Economy

New British government inherits worst economic plight since World War II

Published

2 months ago

July 11, 2024

Britain’s new Labour Party government is betting that an economic plan modeled on “Bidenomics” will reverse more than a decade of economic drift and boost stagnant living standards without requiring budget-busting spending.

It won’t be easy.

Like President Biden, Prime Minister Keir Starmer promises a more active government than his Conservative Party predecessor, as well as investments in green energy and industrial policies that promote domestic manufacturing.

But Starmer — who met Biden at the White House on Wednesday — inherited an economy showing the strains of more than a decade of political tumult, inadequate business investment and sclerotic government planning. He also lacks a ready source of cash.

The economic climate represents “the worst set of circumstances since the Second World War,” Rachel Reeves, the country’s first female chancellor of the exchequer, or finance minister, said Monday. Adjusted for inflation, wages are virtually unchanged since 2007, according to the Center for Economic Performance, a research institute. The average German is now 20 percent richer than the typical citizen of the United Kingdom.

“The U.K. is not in a quick-fix situation. Most people think it is going to take the best part of a decade to see material improvement come through,” said David Page, head of macroeconomic research at AXA Investment Managers in London. “But I think there’s also now a hope, and that’s different, that you might see that emerge in the next 10 years.”

Reeves moved quickly this week to underscore the urgency of the challenge, calling economic growth “our national mission” and saying that “there is no time to waste.” But she has vowed to obey informal fiscal rules that will limit Labour’s ability to spend freely, given the country’s debt load. Her aim is to use modest amounts of public money to attract private capital.

The roots of Britain’s economic woes lie in weak productivity growth, economists said. Equipping workers to produce more goods each hour is the key to expanding the economy and raising living standards. And it is what has been missing from Britain’s recent performance.

The typical American worker last year produced 23 percent more than their British counterpart. That gap had more than doubled since 2007. French and German workers also outperform the British.

British productivity rose steadily for nearly three decades but has flatlined since the 2008 financial crisis. The government austerity and recurring political crises that followed the Great Recession discouraged companies from investing to make workers more efficient, economists said.

In the United States, business investment has risen by more than one-third since 2016, almost seven times the increase in the United Kingdom, according to government statistics.

“What does it mean? It means you’re working with outdated equipment and less of it,” said Rob Wood, chief U.K. economist for Pantheon Macroeconomics in Newcastle upon Tyne.

The pandemic — and government budget cuts that left the National Health Service understaffed — also took a toll on productivity. There are 754,000 more working-age people inactive now compared with before the pandemic, according to a House of Commons analysis. Many are among the more than 6 million Britons who are waiting to see a doctor, according to the British Medical Association.

Britain’s problems are the legacy of years of interplay between public and private choices. The country’s overly large financial services industry shrank following the 2008 crisis, which made credit harder to get than elsewhere.

The government met the crisis with an “age of austerity,” which hurt public services and crimped economic growth.

“We’ve learned that public austerity destroyed the private sector as well. We need to invest,” said David Blanchflower, an economics professor at Dartmouth College, who served on the Bank of England’s monetary policy committee before the 2008 crisis.

Brexit — the 2016 decision to quit the European Union — and its implementation consumed three prime ministers over most of a decade and continues to shadow the economy.

Erecting commercial barriers against its largest trading partner will shrink the U.K. economy by 4 percent and will leave both exports and imports roughly 15 percent lower than if the country had remained in the E.U., according to the Office for Budget Responsibility, an official agency.

Government instability has been an impediment to growth. Since 2010, Britain has had five prime ministers, seven chancellors, nine cabinet ministers for business and countless long-term economic plans.

Last fall, Prime Minister Rishi Sunak canceled the second half of a high-speed rail line intended to link London with northern cities. First proposed in 2009, the line — billed as Europe’s largest infrastructure project — was to have connected the capital with Birmingham and Manchester, farther north.

But in October, Sunak eliminated the portion of the line from Birmingham to Manchester, leaving businesses that had planned on faster rail connections fuming.

“The sheer political and policy volatility [means] businesses don’t know whether they are coming or going,” Wood said.

Starmer’s meeting with Biden on the sidelines of a North Atlantic Treaty Organization summit underscored the “special relationship” between the allies.

In a Washington speech last year, Reeves sketched an economic formula that resembled Treasury Secretary Janet L. Yellen’s doctrine of “modern supply-side economics.” The two share an enthusiasm for spurring growth by expanding the labor force and investing in infrastructure and climate-friendly energy sources.

Relative to the size of its economy, the U.S. public debt is a bit larger than that of the United Kingdom. But the dollar’s status as the global reserve currency gives the U.S. government more latitude in dealing with its spending issues.

Labour has said it will abide by an informal fiscal rule developed by the previous U.K. government. That will require it within five years to start reducing debt as a percentage of gross domestic product, which is now set to reach 95 percent in 2026.

Labour also has ruled out increasing personal income taxes, the national insurance levy or the value-added tax.

Budgetary realities already have caused Labour to shrink its ambitions. In February, the party scrapped its pledge to spend 28 billion pounds, or roughly $36 billion, each year on green energy programs. Instead, officials said annual spending would hit 4.7 billion pounds, or $6 billion.

“Reality has kicked in,” said Paul Dales, chief U.K. economist for Capital Economics. “The new government has to focus on areas where actually they can make a difference without costing lots of money.”

One such priority will be overhauling the notoriously slow planning process that governs housing and infrastructure projects. Labor wants to speed planning approvals to build 1.5 million homes over the next five years and to overhaul the energy grid.

