Boosting growth and investment while averting austerity is a tough ask, but options are available for the chancellor, writes the research director of the Resolution Foundation Labour MPs urge Reeves to spend tens of billions more on ailing public servicesThe chancellor has said she wants to avoid a return to austerity". She's also said she'll deliver a pro-investment, pro-growth budget. Those are laudable goals, but she must fix a dire set of public finances, a tough task not helped by the 22bn overspend uncovered this summer. This is the trilemma facing Rachel Reeves before the government's pivotal first budget. Here's how she might try to tackle it. Continue reading...
Economic problems and the far right threaten the whole of Europe. Labour's isolationist approach must changeThere ought to be not only a national esprit de corps, but a European esprit de corps."This plea by the renowned barrister and lord chancellor FE Smith - who became the first Earl of Birkenhead - was made in the wake of the devastation caused by the first world war. Birkenhead, a friend of Churchill's, died in 1930, shortly before the rise of Hitler and the subsequent outbreak of the second world war. Alas, no European esprit de corps in the 1930s! Continue reading...
Powerful vested interests are trying to stop the wealthy from paying their fair share. Rachel Reeves should ignore themDenis Healey is often misquoted as saying he wanted to squeeze the rich until the pips squeak" in the 1970s. He never actually used that phrase. What Labour's finance spokesman did predict, however, was that his proposed top tax rate would spark howls of anguish from the 80,000 people" wealthy enough to pay. With Labour in power again, it seems plus ca change, plus c'est la meme chose. On Thursday this newspaper reported that Rachel Reeves, Healey's successor in the Treasury, was looking at taxing the rich more by increasing capital gains tax. That would be a very good idea. Yet howls of anguish" fill the airwaves and can be found on newspaper front pages. Ms Reeves should ignore them.For decades the rich have projected ideas that support their interests, notably by reframing political language to valorise wealth creators". Post the financial crisis, this has been a harder sell. But plutocrats won't easily give up their muscle, privileges and wealth. In Britain, the grossly unfair distribution of power fuels the effort to protect 3,000 individuals in private equity from Labour's plan to make them pay their fair share in tax. It's absurd to think that successful capitalists require an annual state subsidy of 188,000 just to perform their roles. However, this is probably only the beginning of Labour's efforts. On paper, Britain's tax system seems relatively progressive, with a headline rate of 47% for those earning over 3m. In reality, nearly a quarter of this ultra-wealthy group pays less than 12% in taxes.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...
As chancellor reaches milestone she faces the tricky task of rescuing public finances while also investing in growthThe politics all looked simple for Rachel Reeves as she stepped over the threshold of the Treasury on 5 July to take up her post as Britain's first female chancellor. The outgoing Conservative government had been routed at the general election and the idea was to blame the discredited Tories for the looming repair job on the public finances deemed essential by the new government.As it turned out, things during Reeves's first 100 days - a milestone she crosses on Saturday - proved to be not quite that simple. The chancellor duly rolled out phase 1 of her plan three weeks after the election when, after looking at the books, she said there was a 22bn hole that needed to be filled. Reeves expressed shock and anger at the evidence of fiscal incontinence that had come to light. The means testing of the winter fuel allowance was merely an early taste of the pain to be expected in the budget at the end of October, Reeves made clear. Continue reading...
by Richard Partington Economics correspondent on (#6RCZR)
GDP rises by 0.2% in August after flatlining in June and July but rate of expansion slower than first half of yearThe UK economy returned to growth in August after flatlining for two months, in a boost for the chancellor, Rachel Reeves, before the autumn budget.The Office for National Statistics (ONS) said gross domestic product rose by 0.2% in August, after zero growth in June and July. The reading matched the forecasts of City economists. Continue reading...
Co-founder of 4bn British tech firm to lead Office for Investment as a minister in Treasury and Department of Business and TradeThe co-founder of the 4bn British tech firm Darktrace, Poppy Gustafsson, has been appointed as the government's new investment minister.Darktrace, the listed cybersecurity company, was this month sold to a US private equity firm and Gustafsson stepped down as chief executive. She will become a peer. Continue reading...
