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THE Prime Minister's attempt to co-ordinate a global response to the downturn at the G20 summit in London has already taken him this week to the European Parliament and the United Nations in New York. Today he visits Brazil to talk about ways of getting credit moving again. He may, therefore, not have the time to worry as much as he should about the failure of yesterday's auction of government bonds, the first time this has happened since 1995. The failure is an early, small sign that the Government's vaunted policy of quantitative easing, or creating more money, may not be working.
Naturally, the Treasury is pointing out the technical reasons why this particular sale failed. But there remains the nagging possibility that the reason why investors are reluctant to buy government bonds, which fund public spending, is that there are serious doubts in the markets about the credibility of the Government's policies and the extent of its debt. The UK deficit could rise to 11-12 per cent of gross national product. Quite how we get from here back to business as usual is anyone's guess. And if capital markets abandon gilts, the Government's room for manoeuvre will be drastically curtailed because it will not be able to fund its debts.
It is, then, a bad time for Gordon Brown to be offering advice to other nations about how to escape recession. "Doing nothing is no longer an option," he said yesterday. But some countries feel that it is preferable to doing the wrong thing: the Czech prime minister this week memorably described borrowing to fund economic recovery as "the road to hell".
Mr Brown is starting to emphasise other elements of his agenda. Greater regulation of the banking sector, a crackdown on tax havens and a rejection of protectionism are policies he can promote without too much controversy. It may be that the most Mr Brown can hope for from the G20 summit is an anti-protectionist consensus, together with an agreement to help poorer countries. It's all commendable but does not quite cast Mr Brown in the role of saviour of the global economy that he might have hoped.
Network failure
OVER the past two weekends, the main rail links between London and the North of England, and Scotland, have been closed. This comes despite assurances from Network Rail, the state-funded company that maintains the rail system, that this state of affairs would be avoided as far as possible. Lord Adonis, the Transport Minister, has written to the company to demand a meeting with rail operators and passenger groups to prevent any further disruption. The company insists that the closures were necessary. Nonetheless they seem both unco-ordinated and poorly planned, with precious little alternative rail provision available for passengers. Given the controversy over Network Rail's performance since 2002, there will now be more calls for its outright nationalisation. Passengers certainly will want the bonus of Iain Coucher, its chief executive, reconsidered.
Meanwhile, the rail operator Stagecoach has launched a cheap combined rail and coach service between London and the North of England. It has the advantage over other economy deals in that passengers know the number of seats actually available each day - many cheap rail deals apply to only a few seats; operators do not say how many. But however welcome a £1 trip to Doncaster, deals like this are no substitute for affordable, flexible tickets for all rail passengers, including on-the-day travel.
Workhouse chic
THE new, vast London Historic Records database will be a boon to anyone researching family history. Lists of the inmates of Victorian workhouse go online today. In Australia there is a certain chic in having convict ancestors; perhaps having a lunatic workhouse forebear might become fashionable here.
Reader views (3)
If G. Brown really wanted to do something about tax havens, he would need to speak to his 'boss' the Queen of England, as most of the world's tax havens are Crown property (Channel Islands, IoM and several Caribbean Islands...).
But as that would likely reveal the hidden treasures of most of the British 'elite', this will never actually happen.
- Andy Smith, London, 27/03/2009 01:10
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I wonder why today's £1.1b sale was covered by a ratio of 2.72.
- Val Daniels, Mijas Costa, Spain, 26/03/2009 22:05
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The Treasury may offer 'technical reasons' for the shortfall in take up.They may also offer technical reasons why quantative easing enabled some investors to transfer their cash abroad. The reality is that some people can vote with their feet. And the fact that the Government can spin as many a webb of lies as it likes won't change the fact that they have lost that one thing which keeps a Government aflaoat-confidence
- Jeremiah, London, 26/03/2009 12:12
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