MPC: Britain on the Brink of Recession

Britain could well be back into recession – warns a senior member of the rate-setting committee, Monetary Policy Committee (MPC). He said the economy’s recovery had been sluggish in the previous six months of last year.

David Miles states, “There is a risk the economy could fall back into recession, though I do not believe this is the most likely outcome.”

Official data shows very little growth in the country’s GDP – a mere 0.2% in the second quarter of last year – after a stagnant growth in the last six months.

Analysts are estimating a 30% chance of raising interest rates this year by the Bank of England (BoE). The economy’s recuperation is so fragile that they assume the possibility of the bank renewing its printing program in the hopes of boosting growth.

A study by leading British Trade Body, Confederation of British Industry (CBI) that polled British manufacturers showed a slump in confidence in the economy; factories are now preparing to axe jobs in the coming months.

The outlook was the most depressing; CBI chief advisor Ian McCafferty states, “The combination of political and economic uncertainty is sapping confidence” referring to the endless bickering over the United States’ debt ceiling and the eurozone’s financial crisis.

The British Retail Consortium confirms the absence of economic trust; 3,100 jobs have been cut in UK stores just in 2010. The manufacturing sector, which was the major performer in the first days of the economy’s recuperation, stooped down 0.3% in the second quarter.

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Labour Wants Government to Produce 200,000 Jobs from Bankers Bonus Taxes

A Parliament Member is calling for economic boost (putting up new homes, create jobs and apprenticeship) by pushing the government to implement taxes on banker bonuses.

It was recalled the previous Labour administration started imposing taxes on bankers’ bonuses last year, which garnered £3.5 billion.

A tariff, announced by the coalition government, will be introduced starting the first day of next year, January 1, 2012, based on every financial institution’s balance sheets.

A representative from Bolton North East, David Crausby agrees to the new ruling since it was “the banks that caused recession,” and thus, “they should pay their fair share to fix the damage”.

He continued, “A tax cut for banks this year is not fair when we see the Government cutting so much spending and making so many people unemployed.”

It is expected the tax on banker bonuses will make up to 2 billion pounds. The Labour Party wants the government to utilize the £1.2 billion to create over 200,000 jobs

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Deputy Prime Minister: It Is Right The Public Enjoy Windfall Shares

Deputy Prime Minister Nick Clegg encourages the Treasury to give a total of 1,000 pounds worth of bank shares after nationalized banks RBS and Lloyds Banking Group are sold, saying, ” it is right the public enjoy the benefits of potential windfall profits”

He further stated, ” Psychologically, it is immensely important that the British public feel they have not just been overlooked and ignored” …”their money has been used to the tune of billions and billions and billions to keep British banking system on a life support system”

RBS is 83% owned by the British Taxpayer, and 43% of Lloyds, both banks were injected with ?67 billion pounds during the banking crisis in 2008.

The motion, supported by leading Conservatives, was started through a letter addressed to the Treasury, calling for their consideration to give every UK citizen an estimate 1,450 shares in RBS, and 440 in Lloyds, valuing presently up to 775 pounds in the market.

Britons would get a “floor price” or “free gains” made beyond the floor value – in other words – if shares increased to 1,500 and would be liquidated, individual taxpayers could receive 500 pounds after a thousand bounces back to the Treasury.

David Cameron who shares the idea of “widening share ownership”, gives his word to look into the scheme.

Even prior to 2010’s general election, George Osborne came up with the plan of selling shares at a “discounted price”, however, at that time, was dismissed by the administration, along with the Liberal Democrats, having not yet a clear plan on how to privatize banks.

The “People’s Banking System” would be the largest shares allotment since nationalized industries were liquidated in the 1980s by former Prime Minister Margaret Thatcher.

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Ignoring Big Spending Leaves Britain Badly in Debt

A leaked document reveals the excessive spending of over £90 billion by Former Prime Minister Gordon Brown and shadow chancellor Ed Balls left Britain “dangerously exposed to the economic crisis.”

