Economics | The Guardian

Chancellor is upbeat but there is little chance of autumn statement changing voter perceptions of Tory planIf the opinion polls are right, Jeremy Hunt is on the political equivalent of death row. Voters have passed judgment on the government and it is only a matter of time before the sentence is carried out.That's not the way the chancellor sees it. For a condemned man, he was remarkably cheerful as he did the rounds of the TV studios in the run-up to Wednesday's autumn statement. His message was simple: things may look bleak for the government but all is not lost. There is too much negativity. The long-term prospects are fantastic". The chancellor is confident there will be an 11th-hour pardon from the British people. Continue reading...

Investment, investment, investment must be the chancellor's mantra. Instead, he is being urged to give away billions to those least in needIt is time to focus on growth", intoned the chancellor, Jeremy Hunt, on Friday. The economy, he seems to think, has turned a corner. Before Wednesday's autumn statement - the biggest set-piece economic event of the year - anticipation on Tory backbenches and in the rightwing media is beginning to run high, as estimates about his potential largesse balloon. A focus on growth in their eyes can have only one meaning: buying back popularity with tax cuts.It is breathtakingly wrong. Tax cuts, especially the widely mooted deep cuts to inheritance tax that Hunt is said to be considering, will do little for growth - instead choking off a much-needed source of revenue and inflating inequality. That they should be framed as crucial supports to aspiration, enterprise and growth is tribute to the huge rightwing bias in our national conversation, with the reasons for the prolonged stagnation facing us going largely unacknowledged. Britain is suffering from an intensifying four-decade-long investment drought in the public and private sectors - the root cause of the crisis in stagnating productivity and living standards that shapes our politics and daily lives. Every spare pound should be consecrated not to tax cuts but to raising public investment - a key trigger for increased private sector investment and, ultimately, a better future. Continue reading...

The chancellor's potential inheritance tax cut in Wednesday's budget would aid millionaires amid a cost of living crisisJeremy Hunt faces a backlash from red wall" Tory MPs if he uses a fiscal windfall of up to 20bn to deliver tax cuts for the rich rather than to help ordinary families with the cost of living, the Observer has been told.The chancellor and Rishi Sunak are this weekend finalising an autumn statement on Wednesday that could include a major reduction in inheritance tax - four-fifths of which would benefit those with more than 1m at their death, according to a new report from the Institute for Fiscal Studies (IFS). Each person with more than 1m would receive an average tax cut of 180,000, the IFS states. Continue reading...

The days of cheap credit that could have fuelled long-term investment have gone. Now chancellors must find a different source of revenueJeremy Hunt's autumn statement is fast approaching and it looks like the public will be treated to the exciting spectacle of a chancellor treading water.Hunt is in no mood to splash the cash when the financial markets still have a wary eye cast in his direction. Investors remember the panic that followed Liz Truss and Kwasi Kwarteng's first and only budget, when the UK's good name was sullied and, as a financial punishment, the cost of borrowing rocketed. Continue reading...

Chancellor considers deep cuts to inheritance tax in autumn statement to improve Tory polling

Bond yields fall as retail sales volumes across Great Britain fall to their lowest level since February 2021, amid cost of living squeeze and wet weather

Chancellor could try to win votes with a tax giveaway, but seems unlikely to improve the polls or the economyAn economy going nowhere. Limited financial firepower. Polls suggesting the Conservative party on course for a wipeout at the general election. Tory MPs clamouring for tax cuts. Jeremy Hunt is under real pressure to announce a gamechanging autumn statement on Wednesday. Rarely has a chancellor been so poorly positioned to do so.Hunt has been at the Treasury for just over a year but by the standards of the current parliament, that makes him a veteran. He is the fifth chancellor since 2019 and three of his predecessors - Sajid Javid, Nadhim Zahawi and Kwasi Kwarteng - were so short-lived in office that they failed to produce a single budget between them. Continue reading...

