LONDON // Alistair Darling, the chancellor of the exchequer, is still cautious about the economic outlook in the UK and highly sceptical of proposed US banking reforms to prevent another global financial crisis.
Key GDP figures for the UK are to be released tomorrow, but Mr Darling refused to get carried away by predictions of growth.
The UK has remained in recession longer than almost any other major advanced economy, but economists are almost certain that preliminary estimates will show growth resumed in the last three months of 2009.
"I don't know what the figures are - but I remain cautious," Mr Darling told The Sunday Times. "There is still a lot of uncertainty around."
In his budget in April last year, Mr Darling predicted a return to growth around the turn of the year, a forecast that proved more accurate than most economists' expectations of expansion in the third quarter.
During what has been the country's deepest recession in more than 50 years, the budget deficit has ballooned, while salaries for top public-sector jobs have soared.
"In some quangos [quasi public-sector agencies], local authorities and other organisations, the level of pay, especially at the top end, and bonuses have reached the stage where they don't pass what I call the next-door neighbour test. If you can't justify them to your neighbour, you've probably got it wrong," Mr Darling said.
He was also sceptical about recently announced plans from Barack Obama, the US president, to toughen bank regulation, for example by restricting proprietary trading.
Such moves were doomed to fail unless they found very broad international support. "The banks are global, they are quite capable of organising themselves in such a way that if the regime is difficult in one country they will go to another one, and that doesn't do anyone any good," he said.
Mr Obama announced plans last week to limit the size and scope of US banks and financial firms, saying they would "never again" get so big that taxpayers have to bail them out or risk the economy.
The aim of the plan is to limit "excessive" risk taking and to "protect" taxpayers by preventing banks or financial institutions from owning, investing in or sponsoring hedge fund or private equity funds.
"It is always difficult to say ex ante that you would never intervene to save a particular sort of bank," Mr Darling said. "In Lehman [Brothers], for example, there wasn't a single retail deposit, but the then American administration allowed it to go down and that brought the rest of the system down on the back of it."
Mr Darling said the UK would continue to work with the US on financial reform, but said any proposals must be "workable and deliverable", and insisted any action had to be international.
"If everyone does their own thing, it will achieve absolutely nothing," he said.
* with Agence France-Presse
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more from Janine di Giovanni
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How to play the stock market recovery in 2021?
If you are looking to build your long-term wealth in 2021 and beyond, the stock market is still the best place to do it as equities powered on despite the pandemic.
Investing in individual stocks is not for everyone and most private investors should stick to mutual funds and ETFs, but there are some thrilling opportunities for those who understand the risks.
Peter Garnry, head of equity strategy at Saxo Bank, says the 20 best-performing US and European stocks have delivered an average return year-to-date of 148 per cent, measured in local currency terms.
Online marketplace Etsy was the best performer with a return of 330.6 per cent, followed by communications software company Sinch (315.4 per cent), online supermarket HelloFresh (232.8 per cent) and fuel cells specialist NEL (191.7 per cent).
Mr Garnry says digital companies benefited from the lockdown, while green energy firms flew as efforts to combat climate change were ramped up, helped in part by the European Union’s green deal.
Electric car company Tesla would be on the list if it had been part of the S&P 500 Index, but it only joined on December 21. “Tesla has become one of the most valuable companies in the world this year as demand for electric vehicles has grown dramatically,” Mr Garnry says.
By contrast, the 20 worst-performing European stocks fell 54 per cent on average, with European banks hit by the economic fallout from the pandemic, while cruise liners and airline stocks suffered due to travel restrictions.
As demand for energy fell, the oil and gas industry had a tough year, too.
Mr Garnry says the biggest story this year was the “absolute crunch” in so-called value stocks, companies that trade at low valuations compared to their earnings and growth potential.
He says they are “heavily tilted towards financials, miners, energy, utilities and industrials, which have all been hit hard by the Covid-19 pandemic”. “The last year saw these cheap stocks become cheaper and expensive stocks have become more expensive.”
This has triggered excited talk about the “great value rotation” but Mr Garnry remains sceptical. “We need to see a breakout of interest rates combined with higher inflation before we join the crowd.”
Always remember that past performance is not a guarantee of future returns. Last year’s winners often turn out to be this year’s losers, and vice-versa.
Moon Music
Artist: Coldplay
Label: Parlophone/Atlantic
Number of tracks: 10
Rating: 3/5
MATCH INFO
Manchester United v Manchester City, Wednesday, 11pm (UAE)
Match is on BeIN Sports
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Company%20Profile
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UAE currency: the story behind the money in your pockets
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
Company%20Profile
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What is a Ponzi scheme?
A fraudulent investment operation where the scammer provides fake reports and generates returns for old investors through money paid by new investors, rather than through ligitimate business activities.
The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
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How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
APPLE IPAD MINI (A17 PRO)
Display: 21cm Liquid Retina Display, 2266 x 1488, 326ppi, 500 nits
Chip: Apple A17 Pro, 6-core CPU, 5-core GPU, 16-core Neural Engine
Storage: 128/256/512GB
Main camera: 12MP wide, f/1.8, digital zoom up to 5x, Smart HDR 4
Front camera: 12MP ultra-wide, f/2.4, Smart HDR 4, full-HD @ 25/30/60fps
Biometrics: Touch ID, Face ID
Colours: Blue, purple, space grey, starlight
In the box: iPad mini, USB-C cable, 20W USB-C power adapter
Price: From Dh2,099
The Transfiguration
Director: Michael O’Shea
Starring: Eric Ruffin, Chloe Levine
Three stars
The biog
Favourite food: Tabbouleh, greek salad and sushi
Favourite TV show: That 70s Show
Favourite animal: Ferrets, they are smart, sensitive, playful and loving
Favourite holiday destination: Seychelles, my resolution for 2020 is to visit as many spiritual retreats and animal shelters across the world as I can
Name of first pet: Eddy, a Persian cat that showed up at our home
Favourite dog breed: I love them all - if I had to pick Yorkshire terrier for small dogs and St Bernard's for big