The document came from personal files of the Labor politician following news of his scheme to remove Prime Minister Tony Blair.

Revelations tell of the Former Prime minister and his parliament member ignoring the warnings of the crippling economic effects of big spending.

Even before, public sector officials expressed their immense concern to the ex-prime minister about spending carefully, constantly reminding him to align every expense with inflation and its possible effects to it, as well as considering the 12 different areas where billions of pounds could be trimmed.

Instead, Brown doubled the recommended spending, which he only based on 4 areas, and left the country badly in debt. Chief Secretary Liam Byrne echoed in his statement, “There is no money left”

A source commented on the predicament, saying the document clearly showed “the reckless approach of Brown and Balls which left Britain dangerously exposed to the economic crisis.”

Other revelations tell millions living on pensions and underprivileged Britons could be affected if the 10% tax rate was trashed.

Like the spending cut, the former prime minister dismissed the warning and proceeded with the change. He came confidently that no one would lose to his plans but later on gave an emergency compensation package.

A draft of former foreign Secretary David Milliband’s speech had found his fear of the Labor under valuing the demands of deficit and his plans on choosing former chancellor Alistair Darling to start a body of new fiscal spending ruling, and tackling government debt.

Milliband also wanted to notify the Labor party, the importance of regaining the public’s confidence in the economy.

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Financial Power Will Shift to the East by 2030

India’s emerging market asset will soon overtake G7 banks by 2036, according to research from Price Waterhouse Cooper.

Financial crisis in the UK has fast-tracked predictions about the rate at which emergent banking markets, like China, India and Brazil, will dethrone the UK, US and other developed countries before 2050.

Britain’s banking advantage was dubbed as the world’s fourth largest after the US, China and Japan, but is under threat of stepping down in place of India due to the prolonged financial crisis.

E7 economies include China, India, Brazil, Turkey, Mexico, Indonesia, and Russia; of which China and Russia are predicted to become giant banking markets.

Chief economist of PwC Mr. Hawksworth stated, “The UK banking market should show some growth in the long term but, like other G7 economies, it is a mature market, and regulatory changes will constrain lending growth for some time to come. In the long term, therefore, the success of UK banks will depend a lot on their ability to compete in the fast-growing emerging market,”

G7’s assets come below $50 trillion (£30.4 trillion) while E7’s are less than half of G7’s total assets.

PwC predicts emerging economies will overtake developed systems by 2036, and will be 50% bigger.

China, which possesses an estimated $30tn in assets, will be able to surpass the United States in 2023, and India is expected to outdo Japan by 2035.

Hawksworth said the increasing growth of eastern economies is a sign that financial power has shifted from the West to the East and its implications will have a deep impact on the banking industry.

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Financial Sector is Under-Taxed

Financial reform campaigners have called for a £20 billion tax levy on the financial services industry, after a report by the Robin Hood Tax Campaign found that contributions to the Treasury are dwarfed by the increase in Government debt caused by the crisis.

The report ‘There is an Alternative’ estimates that it will take nearly 20 years to recover the costs of the banking crisis, and has demanded that the Banks take on more responsibility for repaying the debt

It referred to figures from the International Monetary Fund (IMF) that put the cost of Government debt at £737 billion as compared with the £203 billion it received in tax from the financial sector from 2002-2007.

Spokesman for the Robin Hood Tax Campaign, Max Lawson, said “The contribution banks make in boom years is dwarfed by the cost they impose on us all when things go wrong. It is time our politicians brought big banks to heel and made them pay their fair share. Even the IMF says the financial sector is under-taxed.”

Further adding that “The public should not pay the price of the reckless profiteering that was allowed to pass for productive activity in the trading rooms of the City”

The proposed £20 billion tax levy is a far cry from the current £2.5 billion levy on the banks’ profits that is currently in force.  The Robin Hood Tax Campaign, which launched in early 2010, wants the banks to help fight poverty in the United Kingdom and abroad and take responsibility for the mess they caused in the lead-up to an in the wake of the banking crash.

