The latest growth figures, which are set to be published later this week, are expected to show that the UK remained in recession between April and June 2012; and with the Chancellor already under pressure to reduce public spending, with the welfare budget earmarked for an extra £10 billion of cuts, leading economists are now adding further pressure onto George Osborne.
Many of the economists are calling for the Chancellor to make tax cuts and introduce major infrastructure projects, in a bid to boost the ailing economy, with a former Bank of England rate setter, Andrew Sentance, claiming that George Osborne should place a stronger emphasis on reform.
Mr Sentence, added: “A higher priority should be given to programmes which will help business competitiveness – such as investment in transport infrastructure.
“On the tax side, we need a much stronger emphasis on longer term reform – cutting tax rates by spreading the tax base of tax and simplifying the tax structure.”
Along with leading economists adding pressure on the Chancellor, George Osborne’s predecessor, Alistair Darling also urged the Chancellor to change course or risk doing 'immeasurable' damage to the UK economy.
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One of the Bank of England’s committee members has claimed that there is a new “underlying sense of confidence” in the UK; as he predicts that the current financial squeeze on household incomes will end shortly.
Martin Weale, a member of the Bank of England’s Monetary Policy Committee, has said that he is hopeful of a revival within the economy, although he has warned that despite the underlying sense of confidence, the Eurozone crisis could still influence the recovery.
During a visit to Birmingham this week, Mr Weale said: I would say that the general mood is that there is an underlying sense of confidence. The economy is stagnating but I have not heard people say ‘this is a disaster.’
“For quite a long period now, we have had slight upward movement, and slight downward movement. Rather than describe it as a double-dip recession, I would describe it as a sustained period of stagnation.
“Not only are we not making any progress, but we are not growing at all. My hope is that there will be a gradual revival.
“I think that the squeeze on household spending through rising fuel and petrol prices is coming to an end. The big uncertainty is how the situation in the Eurozone develops.”
Mr Weale, who previously worked as the Director of the National Institute of Economic and Social Research, added: “I think in the longer term we need to get into a situation where people feel more comfortable about the level of debt they have.
“I think that people have discovered that debt is not an automatic way to higher profits.
“But the elephant in the room is the Eurozone and that could have very unpleasant consequences and I think that everybody recognises that.”
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For the first time, the names and faces of twenty of the most wanted “tax fugitives” who owe HMRC more than £700 million are being published on the tax authority’s flickr channel and within the national press.
The decision to publish the names and faces of those wanted for tax evasion, fraud and money laundering, has been taken by HMRC in an effort to try and enlist the support of the public in tracking them down.
It is also the latest move of a government campaign which aims to tackle tax evasion and gather taxes at a time of austerity; with those featuring on the list being described as “tax criminals who have absconded after being charged with a crime or during trial.”
David Guake, the Exchequer Secretary, has said of the latest tactic being used by HMRC to tackle tax evasion: “The government is absolutely committed to tackling tax evasion and fraud.
“These criminals have collectively cost the taxpayer over £765 million and HMRC will pursue them relentlessly. We hope that publishing their pictures in this way will enable members of the public to contribute to the effort to catch them.”
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It has been suggested that the government could fund a tax “giveaway” of up to £20 billion to boost economic growth next year, by using the profits made by the Bank of England’s quantitative easing programme.
The suggestion has come from a leading economist, who has claimed that the government could use the “accumulated profits from quantitative easing to finance a special temporary tax cut for a year or two” after official figures revealed the potential profit by February next year from quantitative easing to the Bank of England would be around £20.7 billion, which it is claimed is more than enough to knock 2.5 pence off income tax for a year.
The economist has added that in an effort to avoid damage to the credit rating, the government could reclaim the profits from quantitative easing, claiming that “the superficial attraction of this proposal for the government is clear: recycling this money to voters rather than leaving it idle at the Bank.”
However, despite the official figures revealing that the profits from the quantitative easing programme would reach the £20 billion mark, the Bank of England are said to be sitting on the profits because it bought gilts with money it has effectively printed; and the gilts pay interest which is collected from the government.
Although the arrangement means the funds are effectively moved from one arm of the government to another, it is still recorded as a normal payment.
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Official figures published today (August 14th 2012) have revealed that the inflation rate within the UK unexpectedly rose last month, as a slowdown in sales on the High Street squeezed household budgets further.
The latest figures, compiled and released by the Office for National Statistics, have shown that during July inflation rose to 2.6 percent, compared to 2.4 percent in June; with a 21.7 percent rise in the cost of flights which saw overall transport prices rise by one percent being one of the reasons cited for driving inflation up.
A rise in the Consumer Price Index (CPI) was met with a rise in the Retail Price Index (RPI), which saw an increase from 2.8 percent in June to 3.2 percent last month.
The latest figures come less than a week after the Bank of England lowered its inflation forecast in its latest quarterly report, suggesting that the annual inflation figure was likely to fall below the two percent target by the end of the year.
Despite the latest figures showing an unexpected rise, economists believe that the two percent target is still achievable, with July’s figures being a temporary blip. One economist has said of the latest inflation figures: “Today’s inflation report is not expected to be an obstacle for further policy action in the coming months, as CPI is still expected to remain below the two percent target in the medium term.
“All in all, today’s upswing in inflation is likely to be just a blip and the downward trend is expected to resume in August. Easing demand is expected to prevail in the coming months, with retailers left with very limited pricing power.”
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