BNP ECONOMICS BULLETIN
JANUARY 8, 2007

British National Party
www.bnp.org.uk




1. CHRISTMAS OVERSPENDING BANKRUPTING PEOPLE

Another sign of the rampant excesses of consumerism.

http://www.forbes.com/markets/2007/01/05/britain-barclays-hsbc-markets-e
con-cx_po_0105markets11.html

The British spent so much on presents and partying this past holiday
season that thousands will have subsequently gone bust. A new report by
British financial services group Grant Thornton predicts that a third of
all personal bankruptcies filed in the first quarter of 2007 will be
because of excessive spending at Christmas.

The bigger picture is more worrying. While the rate of insolvencies in
the rest of Continental Europe is falling, Britain's is rising.
According to research by Euler Hermes, a credit insurance manager based
in Paris, personal insolvencies in Britain will have risen 8% in 2006,
and 3% in 2007.

But in Germany, insolvencies are expected to decrease by 13% in 2006 and
stabilize in 2007. The unification of the country's East and West had
prompted a 300% surge in personal bankruptcies between 1991 and 2002,
but insolvencies have been in decline since 2004 as the economy has
gradually improved.

France is also expected to see its consumer bankruptcies decline 3% for
2006, thanks to some improvements in the economy, while Italian
insolvencies are expected to stabilize in 2006 and 2007.

Britain, however, is out of step with those improving economies.
According to Grant Thornton, around 106,000 Brits will have declared
themselves bankrupt for 2006, marking a 57% increase from the 67,600
filings of 2005, and more than double the 46,650 that were filed in
2004.

The problem lies in wanton consumer spending, a growing
buy-now-pay-later culture, and Britain's economy. ‘Several developments
such as interest rate rises, sky-high utility bills and increases in
unemployment have contributed to pushing more people into financial
trouble,’ said Mike Gerrard, head of Grant Thornton's personal
insolvency practice.

One country Britain seems to have much in common with is the United
States, where ‘buy-now, pay-never’ is running at full steam. Around 0.5%
of Americans declared themselves bankrupt in 2006, compared with 0.2% of
Britons.

An 11th-hour rush by thousands to file just before the Bankruptcy Abuse
Prevention and Consumer Protection Act came into force in October 17,
2005 caused U.S. bankruptcies to shoot up 19% that year.

Now those numbers are merely dipping. There was a welcome 10% drop in
personal bankruptcies in 2006, but the rate is expected to jump again,
by 10%, in 2007.

Some minor solace for the United States: Britain's consumer debt
mountain is comparatively larger than the Land of Liberty's. It's worth
$2.46 trillion, while in America (where the population is almost five
times larger), it's $2.19 trillion, as reported by the Fed in August
2006. Last year, the Brits borrowed almost £14 billion ($27 billion) in
unsecured lending alone.

Gerrard concurs with Euler Hermes that personal insolvencies in Britain
will continue edging up. ‘While they may eventually settle down before
next Christmas, they will do so at an already high level,’ he said. ‘At
present, there are simply not the conditions in place to expect a sudden
drop.’


It all makes gloomy reading for Britain's banks, who have seen a
disconcerting rise in bankrupt customers entering individual voluntary
agreements, an easy form of insolvency where lenders write off a portion
of the debts.

British banks like HSBC (NYSE: HBC - news - people ) and Barclays (NYSE:
BCS - news - people ) are now complaining of aggressive promotion of
IVA's by insolvency practitioners as a cheaper and easier alternative to
bankruptcy. They want the industry to be more tightly regulated, though
it's likely consumer borrowing will continue unabated.






2. SLOWING HOUSING MARKET IN UK

http://www.forbes.com/markets/2007/01/05/britain-housing-halifax-markets
-econ-cx_po_0105markets14.html

A scorching housing market has been fuelling Britain's economy in recent
years, so it was a worrying surprise for some when a report by Halifax,
Britain's largest mortgage lender, showed on Friday that house prices
had fallen 1% in December. It's the first time since June that the
growth had faltered.

Analysts had been expecting a rise of 1%, and the decline weighed on the
annual rate, which fell to 9.9% instead of coming in at the predicted
10.2%.

A recent increase in interest rates may well have held back demand. The
Bank of England raised the rate at which it lends to banks twice in the
last 5 months, bringing it up to a five-year high of 5%.