It also thinks that the banks’ warnings of a moving overseas if they are treated harshly is an empty threat, and UK politicians should call their bluff.

A proposed financial transactions tax is on the agenda of a meeting of European finance ministers later this month. Nicolas Sarkozy, the French president, and German chancellor Angela Merkel are both in favour, but will face of opposition from the US and UK.

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British Councils Found Wasting Millions – Another Expenses Scandal

An investigation found British councilors spent millions of pounds on luxuries from credit cards financed by taxpayers.

UK Public Spending

Among the expenditures were first class travel and accommodations in five-star hotels, buying llamas that cost £1,150, a little group of sheep and fish for a council pound that charged £575 on credit cards. This was headed by the Horsham Council in West Sussex.

The data was obtained using a Freedom of Information request.

Town hall chiefs have been told to slash lavish spending, but continue to waste thousands of tax-payer funds on luxuries such as pricey electronic gadgets (ipads and videos games), vacation tours and dinners at expensive restaurants like Michelin and Claridges – all while cutting back jobs.

Leisure trips alone cost more than £2m in total; counting air travels to Thailand, Kenya and Bermuda, and hotel accommodations at the most expensive five star hotels; Athens Hilton, Pan Pacific Singapore, and Four Seasons New York.

The total also included booking tables during award functions, champagne parties, and pork roasts.

A further £300,000 was splurged on online shopping at a general-goods retailer, £150,000 for products bought at Amazon, and another £500,000 on Tiffany jewelry, Gucci merchandise & silk ties.

Councils have used taxpayer-backed plastics of up to £40m. In total, councils are believed to have spent approximately £100m in luxuries during an expenditure exposé of over £500, which implied other expenses in lower-priced items or services were still not declared.

White hall executives gasped with surprised upon knowing of the total credit card sum; one source declared “another MPs-expense style” swindle may be on the rise.

The Communities Secretary Eric Pickles was accused of overlooking the councils’ practices whose spending was called “wild”.  In a statement, he said, “It appears that for years, some councils have been enjoying the high life paid for by you and me.”

He hopes after the spending cost exposé, the “culture of wild overspends and excess”, which “had become the norm under Labour, will become a thing of the past.”

252 councils who were called upon failed to publish their credit card bills despite instructions from the Communities Secretary to issue all costs beyond £500 by January.

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British Chamber of Commerce: Economic Recovery Will Be Slow

The British Chambers of Commerce forecasts the British economy to grow at a much slower rate in the next two years than expected, and predicts interest hike to commence in August.

 

Economic Recovery

Recent forecasts by Office for Budget Responsibility (OBR) propose an optimistic growth of 1.7% next year and 2.5% in 2012.

The BCC states economic progress will be much slower than OBR’s prediction in March, raising its annual consumer price inflation (CPI) to 4.5% in 2011 and 2.7% in 2012 from 4.2% and 2.3%.

Last week, the Bank of England governor Mervyn King stressed the threats of rapidly increasing interest rates.  The Bank forecasts inflation to reach 5% in succeeding months, after wrongly raising price index inflation to 4.5%, which was the highest since October 2008, before it goes down to the original target of 1.9%.

Factors that surged prices were increase in oil, alcohol, and tobacco.

BCC chief economist states, that with the right strategies the UK economy will gradually grow and become stronger; “Main drivers of UK growth over the next two years will be net exports and business investment”.

David Kern is positive that British businesses will be able to fare with the little price increases. However, the Monetary Policy Committee (MPC) should be very careful “not to be too aggressive in it’s tightening.”

The group recognizes problems of unemployment as it expects it to increase around 15,000 over the next 15 months to mid 2012; but is optimistic for even a slight decrease of its numbers from 2.6 instead of 2.65 in March.

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