The 2010 UK budget in brief.

Reading: Hamish McRae in The Independent, Ambrose Evans-Pritchard in The Telegraph and Jill Palmer in Tribune.

A print magazine cover image on what the 2010 general Election is all about.
Reading: Simon Jenkins in The Guardian on how in hock we are to the debts of the insolvent banks
Reading: CityWire on Lehmann Bros and how to cook the books
Reading: What Ernst and Young – the auditors of Lehmann Bros – and who signed off their books say

Dodgy tenner cartoon featuring Alastair Darling drawn for Channel 4 News © Matt Buck Hack cartoons

More rumblings from some of the membership of the Monetary Policy Committee of the Bank of England – as reported by CityWire. The MPC is the committee which decides how well the national economy is doing and which recently approved the policy of Quantitative Easing (video explainer). This process invented £225Bn of new UK money (or credit) which was then used to buy government debt, much of which was undertaken to support the insolvent banks and financial institutions including HBOS and RBS.

QE in the UK started on March 5th 2009 and ended during February of 2010.

The following chart is a screenshot of the BBC twelve-month tracker for the value of the UK’s currency –  pound sterling – measured against the US dollar and which covers these two dates. I have added them to the chart because I think there is an interesting connection of time and dates. Can you see a coincidence anywhere?

If you would like to learn about the invention of paper money or credit) with more than a few excellent jokes do watch this fine animated cartoon.

Updated: 9pm 9th March 2010. The BBC’s Stephanie Flanders has a piece of analysis on the relative position of the UK after the disappointing balance of trade figures for Jan 2010. The ‘recovery’ seems to have stalled.

So, the 2010 election campaign in which no one talks about the issue has started. We know it has because expensive poster sites have been purchased. It’s going to be a tiresome few months while respective campaigners batter glossed messages back and forth and the potential voters look for something more enlightening, or productive to do.

The essential issue, which will be avoided as much as possible, are  how the cuts in wages, public services and the rises in taxation made inevitable by the gift of money to the insolvent financial houses will be managed.

The ‘emergency’ budget following the election will be brutal whoever wins. Social distress (a euphemism for further unemployment and mass protest) may come in the wake of wage cuts and job losses in the public sector later in the year.

On the party political front, Labour are a mess, unable to ditch Gordon Brown, a massively unpopular (and probably unhappy) leader. They seem to need an argument and a leadership election about what they are for. The Tories have a ‘flawless’ front man in David Cameron they appear to neither particularly  want or like, but they will be loyal while he holds the prospect of a general election victory after 12 years in opposition. (The launch of the first Conservative poster may reveal an explicit Cameron not Conservative sale.) After the election and probably in office, the internal party loyalty will be more prone to fracture, perhaps even under pressure from business interests lobbying about the need for entry to the Euro, especially if sterling continues to be devalued to inflate away the enormous national debt.

Nick Clegg, leader of the Lib Dems and the other minority nationalist parties will find themselves courted as potential partners in any possible coalition or minority government should the result be as messy and close as some predict.

More unpredictable general problems are the after effects of printing money to prop up the economy during 2009 (quantitative easing), the collapse in sterling relative to the Euro and the Dollar and the price of interest payable (yields) on UK government debt (gilts). The Chancellor (of the Treasury) and the Governor (of the Bank of England) have to try and sell record volumes of gilts to finance future national spending.

When asked for something optimistic to add to this speculative post, a close collaborator said, we may not need an election for another four years. Some people also hold out hope for Fabio Capello’s England team in the World Cup. (Labour are bound to roll out the old line from Harold Wilson about only winning it under a Labour government…)

Perhaps the weather will also improve. Please add reasons any more reasons to be cheerful in the comments below if any spring to mind. Happy 2010.

It’s a sad thing about news that you usually only get it in dribs and drabs and rarely all at once.

• The Chilcott Inquiry into the Invasion of Iraq opens

• Bank of England reveals undeclared £60Bn loan to part-nationalised financial houses HBOS and RBS

Cartoon made for Tribune.

