Declan Curry is annoying my mother. Curry, for those who don’t know, is the business correspondent on BBC Breakfast.
My mother phoned me yesterday to vent her ire. She was already pretty upset at the tax changes that came into force yesterday. As a low income worker she’s among those hardest hit by Gordon Brown’s decision last year to scrap the 10% starting rate of tax.
But what annoys her more is the insistence by some correspondents, Curry included, that the extra tax she’ll pay will be offset by a rise in tax credits. She’s adamant they won’t.
True, the tax credit threshold is being raised. But the tax credit itself is based upon gross income. The extra tax won’t show up in that top line, and so won’t result in a higher tax credit payment. The result will leave poor families worse-off.
At least, that’s how I understand it. I’ve not had any first-hand tax-credit experience, so I phoned Her Majesty’s Revenue and Customs for clarification. They told me it was "a policy matter", and told me to phone the Treasury.
The latter said they’d get back to me, but my deadline loomed before they’d done so...
Needless to say, the government’s new tax regime, while making many better off (the basic rate has fallen from 22% to 20%), strikes hardest at those currently struggling most. It is a regressive move.
And it’s not just consumers being hit. Small companies have also seen their tax bills rise. They’ll now pay 21%, up from 20%. Presumably this is to help pay for the "business-friendly" cut in main corporation tax, down from 30% to 28%. If that was expected to mollify business, it hasn’t worked.
The Confederation of British Industry (CBI) reckons businesses will pay an extra £4 billion over the next three years as a result of the change.
"When the economy is slowing, the last thing a government should do is raise taxes on the part of society which creates jobs and wealth," said CBI deputy director general John Cridland.
Small businesses and low income households are especially sensitive to tax changes.
For many entrepreneurs, this tax hike could mean the difference between survival and going bust.
Meanwhile, every extra penny paid by low income consumers to the exchequer represents a penny not spent on consumption. They don’t have savings to dip into.
The UK economy is staring down the barrel of a recession. So it’s hard to understand why the government would press ahead with such regressive, contractionary moves. The only explanation is that they’re hard up for cash and don’t have a choice.
Not a cheery thought as the economy slows down...
US jobs see biggest fall in five years
If it’s bad over here, it’s worse in the States. US employment figures released on Friday showed a third consecutive drop in March. Economists had expected the number of those on the non-farm payroll to fall by 50,000. It actually went down 80,000 — the steepest drop since March 2003.
"As the FT points out, this number will keep the pressure on the Bernanke team to cut rates," says my US colleague Bill Bonner. "It didn’t mention that it will also keep pressure on the dollar - speculators will expect the dollar to fall."
Bill reckons we’re seeing a tug-of-war between inflation — fuelled by years of easy credit and fiat currency — and deflation — caused by falling demand as America’s economy weakens.
Which will win?
"Both," says Bill. "We won’t have our cake, and we won’t eat it either! We’ll have losses as consumer prices rise, and losses from defaults too. The value of both our credits and our debts will go down."
Not that US stock markets are paying attention. The S&P 500 is still hovering around the 1370 mark.
Incidentally, we pay a man to watch the S&P for us. I’m serious! Minute by minute, tick by tick, our man Robin Tracey has his eyes glued to the market.
I assure you there’s a good reason for this (it’s not just some sadistic experiment). Robin, you see, is a trader; the S&P 500 his chosen arena. He’s devised a cunning trading strategy with which he’s made spectacular profits over the last few months.
Now we’ve persuaded him to share it with us. Find out how, with Robin’s help, next Thursday, 17 April, could be one of the most profitable days of your life!
Fire at Exxon refinery, and why oil should stay above $100
Oil went above $106 this morning, following a small fire at an Exxon refinery in Los Angeles. Garry White, our commodities expert, believes further rises are on the way.
"The oil price has found a floor at $100," he says. "Everyone’s still worried about the dollar, and Opec has cut production for the first time since last August."
Opec’s secretary-general Abdullah al-Badri is talking tough — he reckons there’s enough oil in the market.
"There is no need to change Opec’s crude output," he said. "Nobody can put pressure on Opec because we decide based on our own interest."
But Garry’s not buying that. "There’s a lot of bravado on show here," he says. "Opec doesn’t want to reduce output because member countries know their oil supplies are limited. They want to get the maximum price they can muster."
There’s another problem too, and it’s the real reason why oil is staying high.
A run on rice
"Charley didn't get much USO. He was dug in too deep or moving too fast. His idea of great R&R was cold rice and a little rat meat..."
A classic line from Vietnam war film Apocalypse Now. But now that supposed Viet Cong delicacy is becoming a scarce luxury for some. At least the rice part of it is.
"The price of rice has doubled in the last year alone," Manraaj Singh, our emerging markets guru, tells me. "And it’s gone up five-fold since 2001."
Rice exporting countries have started cutting back on how much they’ll sell to foreigners, to ensure there’s enough to go round at home. Vietnam, India, China and Egypt have all banned exports... we’re seeing a run on rice.
It’s further evidence of the huge bull market in agriculturals. And Manraaj reckons the rice bottleneck will cause spikes elsewhere... and will deliver big profits for one of his hot tips.
Until tomorrow
Ben Traynor