Volumes drop 2.7% year on year in October as high interest rates and poor weather drive away shoppers

Before autumn statement, industry bosses say more consistency is needed after more than a decade of instabilityBritain's economy has lost billions of pounds in investment since 2010 amid government flip-flopping" on its industrial growth plans as it churned through 11 different economic strategies, according to a report.As the chancellor, Jeremy Hunt, prepares for his autumn statement next week, industry bosses warned ministers that more consistency was required to increase investment levels after more than a decade of instability. Continue reading...

Chancellor to launch 2.5bn back to work plan' in autumn statement aimed at increasing workforce participationWelfare claimants who refuse" to engage with their jobcentre or take work offered to them may lose benefits, under plans confirmed by the chancellor before next week's autumn statement.The crackdown, first floated by Jeremy Hunt in his Conservative party conference speech in October, is part of a wider government plan to tackle a decline in workforce participation since the Covid pandemic. It could see those sanctioned denied access not just to welfare payments but associated benefits such as free prescriptions or help with energy bills. Continue reading...

Mars to swallow Hotel Chocolat, and Bank of England's Megan Greene says fall in inflation is good news', but it's too early to think about cutting borrowing costsHere's another clip from Megan Greene's interview this morning:Bank of England policymaker Megan Greene has hailed yesterday's fall in inflation to 4.8% as good news', but warned that it's too early to consider cutting interest rates.The recent data is good news.Inflation came down pretty significantly, in both headline and core, but the biggest contributor was energy. Continue reading...

Premier Foods, which also owns Angel Delight and Bisto, says it plans further reductionsThe maker of Mr Kipling cakes, Angel Delight and Bisto gravy granules has announced price cuts on some of its ranges on the back of a fall in the rate of inflation on associated production costs.Premier Foods said products including Batchelors Super Noodles and Mr Kipling Slices have had their prices reduced to levels seen last summer, and added that it intended to unveil more reductions in the coming months. Continue reading...

With crises hitting us head-on, the shadow cabinet thinks that yesterday's reformism can tackle today's emergencies, says Nick MossAditya Chakrabortty is right that we are experiencing the end of the end of history" and we need to ditch the intellectual complacency that accompanied it (The Westminster panto is in full swing: but there are real dangers waiting in the wings, 9 November). It's not just that we need new ideas. We have a political class that does not take ideas seriously. The Tories throw scare stories to the media, and Keir Starmer and his party just try to dodge the bullets, rather than putting forward a coherent set of ideas to address the chaos of the times.For all its failings, the Corbyn project at least had John McDonnell's economic advisory committee, with critical socialist economists such as Thomas Piketty and Mariana Mazzucato feeding into McDonnell's attempt to develop a new economic strategy. Now, any intellectual energy in the Starmer government-in-waiting comes from Rachel Reeves's securonomics", and even critical centrists like Stella Creasy and Neal Lawson are sidelined. Continue reading...

Cost of living campaigners say government should use September's inflation rate to set benefits, not October's, after CPI falls to 4.6% from 6.7%

It is falling global energy prices that have led to a fall in inflation, rather than anything the prime minister has doneRishi Sunak is boasting about his achievement" in halving inflation. Like the fly on the ox's neck congratulating itself on a hard day's ploughing, neither he, nor his government, nor even the Bank of England and its interest rate rises, deserve the credit for falling inflation, which is driven by falling global energy prices.When Russia invaded Ukraine in February 2022, the disruption to oil and natural gas supplies across Europe was immediate, with prices for natural gas surging to 10 times their pre-invasion level. Inflation, which measures average price rises over the previous 12 months, soared to 40-year highs in Britain and for other heavy users of natural gas such as Germany. But as the initial shock wore off and energy prices started to come down from the middle of last year, overall inflation everywhere has started to fall.James Meadway is the host of the Macrodose podcast Continue reading...

