Tuesday 20 February 2018

The Punt: George didn’t budget for this

British Chancellor of the Exchequer George Osborne. Photo: PA
British Chancellor of the Exchequer George Osborne. Photo: PA

It hasn't been a good few days for George Osborne. He's been forced to backtrack on cuts to so-called tax credits after the House of Lords defeated a key component of his drive to wipe out the budget deficit.

It is a blow to the chancellor, below, who has staked his reputation on making Britain 'live within its means', and could spur the leadership ambitions of other members of the ruling Conservative Party who are keen to replace David Cameron.

And then yesterday came the news that the UK economy slowed more in the third quarter than had been expected.

The economy grew 0.5pc in the third quarter, official figures showed yesterday - a respectable rate by historic standards but below the 0.7pc seen in the second quarter and economists' expectations for the third.

Growth was almost entirely driven by Britain's dominant services sector, which picked up pace from the second quarter, while manufacturing shrank for a third quarter in a row and construction suffered its biggest contraction in three years.

The economy remains much bigger than what it was pre the financial crisis, but these are headaches Osborne could do without.

Redemption song for bankers

ONE of the recurring themes of the post-crash world has been the number of bankers apparently seeking redemption for the actions of their fellow professionals in the past.

Time and again, we have heard stories about bankers getting out of the industry to "do something meaningful with their lives" or something similar.

Well, it seems things are no different over in Cyprus where a slew of bankers have descended onto the island to help put right some of the problems that blew up there in 2013.

One of those is Josef Ackerman. The former Deutsche Bank ceo is now chairman of Bank of Cyprus. Ackerman had a poor crisis. He led Deutsche to the top of investment banking - a move that is now being rolled back. More seriously, when he chaired Zurich Insurance his cfo committed suicide and blamed Mr Ackerman for his despair. An inquiry cleared Ackerman.

He told 'The New York Times' that while his conscience was clear, he wants "to demonstrate that we cannot only make money for ourselves, but also that banking is actually something which is a main contributor to the prosperity of society at large".

That's one way of putting it, anyway.

Critics can’t burst Lane’s bubble

It can sometimes feel that candidates for senior post-crash jobs are being judged, at least by a section of society, purely on their previous success in calling the top of the boom.

That is especially true of economists - some of whom seem to get great credit for calling the peak of the bubble even before it inflated.

On that score there has been some sniping at the new Governor of the Central Bank over his alleged failure to warn of the impending debt crisis before the financial and property bubble eventually popped.

In fact, Prof Lane presented a paper at the Institute of International and European Affairs (and elsewhere) analysing the risks facing the local and global economies well in advance of the credit crunch.

It is not his style to go in for fortune-telling but his calculations found that, if trouble in Ireland coincided with trouble in the US, then the results would be very nasty indeed.

Most of his audience would have concluded that this was the most probable of the scenarios outlined - as indeed turned out to be the case.

It's the kind of balanced assessment of probability that ought to be valued more highly that a lucky guess, but of course rarely is.

Many of us prefer the pregnancy-test model - binary outcomes based on perfect predictive capability.

Irish Independent

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