UK OK
IMF backtracks
The International Monetary Fund (IMF) has withdrawn its previous criticism of the UK’s austerity programme. Earlier this year the IMF’s chief economist, Olivier Blanchard, described the coalition government's programme of cuts as 'playing with fire', but this week the organisation played down its previous call for the UK government to ramp up spending to pull the economy out of its trough and also praised the Bank of England governor Mark Carney's move to provide strong forward guidance on monetary policy. In a further boost to the chancellor George Osborne, the IMF also upgraded its growth target for the UK to 1.4 per cent his year and 1.9 per cent in 2014.
Budget fears
Ceiling looms
The deadlock in Washington over the US budget looks set to continue amid little signs of a détente between the two sides of the political divide. And the stakes look set to be raised even higher in the next week as the budget impasse looks set to become wrapped up in the even bigger discussion over agreement on raising the US debt ceiling. Theoretically this needs to be agreed by 17 October or the US government will find itself heading rapidly towards defaulting on its debts. Short-term measures may buy it a little time but without an extension to the debt ceiling, the US will soon no longer be able to service its debts. Meanwhile, quantitative easing doves were given a lift this week with the nomination of Janet Yellen as the next chair of the Federal Reserve.
Help at hand
Scheme starts
The government's flagship policy to resuscitate the housing market, Help to Buy, was extended to the secondary market this week. Originally scheduled for January, the scheme was brought forward after proving successful in the new build housing market. It allows banks to offer mortgages against 5 per cent deposits because the government is offering an indemnity on the next 15 per cent of any mortgage, effectively taking the loan to value to 20 per cent. Concerns have been raised among some economists that the scheme will merely create yet another housing bubble.
Global wobble
Growth worries
Global growth is likely to be compromised by the US budget impasse, the potential withdrawal of stimulus from the US economy and the slowing growth of the biggest emerging markets economies, the IMF warned this week. In its semi-annual World Economic Outlook, the IMF shaved its growth forecast for the global economy for this year by 0.3 per cent to 2.9 per cent and by 0.2 per cent for 2014 to 3.6 per cent. The report criticised the fiscal consolidation in the US economy brought about by across the board sequestration, itself a product of political wrangling which was never satisfactorily resolved late last year and is holding back growth, forecast to be 1.6 per cent this year.
Rail returns
East Coast dividends
The government benefited to the tune of £208m in premiums and dividends from the nationalise East Coast mainline during the year to March. The government body, Directly Operated Railways, took over running the line in 2009 when National Express handed back the keys saying it could not run it profitably and now says it expects the taxpayer to benefit to the tune of around £1bn by the time it is returned to private hands in 2015. The figures boosted calls from unions for the line to remain in public hands although the government remains committed to a timetable which will see a new private operator announced next autumn, with a view to handover in February 2015.
Equitable search
400,000 sought
The government is launching a campaign to find 400,000 Equitable Life policyholders who have not come forward to claim any payment due to them. It is also extending the deadline for individuals to submit new claims to the Equitable Life Payment Scheme to 2015. Many policyholders lost half their life savings when Equitable Life, a previously well-regarded insurer, came to the brink of collapse in 2000 after promising unrealistic annuity rates to investors. The Treasury this week blamed poor data from Equitable Life for the failure to track down more eligible policyholders, but in July 2011 the Treasury destroyed details and addresses of 353,000 policyholders provided by the Equitable Members Action Group on data protection grounds. Since 2011 policyholders have received £734m in payments, out of the government's allocation of £1.5bn.
