Macroeconomics: UK economy, IB Economics

It seems as though the global cost of living crisis allowed some of the world's largest MNCs to profit at consumers' expense, with research from thinktanks the IPPR and Common Wealth discovering that business profits rose by 30%, largely as a result of the actions of 11% of firms, among them energy firms, mining companies and commodity traders. 

This has led, rightly, to accusations of so-called greedflation - and, the thinktanks argue, has seen them gain at the expense of the ordinary consumer.  

Harry Quilter-Pinner's piece in today's Guardian makes for interesting reading in a week when the pensions triple lock seems set to give pensioners an 8.5% increase in the state pension and exacerbate intergenerational equity issues. 

He doesn't deny that the state pension is low and needs to rise, but argues that the rise should be to some determined proportion of average earnings and that any money saved should be shifted into triple locks for working-age benefits because as he notes, a pensioner gets £200 per week, whereas a single person on Universal Credit gets approximately half that.   

The left-leaning IPPR has called for a six month extension to the government's energy price cap, arguing that such a move could lower inflation, help growth and allow more to be spent on public services. 

However, I suspect that this isn't the prevailing view, nor one that is likely to find favour with financial markets who are already concerned about the sustainability of the public finances. 

The Institute for Public Policy Research seems to support the view that a minimum global corporate tax rate would be a good thing - generating a £14.7bn fiscal dividend for the UK if it were set at 21%.

Quelle surprise! Covid is worsening regional inequality, with little evidence of levelling up. 

I have to say, anyone who believed the original pronouncements has clearly disregarded the last 40 years of British politics - and beyond. There's been no serious attempt to tackle this issue and it is unlikely to happen in a government headed by an Etonian, with the public purse controlled by the former Sen Co Prae at Winchester. 

On the day that the IFS launches the Deaton Review, the IPPR has highlighted the extent to which there's regional inequality in the UK, with a quarter of all Northerners earning less than the 'real living wage' of £9 per hour.

It's interesting but I'd also warn that living costs in the North are lower than those in London and the South East, so I'd take this with a pinch of salt.

Just my luck! Having prepared this week's material on income inequality, I stumble upon the latest IPPR research that calls for an overhaul of the UK economy. The IPPR Commission on Economic Justice has found that the UK is being held back by a number of weaknesses, not least a lack of investment, and high levels of inequality and has proposed a number of solutions to these deep-seated problems. 

I'd outline them here - if I didn't think it would stop you from reading the article itself.

The Institute for Public Policy Research has published research which suggests that the inability to maintain a consistent strategy to develop Britain's infrastructure has cost the country billions, and reduced the effectiveness of policy since 2010. And this is in a period of - the Coalition apart - Conservative government, never mind a period with a change of government. 

Why? The IPPR identifies 11 different industrial strategies - unsurprisingly, given 9 Business Secretaries and 7 Chancellors - and as a result of 'flip-flopping' and a lack of certainty, the UK hasn't maximised its potential growth. Does this mean that there's a case for an independent body tasked with the maintenance and improvement of the economy's infrastructure? It's certainly something worth consideration, in my view. 

The Institute for Public Policy arguably sums up the last 40 years: £500bn plus under-investment has resulted in low growth. It argues that British investment is the lowest in the G7 and 27th out of 30 in the OECD, ahead of only Poland, Luxembourg and Greece. 

The solution? The IPPR argues that the government should be looking for public investment to "crowd in" private sector investment, giving confidence to companies investing in the UK. That said, is there much evidence for this? 

Aside from all the 'noise' about tax cuts the Institute for Public Policy Research has revealed that despite cuts to corporation tax, Britain's investment is now the lowest of all G7 member states. Despite a fall in corporation tax from 30% in 2007 to 19% in 2019, the UK's level of investment as a share of national income is lower than any other G7 nation.

And there's the rub...this supply-side issue, a long-term, structural factor is probably more responsible for sluggish growth than any of the other factors currently being singled out. 

The latest Institute for Public Policy Research (IPPR) research reveals that the level of poverty among working households is the highest ever. 

They argue that relative poverty has risen from 13% in 1996 to 17.4% of working households in the year to March 2020, and identify four main causes: rising housing costs, modest pay rises, a social security system that has failed to keep pace with housing costs and a lack of affordable childcare.

It should be a national embarrassment that 1 in 5 people in the world's largest economy are living in relative poverty - but I suspect it won't garner much in the way of publicity. 

The IMF's 'economic counsellor', Gita Goppinath believes that recovery from the coronavirus pandemic should be predicated on environmentally-friendly infrastructure projects, something that the Institute for Public Policy Research has also argued in favour of.

A bit more detail on the extent of inequality in the UK. 

Alas, it's a bit late for me, but that's life.