The Office for National Statistics (ONS) will almost certainly show a sluggish growth of 0.3 per cent at best for the second quarter, with some analysts forecasting as low as 0.2 per cent.
The first GDP reading for the second quarter will only provide information about growth in key sectors of the economy, without giving details about consumer, government or export demand. And a low figure will certainly bring calls for the Government to change its deficit policy.
However, Chancellor George Osborne has said that it is important for the government to stick to its economic plan "in a world of very great uncertainty".
"We have brought stability to the British economy, we have brought interest rates down and we are creating private sector jobs. That is all evidence that our economic plan is working and on track," he told a press conference.
Various factors are being blamed for the feeble growth, including the extra Bank Holiday in April and the effects of the Japanese earthquake and tsunami.
Despite the growth or lack of it, many economists are keen for the Government to stick to its deficit reduction plans in an attempt to maintain the UK’s AAA rating.
Ross Walker, UK economist at Royal Bank of Scotland said "What would be more damaging would be if we were to see slippage on spending cuts."
And Danny Gabay at Fathom Consulting added: "The biggest risk to our rating is if the Government caves in. It has set out a plan for short-term pain that leads to long-term growth. That has got to be right."
In support of these arguments the IMF said last month that the UK's high inflation and low growth had been unexpected but were largely temporary and that no changes to policy were yet needed.
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( 3 / 149 )In advance of the publication tomorrow of the last quarter’s GDP figures, Business Secretary Vince Cable has said that growth in the UK economy “isn’t great.”
Dr Cable also suggested the Bank of England may have to engage in more quantitative easing (QE) as growth stalls. He said that the deal struck in Europe last week to bail out countries such as Greece and Ireland had been a "significant step forward".
And in the same interview yesterday he made an astonishing attack on the “right-wing nutters” in the US Congress, who are rejecting a deal over the debt ceiling, saying that they pose a greater threat to the global economy than the eurozone crisis.
Republicans and Democrats have until August 2 to raise the nation's $14.3 trillion (£8.8trillion) debt ceiling. Failure to do so will leave markets facing the prospect of the first ever, major default by the United States.
Coming back to the picture in the UK, Dr Cable said: “"It is not surprising that it isn't great because of the problems we inherited." He added that there was also evidence of "rebalancing" in the economy, and the "beginning of the rebirth of manufacturing and exports".
And speaking of quantitative easing (QE), he said that that would be the right approach if consumer demand remained suppressed and agreed with the Chancellor that the Government should not revert to a ‘plan B’.
"... if there is a sustained period of weakness of demand, the right approach to that is not for the government to relax its fiscal discipline. We have to keep that going,” he said.
"It is about the Bank of England pursuing policies of low interest rates that also helps keep our exchange rate down and helps exports... also using the expansion of QE perhaps in more imaginative ways, not just acquiring government securities. If we have a continuing problem of weak demand that is the way to deal with it," Dr Cable added.
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( 2.9 / 147 )With the Dilnot report on funding for long-term care of the elderly out today, most politicians have realised that the majority of the cost of caring for an ageing population will have to be met by the Government.
Andrew Dilnot’s review of social care has been called a "once-in-a-lifetime" chance to fix the way Britain finances care for its growing numbers of old people.
At the moment care for the elderly is means-tested and anyone with more than a relatively modest £23,250 in assets has to pay their own way. As a result, older people fear that their life savings could be swallowed up by care costs, leaving them nothing to pass on to their children.
The report now suggests a "shared payment" system, where both the state and individuals may have to pay more towards care costs. It is likely that individuals will be responsible for all care costs for a number of years, but once costs exceed a set limit or cap, then the state will step.
A cap of between £35,000 and £50,000 has been suggested, which would almost certainly mean that the Government would have to raise taxes or cut other public spending to pay for it.
New Treasury figures show that while the initial cost will be £2.5 billion a year this will double within a decade to around £5 billion - equivalent to £200 per household.
Another solution to the new hefty price tag would be for taxpayers to buy insurance, although at present, insurers are reluctant to cover what could be a limitless cost.
Prime Minister David Cameron will today welcome the report and Government ministers will call it a "serious and thoughtful" attempt at tackling a major issue.
However, despite calls from an alliance of charities urging political leaders not to “let reform fall off the table for another generation," it is unlikely that any new system will be in place before the next election.
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( 3 / 129 )In a speech in Madrid to the Spanish Foundation for Analysis and Social Studies think-tank, Iain Duncan Smith, Secretary for Work and Pensions, will say that UK businesses should recruit more unemployed young Britons rather than relying on labour from abroad.
He will go on to say that if Government policy has prepared young people for work, "we need businesses to give them a chance", otherwise they will be lost to dependency and hopelessness.
In his speech Mr Duncan Smith will highlight the Government's drive to cut "painfully high" unemployment, saying that it depends not only on welfare reform and training but also on getting immigration under control so that British workers do not face so much competition for jobs from migrants.
He will say that the Government is determined to create an immigration system "that gives the unemployed a level playing field".
"If we do not get this right then we risk leaving more British citizens out of work, and the most vulnerable group who will be the most affected are young people," he will say.
Mr Duncan Brown’s comments appear to echo Gordon Brown’s 2007 slogan of ‘British jobs for British workers’, which was then widely criticised when it emerged that around 80 per cent of the jobs created during Labour's time in power went to migrants.
However, official figures suggest that almost 90 per cent of the 400,000 jobs created in the UK in the past year went to foreign workers.
Mr Duncan Smith will say that while immigration "plays a vital role" in helping bridge certain skills gaps, there are many foreign nationals in low-skilled or semi-skilled jobs that could easily be done by unemployed Britons.
"Good immigration is managed immigration. It should not be an excuse to import labour to take up posts which could be filled by people already in Britain," he will say.
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( 3 / 137 )Britain and other European countries have welcomed the Greek parliament’s vote for severe austerity measures, which should lead to a second bail-out programme thought to be as much as €150bn.
Following the vote, which was passed by 155 votes to 138, with seven abstentions, the FTSE jumped 89.07 points - its biggest one-day gain for more than two months – and the Euro rose to a two week high.
Had Prime Minister George Papandreou lost the vote there would almost certainly have been snap elections and a default on its existing debt, which would have been disastrous for European and global financial stability.
Greek’s largest creditor, Germany was delighted wit the news. Chancellor Angela Merkel said the vote was “really good news” and important for the stability of the Euro.
However, most analysts believe that the vote will only delay the crisis, as Greece’s debt looks unsustainable. Jens Weidmann, president of the German Bundesbank, said: "We've made an important step but we are not at the end yet."
And outgoing European Central Bank member Axel Weber said earlier this week: "ultimately, solving the Greek debt problem will have to deal with the outstanding, past amount of debt".
Following yesterday’s vote, Greece faces the huge question of whether it can implement the austerity programme well enough to satisfy the next inspection of international authorities in three months' time. It also has to raise up to €50bn from the sale of national assets.
Many experts think that this is not enough time. Raoul Ruparel of Open Europe, the London-based think-tank, said: "Although this may pave the way for a second bailout, a Greek default still looks inevitable in the longer term. Delaying tactics will only increase the cost of an inevitable restructuring, particularly for European taxpayers, who soon will own the majority of Greece's debt."
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