Never one to pass up the opportunity to spread a bit of festive cheer, I thought we could raise a glass of hot wine to our economy, as we are finally standing out from the rest of the civilised world in these difficult times.
At the end of the year in which our prime minister led from the front in his most honourable purpose to save the world, it looks like the rest of the world is now clawing away from the precipice. In fact, this magical act of philanthropy on the part of our leader has ensured that only one G20 country remains in recession. Us.
Even the Irish have shown us a snowy pair of heals. Twelve months after we all raced to Ladbrokes to plant the remainder of our savings on the embattled Irish economy following the fate of Iceland, the likeable vagabonds grew their output by 0.3 per cent in the third quarter of 2009. Meanwhile, ours shrank by 0.2 per cent.
And economists have recently hit on the problem. We’re not spending enough. People are repaying debts, instead of spending in the shops and amassing more debts. That doesn’t sound too stupid when you think about what might happen next year. VAT is going up, after the election other taxes will follow, energy bills are unlikely to fall and public spending is seizing up.
So, as anyone with the merest hint of fiscal nous would do, families are being more frugal. Last year we all tucked into our partridge inside a duck inside a chicken inside a goose inside an ostrich. In some ways, it’s quite nice to get back to the Turkey and stuffing this year.
At the end of 2008, UK households owed more than 180 per cent of total net disposable income, according to the Organisation for Economic Co-operation and Development. German households owed 98 per cent, French consumers owed 100 per cent and only our special partners across the pond could get anywhere near us.
Anyhow, the share of income saved in banks is at its highest level in more than a decade, despite the rewards being at their lowest, and our unwillingness to spend will almost certainly prolong the City’s gloom.
But surely prudence is the right plan. Let’s find our feet again and not be too downhearted about trailing the Irish. After all they’re better than us at Gaelic Football, Eurovision and Hoolying (whatever that is). Let’s spend, but spend well on quality products. Let’s support each other and buy from each other within the business sector. I’ll stop short of suggesting we consider an alternative to supermarket shopping for fear I may disappear.
And whatever anyone tells you – it isn’t actually your fault.
So have a wonderful Christmas. Try not to swear when you trip over the Go Go Hamster as you stagger towards the settee clutching a glass of port. And remember, no matter how bad things appear, there is a God. And let’s take a moment now to thank him now for Rage Against The Machine.
Stuart Wilkin writes for Insider
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So the Chancellor delivered his pre budget report today with his usual sense of mirth. But he resisted the temptation to throw out pretend figures willy nilly, as not everyone saw the funny side 12 months ago.
In November 2008, as we stumbled towards the eye of the storm, Mr Darling predicted that the government’s borrowing would reach £118bn by the end of 2009, before falling to £105bn and then £54bn in 2010. Cue hoots of derision and yells of ridicule from the retired majors, Oxbridge graduates and members of the Hellfire Club on the opposition benches.
One year on and it turns out that the Eton Rifles were pretty safe to laugh out loud. And so today when Mr Darling admitted that the deficit was now £178bn and he predicted a fall to £176bn next year, there were less belly laughs and more muffled sniggers from the back of the class.
I think we’re becoming a bit immune to the shock effect of the figures. Would anybody have really noticed if the Chancellor had said, ‘I’m confident that our current deficit of eight hundred trillion will reduce by over 3 per cent next year’? Not everyone by a long stretch.
What does it actually mean for us in business? In general terms some spending cuts and tax rises. But more specifically:
- We can anticipate a further half per cent increase in national insurance in 2011.
- VAT will be going back up to 17.5 per cent from January. Mr Darling said: “To cut support now could wreck the recovery.” Does he know something I don’t?
- The Chancellor confirmed the government was seeking cash from major banks for a £500m Capital Growth Fund that would help increase lending to small and medium-sized businesses. Good.
- The £500m fund will be voluntary. Bad.
- And we can have our own laugh at the banks. There will be a one-off levy of 50 per cent on bank bonuses above £25,000, to be paid by the bank, not the employee. Bonus levy is expected to yield £550m. But maybe we shouldn’t giggle too much. I haven’t worked out where the banks will get the money from yet.
And speaking of which, I hear 1,000 disgruntled RBS investment bankers are threatening to leave the country in response to the government’s clampdown on bonuses. In light of RBS’ well documented difficulties over the past 24 months, does that qualify as a talent drain?
Stuart Wilkin writes for Insider.