Does the December blip herald a bigger slowdown? Martin Ellis, Halifax
chief economist, says no. ‘House prices fell by 1% in December, but it
remains too early to conclude that this indicates a genuine slowdown in
the housing market.’

Take the numbers from the final quarter of 2006 and things look healthy
enough. Prices were 4.2% higher than the previous three months, marking
the strongest quarterly rise since the sizzling second quarter of 2004.

But the market for 2007 won't be as hot as 2006 or even 2005, which saw
8% growth, the bank said. Halifax predicts house prices in Britain this
year will rise 4%. Already-elevated interest rates, along with the
chance of a further rise this February, could hold back demand, said
Ellis, and so could greater pressure on household finances and subdued
real earnings growth.

The findings stand out against other housing surveys that have shown the
U.K. housing market in prime health. Rival mortgage lender Nationwide
said British house prices had actually jumped 10.5% in 2006, with a 1.2%
rise in December. It predicted a rise of 5% to 8% in 2007.

It is worth noting that the 10% rise in prices for 2006 were well ahead
of most analysts' expectations 12 months ago. They'd predicted growth of
2% to 3%.





3. POLITICIANS MUST HELP SMALL BUSINESS

http://www.freelanceuk.com/news/2053.shtml

One of Britain’s most vocal small business supporters has singled out
top politicians to safeguard micro businesses from an imminent economic
struggle.

The Federation of Small Businesses says without action from several
high-profile figures the sector will suffer, leading to adverse effects
for the whole UK economy.

Carol Undy, the group’s national chairman, has restated the commitment
small businesses make to the UK economy, alongside the list of New Year
Resolutions, drafted for the great and good.

‘Small businesses employ over 58 per cent of the private sector
workforce,’ Ms Undy said.

‘A huge number of public figures have a major impact on these employers
and their 12 million employees. These businesses produce half of
Britain’s GDP, representing £1,200 billion per year.

‘To ensure that 2007 is a year in which small firms can grow, employ
more people and keep their existing employees in jobs we have
resolutions for many of these public figures.

‘If they keep them 2007 will be a prosperous year for the whole country.
If they don’t, small businesses will suffer and with them will go the UK
economy.’

The FSB’s New Year Resolutions are as follows:

• Tony Blair, the Prime Minister, to ensure an orderly transition of
power to a new PM that does not affect business confidence or the
economy in a negative way.

• David Cameron, Leader of the Conservative Party, should remember that
business creates the wealth to fund public spending. Support from this
sector should not be taken for granted, especially when examining green
policies that can hit businesses hard if not drawn up correctly.

• Sir Menzies Campbell, Leader of the Liberal Democrats, to continue the
push of LibDem ideas for a general reduction in regulations for small
businesses.

• Gordon Brown, Chancellor of the Exchequer, should step up to the plate
and bat for business by clamping down on the gold plating of EU
regulations by UK civil servants.

• John Reid, Home Secretary, must recognise the role that businesses can
play in improving community safety with the right support, advice and
response from the police. The police need to be more proactive in their
response to crimes against businesses. This will ensure that businesses
continue to be the 'eyes and ears' of communities in the counter
terrorist effort.

• John Fingleton, Chief Executive of the Office of Fair Trading, to make
the OFT do what it says on the tin. He should prevent the unfair market
created by the supermarkets from continuing the carnage of small shops
on the high streets across Britain, which reduces competition and
consumer choice.

• Douglas Alexander, Secretary of State at the Department for Transport,
to remember that investment in new and existing roads is crucial for
small businesses to survive. A balance must be maintained between the
economic and environmental health of the country.

• Alistair Darling, Secretary of State for Trade and Industry, to
protect the post office network and reversing his decision to cull 2,500
post offices. To continue the fight in the EU against scrapping the UK
opt-out from the Working Time Directive.

• John Hutton, Secretary of State for Work and Pensions to remember that
without employers there would be no employees. He must make sure pension
requirements in his White Paper do not bankrupt small businesses.

• Sir Digby Jones, the Government’s new Skills Tsar, to remember that
99% of businesses are small and thus need training to be on-site to
avoid losing a large proportion of a business’ workforce all at once. He
should also make sure that any employer-led Commission for Employment
and Skills must have full and proper small business representation.