With gas prices linked to events worldwide, the average UK household is likely still to pay 800 more than what used to be normal

Charities say it would be indefensible to raise working-age benefits in line with CPI figure for October instead of September

Decline in annual rate in October eases fears that Bank of England will raise interest rates again this year

From olive oil to tea and clothing to recreation, how the cost of everyday items varies

Bank of England will look beyond drop in headline figure, and it is too early to say cost of living crisis is over

This online tool will help you discover what is contributing to your household's cost of living increasesInflation has been soaring in the UK, with people being hit by higher prices for everyday essentials, but cost of living pressures are finally starting to ease.The latest inflation rate for the 12 months to October 2023 means that goods and services cost 4.6% more than they did a year ago - in most cases, surpassing any pay rises workers can expect to receive. Continue reading...

Kemi Badenoch has sought state-level accords post-Brexit but only national trade deal with US would reduce tariffsThe UK's business and trade secretary has signed a deal to increase trade with Florida, the British government's latest pact with a single American state as it awaits a broader, post-Brexit US free trade agreement.The memorandum of understanding, signed on Tuesday by Kemi Badenoch and the Florida governor, Ron DeSantis, is the seventh deal between the UK and individual US states. Continue reading...

Economists expect October's reading to fall almost two points to 4.8%, helped by drop in energy pricesThe annual pace of price rises is expected to have slowed sharply when the latest official figure for October is released on Wednesday, easing fears that the Bank of England could increase interest rates next month.City economists polled by Reuters have signalled that inflation as measured by the consumer prices index (CPI) will fall almost two percentage points to 4.8% from September's 6.7% reading. Continue reading...

Thinktank says government and Bank of England need to take more joined-up approach to solving economic problemsThe Treasury should use price controls and cuts in VAT during the cost of living crisis to prevent the Bank of England from driving the economy into recession through over-aggressive use of interest rates, a thinktank has said.Warning of the need for the two institutions to stop operating from separate silos, the left-leaning Fabian Society said poor policymaking in the past quarter of a century had often been the result of the Treasury and the Bank pulling in opposite directions. Continue reading...

US core inflation has dropped to a two-year low, cheering investors, while more UK firms fall into insolvency last month

Consumer price rises were down from 3.7% in September continuing a downward trend from high of 9.1% in June 2022The rate of US consumer price rises cooled in October amid lower gasoline prices and slowing increases in housing costs.The annual rate of inflation measured by the Consumer Price Index (CPI) - which tracks the cost of a basket of goods and services - slowed to 3.2% last month, lower than the 3.7% reading in September and the coolest rate since July. Continue reading...

Employers are looking for support in finding the workers they need through training, childcare and benefits

ONS finds unemployment rate broadly unchanged and real wages rising thanks to falling inflation

Payments designed to help people cope insufficient to meet scale of problem, says committeeMinisters have come under further pressure to expand the financial support for Britons struggling with the cost of living crisis, after a committee of MPs found some had slipped through the safety net".The cross-party work and pensions committee said that support payments designed to help people cope with soaring household bills had proved insufficient to meet the scale of the problem and offered only a short-term reprieve" for many. Continue reading...

Rolling overage of the latest economic and financial news, as Rightmove reports prices falling at the fastest rate in five years, for the time of year

Generation Y counterparts in the US have closed living standards gap on previous generationsMillennials in the UK are still bearing the economic scars" of the 2008 financial crisis and are struggling to catch up with the living standards of older groups while their US counterparts have closed the gap, new research shows.In its annual intergenerational audit", the Resolution Foundation compares the fortunes of millennials - born between 1981 and 2000 - with their predecessors, including Generation X, born between 1966 and 1980. Continue reading...

Western nations are caught in a low-growth trap, with tricky political choices to make - but there is a way outThe past 15 years have been the most difficult for western economies since the 1920s and 1930s. Public anger has risen as living standards have been squeezed by a prolonged period of weak growth. American politics is as ugly as it has ever been, while parties of the far right have emerged as powerful political forces in Germany, Italy, Austria, Finland, France and Sweden.The new age of anger is a far cry from the six decades between 1948 and 2008. Sure, there were recessions - often deep ones - during that period, but growth resumed and living standards bounced back. Certainly, there were protests - sometimes prolonged, as in the demonstrations against the Vietnam war - but the young people who marched eventually secured a stake in the system. Continue reading...

