Markets expect his policy package to harm trade and growth but reduce business taxes

This parliament's real battle won't be cultural, it will be over the size of the stateKemi Badenoch was still wooing votes from Conservative members last Wednesday, the day the budget was delivered. Now leader of only 120 MPs, she can do little more than tut over the finance bill. Nevertheless, it's the budget that sets out the great philosophical divide between Ms Badenoch and SirKeir Starmer. It lies not in a particular policy or even a political commitment, but most acutely in a graph. It's an exhibit that has received precious little discussion, yet it represents an ideological battleground that could help shape this parliament.You can find the chart about halfway through the outlook issued by the Office for Budget Responsibility(OBR). Along its X axis are the world's richest economies, ordered by how much they tax, which is a key measure of the size of their state. The countries that levy the least are Ireland, Chile, Switzerland and the US. At the other end are France, Norway, Austria and Finland - these are the biggest states, taking over 40% of GDPintax.Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. Continue reading...

Head of OBR says spending commitment would have materially changed' its forecast on Jeremy Hunt's pre-election budget

Later October half-term break and budget uncertainty also led to lower spending, says industryGrowth in UK retail sales slumped in October, according to industry figures that suggest shoppers have put off spending in anticipation of Black Friday promotions and because of a later school half-term break.Figures from the British Retail Consortium (BRC) show total sales grew by 0.6% year on year in October, significantly weaker than September's and less than half the three-month average growth rate. Continue reading...

Donald Trump has been ahead in betting markets, despite trailing in opinion polls

Live, rolling coverage of business, economics and financial markets as investors reassess bets after some polls suggest Kamala Harris has gained momentumIn Germany the manufacturing recession has been particularly marked - a major problem for the EU considering its massive size.Carmakers in particular have reported difficulties, and the automotive industry's troubles were also behind the fall in confidence from other businesses.The respective rates of contraction remained sharp by historical standards, amid reports from panellists of headwinds to demand from economic and political uncertainty, high interest rates and troubles in the automotive sector.Overall, the manufacturing PMI remains downbeat. It has underestimated growth in manufacturing in recent quarters so we doubt industrial production will have fallen as much as it suggests in Q4, but we look for a renewed fall in output nonetheless. By country, weakness is concentrated in GermanyEurope's manufacturing sector stands at a critical juncture, balancing newfound momentum in the south with deepening challenges in the north. Traditional powerhouses like France and Germany continue to experience declines, as northern Europe faces challenges to reclaim its competitive edge. Also, Italy is seeing output falling at a faster pace than in September.Spain is structurally on a different outlook. It is in solid expansion territory and is bumping up the overall number with its healthy order book. Greece - the second country with a PMI above 50 - is hiring and expanding output, but at the same time, is seeing new orders declining. Continue reading...

US economists and everyday Americans seem to live in two different realities - this disconnect could ultimately decide who takes the White HouseThe last few months have been filled with great news, according to US economists. Inflation is a hair's breadth from pre-pandemic levels, unemployment is close to a 50-year low. The stock market keeps hitting record highs. The Federal Reserve cut interest rates last month, the first time since 2020. Some economists have gone so far as to say that the economy we're living in is one of the best seen in decades.And yet, as the US heads to the polls, many Americans believe the economy stinks. It's a disconnect that could ultimately decide who takes the White House. Continue reading...

While some were optimistic about stabilizing costs, others told the Guardian high prices continue to squeeze financesExperts seem to agree the US economy has been on the upswing in 2024. A wave of new jobs, robust consumer spending, lower interest rates, falling inflation, impressive levels of business investment and record Wall Street highs has made the US economy the envy of the world".But many Americans appear to feel very little of that. Continue reading...

Pilot scheme said to have groundbreaking' potential for the hospitality industryOne thousand workers in the UK will get extra time off with no loss of pay in the first official pilot by the four-day week campaign under the Labour government.The British Society for Immunology and Crate Brewery in Hackney, east London, are among the businesses to have joined the latest trial, which is being led by the 4 Day Week Campaign, as it launches on Monday. Continue reading...

A dip in prosperity may not bode well for Harris, although whoever sits in the White House may not have much impactPennsylvania has been bombarded with political ads as Kamala Harris and Donald Trump duke it out for my state: the vital swing state of Pennsylvania. As we finally head to the polls, one of the - if not the biggest - issues on most small-business owners' minds will be their pocketbooks.So how are businesses and their employees doing so far in Pennsylvania? A fallback in economic prosperity may not bode well for the Harris campaign. And unfortunately, that seems to be what has happened in the past year. Continue reading...

