government. Johnson is incapable of tackling the serious issues and will always be incapable of doing so. The cabinet is pathetic and spineless and so we totter onwards, unless more backbenchers grow spines and jump ship. That is all that will save us at the moment.

Whitewavemark2

Thinking about it though to try to reverse the contraction of U.K. economy is to create greater demand.

It seems to me to be a sensible move to give serious consideration to joining the single market and customs union. At one stroke it would help business costs who in turn could lower prices and therefore create demand both from the U.K. and Europe.

What not to like in that idea?

Despite polling over at least the last two years shows that more people think Brexit was a mistake than people who think it wasn't, the tories still think that the the electorate would oppose moves towards the EU. So they won't move.
And Labour is either still frightened to point this out or is frightened of the right wing media response if they do.

www.statista.com/statistics/987347/brexit-opinion-poll/

www.thelondoneconomic.com/news/every-region-now-considers-brexit-to-have-been-a-mistake-324930/