Month: May 2022

The National Institute of Economic and Social Research (NIESR) predicted the UK will fall into recession this year.

It called on Chancellor Rishi Sunak to do more to stop people sliding into debt and destitution.

The Treasury said it is providing support to households.

In its latest quarterly outlook of the UK economy, NIESR warned that a combination of rising prices and measures announced in the Chancellor’s Spring Statement – such as the decision not to scrap a planned rise in National Insurance tax – are hitting the poorest households hardest.

Inflation – the rate at which prices rise – is at a 30-year high, as the Ukraine war drives up fuel and energy prices.

The Bank of England has warned inflation might reach 10% within months.

The think tank urged the government to raise Universal Credit by £25 per week between May and October, which would cost around £1.35bn, and give £250 each to 11.3 million lower income households.

“Without this targeted support we expect a further increase in extreme poverty,” the think tank said, with about a quarter of a million households sliding into extreme poverty, taking the number to about a million.

About half a million households would “face the choice between eating and heating” without these payments, it said, adding that the chancellor had a reported £20bn of “headroom” for government spending that could be used to cushion the shock to income.

It wasn’t the National Institute for Economic and Social Research but the official independent forecaster, the Office for Budget Responsibility, that first identified £20bn of fiscal “headroom” in the Spring Statement, much of which Rishi Sunak chose not to use.

This refers to the room for manoeuvre the Chancellor has if he wants to meet self-imposed fiscal rules, such as his goal of not borrowing to fund day-to-day spending within three years.

Those rules don’t refer to any objective constraint on government spending – unlike the trouble households get into when they hit the overdraft limit.

The Treasury points out it has already spent billions on support, which is true.

But even within his rules Mr Sunak has billions more to spare.

With the economy forecasted to contract, NIESR is not alone in thinking that further support for households could loosen the grip of a squeeze on living standards that is already feeling painfully tight.

The think tank predicted that inflation would average 7.8% in 2022 and will remain above 3% until 2024 – above the Bank of England’s 2% target.

At the same time, economic growth is set to slow.

While NIESR forecast that UK economic growth in 2022 would increase by 3.5% on average, it predicted a fall in the final two quarters of the year.

This would push the UK into a recession, which is two consecutive quarters of economic decline.

Meanwhile, government policies are set to leave households with even less disposable income, according to NIESR.

It forecasts household income when adjusted for inflation will fall by 2.4% in 2022, along with a small rise in unemployment next year.

Tony Danker, director general of the CBI, which represents big businesses, told the BBC’s Today programme that companies were suffering too.

He said inflation, higher energy prices, labour shortages and the war in Ukraine had made firms “pause before investing”, and that this was stopping them “creating jobs and paying good wages”.

He said the government needed to create “reasons to invest” such as subsidising the shift to clean energy or cutting business rates for shops that have had to put up prices.

“If we wait… the economy will end up in more trouble,” he added. “Get firms investing now because that will stop us facing dire consequences later on.”

Professor Stephen Millard, NIESR’s deputy director for macroeconomics, said: “Although the war in Ukraine is fundamentally a human tragedy, it has resulted in another supply shock for the UK economy: pushing down growth and pushing up on inflation.”

He added: “We need fiscal policy to loosen and monetary policy to tighten if the UK economy is going to sail safely through these treacherous seas.”

A Treasury spokesperson said the country has had a “strong economic recovery” from the pandemic but acknowledged that these are “anxious times”, and said the government is taking action to support households.

“This includes a tax cut of over £330 a year for the typical employee, lowering the Universal Credit taper rate to help people keep more of the money they earn, and providing millions of households with up to £350 each to help with rising energy bills,” the spokesperson said.

“Public debt is at the highest levels since the 1960s and rising inflation is pushing up our debt interest costs, which means we must manage public finances sustainably to avoid saddling future generations with further debt.”

It comes as NIESR separately forecast that global economic growth would be 1% lower, or about $1.5tn, at the end of 2022, due to the Ukraine war.

The prime minister is scheduled to meet leaders of both countries during a 24-hour trip on Wednesday.

Mr Johnson is expected to discuss Europe’s response to the ongoing Russian invasion of Ukraine.

Mr Johnson’s official spokesman said the visit was also about the “security of Europe more broadly”.

“We understand the positions of Sweden and Finland and that is why the prime minister is going to discuss these broader security issues,” he said.