The Fed is likely to cut base rates this month - but its decision will come the day after an explosive US electionThere could be recriminations, protest marches and even social unrest on US city streets when Federal Reserve officials meet at their Washington HQ a day after the election of a new president on 5 November.The election of Kamala Harris could bring supporters of Donald Trump on to the streets, while a victory for Trump could provoke widespread anger and condemnation among Democrats. Continue reading...

A second Trump term will threaten everything from freedom of the press and gun safety to foreign policy and climate change. The impact will be felt in many aspects of American life and across the worldIf Donald Trump returns to the White House for a second term as president, the impact will be felt in many aspects of American life and also across the world.On almost every issue of domestic US policy - from immigration to the environment to gun laws to LGBTQ+ rights - Trump has tacked far to the right of the American mainstream. Continue reading...

West's dominance is being challenged, with Brics summit showing emerging markets are unwilling to bow to pressure

The Office for Budget Responsibility's extreme conservatism means it has woefully underestimated the impact of Labour's public spending plansThere is a consensus among economists that a precondition for higher growth is higher levels of investment, and that one of the most certain ways of lifting investment levels is for the state toprovide a lead.Whether European growth in the 1950s, Japan's astounding national income-doubling plan in the 1960s or the dynamic growth of the Asian tigers in the 1970s and 80s, it has been the same story of higher public investment triggering a step change in economic growth. In the US, vast increases in investment spending on defence have induced growth and the tech revolution, given extra economic impetus by President Joe Biden's infrastructure and R&D spending. It was true of Britain in the 1950s and 1960s too, when public investment averaged more than 3% of GDP. Continue reading...

Rachel Reeves throws down budget gauntlet to new Tory chief as party's first black leader is congratulated on winLabour has thrown down an immediate challenge to the new Tory leader, Kemi Badenoch, to back Rachel Reeves's budget plans for big increases in tax, spending and borrowing, as a huge political divide threatened to open up over economic policy and the future of public services.All the main party leaders congratulated Badenoch on Saturday on becoming the first black leader of a main UK party after she stormed to victory over former immigration minister Robert Jenrick with 56.5% of the vote among Conservative party members. Continue reading...

Rachel Reeves's spending plans signal a welcome break with the past and underline the scale of the challenges facing BritainThe first Labour budget in 14years introduced some much-needed honesty on the requirement for higher taxes and borrowing in an ageing society characterised by sluggish economic growth and a deteriorating public realm. This allowed Rachel Reeves to earmark essential resources for schools and hospitals, and to increase levels of public investment to secure future growth. That this budget had no hope of being a magic bullet for Britain's economic woes, however, is no reflection of Reeves's lack of ambition, but a sign of just how bad the problems she inherited are.The Conservatives' approach to the economy has made the longstanding issues that have for decades plagued the UK worse. Through cutting back the state while doling out tax cuts to affluent households, then pursuing a hard Brexit, successive Conservative prime ministers have caused huge damage to the economy in pursuit of ideology and worsened the impact of the unenviable economic headwinds of recent years. In his last budget as chancellor, Jeremy Hunt offered up a 23bn cut in national insurance that the UK could not afford, paid for by baking in unachievable spending cuts after the July election: the height of fiscal irresponsibility. Kemi Badenoch, today elected leader of the Conservative party, will no doubt continue to cleave to a wrong-headed predilection for a small state. Continue reading...

The now-outgoing president inherited a US economy battered by Covid and a looming inflation crisisJoe Biden promised a recovery for everybody" as he prepared to take over an economy ravaged by the pandemic four years ago. Few predicted what would follow.One of two candidates - Kamala Harris, his vice-president, and Donald Trump, his predecessor - will succeed Biden in January. As millions prepare to elect the next US president, here is how the world's largest economy fared under Biden. Continue reading...

Anger over the cost of living is Trump's biggest weapon, but health and education should be winning cards for the DemocratsThere are themes playing out in the US presidential election that are familiar to most people across the developed world.The lack of affordable housing. Rocketing home insurance and childcare costs. How expensive owning and running a car has become. Continue reading...

I know first-hand that secure work and a secure home are the foundations of a better life for ordinary Britons. That defines our missionFor 14 years, the Conservatives failed working people by choosing austerity and decline. As a result, public services are crumbling and working people have paid the price. Though we come from different generations and grew up in different parts of Britain, the prime minister and I both saw how politics could make a difference to people from working-class backgrounds like ours. But the country we inherited in July had seen those opportunities denied to too many working families. That's the Britain we are determined to change.This week we turned the tide, choosing investment over decline. The budget charted a course for national renewal, fixing the foundations of our country to deliver the change Labour promised. It is a budget for working people, by a government for working people.Angela Rayner is the deputy prime ministerDo you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. Continue reading...