• Sir Michael Lyons must reject calls for business rates to be returned
to local authority control. For the sake of the economy this cannot be
allowed to happen.

• Bill Callaghan, Chair of Health and Safety Commission, should make
sure that the HSE Simplification plan delivers real improvements for
business in terms of reduced costs and time spent filling in forms and
doing risk assessments. This can be achieved without putting worker
safety at risk.

• James Purnell, Minister at the DWP, to recognise that the
responsibility for saving for retirement lies with the individual, not
the employer, and to remember that if businesses' money is diverted to
pensions less will be spent on growing the business.

• Malcolm Wicks, Minister of State at the Department of Trade and
Industry to give small businesses a fairer deal in the energy market.





4. FRANCE CONSIDERS RADICAL TAX CUTS FOR CORPORATIONS

France has long suffered economic stagnation, due in part to high taxes.
Britain used to have a tax advantage, over most of the rest of Europe,
but Blair's tax increases have wiped this out. The article below is a
sure sign that the high-tax faith is growing stale even for its biggest
believers. Still, one must be careful, when bribing big business with
tax cuts, that they actually deliver the job growth they're being bribed
to produce. Otherwise, tax cuts for them simply dump more tax liability
onto the rest of us.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/01/05/cnfran
ce05.xml

French president Jacques Chirac has proposed slashing France's
corporation tax rate from 33pc to 20pc to relaunch its flagging economy,
a move that could leave Britain behind as the high-tax laggard in
Europe.

‘We have to take action on corporation tax to save our businesses and
help create new ones. The goal should be to reduce it to 20pc in five
years,’ he said in his New Year speech, proposing a long-term goal of
just 10pc.

Mr Chirac also stepped up his attacks on the strong euro policy of the
European Central Bank, calling for political intervention to force down
the exchange rate.

‘Europe must take its destiny in hand,’ he said. ''It is time that it
exercised its economic sovereignty by setting an exchange rate policy
and a change in trade policy to take account of globalisation.

‘It's time the Union adopted an aggressive commercial policy, using the
same weapons as other powers,’ he said.

Mr Chirac appeared to be referring to a clause in the Maastricht Treaty
giving EU ministers the final say over the exchange rate policy, a power
that could enable them to dictate policy changes to the ECB.

The markets have so far dismissed such comments by French politicians as
empty posturing, noting that Paris appears to be isolated.

But EU veterans warn that this could be a grave misjudgment of political
realities in Europe.

The reinvention of France as a low-tax tiger is a startling idea for
those wedded to the French social model, with 53pc of the economy still
in state hands.

But Paris is becoming alarmed by the growing economic gap between France
and Germany, certain to widen further as Berlin pushes through
‘Thatcherite’ cuts in employer costs and a fall in corporate tax from
25pc to 16pc (30pc with regional and city taxes).

While the flat tax revolution across eastern Europe has run out of
steam, rates of 18pc in Poland, 16pc in Romania, and 13pc in Russia,
among others, are still in place and exerting a powerful effect.

Almost all of Europe has trimmed tax rates in recent years. The two
exceptions have until now been France and above all Britain, where the
share of economy in state hands is creeping ever upwards.

George Osborne, the shadow Chancellor, said that Labour inherited an
economy where only 10 of the world's 30 rich states had corporation tax
lower than Britain. Now 20 are lower, and soon perhaps 21.





5. MORE SOPHISTRY ON IMMIGRATION-UNEMPLOYMENT LINK

This article is a fine case-study of a classic piece of immigrationist
sophistry: Immigration doesn't cause unemployment, therefore immigration
is good for British workers.

For a start, the premise is wrong. Immigration does raise unemployment,
because even if new jobs are created as fast as immigrants arrive, the
availability of cheaper and more desperate foreign labour will cause
employers to shun the least attractive indigenous workers -- like the
old, who are suffering increased age discrimination as a result.

Furthermore, the main impact of immigration, in a flexible economy like
ours, in which new jobs are easy to create, isn't against the quantity
of jobs, it's against their *quality*. An increased supply of labour
drives down labour's price, as with any other commodity.

http://www.inthenews.co.uk/money/news/finance/immigrants-not-driving-une
mployment-up-$1037291.htm

There is ‘little evidence’ to suggest that economic migrants from EU
accession states, the Middle East and Asia, have increased unemployment
in Britain, a Bank of England report has concluded.

