Financial Transaction Tax Good for Economy 
According to the European Union official in charge of tax policy, the introduction of a financial transaction tax would cause minimal disruption and raise just under £8.5 billion for the government.

Speaking earlier this week, the European Commissioner for taxation and customs union, Algirdas Semeta, told the House of Lords that banks were highly unlikely to relocate anywhere else if the tax was brought in.

Mr. Semeta said: “It is very difficult for me to imagine that a financial institution could move somewhere else and abandon all its clients in the European Union.”

He also added that the European Union's planned implementation of an FTT would "minimise the risk of relocation", though he said he was open to suggestions as to how the risk of activity moving elsewhere could be reduced further.

The European Union expect the financial transaction tax to raise roughly €60 billion across the region every year, of which a fifth would could from the UK; and Mr. Semeta told the House of Lords that all the money raised within the UK would go to the British budgets.

Previously the Prime Minister, David Cameron, and the Chancellor, George Osborne have publicly stated their opposition to the tax being introduced within the UK; whilst the French president, Nicolas Sarkozy has already announced that France would be introducing the tax from the middle of the year.


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Consumer Confidence Reaches Five Month High 
Consumer confidence rose in January to its highest level in five months, in a sign that the underlying economic conditions aren’t as weak as first feared.

A leading consumer confidence index rose by nine points to forty-seven in January, the highest it has been since August 2011 – although this figure is still nearly thirty points below the average.

The improvement in consumer morale supports the Bank of England’s view that consumption will help stabilise the economy later this year, as a fall in inflation eases the squeeze on household budgets.

One chief economist said: “Looking forward, renewed hope that the UK will avoid a double-dip recession may support sentiment, especially since the downward trend in inflation is set to continue through 2012.

“With the UK recovery likely to remain weak in the first half of the year, a significant and sustained rise in consumer confidence remains unlikely in the near term."

The increase in consumer confidence is being attributed to improved industry surveys for the manufacturing and service sectors, as well as the recent sharp fall in inflation.

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Report Suggests Inflation Set to Fall Below Two Percent 
It is expected that households will receive a welcome boost later today when the Bank of England signals that inflation will fall below 2percent in the coming months.

Following two years of shrinking incomes, the Bank of England’s latest quarterly Inflation Report is expected to show a sharp drop in the forecast for the benchmark consumer prices index (CPI); providing further cause for hope.

The downward trend has already started, after the Office for National Statistics reported yesterday that inflation fell to a 14 month low in January; with the pace of the decline expected to accelerate.

A sharp fall would help to ease the squeeze on households, which have been hit by a combination of high inflation, rising unemployment, and low wage rises; and economists are expecting such a fall to prevent the UK facing a double-dip recession and hold on to its AAA credit rating.

The resurgence in optimism has been driven by better-than-expected recent surveys and also the markets shrugging off Moody’s rating warning yesterday, to reinforce Britain's "safe haven" status.


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Moody’s Warn UK on Credit Rating 
The ratings agency, Moody’s, has warned the UK its credit rating may be cut in future, potentially increasing borrowing cuts.

Following concerns about the possible impact of the Eurozone crisis on the UK’s growth prospect, the US agency have put the UK on “negative outlook”, implying there is a thirty percent change the UK could lose its AAA credit rating within the next eighteen months.

Moody’s said in a statement: “The increased uncertainty regarding the pace of fiscal consolidation in the UK due to materially weaker growth prospects over the next few years, with risks skewed to the downside.

“Any further abrupt economic or fiscal deterioration would put into question the government's ability to place the debt burden on a downward trajectory by fiscal year 2015-16.

“Although the UK is outside the Euro area, the high risk of further shocks within the currency union are exerting negative pressure on the UK's AAA rating given the country's trade and financial links with the Euro area.

“Overall, Moody's believes that the considerable uncertainty over the prospects for institutional reform in the Euro area and the region's weak macroeconomic outlook will continue to weigh on already fragile market confidence across Europe.”

Other European countries including Austria and France have also been warned about the future of their credit rating; whilst Italy, Portugal and Spain have had their ratings lowered.


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UK To Avoid Double-Dip Recession 
The Confederation of British Industry (CBI) has forecast that the UK will narrowly avoid a double dip recession during 2012; although they have announced that the fate of the country’s economic future is closely tied to the Eurozone.

In their latest economic forecast, the CBI have lowered their estimates of British growth from 1.2 percent predicted in November 2011 to 0.9 percent, forecasting a fragile 0.2 percent growth during the first quarter of 2012.

The CBI say the latest figures are in response to the economic contraction recorded during the last three months of 2011; with CBI’s general director, John Cridland, saying: “Economic conditions will continue to be tough, especially in the first half of the year, and the UK recovery will depend on the successful resolution of the Eurozone crisis.

“Although risks remain we expect growth this year, improving modestly in 2013, primarily driven by positive net trade and business investment.

“The pressure on household incomes will also ease slightly in the second half of this year as inflation falls, resulting in a slight increase in consumer spending. But weak wage growth and high levels of unemployment will continue to be a brake on household spending.”

The CBI have predicted that during the next twelve months growth will pick up, forecasting a 0.6 percent increase in the third quarter and a 0.5 percent growth in the final quarter; whilst also predicted a two percent growth during 2013.


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