Economics | The Guardian

Rolling coverage of the latest economic and financial news, as hundreds of investors meet at Hampton Court

Defense Production Act of 1950, passed to streamline production during Korean war, was last used during Covid pandemicThe White House has announced it plans to use a cold-war era law to ease supply chain issues that the administration argues are contributing to higher inflation - a key electoral challenge to Joe Biden's re-election chances next year as polling consistently suggests voters are not buying his Bidenomics pitch.In a statement, the White House said Biden will use the Defense Production Act to improve the domestic manufacturing of medicines deemed crucial for national security and will convene the first meeting of the president's supply chain resilience council to announce other measures tied to the production and shipment of goods. Continue reading...

Andrew Bailey again dismisses speculation about rate cuts, saying fight to bring inflation down to 2% is hard work'

Extreme weather contributing one-third of all food price inflation with worse to come in 2024, warn climate researchersBritish households' food bills have been driven up by more than 600 over the past two years by the global climate emergency and soaring energy prices, according to a report warning of further increases to come in 2024.Sounding the alarm over the impact from increasing extreme weather patterns for food production, the Energy and Climate Intelligence Unit (ECIU) thinktank said that global heating was directly contributing to the cost of living crisis. Continue reading...

Inequalities of income, wealth and power cost UK 106.2bn a year compared with average developed OECD countryThe UK spends more than anywhere else in Europe subsidising the cost of structural inequality in favour of the rich, according to an analysis of 23 OECD countries.Inequalities of income, wealth and power cost the UK 106.2bn a year compared with the average developed country in the Organisation for Economic Co-operation and Development (OECD), according to the Equality Trust's cost of inequality report. Continue reading...

Report says lack of intellectual diversity' at senior level and too wide a range of priorities led to errors and fall in public confidenceThe Bank of England's reliance on inadequate" forecasting models and a lack of intellectual diversity within its most senior ranks contributed to inflation sticking at among the highest levels in decades, a Lords report has found.In a report critical of Threadneedle Street, the powerful Lords economic affairs committee said the central bank had made errors" in its handling of the inflation shock triggered after the Covid pandemic and Russia's invasion of Ukraine. Continue reading...

Music, theatre and art have been crushed by years of Tory cuts. They need to be nurtured again, with purpose and with prideAs the Conservatives clutch at political straws, the Labour party is readying itself for government. Some predict a general election as early as next spring. In Thangam Debbonaire - who started out as a professional cellist - there is the unusual prospect of a culture secretary who understands the arts from deep personal experience. Two months into her job shadowing the unimpressive incumbent, Lucy Frazer, she is in listening mode. The next step is to get herself a serious, ambitious plan for power.As Labour culture secretary, she would almost certainly score easy points by just not being Tory. That means, to pick some random examples, by not being among the 12 Tories to hold the post in 13 years. By displaying less ignorance about the brief (Nadine Dorries's startling misapprehension, when culture secretary, that Channel 4 is publicly funded, stands out amid a strong field). By not relentlessly starving, punishing and criticising the BBC, the UK's largest cultural organisation. By not dragging the arts into a cynical, divisive culture war. By not being part of a government that unleashes something as self-harming as an exit from the European Union. By not engaging in a zero-sum game in which London is pitted against the rest of the country in the name of levelling up.Charlotte Higgins is the Guardian's chief culture writer Continue reading...

High-priced homes do not create wealth, Alan Kohler says, they redistribute it. Now financial success is largely a function of geography, not accomplishment

Immigration fuels growth and much-needed workers but there are ways to wean UK plc off its dependencyRishi Sunak can't catch a break. Barely was the ink dry on last week's autumn statement than the news came out of record migration figures. The previous week, a bigger than expected fall in inflation was followed within hours by the supreme court ruling against the government's plan to process asylum seekers in Rwanda.No question, migration ranks alongside the record level of tax and the dismal state of the economy as one of the three big economic challenges facing the prime minister. The way the opinion polls are looking they will soon be problems Keir Starmer will inherit. Continue reading...

Jeremy Hunt's almost carefree approach to the autumn statement bespoke a chancellor, and a party, that has largely ceased to careWhat impressed me most about the delivery of last week's autumn statement was the good-humoured - almost jovial - manner in which our fourth chancellor in three years unveiled a seemingly endless list of measures supposed to promote growth".In most cases they were nothing of the sort. But Jeremy Hunt was so relaxed that one wonders if he believed a word of it. I had the wicked thought that as his party is assumed by most observers - not least its own members - to be approaching the electoral scaffold, the prevailing mood was one of lie back and think of the election after next". Meanwhile, they can enjoy the spectacle of a Labour party struggling to carry out its traditional role of trying to sort out the mess it is likely to inherit. Continue reading...

