Show Hide image

Slight recovery in European stocks

Global shares on the rise following US interest rate freeze.

European stocks have responded positively to the US central bank's announcement that interest rates are likely to remain on hold until 2013.

Signs that the Federal Reserve are implementing growth strategies led to gains of between one and two per cent in European bourses. London's FTSE 100 share index was up by 1.4 per cent.

The news comes at a time when positive growth in other parts of the global economy is also taking place. Following Tuesday's statement, US shares closed up four per cent and Asian markets continued to show gains of between one and two per cent.

The US interest rate currently ranges between zero and 0.25 per cent. As well as the welcome news surrounding interest rate freezes, the Federal Reserve posited the possible introduction of further quantitative easing methods in order to stabilise the global economy.

The US economy has suffered serious blows in recent days following the ongoing debate between Republicans and Democrats over whether to raise the US debt ceiling. Standard & Poor's downgrading of the US credit rating from triple A to AA+ for the first time added to fears that the world's biggest economy was heading for recession.

Despite putting interest rates on hold, analysts have made it clear that such fears persist. There is still a long way to go before the falls of recent weeks are in any way close to being recovered. Ongoing eurozone volatility has provoked analysts to reassess economic and corporate profit growth estimates. Although recent growth figures offer a glimpse of reassurance, longer-term uncertainty over US and European economies prevails.

Tess Riley is a freelance journalist and social justice campaigner. She also works, part time, for Streetbank, and can be found on Twitter at @tess_riley

Photo: Getty Images
Show Hide image

David Cameron’s starter homes: poor policy, but good politics

David Cameron's electoral coalition of buy-to-let retirees and dual-earner couples remains intact: for now.

The only working age demographic to do better under the Coalition was dual-earner couples – without children. They were the main beneficiaries of the threshold raise – which may “take the poorest out of tax” in theory but in practice hands a sizeable tax cut to peope earning above average. They will reap the fruits of the government’s Help to Buy ISAs. And, not having children, they were insulated from cuts to child tax credits, reductions in public services, and the rising cost of childcare. (Childcare costs now mean a couple on average income, working full-time, find that the extra earnings from both remaining in work are wiped out by the costs of care)

And they were a vital part of the Conservatives’ electoral coalition. Voters who lived in new housing estates on the edges of seats like Amber Valley and throughout the Midlands overwhelmingly backed the Conservatives.

That’s the political backdrop to David Cameron’s announcement later today to change planning to unlock new housing units – what the government dubs “Starter Homes”. The government will redefine “affordable housing”  to up to £250,000 outside of London and £450,000 and under within it, while reducing the ability of councils to insist on certain types of buildings. He’ll describe it as part of the drive to make the next ten years “the turnaround decade”: years in which people will feel more in control of their lives, more affluent, and more successful.

The end result: a proliferation of one and two bedroom flats and homes, available to the highly-paid: and to that vital component of Cameron’s coalition: the dual-earner, childless couple, particularly in the Midlands, where the housing market is not yet in a state of crisis. (And it's not bad for that other pillar of the Conservative majority: well-heeled pensioners using buy-to-let as a pension plan.)

The policy may well be junk-rated but the politics has a triple A rating: along with affluent retirees, if the Conservatives can keep those dual-earner couples in the Tory column, they will remain in office for the forseeable future.

Just one problem, really: what happens if they decide they want room for kids? Cameron’s “turnaround decade” might end up in entirely the wrong sort of turnaround for Conservative prospects.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.