When the former PM crashed the economy, working people suffered. We can never let it happen again, writes the shadow chancellorRead more: Labour motion to ban Truss-style budget meltdowns puts pressure on Tory MPs Leadership is not just about having the conviction to take the right decision. It is about having the strength to follow it through. The behaviour of Suella Braverman last week was deeply irresponsible. At a time when those in power should be working with the police to keep our streets safe, she was undermining them. And at a time when our leaders should be working to bring our communities together, she was trying to pull them apart.Rishi Sunak knew this. He knew what she was saying and doing was wrong, but he was too weak to do anything about it. Putting party first, country second. Unable to take the tough decisions. It's a pattern of behaviour we see time and time again from this prime minister - including on the economy. Continue reading...

Party loyalty would force Conservatives to vote against plan for fiscal responsibilityRead more: I challenge Rishi Sunak: vote with Labour to stop a Truss-style disaster happening again,' writes Rachel ReevesLabour will force a Commons vote this week aimed at creating new legal safeguards against fiscal disasters such as Liz Truss's catastrophic mini-budget, which sent the financial markets into meltdown and drove up mortgage rates.The party's plan for a fiscal lock" to protect personal, family and the national finances from reckless politicians will be contained in an amendment to the king's speech that will be voted on by MPs on Tuesday. The manoeuvre will present Conservative backbenchers with a dilemma over whether to back a Labour amendment, or vote against what is a plan designed to embed fiscal responsibility into the budgetary process, and protect it from wild or accidental political misjudgments. Continue reading...

From privatisation to Brexit to its current collapse, the damage done by the Conservative party leaves one longing for the pastWhen thieves fall out, they certainly know how to do it. The sight of former cabinet ministers such as Nadine Dorries slagging off the prime minister, and the home secretary - at the time of writing - plumbing the depths of extreme rightwing prejudice, shows that there are now no depths to which the Conservative party will not sink.They are desperate, and with reason. The chickens bred during George Osborne's austerity chancellorship, and let out of captivity by Boris Johnson's Brexit, are finally coming home to roost. Continue reading...

Slower price growth, due partly to tighter Treasury purse strings, won't lift the gloom of a flatlining economyUK inflation could be found to have fallen below 5% for the first time in two years when figures for October are published this week. It would be a landmark moment for Rishi Sunak, who in 2022 promised to halve inflation from its 10.7% level.The prime minister made inflation one of the five pledges by which the nation should judge his premiership. And a drop to less than 5% in the consumer prices index could well be one of the few pledges he can comfortably say has verifiably been achieved. Continue reading...

Company cites continued political polarization' and risks to the nation's fiscal strength as reason for changeThe credit ratings agency Moody's reduced its outlook on the US government from stable to negative, citing division in Washington DC and risks to the nation's fiscal strength.While Moody's maintained the US's current top-grade AAA rating, it raised the prospect that this may be cut. Continue reading...

In 1923, the country was rocked with hyperinflation, now the retreat from globalisation is exposing the fragility of its industrial modelGermany has come a long way in 100 years. Back in November 1923, people were trundling wheelbarrows stacked high with cash through its streets to buy a loaf of bread. Now its reputation is that of an economic powerhouse.That episode of hyperinflation left deep scars on the nation's psyche. Government printing presses were working flat out to produce mountains of worthless bank notes and the currency collapse was so severe a single US dollar was worth 1tn marks. Never again" has been the mantra ever since. Continue reading...