Warning from Institute of Directors comes as ratings agency Moody's says budget will do little to improve growth

Average monthly job gains in 2024 had been about 200,000, but new figures affected by Boeing strike and hurricanesThe US added just 12,000 jobs in October, the last snapshot of the employment market before election day, in a report heavily affected by the strike at Boeing and two recent hurricanes.The unemployment rate was unchanged at 4.1%. Continue reading...

ATO finds 31% of large businesses reported nil tax paid as many companies deducted losses and used offsets to dial their bills down to zero

The Guardian's special correspondent Heather Stewart analyses Labour's first budget in government for more than 14 yearsOn Wednesday the chancellor, Rachel Reeves, set out the Labour government's debut budget in parliament. She told the House of Commons that Labour would rebuild Britain", promising more money for the NHS, schools and public transport.In 1945 it was the Labour party that rebuilt our country from the rubble of the second world war. In 1964 it was the Labour party that rebuilt Britain with the white heat of technology. And in 1997 it was the Labour party that rebuilt our schools and hospitals," she said. Today, it falls to this Labour party, to this Labour government, to rebuild Britain once again." Continue reading...

Businesses adopt a wait-and-see response as it becomes clear the autumn budget is part of a long-term mission

Rachel Reeves has finally laid out Labour's spending plans in the party's first budget in almost 15 years. The Guardian's John Harris is joined by political editor Pippa Crerar and political correspondent Kiran Stacey to discuss the fallout Continue reading...

Chancellor also criticised for letting the very rich off the hook with a lower than expected rise in capital gains tax

Forecaster says extra spending revealed by Rachel Reeves will give only a short-term lift to economy

The budget favours increased public spending and taxation, contrasting with Tory austerity. However, there were missed opportunities to address poverty and inequalityThe 1970s are making a notable comeback - not necessarily in reputation, but certainly as an object of interest. Rachel Reeves' budget is poised to become part of that decadology", primarily because her tax changes mark the biggest shift since Margaret Thatcher slammed Labour for its genuine socialist" fiscal policy in 1975. Today's economic turmoil - driven by war-induced inflation and a frayed social contract - has rekindled the relevance of that era. Yet there's a key difference: the 70s birthed austerity, while Ms Reeves is opting to spend her way out of the current crisis in public services.In Labour's first budget since 2010, Ms Reeves unveiled about 20bn a year in tax increases on businesses and the rich, aiming to reverse more than a decade of decline in the British state. Her plans also raise borrowing by the same amount annually, spooking some in the City. This allows for an increase in spending of 2% of GDP to prevent real cuts in some departmental current budgets and to stop investment from falling as a share of national income. This is a much-needed shift away from the policy failures of previous Conservative administrations.Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. Continue reading...

Employers say they will be counting costs of budget amid increases to national insurance contributions

How the chancellor's changes to tax, benefits and pensions will affect your personal finances

Mortgage approvals rise in September and bond investors look sanguine ahead of tomorrow's budget

Downward trend in oil price from higher production, falling demand in China and clean energy to continue

10-year gilt yields have risen in the past month but are within the range of other pre-budget periodsUK government borrowing costs have risen ahead of Rachel Reeves's budget on Wednesday.Some City investors say the chancellor's preparations for changing her fiscal rules could be contributing to a febrile mood in financial markets, amid fears that up to 50bn in extra borrowing for infrastructure investment could reawaken bond vigilantes betting against Britain. This includes warnings of a buyer's strike" if Reeves handles Labour's first budget since 2010 badly. Continue reading...

British Retail Consortium says prices falling at fastest rate in three years and are 0.8% lower than a year agoThe chances of a fresh cut in interest rates from the Bank of England next week have been boosted by a report that shows shop prices falling at their fastest pace in more than three years.The monthly snapshot from the British Retail Consortium showed prices were 0.8% lower this month than in October 2023 - compared to an annual fall of 0.6% in September. Continue reading...

Two days before the budget, the British prime minister promises better days lie ahead - but first, some pain

Rolling coverage of the latest economic and financial news

As Rachel Reeves prepares to unveil her measures, we look at how five of her predecessors broke the mould

A strategy of raising taxes, spending and borrowing all at the same time to fund investment has risks, but it has a logic too

Keir Starmer and Rachel Reeves were so desperate to win the election that they deprived themselves of the best tools for fixing their bleak inheritance'It saddens those of us who waited so long to see the back of the last lot that the new government has been so inept in its first 100 days. And it is particularly distressing that, while one hopes one's criticisms are constructive and made with the best of intentions, the Starmer government has been such easy meat for the rightwing press.It was the economist James Ball who used to say: beware of the OBE. He was not referring to the Order of the British Empire: those initials stood for One Big Explanation. For Keir Starmer, and Rachel Reeves, the one big explanation for their troubles is the inheritance" - far worse than they expected. Continue reading...

