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Scooped by
Graham Watson
onto Microeconomics: IB Economics November 4, 2024 3:16 AM
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Nationwide predicts a fifth of first time buyers will pay the tax going forward, affecting activity.
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Regulator could do us all a favour with clear multi-year forecasts and breakdowns of electricity pricing
Graham Watson's insight:
Nils Pratley takes aim at the regulator, arguing that whilst OFGEM is going to revise the Energy Price Guarantee upwards this week by around £200, it's not going to make any promises about the future direction of energy prices, even though it easily could.
His view is that the reality is that higher energy bills are here to stay, and that a large part of this is pre-determined by various fixed costs, such as balancing costs, and that it has a duty "to protect the interests of energy consumers". He, and others, notably Dieter Helm, think the regulator should be more upfront about this.
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Exclusive: Cache of internal documents leaked to the Guardian and the ABC’s Four Corners show multinational has war-gamed ways to massively delay decarbonisation
Graham Watson's insight:
Bit of a scandal brewing in Australia where mining giant BHP appears to have parked its climate action, delayed decarbonisation and instead, as theory would suggest, put profit first.
It's an interesting issue: given that the demand for minerals is highly inelastic and for most consumers not terribly visible, have the company simply decided that it's not worth their while.
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The UK's brewery scene is shrinking as pubs close, costs rise and drinking habits change.
Graham Watson's insight:
This article looks at how the brewing industry is changing, with the number of breweries declining, and the reasons for this. Whilst there's still a market for craft brewers, it seems as though the dominant position of the big brewers and their ability to dominate draught lines in pubs and undercut the independents in supermarkets too. Well-publicised tax and National Insurance changes have also threatened the existence of small brewers.
However, there are pockets of success - with Sheffield and Bristol cities with a brewing cluster that's survived.
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Fuel duty was initially cut by 5p in March 2022, under the Conservative government.
Graham Watson's insight:
Confirmation that the fuel duty freeze, which saw fuel cut cut by 5p in March 2022 has been extended by the government as it looks to help tackle the forthcoming cost of living crisis. The Prime Minister also announced a 12-month holiday on vehicle excise duty for HGVs, in an attempt to tackle supply chain costs.
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Pub owner’s sale to Barcelona-based brewer Damm is latest takeover of a British beer by an overseas buyer
Graham Watson's insight:
Spanish brewer Damm, owner of the Estrella brand has bought the Old Speckled Hen brand from UK pub owner, Greene King. The latter have decided to move away from the off trade to selling its own beers in its own pubs.
As a result, the long-term plan is for Damm to brew the beer at its new Bedford brewer and move away from the current Bury St.Edmunds brewery. It's part of wider trend of foreign brewers buying up UK beer brands.
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The average price of unleaded has risen to 158.52p a litre, according to the RAC, who warn that it could rise further in the coming weeks.
Graham Watson's insight:
The usual: petrol prices, Iran...D&S
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Despite the ban on disposables, waste professionals say the mountain of discarded devices is a £1bn-a-year issue
Graham Watson's insight:
This article looks at the negative externalities arising from disposable vapes, with their disposal being far from straightforward because they need separating into different components and they're also responsible for a significant number of fires at recycling centres.
The extent of the problem is such that the government are looking at a variety of solution to this, including a deposit return scheme which would see vape users return them to where they sold them and collect a sum of money for their return.
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Climate and transport organisations warn ministers not to ‘sleepwalk into crisis’ amid Iran war oil and gas shortages
Graham Watson's insight:
A number of environmental and transport groups have called for intervention to tackle the prospect of a fuel shortage, with non-market interventions such as reducing speed limits and banning private jets being two of the solutions volunteered.
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Philip Morris claimed it wanted to end cigarette sales, but experts and campaigners say new promotions seem designed to attract younger consumers
Graham Watson's insight:
Anti-smoking campaigners are upset by the seeming hypocrisy of Philip Morris, the manufacturer of Marlboro cigarettes who appear to have pivoted from the CEO, Jacek Olczak, saying that “cigarettes belong in museums” to launching a global advertising campaign entitled "I AM Marlboro".
To be frank, it's not that surprising: Philip Morris is going to be a profit maximiser and it will also own a lot of cigarette-specific assets that are only going to decline in value if they stop selling cigarettes. However, whilst it's probably good for them, what's the net effect on the wider global economy?