The chancellor's tax giveaway will simply load even more painful spending cuts on to an inflation-devastated public sectorJam today, austerity after the next election - that was the thrust of the chancellor's heavily trailed autumn statement last week. As expected, Jeremy Hunt announced tax cuts that the country can ill afford. But despite his claims to be focused on the long term, he is paying for these cuts by raiding the money that should be reserved for public services after the next election to help them cope with rising inflation.If this further round of spending cuts is imposed, it will blight the lives of the people who disproportionately rely on Britain's public infrastructure - children from disadvantaged backgrounds, older people with care needs, women suffering domestic abuse. It will also continue to suppress the country's future growth prospects, perpetuating the austerity fallacy that cutting public spending makes good economic sense despite the fact that it inevitably shrinks future tax revenues. Continue reading...

Fewer online purchases and less high street footfall reported in early trading but retailers remain hopeful as monthly payday loomsShoppers took to their laptops and flocked to high streets on Black Friday in what is expected to be one of the busiest retail days of 2023 - but early indications are that this will be a more muted affair compared with previous years.Sales in cash terms are expected to be on a par with 2022, but prices are higher due to a year of rampant inflation, meaning fewer items will actually be sold over the US-inspired discount period. By lunchtime on Friday, some retailers had seen a slight uplift, but online activity was flat and footfall down more than 5% at shopping destinations. Continue reading...

The extent of Tory spending cuts could prove unpalatable for voters - and leave a Labour government with a huge holeOne of the most striking pieces of recent polling showed nearly 80% of Britons think public services have deteriorated in the last decade. This would seem an electoral gift to Labour. But as this week's autumn statement shows, the long shadow of austerity is hugely problematic for both parties.Jeremy Hunt's de facto budget was, even by the usual standards of such events, something of a smoke-and-mirrors affair, boasting of big tax cuts while contributing to a fiscal mix in which the average household will be worse off. Continue reading...

Rolling coverage of the latest economic and financial news, as strikes take place at Amazon's Coventry warehouse, and at sites in Germany

Net migration to the UK in 2023 is estimated at 672,000, and the PM says a more sustainable' level is needed. This live blog is closedWhen Nigel Farage was leading the Brexit party, it was considerably influential for a party with no MPs, winning the European elections in 2019 and helping to push the Conservative party into a harder position on Brexit. After the 2019 election it was renamed Reform UK, Richard Tice took over as leader and it became much more marginal. But in an interview on the Today programme this morning Tice claimed that the government's failure to bring down immigration was presenting it with an opportunity. He told the programme:The British people voted to control immigration, and the government have betrayed the people's promises. And that's why so many thousands of people, former Tory members, are joining us. Our polling numbers - we got record polling last week, four different polls where we're in double figures. This week, we've had Tory donors joining us. Frankly, I fully expect Tory MPs who are furious and angry with the government to be calling me next week.[Cleverly] has made the point that he says that it was not aimed at a particular place. Knowing James well, he's not the sort of person, in my opinion, who would have made that kind of remark in that kind of context.But he has accepted that this was certainly unparliamentary language and he has rightly apologised. Continue reading...

Former home secretary says pressure on housing, the NHS, schools, wages, and community cohesion, is unsustainable. This live blog is closedThe Covid inquiry has announced its timetable for hearings next week. Matt Hancock, the former health secretary, who has been repeatedly accused by witnesses to the inquiry of giving false assurances to colleagues, is due to give evidence for a day and a half, starting on Thursday. And Michael Gove, who as Cabinet Office minister at the time was one of the lead ministers dealing with Covid, is due to give evidence for most of Tuesday.Sajid Javid, another former health secretary, and Dominic Raab, foreign secretary and first secretary of state during most of the Covid crisis, and stand-in PM when Boris Johnson was ill, are due to appear on Wednesday. Continue reading...

Already squeezed criminal justice system, schools and local government would face painful cuts if chancellor's sums are to add up

Latest PMI survey shows a marginal return to growth for UK companies, but falling orders raises recession risk

Thinktank says 20bn package of tax cuts would be mostly funded by deep reductions in public spending planned from 2025

Debt is not coming down. We haven't beaten inflation. Taxes aren't falling. But Jezza sails through interviews, believing it allSometimes it's hard to know just how to react. Whether to laugh or cry. Or just to wander off and quietly inject yourself with large quantities of morphine. Much like most Tory MPs seem to have been doing for the past year or so.Should you just sit back and applaud? In open admiration of the sheer cheek. The illusion that had been pulled off in plain sight of the entire nation. Somehow that doesn't seem quite right with Jeremy Hunt's autumn statement. Because actually the magic has been a bit rubbish. A bit like watching someone claim to levitate when they are actually propping themselves up with a stick. Continue reading...