The chancellor says she will invest to reverse Tory decline, but stands accused of breaking party manifesto promisesLabour will launch a new era of public and private investment in hospitals, schools, transport and energy as momentous as any in the party's history in this week's budget, the chancellor, Rachel Reeves, has said.In an interview with the Observer before the first budget by a female chancellor, Reeves draws comparisons with Labour's historic reform programmes begun in 1945 by Clement Attlee, in 1964 under Harold Wilson and in 1997 under Tony Blair. Continue reading...

Leaders of the town, which has some of UK's highest levels of economic inactivity, are hoping for help from Rachel Reeves's budgetI'd love to work again, to have a reason to get out of bed in the morning," says Michelle. The former accountant from Barnsley has been out of work since the pandemic, but has found jobhunting tough amid a battle with the depression and anxiety she has faced since her teenage years.I've come out of a 30-year marriage. I got my first sicknote at the age of 57, first time unemployed. And everything went down hill from there," she says, wringing her hands under the table in a dimly lit room at the town's adult learning centre, alongside a dozen others in a similar position. Continue reading...

In one session after another, IMF officials repeated backing for principle of increased borrowing to drive growthSpeaking on Tuesday in Washington, the chief economist of the International Monetary Fund suggested he was relaxed about higher debt levels to fund public investment. He made the comment in answer to a question about the UK at the annual meetings of the IMF and World Bank, but it felt like a highly choreographed piece of theatre.Rachel Reeves was due to arrive at the meetings in the US capital the following evening and the IMF was aware that the UK chancellor was going to announce a significant overhaul of Britain's budget rules to allow for more investment by the state. Continue reading...

People holding their breath' to see what's in store for them in Rachel Reeves's first budget, reports GfK

Chancellor pledges to spend, but says there will be no Truss-style splurge when she changes fiscal rules in budgetRachel Reeves will pledge to reverse huge cuts in public investment in her budget next week after she confirmed that rules limiting her spending power will be overhauled to enable the government to release as much as 50bn for infrastructure spending.The chancellor said she would revise how the Treasury calculated shortfalls in the government budget over the rest of the parliament to free up funds to invest in public infrastructure. Continue reading...

Former chancellor says increasing borrowing means interest rates would be higher for longer' as Reeves says it will make space for investment'Nigel Farage, the Reform UK leader, has said that no one knows" who Robert Jenrick, the Tory leadership contender, is.Of the two candidates left in the contest, Jenrick is the one who is doing most to appeal to Tories who defected to Reform UK, because he is saying Britain should leave the European convention on human rights.I know the fella. Is he the chap that one day was on the very much on the left of the Conservative party and is now on the right of the Conservative Party?... No one knows who he is.I'm sure government can agree that support and providing opportunities for young people should be central to the policy of any government. We are glad to see the government working to build closer economic and cultural ties with Europe. We want to forge a new partnership with our European neighbours, built on cooperation, not confrontation and move to a new comprehensive agreement.We must build rebuild confidence through seeking to agree partnerships or associations helping to restore prosperity and opportunities for British people.We are not going to give a running commentary on the negotiations. We will obviously look at EU proposals on a range of issues, but we are clear that we will not return to freedom of movement. Continue reading...

People don't feel good about economic prospects, admits IMF chief Kristalina Georgieva

Ahead of the budget next week, the Guardian's John Harris is in Birmingham, where the city council in effect declared itself bankrupt in 2023. He spends time with people struggling with the severe spending cuts and asks what will happen if the chancellor Rachel Reeves does not offer more financial supportSupport the Guardian today: theguardian.com/politicspodFind out more about Saathi House here Continue reading...

After weeks of speculation, chancellor will tell IMF in Washington that UK's debt measure will be redefined to permit borrowing for investmentRachel Reeves will announce at the International Monetary Fund a plan to change Britain's debt rules that will open the door for the government to spend up to 50bn extra on infrastructure projects.After weeks of speculation, the chancellor will confirm at the fund's annual meetings in Washington on Thursday that next week's budget will include a new method for assessing the UK's debt position - a move that will permit the Treasury to borrow more for long-term capital investment. Continue reading...

New report upgrades outlook for UK economy with growth now forecast at 1.1% rather than 0.7%

Report says intense military operations in Gaza have left unprecedented humanitarian, environmental and social catastrophe'Gaza's economy has been left in utter ruin" by the year-long war between Israel and Hamas, and it would take 350 years to return to its pre-conflict levels, the United Nations has warned.In a report on the economic costs of the war prepared by its trade and development wing (Unctad), the UN said the fighting since Hamas killed more than 1,200 people in Israel on 7 October last year had devastated the remnants of Gaza's economy and infrastructure. Continue reading...