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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
cutting the deficit
Cutting the deficit
  • Number one priority
  • Loss of Moody’s triple A rating – humiliating.
  • http://www.telegraph.co.uk/news/politics/georgeosborne/9889605/George-Osborne-no-let-up-in-plan-to-cut-deficit-after-AAA-downgrade.html
  • http://www.bbc.co.uk/news/business-21554311
  • http://www.bbc.co.uk/news/uk-politics-21564391
moody s downgrade
Moody’s downgrade
  • http://yougov.co.uk/news/2013/02/25/black-friday-blame-changer/
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)
  • 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
  • Tax loopholes
  • Triple Dip
  • Credit Rating
  • Stagflation
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
  • 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