The new government this week ended the Conservatives’ ban on onshore wind farms. Instituted in 2015, it allowed a single objection to block projects.

Labour faces a daunting to-do list. But it may enjoy a short-term tailwind. Inflation in May was running at an annual rate of 2.8 percent, down from its peak near 10 percent in 2022. After a brief recession last year, growth is beginning to stir. The International Monetary Fund expects the economy to expand by 0.7 percent this year and accelerate to 1.5 percent in 2025.

With inflation falling, the Bank of England could soon cut its 5.25 percent benchmark lending rate for the first time in four years, which would give the economy a boost.

If the new government can improve the nation’s health service and return some inactive workers to the labor force, the economy would get a further lift.

Labour’s massive parliamentary majority and the disarray in the ranks of the opposition Conservatives mean that Starmer can expect to remain in office for at least a full five-year Parliament, if not two.

That relative stability comes as other major economies are preoccupied with domestic politics. In France, the left-wing coalition that triumphed in parliamentary voting this month has endorsed free-spending policies that could unsettle financial markets. And the United States is in the midst of a divisive presidential contest, which could return an unpredictable former president to the White House.

“In an uncertain world,” Reeves said on Monday, “Britain is a place to do business.”

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Economy

Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

Published

15 hours ago

September 18, 2024

Anne Joseph

VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

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Economy

N.B. election: Parties’ answers on treaty rights, taxes, Indigenous participation

Published

15 hours ago

September 18, 2024

Anne Joseph

FREDERICTON – The six chiefs of the Wolastoqey Nation in New Brunswick distributed a survey on Indigenous issues to political parties ahead of the provincial election, which is scheduled to kick off Thursday. Here are some of the answers from the Progressive Conservative, Liberal and Green parties.

Q: How does your party plan to demonstrate a renewed commitment to recognizing our joint treaty responsibilities and acknowledging that the lands and waters of this territory remain unceded?

Progressive Conservative: The party respectfully disagrees with the assertion that land title has been unceded. This is a legal question that has not been determined by the courts.

Liberal: When we form government, the first conversations the premier-designate will have is with First Nations leaders. We will publicly and explicitly acknowledge your treaty rights, and our joint responsibility as treaty people.

Green: The Green Party acknowledges that New Brunswick is situated on the unceded and unsurrendered territories of the Wolastoqiyik, Mi’kmaq and Peskotomuhkati peoples, covered by the Treaties of Peace and Friendship. Our party is committed to establishing true nation-to-nation relationships with First Nations, grounded in mutual respect and co-operation as the treaties intended.

Q: How does your party propose to approach the issue of provincial tax agreements with First Nations?

Progressive Conservative: The government of New Brunswick operates in a balanced and fair manner with all organizations, institutions and local governments that represent the citizens of this province, including First Nations. Therefore, we cannot offer tax agreements that do not demonstrate a benefit to all citizens.

Liberal: Recent discussions with First Nations chiefs shed light on the gaps that existed in the previous provincial tax agreements with First Nations. Our party is committed to negotiating and establishing new tax agreements with First Nations that address the local needs and priorities and ensure all parties have a fair deal.

Green: The Green Party is committed to fostering a respectful relationship with First Nations in New Brunswick and strongly opposes Premier Blaine Higgs’s decision to end tax-sharing agreements. We believe reinstating these agreements is crucial for supporting the economic development and job creation in First Nation communities.

Q: How will your party ensure more meaningful participation of Indigenous communities in provincial land use and resource management decision-making?

Progressive Conservative: The government of New Brunswick has invested significant resources in developing a robust duty to consult and engagement process. We are interested in fully involving First Nations in the development of natural resources, including natural gas development. We believe that the development of natural gas is better for the environment — because it allows for the shutdown of coal-fired power plants all over the globe — and it allows for a meaningful step along the path to reconciliation.

Liberal: Our party is focused on building strong relations with First Nations and their representatives based on mutual respect and a nation-to-nation relationship, with a shared understanding of treaty obligations and a recognition of your rights. This includes having First Nations at the table and engaged on all files, including land-use and resource management.

Green: We will develop a new Crown lands management framework with First Nations, focusing on shared management that respects the Peace and Friendship Treaties. We will enhance consultation by developing parameters for meaningful consultation with First Nations that will include a dispute resolution mechanism, so the courts become the last resort, not the default in the face of disagreements.

This report by The Canadian Press was first published Sept. 18, 2024.

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Economy

Canadian Coast Guard crew member lost at sea off Newfoundland

Published

15 hours ago

September 18, 2024

Anne Joseph

ST. JOHN’S, N.L. – A crew member of a Canadian Coast Guard ship has been lost at sea off southern Newfoundland.

The agency said in a release Wednesday that an extensive search and rescue effort for the man was ended Tuesday evening.

He was reported missing on Monday morning when the CCGS Vincent Massey arrived in St. John’s, N.L.

The coast guard says there was an “immediate” search on the vessel for the crew member and when he wasn’t located the sea and air search began.

Wednesday’s announcement said the agency was “devastated to confirm” the crew member had been lost at sea, adding that decisions to end searches are “never taken lightly.”

The coast guard says the employee was last seen on board Sunday evening as the vessel sailed along the northeast coast of Newfoundland.

Spokeswoman Kariane Charron says no other details are being provided at this time and that the RCMP will be investigating the matter as a missing person case.

This report by The Canadian Press was first published Sept. 18, 2024.

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