Asked whether the two countries’ possible membership of the alliance would be discussed, the prime minister’s spokesman said: “We support democratic capabilities to decide on things like Nato membership.”

Mr Johnson will give a news conference in each country, travelling to Sweden first before going on to Finland and then returning to the UK.

Nato – the North Atlantic Treaty Organisation – is a 30-nation defensive alliance founded shortly after the end of World War Two.

It has its headquarters in Brussels, but is dominated by the massive military and nuclear missile power of the US.

Support for joining Nato has increased in both both Sweden and Finland since Russia invaded Ukraine, despite their long history of pursuing policies of military neutrality to avoid conflict with regional powers.

Finland and Sweden are both modern, democratic countries that fulfil the criteria for membership.

Nato’s chief, secretary general Jens Stoltenberg, has said the alliance would welcome them with open arms and there would be minimum delay in processing their membership.

During a visit to Sweden in April, Finnish Prime Minister Sanna Marin said “everything had changed” when Russia invaded Ukraine and told reporters Finland must to be “prepared for all kinds of actions from Russia”.

Her comments coincided with the publication of a security report that warned membership of Nato could result in “increased tensions on the border between Finland and Russia”.

At the same time, Ms Marin’s Swedish counterpart Magdalena Andersson told reporters that the same “very serious analysis” was taking place as in Finland and she saw no point in delaying it.

Finland for decades, and Sweden for centuries, have chosen to adopt a kind of neutral status rather than enter any military alliance.

But Russia’s invasion of Ukraine has transformed public opinion in both countries. People seem now to want the protection that Nato membership can provide.

But neither country would get the alliance’s security guarantee – that an attack on one member is an attack on all – until their application has been accepted. That could take some months. Until that point, there is a moment of vulnerability.

So what will be interesting is to see what kind of support the UK – and other countries – might be prepared to provide Sweden and Finland in the meantime, during that so-called “grey zone” between both countries’ application and accession to the Western military alliance.

Finnish Foreign Minister Pekka Haavisto subsequently said it would be “useful” for Sweden and Finland to launch joint Nato membership bids, but added no fixed date had been set for any potential application.

However, Russia has warned them not to and threatened “a military technical response” if they do try to join.

Kremlin spokesman Dmitry Peskov stressed that Moscow would have to “rebalance the situation” with its own measures if any bid went ahead.

In a speech last month, Foreign Secretary Liz Truss said they should be admitted “as soon as possible” if they decided to apply for membership.

Mr Johnson held talks with Ms Andersson and Finnish president Sauli Niinisto in March as part of a meeting of the Joint Expeditionary Force nations, which includes Denmark, Estonia, Iceland, Latvia, Lithuania, the Netherlands and Norway.

After the meeting, No 10 said the leaders had all agreed the invasion of Ukraine had “dramatically changed the landscape of European security”.

Finland shares a land border of 830 miles (1,340km) with Russia and is only about 250 miles from St Petersburg.

But the new Levelling Up and Regeneration Bill, published on Wednesday, scraps controversial proposals to make it harder to block development, after a Tory backlash.

Conservative MPs feared the plans cost them votes in crucial by-elections.

A source said Levelling Up Secretary Michael Gove had listened to concerns.

It is understood a proposal for a zonal system will be dropped – which would would have seen certain areas earmarked for housing growth and some development applications automatically approved.

Ministers are also expected to confirm that legally-binding housing targets are being scrapped.

Instead, Mr Gove will promise communities control over what is happening in their area, with measures such as “street votes” allowing them to decide whether new extensions and other developments can go ahead,

Housing is a key challenge for the government, which pledged to build 300,000 houses a year by the mid-2020s. Sources say that target remains.

Making it easier to approve developments was a key part of its initial strategy after Boris Johnson won the general election in 2019.

The original plan would have seen local councils in England having to classify all land in their area as either “protected”, for “renewal”, or for “growth”.

Councils would then have had to look favourably on developments in “renewal” areas, whilst in “growth” zones, applications conforming to pre-agreed local plans would automatically gain initial approval.

Ministers also wanted to introduce binding local quotas.

But the plans sparked a significant Tory backlash – with some in the party saying the policy had contributed to by-election losses in former Conservative heartlands.

Those fears would only have been exacerbated by last week’s local elections results.

The government believes its new plans will give communities more of an opportunity to shape what happens in their area – and stronger grounds to resist unwanted developments.

