Week 6 treasury the department with the power
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Week 6 Treasury – the department with the power. The Chancellor of the Exchequer – the real Deputy Prime Minister? Joy Johnson. Key texts. Morrison – Essential Public Affairs Coalition Agreement 22 Days in May – Laws

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Week 6 treasury the department with the power

Week 6 Treasury – the department with the power

The Chancellor of the Exchequer – the real Deputy Prime Minister?

Joy Johnson


Key texts

Key texts

  • Morrison –Essential Public Affairs

  • Coalition Agreement

  • 22 Days in May – Laws

  • So you want to be a Political Journalist: ed Sheila Gunn, ch 17: It’s the economy stupid! Prof. Steve Schifferes

  • If time various books on the financial crash; inc.

  • Beyond the Crash: Overcoming the first crisis of Globalisation: Gordon Brown

  • The Gods That Failed; Larry Elliott and Dan Atkinson

  • False Dawn The Delusion of Global Capitalism: John Gray

  • End This Depression Now; Paul Krugman winner of the Nobel Prize in Economics


Levers of power

Levers of Power

  • Control of spending

  • Fiscal policy

  • Budget process

  • Comprehensive Spending Review

  • Independent Central Bank – Bank of England

  • Monetary Policy Committee

  • Office of Budget Responsibility

  • Office of Fair Trade

  • Privatisations

  • Private Finance Initiatives (PFI) – fund investment for infrastructure projects - Initially introduced by John Major

  • Embraced by New Labour as PPPs (Public Private Partnerships to fund schools hospitals etc – scandals now on how much they cost in the long term)


Issues

Issues

  • Cutting the deficit (number one priority for the coalition government as stated in the coalition agreement)

  • Growth

  • Public spending cuts

  • Reform of the Banks – tensions with Chancellor and Secretary Of State for BIS

  • Unemployment (particularly young people)

  • Inflation

  • Interest rates


Relationships that matter

Relationships that matter


Chancellor george osborne his liberal democrat chief secretary danny alexander

Chancellor – George Osborne & his Liberal Democrat Chief Secretary Danny Alexander


Chancellor and his team

Chancellor and his team

  • Chancellor of the Exchequer after the PM most senior member of the cabinet

  • Chancellor of the Exchequer – Rt Hon George Osborne MPChief Secretary to the Treasury – Rt Hon Danny Alexander MPFinancial Secretary – Rt Hon Greg Clark MPExchequer Secretary – David Gauke MP†Economic Secretary – SajidJavid MP†Commercial Secretary – Lord Sassoon *


Chancellor of the exchequer

Chancellor of the Exchequer

  • No 11 Downing Street

  • Dorney Wood

  • Treasury – Whitehall

  • Responsibilities : overseeing government’s public spending commitments by managing fiscal policy; managing the national debt; promoting economic growth; controlling domestic inflation and unemployment

  • Treasury select committee shadows the department


Treasury select committee

Treasury Select Committee

  • Questions new governor of the Bank of England – Mark Carney

  • http://www.parliamentlive.tv/main/Player.aspx?meetingId=12544


Controlling the economy

Controlling the economy

  • Fiscal policy and Taxation

  • John Maynard Keynes

  • 2 types of taxation – direct up front from individuals and businesses and indirect i.e. VAT

  • Income tax – progressive ability to pay

  • Regressive tax i.e. Indirect taxes

  • Corporation tax paid by companies on profits

  • Capital Gains Tax (CGT) paid by the owners of financial assets such as property

  • Inheritance Tax – death duties

  • http://www.open.edu/openlearn/tags/masters-money

    Stephanie Flanders series


Managing the economy

Managing the economy

  • Highlight of the Chancellor and the government’s year the Budget and the accompany Finance Act

  • 20March budget (last one that cld affect economy before 2015 election)

  • Comprehensive Spending Review (CSR) the one last November fixed spending budgets for each Government department up to 2014-15.


Budget process

Budget Process

  • Finance Bill speaker designates it a ‘money Bill’

  • Budget is fast tracked through Parliament

  • Speech regarded as first reading

  • 2nd reading must be heard within 30 days

  • Scrutiny at committee stage

  • 3rd reading steamed through on same day as report stage then Royal Assent

  • Lords can’t interfere

  • Budget speech designed to forecast short to medium term movements in the economy 1-3 years

  • Announces new taxes, tax breaks, and or benefits to finance investment

  • Other measures of help to low paid, the elderly etc likely to be in short supply in the age of austerity

  • Leader of the Opposition responds (difficult Parliamentary occasion as there are likely to be surprises)

  • Debate on the floor of the Commons


Economic terms

Economic terms

  • Fiscal Policy – taxation and economic policy of a government

  • Post war – mixed economy

  • Thatcher years – privatisation – monetary policy (economist Milton Friedman)

  • New Labour adopted neo-liberal economics

  • Fiscal rectitude – cutting public expenditure and reducing the amount of government borrowing


Economic terms globalisation

Economic terms - globalisation

  • Neo-liberalism theoretically makes trade between nations easier.