Chancellor defends decision to cut national insurance by 2p, while Labour says rise in energy bills will absorb tax cuts

A taxpayer, a pensioner, a benefit recipient and a parent explain how the chancellor's changes affect them - if they do at allThe chancellor, Jeremy Hunt, delivered his autumn statement on Wednesday and in it announced increases in benefits and a cut in national insurance. We asked a taxpayer, a pensioner, a universal credit claimant and a parent for their views. Continue reading...

Chancellor cuts national insurance but OBR says UK facing biggest fall in living standards since records began

Jeremy Hunt's much anticipated autumn statement promised tax cuts and getting people back to work. John Harris is joined by the Guardian's political editor, Pippa Crerar, and the former Treasury minister David Gauke, to assess what we heard

Chancellor unveils 2p national insurance cut but thinktanks warn next government faces fresh round of austerity

Big firms hail permanent full expensing' - but some question whether it can help smaller companiesBritish manufacturers have welcomed Jeremy Hunt's announcement of permanent tax breaks for investment as the government tries to spur lagging UK productivity after years in the doldrums in its autumn statement.The chancellor said the tax break, worth 11bn a year by 2028-29, was the largest business tax cut in modern British history" as he made permanent full expensing" one of the key growth-boosting measures in Wednesday's autumn statement. Continue reading...

Right wing of party says income and inheritance taxes must be reduced, but Labour says growth has hit a dead end'

It's time to get Sid investing again,' Hunt says; Scotland's sole oil refinery at Grangemouth is due to cease operations in 2025

Tax cuts are hardly unexpected when the country may soon be going to the polls. What is shocking is how little of the gloom they will relieve

Despite 27bn windfall for the autumn statement, government forecaster warns of generally more difficult outlook until 2028

Jeremy Hunt has announced his financial update - here are the main points, with political analysis

Rising interest rates have boosted profitability but are likely to limit demand and increase risk of bad debts, says central bankThe balance sheets of eurozone banks are showing early signs of stress" after a rise in loan defaults and late payments by customers, the European Central Bank has warned.Higher interest rates have boosted banks' income and profits for the time being, the ECB said, but lenders are facing pressures from higher funding costs, worsening asset quality and lower lending volumes. Continue reading...

We show how people are pulled into paying more without the government increasing the tax rateSuccessive Conservative chancellors from Rishi Sunak to Jeremy Hunt have frozen income tax thresholds for the past four years.The policy results in what is known by economists as fiscal drag" - when tax thresholds do not keep up with the rising cost of living, pulling more people into higher tax brackets. Continue reading...

Rishi Sunak's small-state ideology misjudges the needs of the economy and the mood of the countryAnother week, another front opens in the Conservative party's multipronged campaign against facts. In Wednesday's autumn statement, Jeremy Hunt will chart the hard economic road ahead and claim it is the path to prosperity. He will celebrate stagnation by branding it stability. He will claim credit for falling inflation, which is largely beyond the government's control (as ministers were eager to explain when the rate was rising).The chancellor will cut taxes in the hope of synthesising a taste of good times before the next election, making it harder to balance the books after polling day. He will boast that this is responsible fiscal management. Policies drafted with an eye on the following morning's headlines will be advertised as a long-term plan. Continue reading...

From Whitehall to welfare and pay to pensions, here is what Jeremy Hunt is likely to announceThe chancellor, Jeremy Hunt, will set out the government's plans for tax and spending on Wednesday in his much-anticipated autumn statement. Meanwhile, the Office for Budget Responsibility (OBR) will publish updated economic forecasts and an assessment of the government's finances for the next five years - running well beyond the next election. Here is what to expect. Continue reading...

With inflation falling, the chancellor is expected to turn his attention to growing the economyThe chancellor, Jeremy Hunt, will give his autumn statement speech on Wednesday with the UK economy struggling for growth momentum after the sharpest rise in inflation for 41 years.After Rishi Sunak declared victory on his target to halve inflation this year, Hunt is expected to say he is turning his attention to growing the economy - with heightened speculation this could include tax cuts ahead of next year's general election. Here are five key charts that will underpin his statement. Continue reading...

Amid less gloomy OBR forecasts the chancellor is expected to take first steps towards cutting personal taxes

Sales slump 4.1% in October amid highest mortgage rates in two decades and a dearth of housesUS existing home sales dropped to the lowest level in more than 13 years in October as the highest mortgage rates in two decades and a dearth of houses drove buyers from the market.Existing home sales tumbled 4.1% last month to a seasonally adjusted annual rate of 3.79m units, the lowest level since August 2010, the National Association of Realtors (NAR) said on Tuesday. Home resales are counted at the closing of a contract. Continue reading...