The UK's population has grown at a fast pace since the turn of the
decade, in part due to the influx of workers from eastern Europe, but
unemployment rates have accelerated.

However, the report from David Blanchflower, a member of the Bank's
monetary policy committee, says that migrant workers have had ‘little to
do’ with increasing levels of unemployment, particularly among 18 to
24-year-olds.

Mr Blanchflower instead attributes the rise to ‘greater slack’ in the
labour market.

More than half a million workers from recently acceded eastern EU states
work in the UK, and campaign groups have claimed that Britons have had
their wages lowered as a result.

But the BoE report, delivered to the Cambridgeshire Chamber of Commerce,
dismisses this, stating that increased levels of immigration had reduced
overall unemployment and raised the supply potential of the economy.

‘In addition, this recent immigration appears to have continued to
reduce inflationary pressures,’ the study says.

Despite saying itself that economic migrants have had a positive impact
upon Britain's economy, the government has introduced restrictions on
Romanian and Bulgarian citizens seeking work in the UK.

The Baltic states became the EU's newest members when they joined on
January 1st this year.



6. EUROPEANS FURTHER SOURING ON EURO

http://www.timesonline.co.uk/article/0,,2089-2524244,00.html

Non, nein, no: Europe turns negative on the euro Matthew Campbell, Paris

A French diplomat who spent the festive period at his weekend home in
rural
France was astonished last week when a man in a DIY shop presented him
with a
bill in francs, rather than in euros, with the excuse: 'I am sorry,
monsieur,
most of my clients prefer it that way.'

In a world apart from the euphoria with which 12 nations -- excluding
Britain --
switched to the euro on New Year's Day in 2002, hostility towards the
single
currency is growing as a wider malaise over an expanding Europe takes
hold.

'I suppose in some places the euro has just never really caught on,'
said the
diplomat. 'I feel very pessimistic about the future.'

Slovenia will drop its tolar tomorrow in favour of eurozone entry, but
in 'old
Europe' the fifth anniversary of the introduction of the euro will be
more an
occasion for bitter reflection than fanfares.

The high denomination notes may be popular among criminals, but one poll
released last week showed that 52% of French people believe that 'the
euro is a
bad thing', blaming it for inflation, and 57% felt that the euro had
been bad
for them 'personally'.

A quarter of the population, it emerged, still calculated prices in
francs, a
process that the government has not seemed to discourage by requiring
all
receipts to display, alongside the euro total, the equivalent price in
francs.

It might not matter if this disgruntlement were limited to rural French
bakers
who spit at the mention of euros: the French are in a peculiar mood, as
they
demonstrated most spectacularly by rejecting the European Union's
proposed
constitution in a referendum last year.

More worrying to Brussels, however, was evidence that resentment of the
euro was
spreading to other parts of the empire. A majority of Germans, it turns
out,
also long to have their old currency back, according to another recent
poll,
because of inflation that they blame on the 'teuro', as they often call
the euro
in a play on teuer, the German word for expensive.

The Spanish and Irish seem relatively content with their lot but the
same cannot
be said of Italy, where 64% of people acknowledged feeling 'little' or
'not at
all' at ease with the European currency, which they blame for higher
prices.
Some politicians have called for the country to re-establish the lira to
revive
economic growth.

This was all a far cry from the 'very great federating power' that
Hubert
Vadrine, the former French Socialist foreign minister, imagined for the
euro.

'It has not had the effect of an integration lever that its founding
fathers
dreamt of', said the left-wing Liberation newspaper in an editorial last
week.
'At a time when the European project has broken down. . . you have to be
a
Slovene to feel any enthusiasm about joining the eurozone.'

In Slovenia the opinion polls showed that the euro was still generally
popular
because it represented a final break with the communist past.

Yet even here there were fears about rising prices and other EU
newcomers are
hardly racing to the starting line. Hungary has abandoned its previous
target of
adopting the euro in 2010, and Estonia has decided to move its target
entry date
to 2010 from 2008, despite its economic success.

Those already in the club are hardly a good for it. By contrast with
German angst
about the euro, which is strongest among the least well-off, Gallic
grumpiness
with the euro system extends to the political classes that once
trumpeted its virtues.

Various French politicians, including Dominique de Villepin, the prime
minister,
Segolene Royal, the Socialist presidential candidate, and Nicolas
Sarkozy, her
most likely opponent from the centre-right, have displayed a populist
streak by
making the European Central Bank their favourite political punchbag as
the
presidential election draws near.

