The Financial Crisis: How Did We Get Here?

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What is clear is that whatever position they are in today – profit margins low or high – UK businesses are looking to improve that over the next year. On average, the survey found firms were on course to increase margins to their highest ever level, to just shy of 10%. Rishi Sunak appears to be pushing hard for personal tax cuts, saying the halving of inflation is a big moment for the government, a turning point for the economy and an opportunity to cut the tax burden on middle-income families. Environmental groups argue that climate change means water companies must become part of a coordinated effort to protect water supplies and that this cannot be done while they remain private. England’s water system hosts the last of the privatised monopolies. You can shop around for gas and electricity, telephone and broadband. Not water.

The bank raised the cost of borrowing to combat rising inflation. Its governor, Elvira Nabiullina, said she had no choice but to counteract the inflationary effect of war spending. Not any more. This time there is a real war, not just a financial one, and no one quite knows what to do. The major powers cannot agree about how to fight it and policymakers cannot agree about how to handle the fallout, especially the shortages of raw materials and food from Ukraine and Russia that are pushing inflation to 10% and beyond. Next week, MPs on the business, energy and industrial strategy committee will question industry leaders in parliament about “opportunities for growth and innovation, and how policy can help to grasp them”. What they will not discuss is the failings of management and how so many people who rise to the top of the greasy pole look to maximise their pay and pensions rather than invest in the long-term health of the economy. Much of the discussion of intergenerational unfairness has been stymied by the pandemic. The virus kills many more old people than young and so to rail against a tax and benefits system that unfairly profits the old is distasteful.

Many Germans are beginning to question sending more hardware to Ukraine, reflecting a growing sense of unease about the war and its impact on the cost of living. It gives at least a third to a half of retirees a level of disposable income that young families can only dream of, and begins to put the UK on a par with Italy and Greece, where grandparents are at the centre of civic and family life because they are the only ones with any money. One might forgive the Bank of England for scratching its head. The Office for National Statistics, which provides information on corporate profits as a proportion of national income and the flipside of the coin – the share of national income going to workers – has delayed the publication of several reports, saying it is struggling to make sense of data it receives via surveys from employers. Meanwhile increasing pressure is being felt by food banks as people struggle to make ends meet and resort to increasingly desperate measures to keep warm and feed their families. A pensioner also doesn’t pay national insurance and, equally importantly, the national insurance contributions they made over a life of work account for a fraction of what is needed to pay the state pension over what can be 20 or 30 years.

If the OBR agrees to revise its figures in line with the IFS assessment, that could allow Hunt to unfreeze the income tax thresholds for lower earners without sending his budget off course. Official figures show 9.3 million – or 37% of all owner-occupied homes – were owned without a mortgage in 2021, up by 2m from 2012. The huge increase in the number of homes held outright, mostly by older people, means this same cohort of retirees – the ones benefiting from guaranteed occupational pensions – also have a comparatively low cost of living. There are other factors telling us that, for the majority, 2024 won’t be too bad. The recent retail sales figures were buoyant, and plenty of companies are reporting a steady stream of customers coming through their doors. The company has warned that a commitment to make electric vehicles in Britain is in jeopardy unless the government renegotiates its Brexit deal with the EU to maintain existing trade rules until 2027. Jaguar Land Rover (JLR) has said much the same. So has Ford. Meanwhile bosses of energy giants such as Shell and BP play a game of “heads we win, tails you lose” as their pay climbs from year to year, blind to the ups and downs of global energy prices.Threadneedle Street’s finest say in their most recent forecasts that by 2026 the UK economy will have just about reached its previous peak, hit in 2019. That is seven lost years of growth. High borrowing costs, and the likelihood that they will stay high, have altered Blanchard’s view. In a paper, he said it was unlikely growth could be stimulated to exceed the new elevated rate of interest on government bonds, meaning debt-to-GDP ratios could balloon. Under current plans, extended by Hunt a year ago, all the thresholds will remain frozen until April 2028. Davis told the Observer that with the country now operating with the highest overall tax burden for decades, the electoral dangers were clear.

Since 2010, the revivalist hope has come not from mainstream Conservatism, but its right flank, which promised a Brexit bonanza. The road out of Brussels has proved more difficult to navigate than they expected and the latest GDP figures show that trade, far from being a positive benefit to the nation, is a drag and will continue to be for some time. After a post-Brexit-referendum slump, immigration has soared in recent years, but many of the incomers are Ukrainian or Hong Kong Chinese people and the length of their stay looks uncertain. So the UK can look forward to a dwindling number of workers supporting a growing number of retirees. A delay of at least two years before the plans for the pension age could be reconsidered was described by the pensions minister Mel Stride as “appropriate” now that people are dying younger, on average, than pre-Covid forecasts had expected. A government minister might be forgiven for rejecting the claim that the subject is little discussed. Haven’t ministers spent large amounts of energy and cash making sure pensioners can cope with the costs of 21st-century living?There is always a danger when looking for causation, especially when data points to a strong conclusion. In this case, the small sample size used by the Bank’s survey is notable: it covers 2,500 of the UK’s 5m-plus companies. This may be a small sample, but the Bank believes it can provide significant information about firms in relation to many other subjects, so why not this one? Statistics revealing that 57% of 60- to 69-year-olds and 67% of those aged 70 and over voted Tory in the 2019 general election are another incentive for Rishi Sunak’s administration, like those before it, to protect pensioner finances. An independent report, written for Stride and published alongside his decision not to bring forward the pension age rise, highlighted the cost to the public purse. By convention, the chancellor should raise benefits next April in line with September’s inflation rate, which was 6.7%. Pensions have an added level of protection, which is that state pension rises can also go up in line with earnings, if that measure is higher.