What to do on HS2 | Women who start war | Tory leadership race | The comfort of Corbyn | A Labour shakeupThe answer to the question of what to do on HS2 (Nils Pratley on finance, 7 October) depends on the opportunity cost. Everything that can be done is affordable, but if the Treasury insists that the price of more for HS2 is child poverty, cold pensioners, unbuilt hospitals and more obstacles to compensation for victims of injustice (Chagos, contaminated blood, post office, Grenfell etc) then HS2 must stop at Old Oak Common. A sculpture called Black Hole by Anish Kapoor could be built there as a monument to Treasury orthodoxy.
Exclusive: Rates of 33% to 39% being tested as Treasury source says tax-raising plans are in complete disarray'Rachel Reeves is considering raising capital gains tax as high as 39% in the budget, the Guardian can reveal, amid a scramble to raise funds for crumbling public services.Treasury modelling being reviewed by the chancellor and seen by this newspaper shows officials are testing a range of 33% to 39% for capital gains tax (CGT). Continue reading...
She is losing the tussle between head and heart. The economy is better than it has ever been, but ordinary people don't feel itThe defining question in US politics was asked 44 years ago this month. One week before the 1980 presidential election, Ronald Reagan and Jimmy Carter squared up to each other for a televised debate. A former Hollywood actor, Reagan was also proving a lethal Washington aphorist. At the close, he spoke into the camera: Next Tuesday, all of you will go to the polls. You'll stand there in the polling place and make a decision." Watching at home were more than 80 million Americans. When you make that decision ... ask yourself: are you better off than you were four years ago?" Is it easier to buy things, he asked, is unemployment lower?A few days later, voters gave their answer, handing Reagan a 44-state landslide. Every presidential contest since has been framed in large part by his simple, deadly question. Ask it in the final stretch of this election and you get to the great mystery of why the race remains so close. Continue reading...
An oil price shock and economic downturn are among the likely effects of an attack on Iran's exporting capacityWhen Joe Biden last week said that his administration has been discussing" possible Israeli plans to attack Iran's oil industry in retaliation for Iran's ballistic missile attack, it left the world stunned. Notably because Mr Biden didn't reject these plans outright, in the way that he had the day before regarding a possible strike on Iran's nuclear sites. Oil prices jumped 10%, even though the US president walked back the remark the next day.The historian AJP Taylor wrote that wars are much like road accidents" in that they had profound consequences but did not necessarily have equally profound causes. Targeted Israeli strikes on refinery complexes may not do much more than win domestic applause. Bombing Kharg Island, the heart of Iran's oil-export operations, would cripple its economy. However, such a move might also drive up global oil prices and have an impact on American consumers just weeks before a crucial election. Continue reading...
Trio face one more round of voting by MPs before party members have their say on final twoThe prison system in England and Wales was teetering on disaster" when Labour came to power, James Timpson, the prisons minister said today.Speaking at his first Prison Governors' Association conference in Nottingham since he took on the role, Timpson said:It has not been easy to rehabilitate offenders in a system teetering on disaster.We have to take the tough decisions bringing changes to release to ease the pressure on our prisons. It was quite frankly a rescue effort. If we had not acted our justice system would have grinded to a halt - we would have faced a total breakdown of law and order.Unison said it has given notice to Perth and Kinross Council for strike action by members in schools and early years centres.The union, which is the largest local government trade union in Scotland, hopes targeting the action in Swinney's constituency will bring home to him the importance of finding a fair settlement" to the council pay dispute. Continue reading...
Democratic lawmakers accuse companies of shrinking product sizes while charging consumers the same priceIt's becoming a common experience for Americans going to the grocery store: your bag of chips seems lighter, your favorite drink comes in a slimmer bottle, and you're running out of laundry detergent more quickly than usual. And yet things are staying the same price.On Monday two Democratic lawmakers launched an attempt to get to the bottom of the phenomena, accusing three major companies, Coca-Cola, PepsiCo and General Mills, of shrinking the size of products while charging consumers the same price - a price-gouging practice known as shrinkflation". Continue reading...
In letter to chancellor, Tesco and M&S are among firms warning tax could result in widespread store closuresMore than 70 retailers, including Tesco, Marks & Spencer and Ikea, are lobbying the chancellor, Rachel Reeves, for a 20% cut to business rates, warning that the property tax could force tens of thousands of shops to shut.In a letter to Reeves coordinated by the British Retail Consortium (BRC), executives are pushing the Treasury to introduce a retail rates corrector" on the levy, which is a property-based tax charged by local councils and imposed on businesses including retailers, pubs, factories and company offices. Continue reading...
