Considering a church response to the spending cuts

On a Q&A panel at All Souls Langham Place

I'm just back from an evening service at All Souls Langham Place, which focused on a response to the spending cuts.  It was a really good service, which looked at what is happening and how Christians should respond.  It was very challenging too about what each of us should do and also on how the Church should act.  It was political (by definition) but quite rightly not taking a party view: the starting point was that the cuts are happening (whatever the debates about whether or not they are appropriate). Archbishop William Temple would have approved.

I was on a panel alongside the rector, Hugh Palmer, for questions and answers after the service.  We had quite a range of questions.  People had clearly been thinking deeply about the issue.  I was there both as a Christian who thinks about things politically (with the Christian Socialist Movement) but also as someone who is an economist and so to provide some economic context.

There are Christians in all the mainstream political parties who are doing their best to apply their faith in politics with intergrity, even if they disagree with each other.  In the same way, there are Christians who have different professional views about how the economy works and what economic policy should be (including those not politically involved). For example, some will emphasise a need for deep cuts now; others will focus on investment.  The Q&A included questions on how high earners should respond (during the discussion I mentioned the work on executive pay done for the Church Investors Group), the financial situation in the European Union, how we focus on the needs of future generations, and the need for government finances to be sustainable.

I came away thinking we'd covered a lot and yet there was still much to get into.  Christians need to think through what's happening a lot further - and we need to take action.  For any Christians thinking about how to engage on the issue, I recommend reading the first three chapters of John Stott's classic Issues Facing Christians Today.

Stephen Beer, 28/11/2010

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Official growth forecast to be raised

Financial Times reports 2010 forecast to be upgraded - how should Labour respond?

The Financial Times reported yesterday that the Office for Budget Responsibility will announce tomorrow that it will upgrade its 2010 growth forecast for the UK economy.  There will be other changes too.  This should not be surprising.  The UK economy is being managed this year along the lines of Labour's March budget plans.  But the OBR is predicted to be prepared to downgrade its 2011 forecast.

The OBR will apparently raise its 2010 GDP forecast from 1.1% to 1.8%, closer to other forecasts out there (The Observer states it will be 1.7%).  The 2.3% growth forecast for 2011 is reported to be under threat.

The reason for the upgrade for 2010 is that the economy has been growing faster than expected.  No surprise - with relatively small changes, the governments' fiscal plans for 2010/11 are similar to Labour's.  The OBR also apparently believes that consumers are bringing forward spending from 2011 to this year because VAT will rise to 20% (from 17.5%) in January.  The VAT hike was not in Labour's plans.  I wasn't sure how significant this effect would be until this weekend when separately a few (non economist) friends talked about bringing forward big ticket spends they need to make because of the VAT rise on the way.  Anecdotal evidence but, if it is representative, multiply it many times as people over the country make similar decisions (also worrying about harder times ahead).  The predicted surge in consumer spending may reverse in 2011 and that may be behind reports
(from Treasury sources so we must await the official statement) that the 2011 forecast will be lowered.

And with higher growth comes...a lower deficit.  This is no surprise.  The OBR is reportedly going to lower its 2010/11 deficit forecast by £10bn from £149bn.

The Observer reports today that the OBR will lower its forecast increase in public sector unemployment from 500,000 to 400,000.  This is due to the Tory/Lib plans to cut welfare spending further than planned in the Budget in June.  This is an estimate - it's not based on actual decisions made by departments yet as far as I can tell.  It will be interesting to see if a lower growth forecast for 2011 will mean higher predicted private sector unemployment.

Labour has a difficult message to get across but a positive one nevertheless.  The pace of economic recovery in the UK is matching that of the 1980s recovery so far (looking at the recovery in GDP) because of Labour's policies in the March 09 and March 10 budgets.  The 2010 forecasts are average GDP growth figures - GDP so far is growing much faster in reality from the beginning of the year. If we had listened to the Tories we might still be in recession; we may be sharing the same fate as Ireland.  Future growth (and the OBR's 2012 and 2013 forecasts are above consensus at present) could be threatened by harsher than required austerity measures, for which this government has no mandate to implement.

Looking out further, Labour needs to be thinking forward on economic policy.  The UK economy is pretty robust.  So may be the recovery.  We need to be framing the debate now on economic policy to prepare the ground for our answers to the economic questions in three or four years' time.

Stephen Beer, 28/11/2010

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LibDems and tuition fees

The Liberal Democrats are reported to be considering abstaining on the tuition fee hike when it comes time to vote.  This, they will claim, is covered by the Coalition Agreement.  Yet that is too easy a solution.


One of the requirements of government is to take responsibility.  That counts even in Coalition.  Even if we allow for some nuances within a coalition agreement, it would be bizarre to abstain on something you campaigned so clearly against in the election, now advocate, but yet have the power to prevent.  It would be even more amazing if LibDem ministers did not vote for the policy of the government ie their policy (especially since the LibDem minister Vince Cable runs the department responsible for universities and is therefore responsible for the policy).


For too long with this no mandate government we have been seeing Liberal ministers and spokespeople calling for this or that government policy - when they have the responsibility.  In the case of the tuition fee hike, LibDem ministers are arguing for the hike.  They should take responsibility and persuade their MPs to vote for the(ir) policy; or u-turn and force a rethink.


Stephen Beer, 26/11/2010

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An important week for economic policy

Eyes on the Federal Reserve

This week is an important one for economic policy-makers.  They will be looking at what the US Federal Reserve decides to do mid week.  The general expectation is that the Fed will restart quantitative easing - printing money - to help stimulate the US economy.  However no one knows what, if anything, will be announced nor how markets and the economy will react.  But the decision is an important one.  If it works it may be positive for the US economy but a new QE programme may also indicate that the Fed believes the economic outlook without it would be grim.

This is not just a passing interest for us here in the UK.  Not only does the US economy have a major impact on the world economy, but in the UK the Bank of England is debating whether to restart its own QE programme.  The Coalition's economic policies rely on not only a pick-up in investment and exports in the private sector but also on a move by the Bank should the growth outlook disappoint.

Stephen Beer, 01/11/2010

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