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Saturday 28th November 2020
Hi Friend,
Spending Review and OBR Updates ...
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| Push Borrowing Higher ...
Spending Review this week, the Chancellor laid out the plans for government expenditure in the years ahead. The Office For Budget Responsibility released the latest forecast for the economy and government finances.
Government borrowing will hit £400 billion in the current financial year. Add in the funding for Gilt redemptions, the Debt Management Office will issue over £500 billion of new gilts this year. That's almost 25% of GDP. Thank the Bank, for the £1 trillion pound bank note. No need to task the markets too heavily to fund the deficits, "with inky blots and rotten bonds sustained".
The emergency spending on Covid measures now totals £280 billion. In the next financial year, it is hoped that spending on similar measures, will fall to around £55 billion. Total borrowing will fall to around £165 billion, then to £100 billion in 2022/23 as the damage from the pandemic abates.
No need for tax rises as yet. The Bank of England supports the spending plans, to sustain the economy during the crisis. Fears for tiers now extend to spring next year. Economic output is expected to have fallen by 11% in 2020. The good news, a strong recovery is expected next. The OBR is forecasting growth of 5.5% in 2021 and 6.6% in 2022.
The extension of the furlough scheme to the end of March, suggests the anticipated peak in unemployment will occur in the second quarter of 2021 at around 2.6 million, a rate of 7.5%. The spending review offers a commitment to create jobs, grow the economy and protect people's lives and livelihoods. The unemployment rate is expected to fall back to pre covid levels over the next two years.
More money for the NHS, education and defence. More schools, hospitals, safer streets and a big commitment to infrastructure. The creation of a national infrastructure bank, a positive step. The government is committed to the leveling up agenda, across the U.K.
More money for the low paid. The government is accepting in full the recommendations of the Low Pay Commission to increase the National Living Wage by 2.2% to £8.91 an hour and to extend the rate to those aged 23 and over. An increase in the National Minimum Wage rates follows. How long before the development of Universal Credit morphs into a Universal Basic Income?
It was all going so well for the Chancellor. Why then the suggestion of a public sector pay freeze and the threat to overseas aid. The move is political and piecemeal, with a modest yield in savings compared to the borrowing levels this year. NHS workers will avoid the pay freeze, those on lower incomes will receive a pay rise.
What then also of the the cut in overseas aid? The UK will spend the equivalent of 0.5% of GDP or £10 billion in 2021. "At a time of emergency, sticking to the 0.7% rule is not an appropriate prioritization of resources." according to the detailed spending review. It's also a good way of mitigating external capital flows ... always a good idea as the threat of gilt strike hovers ...
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Moving Out and Moving On ...
The President was asked this week if he would move out of the White House, if the electoral college confirms Joe Biden as the 46th President of the United States next month.
"Certainly" he replied, "You know that". Well it hasn't always been so clear. Trump is down 35 - 1 in his legal challenges to the election result. A rambling, incoherent series of claims of voter fraud and the support of the un-dead for Democrats, has not helped.
This week, a Trump appointed judge in Pennsylvania, wrote a 21 page opinion, rejecting the appeal from the campaign team. "Voters not Lawyers, choose the President, Ballots not Briefs, Decide Elections " wrote State Judge Stephanos Bibas. The Federal appeal court, forcefully rejected the Trump campaign effort, to throw our millions of Pennsylvania votes. Allegations of misconduct were "meritless and undercut by a lack of evidence" the verdict.
According to Politico, in one final indignity, the judges, designated the 21 page ruling as "non precedential". "The campaign claims had so little weight, the case is not worthy of being cited in future cases". In Wisconsin, the Trump campaign team paid $3 million for a recount, only to see Joe Biden's numbers increase in the second tally.
Trump now is forced to accept the reality of leaving the White House in the New Year. The transition process is underway. A scorched earth policy is in play. The shredders are working overtime, no doubt and the furnaces burning bright, to obliterate all trace of foul play.
This week Trump pardoned Michael Flynn, former national security adviser found guilty of lying to the FBI. This follows the pardon of Roger Stone. Flynn and Stone were both convicted of impeding an investigation that threatened Trump.
According to the San Francisco Chronicle, "We should be prepared for more such protective pardons in the weeks ahead, possibly including an unprecedented self-pardon, to which Trump has dubiously asserted an “absolute right.” It would be a fitting finale for a president who has served himself at every turn and any cost."
So will come to an end our "White House WTF" feature. Trump is moving out. The adults are returning to the White House in the New Year ... and not before time ...
That's all for this week! Have a great, safe, week-end ... Hands, Face and Space ...
John
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