Post updated: 11.30am George Eaton of the New Statesman has an interesting story about problems with full disclosure in news and opinion here.

Promises of jam tomorrow are a fine political tradition and the last Queen’s Speech before the general election of 2010 will honour them today. This set-piece event allows Her Majesty’s government to lay out its planned legislation for the next session of parliament.

Despite the usual spin from all parties, including calls for it to be cancelled*, it is not half as important an event as the forthcoming pre-budget report. This is because the formal report from the UK Treasury, due on December 9th, will have to deal with the mucky but important matter of money and how it will be spent. Whatever Chancellor Alastair Darling announces will define the Labour spending-Conservative cuts argument set to dominate the coming political campaign.

* which are entirely futile if you work in the highly traditional world of Westminster.

UPDATED: 19th November at 9pm. The national public sector, or government, borrowing requirement in October was the highest on record. This sort of news may have some effect on what the pre-budget report brings (Link from the BBC.)

Later today it is quite possible the Bank of England will choose to invent a lot of money again. This is to help supply ‘liquidity’ or, credit to the UK’s national economy. The process is called Quantitative Easing – and you can read the BoE’s explanation of what they are doing here. The amounts of money they are prepared to ‘print’ (metaphor) or, create with a computer may be as much as £50Bn.

< – Hang on, there’s a fun bit coming – >

The UK has already spent £175Bn doing this since March of 2009 as the full effects of the banking and financial crash became apparent.

The whys and wherefores of these processes are apparently, complex, but they do all stem from our history and from one story in particular. It is a tale about a Scottish adventurer called John Law and his time in France at the start of the 1700s. A very clever Canadian filmmaker called Richard Condie made a film about Law’s story in 1978. I think it is still great now and I recommend you spend (geddit) ten minutes of your day watching and listening to the story about the man who invented paper money for us all.

John Law and the Mississippi Bubble – great animated storytelling

Updated at 12.30pm: The Bank has announced it will extend the process of quantitative easing by another £25Bn. Larry Elliott of The Guardian has the story here.

Young Conservatives enjoy a fancy dress event. Image from Wikipedia

The Conservative Party scored a big win in the Norwich North by-election. The party took the seat from Labour with a hefty swing of the vote, although the overall turnout was under 50% of those eligible to vote.

This week also saw the rebrand of the BBC’s Doctor Who with the appointment of a new doctor, Matt Smith. The photographic evidence, available via The Sun, reveals what looks like a tweedy 1950s style Young Conservative. So, the Beeb’s preparations for the zeitgeist are going well.

Let’s hope somebody‘s policies are as sharp as their fashions because the national economic news, from whichever side of the fence you look, is still uniformly grim.

The Bank of England is to print more money in a further effort to get the banks to get lending again. (The Treasury allowed an initial spend of £150bn in March this year).

Perhaps as a result of printing so much new money, the cost of UK Gilts or, stakes in long-term Government debt, is rising. This means they give less value for money to investors and may as a result struggle for sales against government debt from other countries, such as Germany or the US.

The Chancellor of the Exchequer has unveiled new plans for regulation of the banks. He has been criticised for not enforcing a separation of of high street, or retail and investment banking. Many critics feel the crossover of the two jobs has been a major contributory factor in the collapse of most of the UK’s independent banking industry because of reckless investment decisions, particularly in the property and mortgage markets.

There are some very differing opinions about how well the economic recovery is going following the OECD’s publication of its latest economic outlook paper. The Paris-based organisation anticipates a contraction in the UK economy of over 4% year on year. This is significantly less optimistic than the treasury’s latest estimates. Of course, no one actually knows… (Point ii in last post has something on the brass tacks and grimy UK politics of it at present).

Brass tacks – a definition.

UPDATED. 1st July 8pm. Channel 4 News has a Factcheck on some of the competing claims about public spending here.