The bank's officials last week seemed to take pride in the strength of
the euro
and news that the value of euro notes in circulation was this month
likely to
exceed the value of circulating dollar notes. There was similar
satisfaction
over Iran's recent announcement that it would keep foreign reserves in
euros
rather than dollars.

For French politicians, however, the euro's strength was to blame for
making
French goods too expensive overseas and hampering growth. This ignored a
host of
other factors, such as high French labour costs. However, it played well
with an
electorate terrified of being left at the mercy of market forces. It
also
highlighted the protectionist instincts of even supposedly reform-minded
politicians such as Sarkozy, the son of a Hungarian immigrant, who has
revolutionised French politics with American-style campaigning
techniques and
who likes to advertise himself as the candidate of 'rupture' with the
past. Like
Royal, though, he was in favour of bringing the European Central Bank
under
politicians control.

All of this reflected a wider European malaise: rejection of the EU
constitution
has left Europe rudderless and adrift just as it is set to expand to 27
members
next month. The inclusion of Bulgaria and Romania will
make the EU more unwieldy than ever. But as Germany takes over the
rotating
presidency of the organisation this week the Franco-German axis,
traditionally a
motor of decision making in the EU, has never seemed weaker.

Angela Merkel, the German chancellor, has put more effort over the past
year
into repairing relations with America and befriending George Bush, its
president, than she has into building ties with France.




7. EU WANTS INCOME TAX

An even more audacious grab for our pay packets -- and don't imagine
that the £510
per year quoted below is the end of it!

http://express.lineone.net/news_detail.html?sku=973

Brussels politicians have drawn up proposals to create a European income
tax
which would leave Britons shelling out £510 a year to the superstate.

The rumbling row over the size of Britain’s rebate from Europe
resurfaced as
an influential committee of MEPs received recommendations for sweeping
reforms to the Union’s current funding system.

The Committee On Budgets is facing calls to scale back the current
system in
favour of a form of direct taxation when Britain’s rebate is
re-negotiated
in 2008.

A report drawn up for the committee urges MEPs to ‘seriously consider
the
necessity of ensuring a direct and transparent link’ between the Union’s
resources and its citizens.

It adds that, ‘in the search for such a link due consideration be given
to
paying part of an identified direct tax’ to the Union’s budget.

The recommendations, drawn up by the Committee On Regional Development,
have
been seized on by the UK Independence Party as evidence that Britons
face
the threat of a Brussels tax on their pay packets on top of ordinary
tax.
Currently the Treasury pays £9billion to the European Union and receives
a
rebate of up to £3billion annually.

Our Euro funding is not sliced from earners’ income tax but is raised
primarily on levies on imports into Britain and on VAT charged on most
goods
we buy.

A portion is also taken from Britain’s own gross domestic product.

John Whittaker, UKIP MEP, warned that Britons would end up out of pocket
if
Brussels looked to raise revenue through direct taxes.

‘British taxpayers are already paying through the nose to fund the EU,
the
last thing they need is yet another tax,’ he added.

‘The EU is not directly accountable to the people of this country. To
give
these unelected bureaucrats power over tax is a massive step in the
wrong
direction. Most people see the EU wasting money left, right and centre.
The
last thing we need is them having more to pour down the drain.’

The committee’s paper accepts that while national contributions will
remain
an important source of the Union budget it proposes a revenue-raising
system
to reduce the importance of national contributions.

Rebates which are ‘manifestly no longer justified’ should be abolished,
the
paper adds, while any new system should ‘reflect the relative prosperity
of
each member state and its ability to pay’.

The paper suggests a direct tax could take the form of an income tax or
a
corporation tax.

The rebate was won by former Prime Minister Margaret Thatcher in 1984 to
make up for the huge farming subsidies enjoyed by France and Germany.

But even with the rebate, Britain remains the second highest Union
contributor out of an institution that will, from tomorrow, boast 27
member
states.

In 2005, Tony Blair suggested Britain would be prepared to give up some
of
the £3billion rebate in return for cuts in German and French farm
subsidies
but French President Jacques Chirac refused to give way.

The Union budget is still dominated by farming payments which eat up
£37.73billion, or 49 per cent of all spending.








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