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Britain’s largest carmaker says sales also hit by competition in China as it publishes financial results
Graham Watson's insight:
Some quite remarkable - in a bad way - numbers posted by Jaguar Land Rover, with profits down by 99% to £14m from £2.5bn.
There are two obvious causes of this: the cyber-attack that saw the company shut down for a few week in September and October, and President Trump's tariffs on UK cars, originally set at 25% but subsequently reduced to 10%, which hit demand in US markets. The increasing level of competition in the Chinese market has also played a role in reducing profit too.
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Investment bank JP Morgan expects oil to remain in the "low $100s" even if the Strait of Hormuz were to reopen next month.
Graham Watson's insight:
The usual: D&S, oil prices and geopolitics, with JP Morgan forecasting that oil price is going to remain above $100 for the rest of the year. Oh dear! Economically, this is bad news. Oh dear squared, poor President Trump in the mid-term elections.
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Acquisition would result in combined company serving about 9.6 million households if given regulatory approval
Graham Watson's insight:
German energy giant E.ON has announced its intention to buy UK rival, Ovo, creating the largest electricity and gas supplier in the country with 9.6m customers. However, the deal still requires regulatory approval.
As is always the case, E.ON argue that consolidation will be a good thing - with economies of scale being generated such that energy bills are likely to fall. Ovo has also sold on its home services business that provides boiler insurance and servicing.
However, I suspect the real reason for the merger is more to do with the financial uncertainty surrounding Ovo, which has struggled since taking over SSE in 2019, and it failed financial stress test last September. You would imagine that this has allowed E.ON to drive a pretty hard bargain as far as the cost of the merger is concerned.
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Officials reportedly drafting legislation likely to safeguard Britain’s last blast furnaces and save thousands of jobs
Graham Watson's insight:
Given the history of British Steel, I can't help feeling that they've got this headline wrong: it's renationalisation, rather than nationalisation, surely.
Either way, British Steel is being taken into public ownership and this offers an opportunity to think about arguments for public ownership and arguments for privatisation, and perhaps consideration of whether the 1980s wave of privatisations has been a success; it varies from sector to sector in my view. You might also think about what else has been renationalised, and the arguments offered for renationalisation |
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Rail minister Peter Hendy says fast rollout shows reforms are working as questions over reliability remain
Graham Watson's insight:
Gwyn Topham looks at the performance of South Western Railway under its new nationalised guise, and suggests that the quality of the trains has improved and punctuality issues are being tackled, but actually shies away from a definitive judgment about whether renationalisation has been a good thing.
It would be interesting to have a little bit more data and perhaps a passenger survey or two to help determine whether that's the case.
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The Academy of Medical Royal Colleges says doctors should routinely check on screen time and social media use when seeing younger patients.
Graham Watson's insight:
There's been a lot of discussion of the effects of social media on the young - and if you haven't you need to read Jonathan Haidt's "The Anxious Generation". However, today the BBC are reporting that social media use can be as damaging to the health of young people as smoking, and this suggests that there are significant negative externalities associated with its use.
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Retailers such as M&S need not worry – the UK is not in a state of emergency and competition is clearly working
Graham Watson's insight:
Just an excellent, excellent article from Nils Pratley explaining why the idea of price caps for essential food items is both wrong-headed and never a viable policy. It highlights how it had been discussed by the previous Conservative administration and how the best way of keeping food prices down is simple: competition.
This is exactly the sort of article that an A* student should be gobbling up - it's about resource allocation and weighing up the costs and benefits of economic policy.
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Any price caps would be voluntary apply to key groceries such as eggs, bread, and milk, the BBC understands.
Graham Watson's insight:
I'm sure that there's going to be more detail to follow but my initial response to this is that this way madness lies. The notion of the government attempting to use some form of "suasion" to encourage voluntary price caps is just odd. Rather than rely on an uncertain way of influencing prices, why not use some of the methods that you do have direct control over such as taxation and subsidies.
And then you think - but these measures all have an opportunity cost.