Andrew Bailey fears markets are downplaying risks of persistent inflation, as new figures show UK borrowing so far this year is 16.9bn less than expected

Chancellor says bringing down inflation remains one of his main aims as he prepares autumn statement

Air fryers, skiwear, hot tubs, kayaks - you never know what you'll find in the discount supermarkets. But you can be sure the keenly priced, limited-time-only products will lead to a scrumI am waiting outside an Aldi in south London at 6.45am. Through the window, I eye my prize. He glints at me from a basket placed tantalisingly close to the entrance. Kevin the Carrot, the limited-edition soft toy released by Aldi once a year, is part of the discount supermarket's Christmas promotion. Such is the demand for Aldi's Kevin drop that the toys routinely sell on eBay for triple the retail price. This year, Kevin is golden, his belly straining against the metallic fabric like a wrestler's bespandexed torso.I text Jayne McGibbon Peberdy, a 39-year-old law student and Kevin collector. She has been waiting outside her local Aldi in Greenock since 4.30am. She sends me a photo of a steaming vacuum flask. In 2019, Peberdy witnessed a stampede for Kevins. The following year, they had to get the police to the shop, because a grown man tried to steal a Kevin out of the hands of a four-year-old," she says. Continue reading...

Hopes that nearly 4 million low paid UK workers would be able to keep more of their earnings if personal allowances are uprated

The chancellor is estimated to have billions to play with and has a range of options from lowering income tax to cutting inheritance taxJeremy Hunt could have more money to play with in this week's autumn statement after a reassessment of the public finances from the independent Office for Budget Responsibility (OBR). One economic consultancy says a combination of higher growth and lower debt bills could hand the chancellor as much as 25bn in extra firepower, up from 6.5bn in the spring. We look at some of his options. Continue reading...

The election of the far-right candidate Javier Milei reflects the seriousness of the country's problems - and threatens to deepen themJavier Milei's landslide election victory, with 55.7% of the vote to his rival's 44.3%, is not only terrible news for Argentina but terrifying for many. In a country celebrating 40 years of hard-won democracy, the far-right economist threatens to turn the clock back.It would be easy to mock the former TV celebrity and tantric sex coach, who wielded a chainsaw at rallies and promised that he would take it to the state. But his election as president is no joke. Among the 53-year-old libertarian's ideas are a referendum to overturn the legalisation of abortion, reducing gun ownership restrictions, making the trade in organs lawful, slashing social spending and abolishing the central bank. He has called the Argentina-born Pope Francis the representative of the evil one on Earth", smeared the victims of the military dictatorship as terrorists" and claimed that their death toll was far smaller than the accepted 30,000 figure. Continue reading...

Around 500 employees of OpenAI have signed a letter saying they may quit and join Sam Altman at Microsoft, unless he is reappointed and the board resigns

President-elect's idea is a gamble that is likely to crash an economy paying the price for mistakes of his predecessorJavier Milei's bigger-than-expected victory in the Argentinan presidential election suggests voters in South America's second biggest country have willingly opted for shock treatment to sort out the country's deep economic malaise.It is perhaps not hard to see why 56% of the electorate backed the rightwing libertarian: Argentina may have the world's best football team but its economy has performed disastrously in recent years. Inflation is running at 140% and a three-year drought has led to a sharp fall in agricultural production. Two out of five people live in poverty and the currency has lost 90% of its value in four years. Continue reading...

PM signals that business tax cuts more likely than personal ones as he sets out next phase' of government's economic plan

Scheme used by designers including Paul Smith and Vivienne Westwood to launch brands at fashion showsThe UK trade secretary, Kemi Badenoch, has been accused of quietly killing off a funding stream for small businesses that had helped fashion brands such as Paul Smith and Vivienne Westwood launch their products at global trade fairs.Specific support has been provided by the government since 2006 to small and medium-sized companies wanting to showcase their products at overseas exhibitions, but after years of budget cuts the initiative has been shelved. Continue reading...

Some credit the Fed and Joe Biden for America's relatively painless escape from inflation. It's not a simple answerContrary to the predictions of many economists - and the enduring perception of many Americans - the US inflation rate has, so far, come down without a major decline in economic activity or employment. In fact, the economy has added an average of 204,000 jobs a month over the last three months, well above the labour force's long-term growth trajectory. As a result, unemployment remains under 4%, almost the lowest level since the late 1960s. Meanwhile, annualised GDP growth amounts to 2.3% so far this year, faster than the average rate since the turn of the century. Continue reading...

Chancellor seeks to promote growth ahead of autumn statement that could spark a rebellion among Tory backbenchers defending marginal seatsJeremy Hunt has played down the prospect of immediate income tax cuts, pledging not to do anything in this week's autumn statement that will fuel inflation.Although some Conservative backbenchers are eager for measures that would be quickly felt by households, the chancellor on Sunday sought to emphasise the need to promote growth and indicated that tax cuts were not going to happen overnight". Continue reading...