  • Freer movement of goods, resources and enterprises

  • Light touch or no touch regulation, tariffs, restrictions on capital flow and investment


Economic terms cont

Economic terms cont

  • Gross domestic product (GDP) – total output of goods and services

  • Gross National Product (GNP) GDP + with net property incomes from abroad

  • Group of Seven finance ministers and central bank governors of the leading Western economies

  • Group of Eight

  • Group of Twenty following banking crisis


Economic terms cont1

Economic terms cont

  • The national deficit – the annual difference between government spending and its receipts (mainly taxation) – government has to borrow to make up the difference

  • The national debt the accumulation of these annual deficits and the borrowing incurred to make up the difference


Economic terms cont2

Economic terms cont

  • Inflation – rise in price levels which reduces purchasing power

  • Inflation used to be past scourge

  • “No more ‘boom and bust’” - hubristic boast of Gordon Brown then Chancellor of the Exchequer

  • Low interest rates to help stimulate economy

  • inflation going up

  • Governor of the Bank of England has to write letter to the PM saying why target of 2% has been overshot

  • Fear of stagflation – combination of high price inflation, high unemployment and low economic growth


Useful website

Useful website

  • Useful website http://www.bbc.co.uk/journalism/briefing/politics/reporting-the-economy/

  • http://www.bbc.co.uk/academy/collegeofjournalism/subject-guides/business-and-economy/reporting-economy


Crisis of capitalism

Crisis of capitalism

  • Lehman Brothers (September 2008) collapse triggered meltdown in the financial system


Atms would have run out of money

ATMs would have run out of money

  • Banks too big to fail

  • Gordon Brown then Prime Minister and Chancellor Alistair Darling part nationalised the banks RBS, Lloyds


Global crisis

Global crisis

  • http://www.dailymotion.com/video/x8uf7i_gordon-brown-and-barack-obama-g20-r_news


One view of the financial crash

One view of the financial crash

  • http://www.guardian.co.uk/business/video/2008/sep/17/larry.elliott.hbos


Independent central bank

Independent Central Bank

  • New Labour gave independence to the Bank of England in the first few weeks following their landslide first victory (1997)

  • Established Monetary Policy Committee chaired by Governor of the Bank (Mark Carney takes over from outgoing gov. of B of E Mervyn King).

  • Responsibility to set interest rates. Takes the decision out of the political arena

  • New Labour set up regulation system Financial Services Association (FSA)( (widely accused now to have failed when it came to the global banking crisis – new coalition govt abolished it)


Monetary policy committee

Monetary Policy Committee

  • interest rates set by Bank’s governor and the monetary policy committee – tensions within


Business innovation and skills bis

Business Innovation and Skills (BIS)

  • Vince Cable Secretary of State for Business, Innovation and Skills and President of the Board of Trade

  • Responsible for business and banking and regulation (lost out on Rupert Murdoch and News Corporation bid for BSkyB) tension with Chancellor on wealth tax (NB mansion house tax – Ed. M announced (not a manifesto promise yet) 10p tax rate to be paid for by a mansion tax over 2million)

  • David Willetts Minister of State for Universities and Science (attends Cabinet)

  • BIS select committee shadows department


Labour official opposition

Labour (official opposition)

  • mansion house tax – Ed. M announced not a manifesto promise yet) 10p tax rate to be paid for by a mansion tax over 2million


Office of budget responsibility

Office of Budget Responsibility

  • The Office for Budget Responsibility (OBR) was formed in May 2010 to make an independent assessment of the public finances and the economy for each Budget and Pre-Budget Report.

  • Shaky start chaired on interim basis, by Sir Alan Budd.

  • Chairman Robert Chote (formerly director of Institute of Fiscal Studies IFS respected independent think tank)

  • Growth Rates had to be revised down


Other bodies terms

Other Bodies & terms

  • Office of Fair Trading (OFT

  • Confederation of Business Interests (CBI)

  • Institute of Directors (IoD)

  • Trade Union Congress (TUC)

  • Privatisation – selling government assets

  • Part Privatisation – hybrid

  • Nationalisation – government owned

  • Utilities – essential services i.e. Water, gas, electricity privatised

  • Regulatory bodies i.e. Ofgas, Ofcom, Ofwat


Stock exchange

Stock Exchange

  • Shares in public limited companies (plc) traded on global stock market – one of the biggest London Stock Exchange

  • Limited Liability companies

  • Private Limited companies

  • Public Limited Companies (plcs) – floated and listed on the LSE

  • Hostile takeovers (see Morrison for examples)


Chancellor booed

Chancellor booed

  • http://www.guardian.co.uk/sport/video/2012/sep/04/george-osborne-booed-paralympics-video

  • Can he recovered from a budget (2012) that was dubbed an omnishambles?

  • Next Budget March 20 2013 – last one to have a chance of having an impact on the economy before the election in 2015


Krugman takes on opponents

Krugman takes on opponents

  • http://www.youtube.com/watch?v=_r-AKruzmkk

  • Economic Nobel Prize Laureate economist, author and journalist


Reading and question

Reading and question

  • Seminar reading essential public affairs for journalists, Morrison Ch 7

  • Outline role of the Treasury and the mechanics of the Budget. Budget process


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