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Energy bills will rise by £209 in July to £1,850 a year, forecast says | Energy bills | The Guardian
Cornwall Insight predicts rise in price cap of nearly 13% in Great Britain as Iran war pushes up gas costs
Graham Watson's insight:
It's like deja-vu all over again, with Cornwall Insights forecasting that energy bills are going to rise by over £200 in July to around £1,850 per year for the average household, a 13% increase. This will come about because of OFGEM will review its quarterly price cap then, taking into account the effect of the Iran war on wholesale energy prices. Given the damage to the region's energy infrastructure, it's highly unlikely that prices will quickly fall back to April's level too.
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Closure of local shops and poor public transport leave households struggling to access healthy and affordable food
Graham Watson's insight:
A University of Sheffield study suggests that low income households in rural areas are worse off than their urban equivalents in terms of their access to healthy food options such a fresh fruit and vegetables.
As the article notes: "While just 7% of lower-income households in deprived urban neighbourhoods lived more than 20 minutes’ walk from the nearest shop selling fresh fruit and vegetables, this rose to 52.5% for households with identical incomes in rural areas."
This food insecurity is likely to mean higher obesity rates, and a higher level of negative externalities associated with this.
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Ken Murphy’s pay could rise even higher following scrapping of food waste target and weakness of rivals
Graham Watson's insight:
Readers of this board will know that executive pay is one of my favourite topics - not least because I don't believe that the way we're told to teach it corresponds to reality!
Here's another example: the total pay of Tesco's CEO is due to rise by £1m, to £10.8m, because of a rise in the supermarket's market share. Now, I'm happy to support this - a rise in market share can come from some of the actions of the CEO, but can it solely be attributed to him? And he's failed to hit targets on food waste and diversity and inclusion.
However, there's one sentence in here that intrigues: the rise in market share has been "helped by the weakness of rivals Asda and Morrisons". Eh? So, you're saying that his total remuneration is in part higher because of the poor performance of others? Shall I start giving more generous marks to my best pupils when my worst pupils under-perform? labour ma
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The regulator say the energy supplier breached licence conditions aimed at protecting customers in vulnerable situations.
Graham Watson's insight:
The regulator, OFGEM, has intervened in energy markets to protect vulnerable consumers who were forced into having pre-payment meters fitted by a sub-contractor on the company's behalf. It is part of wider trend within the industry - as the article notes: "40,000 customers had a prepayment meter installed without permission between 2022 and 2023."
In this instance, British Gas has been compelled to pay £20m into a redress fund to compensate consumers.
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Privilege being mistaken for competence as study reveals no evidence to suggest companies run by state-educated peers underperform
Graham Watson's insight:
One of the more interesting labour market related articles that I've come across in a while, this Guardian piece looks at the relationship between the educational background of CEOs and finds that not only do privately educated CEOs make up a disproportionate number of British executives, but that their "performance" results in lower stock market volatility despite the fact that its identical to their state school peers.
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London’s Alphonso mango supply is down this year due to fewer imports and higher prices for shoppers.
Graham Watson's insight:
A shortage of Alphonso mangoes is affecting market traders in London, particularly Tooting. You should, as post-16 economists be aware of the effects of a shortage on the price of mangoes, but unsurprised to hear that the Iran war is partly to blame.
However, for once, a D&S story about something other than oil.
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Hard decisions over a possible sale and future subsidies loom now full nationalisation is on the cards
Graham Watson's insight:
Nils Pratley with analysis of what people are still insisting on calling the nationalisation of British Steel; I'm still adamant it's the renationalisation but assume that because it now only refers to one part of the UK steel industry, this is why the term 'nationalisation' has been chosen.
Linguistic quibbles aside, the article highlights why the move is fraught with difficulty, not least because the opportunity cost of the intervention is going to be so high. Ultimately, I suspect the government is hoping to transition the plant to both greener electric arc furnaces and, at some point, back into private ownership. If it's unable to do this, then it will be on the hook for a pretty large sum going forward.
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The steelworks has been under government control for almost a year, but leglistation to nationalise it will be put forward this week.
Graham Watson's insight:
As trailed earlier, the Prime Minister has announced the renationalisation of British Steel, safeguarding 2,700 jobs.
However, is it good economics? Certainly the figures from the National Audit Office are eye-opening, "the current government supervision regime had cost some £377m", and could cost up to £1.5bn by 2028. Equally, even though the unions are pleased, is it appropriate " that all government-funded projects use UK steel." |
I'm putting this here because it's fundamentally a Microeconomic story about incentives, D&S and so forth, and with a pick up in demand for housing, house prices are going to rise.