Institutions asked to model impact of sharp price movement in wake of Liz Truss market chaosThe Bank of England has asked more than 50 City institutions to model the impact of a sharp movement in bond prices caused by a severe geopolitical shock as part of its first financial system-wide stress test.The request comes after the September 2022 crisis in bond markets and sterling that followed Liz Truss's mini-budget, when pension funds came under pressure and some were driven to near-collapse. A sharp shift in bond prices and the corresponding interest rates, or yields, laid bare major risks that certain kinds of liability-driven investing (LDI) posed to retirement savings. Continue reading...

Rolling coverage of the latest economic and financial news, as UK GDP is unchanged in July-September

Bank of England is unlikely to cut interest rates any time soon and Treasury unlikely to cut taxes due to fear of higher inflation

Zero growth also underlines impact of inflation on consumer spending and business activity

After two bad years for investors the smart money' is piling back inThe last two years have been catastrophic for investors in US Treasury bonds. By one measure, 2022 was the worst year for such investors since 1788. Bond prices are poised to fall again in 2023, making this the first time in US history that they declined for three consecutive years.But now the smart money" is jumping back in. With interest rates on 10-year Treasuries close to 5%, more than triple the levels of two years ago, yields are attractive. If the fundamental factors driving them haven't changed dramatically, then it's possible that interest rates will fall and bond prices will recover now that the inflation scare has passed. Continue reading...

Major banks are accused of a staggering lack of compassion as more borrowers fall behind on their mortgagesNewsflash: The number of mortgages in arrears has risen, partly fuelled by a jump in buy-to-let landlords falling behind on their payments.Trade association UK Finance has reported that there were 87,930 homeowner mortgages in arrears of at least 2.5% of their outstanding balance, in the third quarter of this year. Continue reading...

Nationwide's two-year fixed rate deal offered at 4.99% as lenders jostle for customers

War, economic breakdown and the climate crisis spell the end of the end of history'. But the comedy villains in charge are obliviousThe hall is shrouded in blackness, the audience ensconced in plush red seats. All heads are turned to the bright lights on stage for that annual ritual, the panto.In front of us stands Cinderella or Aladdin or Peter Pan, lost in their usual patter, and blind to the baddie looming up ...Aditya Chakrabortty is a Guardian columnist Continue reading...

Andrew Bailey says free trade demands greater international cooperation on financial rule-makingThe governor of the Bank of England has called for greater cooperation on financial rule-making, warning that Brexit has affected the openness of the UK economy".In an apparent swipe at those calling for the UK to develop a separate rulebook for banking and insurance activities, Andrew Bailey said free trade needed strong regulation based on agreements with foreign watchdogs. Continue reading...

Thinktank says stronger than expected tax revenues have given chancellor scope for bold package in autumn statementJeremy Hunt risks condemning Britain to a decade in the doldrums unless he uses this month's autumn statement to announce a 30bn-a-year investment plan to upgrade public infrastructure, a leading thinktank has warned.The National Institute for Economic and Social Research (NIESR) said the chancellor should ignore calls by Tory MPs for pre-election tax cuts and instead focus on measures to boost growth through improvements to transport, digital networks, skills and housing. Continue reading...

Retailers hope new version of top-selling board game plus Dog-E will help fuel festive sales recoveryA new version of Pictionary that pits artist against artificial intelligence and a pet robo-dog" with a wagging tail are among the toys destined to appear on Christmas lists this year as retailers pray for better sales during the key festive trading period.With the cost of living crisis looming large over another year's celebrations, the Toy Retailers Association's annual DreamToys list of the 20 hottest" gifts includes a dozen that are under 50. Among them is Pictionary vs AI (24), a new version of the classic board game that pitches (terrible) human sketches against the might of AI processing power. Continue reading...

Upmarket estate agent says prices will start to bottom out in 2024 as interest rates fall and will return to growth in 2025Britain's housing market is past peak pain" and prices look likely to bottom out by next summer, according to the estate agency Savills.The average UK house price is projected to fall by 3% in 2024, after a 4% drop this year, the upmarket estate agent and property advisory firm said in its five-year outlook. Continue reading...