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Britain: a case study in low-growth economic mediocrity

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ALLISTER HEATH

BRITAIN is stuck in a rut. No wonder that investors and credit rating agencies are losing patience: the coalition doesn’t have the guts or decisiveness needed to jolt the UK out of its present mediocrity, while the opposition is busy dreaming up new taxes, thinks that a slightly looser fiscal policy would transform our prospects and has no real understanding of the extent of our fiscal crisis.

Britain’s tax receipts confirm that the economy continues to do poorly, albeit not disastrously. So far this fiscal year, receipts from Vat are up 2.2 per cent, less than the rate of inflation. Income and capital gains tax receipts are down 0.2 per cent and corporation taxes are down 8.4 per cent: while in both cases there have been tax cuts (a higher personal allowance and lower corporation tax rates) these don’t explain such shockingly bad numbers. Very limited pay rises, a drop in reported income from the highest earners and weak profits are among the answers. National insurance contributions are up a healthier 3.4 per cent, though this not anything worth shouting about.

What all of this suggests is an economy that is either stagnating or growing a little, but by no more than a few tenths of a per cent. At best, the situation looks only marginally rosier than the official GDP figures; at worst, there is no difference. Mediocrity undoubtedly rules OK.

While revenues are poor, any progress the government is making in trimming overall expenditure on wages, benefits and other current spending is being more than cancelled out by increased interest on the growing national debt. During April 2012-January 2013, central government current expenditure hit ?525.7bn, 2.7 per cent higher than in the same period of 2011-12.

Depending on which measure of inflation one uses, real current spending was therefore either up or down slightly. The real cuts are happening in capex, the one area where state spending can be useful for long-term growth (though the private sector, if it were allowed to, could take over many projects). So far this year, central government net investment was minus ?6.4bn – with depreciation overwhelming gross investment – a massive ?27.7bn lower than in the same period of the previous year. So we are still seeing the wrong kinds of cuts, stagnant growth and weak tax receipts. Unless something drastic changes soon, it is not just credit rating agencies that will be running out of patience with the government.

LOW RETURNS
One of this column’s themes is that we are now facing a world of low real returns across financial assets, with high inflation gobbling up nominal gains, and that the bond markets, after years of astonishing returns, are set for a crash. There is lots of evidence to back up this thesis in Barclays’ latest annual equity-gilt study. The conclusions are stark. Over the next five years, Barclays expects cash to provide negative inflation-adjusted returns of about -1.5 per cent per year (with compounding effects, that means a very sharp drop in value), “safe haven” government bonds -2 per cent – in other words, even worse than cash – and equities annual growth of 3-4 per cent. The authors believe that the bull market in government bonds – which peaked last year – will end in a whimper, rather than in a 1994-style crash. I suspect the authors may be too optimistic, but their case is that a shortage of “safe” assets, combined with a decision by the authorities to keep the monetary floodgates open, will do the trick. One thing is clear: savers are going to suffer.


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Chiltern Miniatures

ECB profits on its Greek bonds

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TIM WALLACE

THE EUROPEAN Central Bank (ECB) made ˆ555m (?480m) in interest income from its Greek bonds, accounts showed yesterday, indicating the whole Eurosystem may have made several billion on the emergency purchases.

That is expected to be divided up among the Eurozone’s national central banks, added to their own earnings and given to Athens.

The ECB made another ˆ553m in interest on other securities bought under the emergency programme, including those of Spain and Italy.

     
     
  Chiltern Miniatures  
 

ADDRESS: 1 Elmbourne Road

CITY: London

COUNTY:

POST CODE: SW17 8JS

TELEPHONE NUMBER:

CATEGORY: Games and Toys

 

Company Chiltern Miniatures is working in Games and Toys only the first year. During his tenure, they greatly succeeded. Of course, in the history of any company some bad pages can be found. There is no business without difficulties. Nevertheless, according to the latest reports, Chiltern Miniatures’s work is normal. They do an excellent job and good attitude of public is evidenced by the comments.

Over time after the start of this company in London there are many similar organizations. However, they are not so successful. They can only be satisfied with small incomes and barely pay their debts. In section Games and Toys this company has a good rating. Ranking is based on estimates of the users of our directory. Rating is used to transparently assess the quality of this company.

The company established itself at very convenient location. Here is the address: 1 Elmbourne Road. Also company office may be contacted by phone. This location is convenient to both consumers and suppliers, and business partners. The best place for such company could ever find. In addition, it has a positive effect on the income of the enterprise. A company partners Chiltern Miniatures is always happy to cooperate.

You can learn more about the company, reading users of our website reviews about it. Many people leave the whole review of the companies they’ve been working with. Some want to talk about how good partnership was. Others want to warn about the bad sides of the relationship with the organization. All this develops into a complete information about the company.

You can always contact the company through these contact details: . Any missing information you can find directly at the company receptionist.

Call Chiltern Miniatures:

 
     
 

BAE plans ?1bn share buyback as profit stalls

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CATHY ADAMS

DEFENCE and aerospace firm BAE Systems yesterday launched an ambitious ?1bn share buyback programme, as evidence of the “robust performance” of the FTSE firm.

Chief executive Ian King said he could see “green shoots” in the company, which gave it the confidence to unveil the buyback, although full implementation still hinges on discussions with Saudi Arabia over pricing of a key contract.

Despite its optimism, BAE yesterday posted a six per cent fall in profit,, and sales over the year fell seven per cent.

Full-year underlying earnings before interest, tax and amortisation fell to ?1.9bn, hurt by unresolved discussions over pricing of the Saudi Arabian contract to supply the Gulf state with Typhoon aircraft.

BAE warned that its key UK and US markets would be “constrained” this year.

It has come under pressure from shrinking military budgets in the US and the UK, as governments try to reel in large budget deficits.

The UK government pledged in 2010 to slash its defence spending by eight per cent by 2014 while the US – from which BAE derives around 40 per cent of its income – already has plans in place to cut $487bn (?320bn) from its defence budget for the next decade.

BAE – whose proposed merger with European peer EADS collapsed in October as Germany refused to give it the green light – is “absolutely not” in discussions to revive the tie-up, King said yesterday.

Meanwhile, BAE yesterday inked a longevity swap with L&G to safeguard it against the risk that its 31,000 pensioners live longer than current estimates.

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