Under Mr Gove’s plans, communities will be able to hold votes on whether planning permission should be granted for extensions to existing homes on their street.

But Labour MP Clive Betts, chair of the levelling up, housing and communities select committee, called the move a “gimmick”. He told the BBC it was “never going to be possible” for communities to “decide absolutely everything” about urban planning in their area.

Mr Betts said the process of building new housing should be simplified, with locals involved in decisions about where homes might be placed much earlier than at the planning permission stage.

Ministers are planning design codes, which would see local communities set rules about the layout of new developments and materials which could be used.

And they hope a new infrastructure levy – to be determined locally – will increase funds for projects such as schools, hospitals and roads by basing the sum on the value of the property when it is sold, rather than when it gets planning permission.

The planning system will also be digitised, making plans more accessible online.

Ministers want to modernise the system, which often sees notices on lamp posts to alert people to local proposals.

As in other high-profile urban electorates held by the Liberal-National government, so-called teal independents (because of a campaign colour preference) are mounting a serious challenge that focuses heavily on climate action, integrity in politics and gender representation. They’re bankrolled by the Melbourne philanthropist Simon Holmes à Court and his Climate200 Group, as well as other smaller donors.

In North Sydney, the sitting MP Trent Zimmerman has acknowledged he is under pressure from Kylea Tink, a former chief executive of the Jane McGrath Foundation, a cancer charity.

Campaign posters and fliers can be hard to find in the mid-autumn sunshine, but opinions among voters aren’t.

“It is a great pity that the independents are putting up such a fight against such an exceptional member of parliament,” explained Martin, a British migrant from Birmingham. “Trent Zimmerman is a fantastic person for the community. It’s a dire situation. I truly hope that he wins.”

Down the road I meet Shamarah, who’s upset not just with her local MP, but with the prime minister, too.

“Trent [Zimmerman] really just didn’t seem to care for the community, but it’s probably more the issue with [PM Scott] Morrison,” she said. “Most of us are really tired of the fact he won’t put a corruption committee in. He really [has] a lot of hot air. Change is needed,” “They are treating us like fools.”

Independent candidates aren’t new in Australian politics. Zali Steggall, a winter Olympian, famously unseated former prime minister Tony Abbott in another neighbouring blue-chip Sydney constituency in 2019. After a nail-biting federal poll in 2010, two regional independents in New South Wales – Rob Oakeshott and Tony Windsor – were part of the glue that held together a Labor government under Julia Gillard.

Political cleanskins could have a decisive say again this time around. Blue blood could be spilt in other three high-profile contests; in the seat of Wentworth in Sydney, and in the well-heeled Melbourne electorates of Goldstein and Kooyong, where the current federal treasurer Josh Frydenberg is at risk of being the highest-profile casualty. His ousting could cause longer term damage to the Liberal Party because he is seen as a potential – and popular – leader should Scott Morrison step aside.

“If it is a very close election they may hold the balance of power,” explained Antony Green, election analyst at the Australian Broadcasting Corp. “If the government loses, it will be mainly their seats that will be lost to independents. The government is arguing these independents mustn’t get elected because of the uncertainty it would create in the creation of the next government.”

The matter of gender fairness has never been more prominent in Australian politics after a raft of allegations of sexual assault and impropriety in government and beyond. For such a skilled campaigner, Mr Morrison seems to have misread the room on such a pivotal issue. There is powerful symbolism in Goldstein, Kooyong, North Sydney and Wentworth where there are four independent women taking on four Liberal men.

“There are lots of these women, mainly, running in these seats with good Liberal credentials and connections who are campaigning on the issue of climate change believing the government is not doing enough,” he added.

For years now, more Australians have been turning away from the two major parties; the centre-right coalition of the Liberal and Nationals, who traditionally represent country areas, and the left-of-centre opposition Labor Party.

Dr Stewart Jackson, a lecturer at the University of Sydney, has observed schisms on both sides of the spectrum.

“The Liberal Party has been moving steadily to the right under first [Tony] Abbott and then Morrison and the people who would otherwise have called themselves moderates or centrists have been, if not pushed out of the party, certainly marginalised in many of the states,” he told the BBC news website.

“It mirrors what has been happening in a number of other countries where there has been a move from particularly evangelical Christians, but also the deeply conservative right, to take control of the major party of the right,” he said.

Dr Jackson said this type ideological splintering has already hurt the other side of politics.

