Our editors give us a breakdown of this week’s current affairs
United Kingdom: Harry Street
Support for Boris Johnson has all but vanished this week: Five senior officials have resigned from their positions, and criticisms from all political corners have saturated the news since the release of the highly-anticipated report by Sue Gray. The report, which was released on Monday, confirmed the doubts of many regarding Johnson and his government’s actions throughout the pandemic-induced lockdowns. Gray described the behaviours as “difficult to justify”, and that there were “failures of leadership and judgement” at Number 10 and in the Cabinet Office. Further fuel was added to the fire, when Johnson wrongly accused the leader of the opposition of “failing to prosecute Jimmy Savile”. This has left the Prime Minister in, what some have described, as an untenable decision: It is a matter of if, not when, the number of letters of no confidence will reach 54, which is the minimum required to trigger a vote of no confidence.
The term “Black Thursday” has now been coined, following a 54% increase on the cap for gas and electricity prices, which will come into effect in April. This means that for around 22 million households, utility bills will increase by £693 per annum, putting many households in an impossible situation. The cap was increased to help energy companies pass on the rising wholesale costs, which saw a large increase at the end of 2021, and are expected to increase even more throughout the year. Rishi Sunak, the UK chancellor, has unveiled a £9 billion package to tackle the crisis, which will offset the price surge through a council tax rebate and a £200 discount on electricity bills, which will be available later this year.
The large uptick in energy prices has added to the spiraling levels of inflation in the UK, which now sits at 7.5%; this greatly exceeds the Bank of England’s 2.0% target. To alleviate inflationary pressures, the BoE has announced a quarter point increase in interest rates, bringing them to 0.5 per cent. They have also warned that households may be facing the worst squeeze on disposable income in 30 years, which is a cumulation of high inflation, increasing taxes, slow economic growth, and rising unemployment. This news was also accompanied by a controversial statement from the governor of the Bank of England, who suggested that workers should not seek big pay rises to tackle these economic hardships. Mr Bailey has received substantial backlash; it does not seem fair to ask the public to suffer financially for issues caused by external forces.
Europe: Cameron Fulton
Austria became the first nation worldwide to write compulsory COVD-19 vaccines into law. Not receiving a vaccine will now be considered a criminal offence. At the time of announcement, 3 months ago, they were heralded as being leaders of pushing the vaccine, with many other nations expected to follow. Instead, rates have plateaued and once more restrictions are beginning to ease across Europe. Support as a result for Austria’s continued staunch response, is likely to erode as this wave begins to alleviate further.
The ECB have proposed a more ‘hawkish stance’ this week, amid growing fears of inflation beginning to spiral. Though a little late for the party in respect to other western central banks such as the Bank of England and the Fed, inflation hitting a record 5.1% caused the camel’s back to finally break. Although about half was caused by surging energy prices, Christine Langarde remarked that inflation risk still ‘tilted to the upside’. This has been the first time the ECB President has flinched regarding inflation, previously remaining set on continued loose monetary policy until 2023. The reaction has been a sell-off in bond markets and surge in the euro value, though these would be expected to subside in the coming weeks.
Turkey’s inflation rate has reached new heights, rising by 48.7% in January, a record during the tenure of Recep Tayyip Erdogan of over 2 decades. This comes a week after Erdogan once more fired another key economist, this time the chief of the country’s statistics institute. Sait Erdal Dincer lasted only 10 months in the role, and is to be replaced by Erhan Cetinkaya, previous vice-chair of the country’s banking regulator. Erdogan has controversially continued loosened interest rates over the past 4 months, defying classic monetary policy theory and facing the inflationary consequences. Last month’s emergency measures, to begin reversal, have seen results in the value of the Lira. If this begins to chip away at inflation is clearly yet to be seen.
North America: Amelia Brown
The US has plans to send an additional 2,000 military troops to Europe as Russian troops continue to border Ukraine. The government is doing so to support Nato’s collective defense, with troops moving from North Carolina to Poland and Germany. US military officials have also warned that they believe Russia would plan fake explosion videos and spread propaganda to justify an invasion, which the Kremlin continuously denies. The rising military moves are in tandem to diplomatic talks between the Biden administration and Russia to de-escalate tensions. A leaked document has shown that these diplomatic efforts have included trading transparencies on missile capacities in the region, and a refrain from troops being in Ukraine. Ukraine’s foreign minister believes that the acceptance of this agreement means Russia would have to withdraw its weapons and troops from the country, and is therefore supportive of the arrangement. Other Nato allies have been in talks with the Kremlin and Putin and have been sending troops and supplies to Ukraine to bolster their defense.
Another weekend of protests started in Canada on Friday. Thousands joined up in the capital of Ottawa last week to protest various covid measures, namely the vaccine mandate on cross-border truckers. The lines of trucks and constant horn blaring paralyzed the city and forced President Trudeau to be evacuated for his safety last week. This week the protests continue in various provinces, with large police presences at most, but overwhelmingly peaceful so far. The formula seems to be similar across the country, with truck and car convoys blocking roads and pedestrians waving flags and holding signs in support. There have been a handful of cities where counter-protests have also taken place, like the group of healthcare workers in favor of the vaccine and covid measures marching in Toronto. In Alberta, Saturday saw the continuation of a blockade of the US border trying to impede crossing, as well as efforts to block healthcare facilities. In other areas violence has broken out in small measures, with a few people arrested in British Columbia, and a man arrested in Winnipeg for driving his SUV into 4 protesters on Friday.
Business: Aoife Doyle
The Bank of England have increased the interest rate from 0.25% to 0.5%, following predictions of the worst squeeze on income of households since 1990. Stemming from the latter half of 2021, the price of gas and electricity has steadily increased, with supply shortages the catalyst for such events. The energy price regulator were obliged to raise the cap on what limites companies can charge consumers in Great Britain. From April, households will see a 54% increase to their energy bills, with an further increase predicted for October. Such steep rise will leave millions of household facing ‘energy poverty’. The Chancellor, Rishi Sunak has announced a package of support for households, however, there is great skepticism over the extent these support schemes can help.
India is one of the latest major economies an official virtual currency, following the Chinese trial of the digital yuan. The announcement came as Nirmala Sitharaman unveiled the Indian federal government’s annual budget. This budget aimed to bolster Asia’s third largest economy and included ramping up spending on infrastructure after the pandemic years hampered economic activity. The digital currency will be subject to a 30% tax on income, but will allow a more efficient and cheaper currency management system. The tax would put profits from trading and transferring cryptocurrencies and NFTs in the country’s highest tax band. In 2018, the Reserve Bank of India banned the trading of cryptocurrencies, however, this ban was overturned two years later. The UK, The Bank of England and the Treasury are exploring a potential central bank digital currency.
Theory: Cassi Ainsworth-Grace
The city of Philadelphia has announced its intentions to trial a Guaranteed Income Progam, beginning from March this year. In an attempt to increase the city’s economic mobility, up to 60 people in need will be able to receive $500 a month for at least a year. There will be no expectations of repayment and minimal associated conditions. These individuals will be selected from a sample of people who received financial assistance from the Temporary Assistance for Needy Families program (TANF). The trial has been endorsed by the Mayor, Jim Kenney, who is a member of the group Mayors for a Guaranteed Income. The success of the program will be the number of individuals who are able to secure full-time employment and cease receiving assistance from the TANF program. This experiment is part of a line of new economic mobility trials that have been started across the US in recent years.