LONDON // The economy has become the elephant in the room as Britons prepare to vote for a new government tomorrow.
Although the three main parties have spelt out some of the spending cuts and tax rises that they will have to introduce after the general election to cut the huge national deficit, economists say all of them are being, at best, disingenuous about the true size of the pain that will have to be inflicted on services and jobs.
The reason is simple: while everyone knows that there is a gaping hole in the UK economy, few party leaders want to explain exactly how they plan fill it with public sector job losses, tax rises and cuts in public services on the eve of polling.
In a hard-hitting report, the Institute for Fiscal Studies (IFS), one of the country's foremost economic research organisations, has accused all three parties of failing to explain adequately how they would fill the "black hole" that led to the country borrowing a record £163.4 billion (Dh911bn) in the 2009-10 financial year.
According to the IFS, the parties have made "misleading" claims about the billions that each estimates it could garner in efficiency savings in the public sector.
Its report also accused the Labour, Conservative and Liberal Democrat parties of denying voters the opportunity of making "an informed choice" tomorrow by failing to spell out in detail how they would tackle the budget deficit.
According to the institute's analysis of the parties' manifestos, the ruling Labour Party had identified only about one-eighth of the cuts that would be necessary, the Conservatives less than one-fifth and the Liberal Democrats about one-quarter.
"Given that this fiscal repair job is likely to be the major domestic policy challenge for the next government, it is striking how reticent all three main UK parties have been in explaining how they would confront the task," said Robert Chote, director of the IFS.
"For the voters to be able to make an informed choice in this election, the parties need to explain clearly how they would go about achieving it. Unfortunately, they have not."
The accusation has been supported by a second report from another economic think tank, the National Institute for Economic and Social Research, which estimates that, whatever party wins power tomorrow, it will have to increase the basic rate of income tax by 30 per cent by 2015 to reduce the budget deficit to a manageable size.
And that, says the report, would be on top of an extra £30bn in spending cuts and other tax rises. "It will be a shock and very painful for almost everyone," said Simon Kirby, one of the report's authors.
Despite the criticism, all three parties continue to insist that it is being honest about the cuts it will introduce.
When asked about the gaps highlighted by the IFS report and in an analysis by the Financial Times, Lord Peter Mandelson, the business secretary and Labour's chief campaign strategist, replied testily: "When I last looked, neither the Financial Times nor the IFS is standing in this election.
"What we have done is to set out in our manifesto what we believe are the priorities for our country and for families. Everyone can see those choices."
David Cameron claimed that his Conservative Party has "gone further than any opposition I can remember in my political lifetime" in spelling out the cuts that would be needed.
The Liberal Democrat leader, Nick Clegg, said the IFS report "concluded that the Liberal Democrats's plan is the most credible".
He added: "Even if there's still much more work to do, we have gone further in spelling out how to cut the deficit."
Meanwhile, Mervyn King, the governor of the Bank of England, appears to believe that the party that wins tomorrow will be picking up not only the reins of government but also a poisoned chalice.
According to David Hale, a US economist who has known Mr King for many years, the Bank of England chief believes that the election winners will become so unpopular by having to impose massive cuts and tax rises that they will ruin any future chances of electoral success for a generation.
Mr Hale said in an interview with an Australian television network: "I saw the governor of the Bank of England last week when I was in London, and he told me whoever wins this election will be out of power for a whole generation because of how tough the fiscal austerity will have to be."
The elephant in tomorrow's election, it seems, might turn out to be more of a large and vengeful woolly mammoth.
@Email:dsapsted@thenational.ae
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
Ziina users can donate to relief efforts in Beirut
Ziina users will be able to use the app to help relief efforts in Beirut, which has been left reeling after an August blast caused an estimated $15 billion in damage and left thousands homeless. Ziina has partnered with the United Nations High Commissioner for Refugees to raise money for the Lebanese capital, co-founder Faisal Toukan says. “As of October 1, the UNHCR has the first certified badge on Ziina and is automatically part of user's top friends' list during this campaign. Users can now donate any amount to the Beirut relief with two clicks. The money raised will go towards rebuilding houses for the families that were impacted by the explosion.”
If you go…
Emirates launched a new daily service to Mexico City this week, flying via Barcelona from Dh3,995.
Emirati citizens are among 67 nationalities who do not require a visa to Mexico. Entry is granted on arrival for stays of up to 180 days.
From Europe to the Middle East, economic success brings wealth - and lifestyle diseases
A rise in obesity figures and the need for more public spending is a familiar trend in the developing world as western lifestyles are adopted.
One in five deaths around the world is now caused by bad diet, with obesity the fastest growing global risk. A high body mass index is also the top cause of metabolic diseases relating to death and disability in Kuwait, Qatar and Oman – and second on the list in Bahrain.
In Britain, heart disease, lung cancer and Alzheimer’s remain among the leading causes of death, and people there are spending more time suffering from health problems.
The UK is expected to spend $421.4 billion on healthcare by 2040, up from $239.3 billion in 2014.
And development assistance for health is talking about the financial aid given to governments to support social, environmental development of developing countries.
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
MATCH INFO
South Africa 66 (Tries: De Allende, Nkosi, Reinach (3), Gelant, Steyn, Brits, Willemse; Cons: Jantjies 8)
Canada 7 (Tries: Heaton; Cons: Nelson)