“It’s been an issue for the Labor Party since the rise of the Democrats,” he said, referring to a centrist party set up in the late 1970s. “But then more specifically the rise of the Australian Greens, with their vote now firmly established between 10-15% depending on the state. That’s 10% of the vote that the Labor Party used to able to count on as votes for them. So, they have already had the existential battle. For the Liberal Party it is a new phenomena.”

There could also be a reckoning for the current government’s junior partner, the Nationals. It promises to improve the services and lifestyles “of the almost eight million people who live and work beyond the nation’s [major] cities” but the party, which is over 100 years old, is now facing independent challenges of its own in its traditional heartland.

“It is really important to mention the regional independents. They know their communities really well and they might even be a higher prospect of being elected than the ones that are getting the high-profile coverage,” said Dr Andrea Carson, an associate professor in Politics, Media and Philosophy at La Trobe University. “We could see the largest cross-bench Australia has ever seen in [the] lower house.”

Some conservatives appear rattled as election day approaches. The teal independents have been dismissed as “a phoney group of green-left activists who want to trick people into voting for them”, according to Sky News Australia host Chris Smith. He didn’t hold back, adding that they “may even hold the balance of power and run this country into the sewer because of their useless and obsessive attempts to save the planet”.

But Dr Carson believes this election could help Australia finally shake off years of inertia on global warming because of divisions that have plagued Labor and the centre-right coalition.

“One of the things that has been really noticeable [during this campaign] is how little conversation the two major parties have committed at this stage to action on climate change,” she said.

In a country that relies heavily on coal for its electricity, policies to address rising temperatures have been toxic for both sides of politics, despite repeated warning from scientists of more severe droughts, bushfires and floods in Australia.

“The broader electorate wants action, which is why these independents might do well at this election because they are one of the few that are prepared to put it front and centre and talk about it,” explained Dr Carson.

North Sydney may have rich Liberal traditions, but one of its former MPs Ted Mack was the first of the modern independents in the 1990s. Voters will now decide if history will be repeated.

The violence capped a day of unrest that saw PM Mahinda Rajapaksa quit amid mass protests at his government’s handling of the economic crisis.

But it failed to calm demonstrators, who attempted to storm his official residence while he was still inside.

Seven people have died and more than 190 have been injured since Monday.

An island-wide curfew has been extended to Wednesday morning as authorities seek to quell the violence. Many protesters are still calling for President Gotabaya Rajapaksa, brother of Mahinda, to leave office.

Since last month Sri Lanka has been gripped by escalating demonstrations over soaring prices and power cuts.

On Monday, government supporters clashed violently with protesters in the capital Colombo outside Mahinda Rajapaksa’s Temple Trees residence, and then at the main protest site at Galle Face Green.

Police and riot squads were deployed, and tear gas and water cannons were fired at government supporters after they breached police lines and attacked protesters using sticks and poles.

Angry demonstrators retaliated, attacking government supporters and targeting ruling party MPs, including one who shot two people after a mob swarmed his car and then killed himself, according to Sri Lankan police.

As the night went on, mobs of protesters across the country torched houses belonging to the Rajapaksas, various ministers and MPs. This included a house turned into a controversial museum by the Rajapaksas in the family’s ancestral village in Hambantota in southern Sri Lanka.

Footage posted on social media showed homes enveloped in flames as people cheered.

Areas near the president’s official residence were also set ablaze, according to reports. A municipal lawmaker died in hospital after an attack on his house.

Following Mahinda Rajapaksa’s resignation, protesters attempted to breach the inner compound of Temple Trees where he was staying along with several loyalists, and set fire to a bus outside the home. Police fired shots in the air and tear gas in an attempt to disperse them.

Mr Rajapaksa was flown out of Colombo to an undisclosed location on Tuesday morning.

Elsewhere in Colombo, tensions remained high. Men armed with sticks and rods had established road blocks on the routes leading to and from the airport, and police and security forces – usually a common sight in the area – were nowhere to be seen, reports the BBC’s Anbarasan Ethirajan.

Sri Lanka is facing its worst economic crisis since gaining independence from Britain in 1948, and people are furious because the cost of living has become unaffordable.

The country’s foreign currency reserves have virtually run dry, and people can no longer afford essential items including food, medicines and fuel.

The government has requested emergency financial help. It blames the Covid pandemic, which all but killed off Sri Lanka’s tourist trade – one of its biggest foreign currency earners.

But many experts say economic mismanagement is also to blame.