Labour hopes the gathering will encourage a fresh injection of private money to drive its growth agendaThe former Google boss Eric Schmidt has been named as one of the high-profile executives attending the Labour government's first international investment summit.Schmidt, who was Google's chief executive from 2001 to 2011, is expected to play a prominent role at the summit in central London on 14 October, where he will take the stage in conversation with Keir Starmer. Continue reading...
Regeneration efforts in former coalmining communities have not led to enough job creationPolitics is hard because it invariably involves making choices between conflicting objectives. As Keir Starmer is discovering, the need to prioritise means you can't please all of the people all of the time.Labour wants faster growth, sounder public finances, decarbonisation, prosperity to be shared more evenly between the regions, tougher controls on migration and a reset of Britain's relationship with the EU. Doing all these things simultaneously is near to impossible. Continue reading...
Liam Byrne has warned the chancellor that extra levies on the rich are needed to halt the rise of the populist rightA failure by Rachel Reeves to back a windfall of wealth taxes" in her budget risks fuelling the rise of the populist right, a former Labour cabinet minister has warned.Liam Byrne, a senior figure in the New Labour government and chair of the Commons business and trade committee, said that the rise of Reform UK at the last election meant the chancellor and Keir Starmer must urgently consider raising funds to deal with inequality. Continue reading...
Rebuilding existing infrastructure is key for the government rather than rushed policymaking for new projectsThere is an air of panic about how to fix Britain. We need to move quickly, shift the dial and jump up the rankings of rich countries. Investment is needed in new stuff to make the UK modern and its services delivered on time.It's a political imperative that galvanised Boris Johnson and then propelled Liz Truss from obscurity to becoming an almost revolutionary prime minister. Continue reading...
Swansea West MP Torsten Bell says such a tax would not raise significant revenues'One of Labour's new MPs has defended the decision by the chancellor, Rachel Reeves, to rule out a wealth tax, claiming it would not have much of an impact.Reeves has previously rejected calls for the tax as a solution to what she says is the 22bn shortfall that is blighting public finances. Continue reading...
Job creation unexpectedly accelerated in September as unemployment rate slipped to 4.1%American employers added 254,000 jobs last month in the penultimate jobs report before the US election, defying fears of a slowdown in the labor market.Job creation unexpectedly accelerated in September, while the headline unemployment rate slipped to 4.1% from 4.2% in August. Continue reading...
by Jack Simpson, Phillip Inman and Jillian Ambrose on (#6R682)
Conflict in the Middle East, a strike at US ports, problems at the Panama Canal ... a rush of problems could create a crisis for exportersWith a pandemic that upended global trade through lockdowns and travel restrictions still fresh in managers' minds, international supply chains are again under pressure.Shippers are facing myriad issues, from the conflict in the Middle East and drought in Central America to strike action in the US, and companies are finding it more difficult - and more expensive - to transport supplies. Continue reading...
by Richard Partington and Jillian Ambrose on (#6R590)
Oil prices rose by more than 4% as Israeli troops moved into Lebanon and Iran launched missiles on IsraelAs Israeli troops moved into Lebanon and Iran launched a missile attack on Israel, the risk of a jump in oil prices that could trigger another global inflation shock appeared to be materialising.Oil prices rose by more than 4% to about $75 a barrel on Tuesday. Continue reading...
Former home secretary says the phrase stop the boats' was an error' and it was too complicated a problem to distil into a soundbite. This live blog is closedRobert Jenrick has used a campaign rally just outside the Conservative conference to paint the issue of migration in highly stark terms, saying his party will die" if it does not commit to quitting the European convention on human rights. (See 8.23am.)Speaking to supporters in a studio theatre at Birmingham Rep, Jenrick repeated his styling of the issue in Brexit terms, saying the choice was between the leave" of leaving the ECHR or remain" of staying in it, and that this was a chance to get migration done".This is more than just, leave or amend' - frankly, our party doesn't have a future unless we take a stand and fix this problem. It's leave or die for our party - I'm for leave.Foreign national offenders in our country,who we have struggled to deport because of our membership of the European Convention on Human Rights - that's the issue I was raising.What is the biggest challenge we face as a party?Our biggest strategic challenge is the fact that the average age above which you are more likely to vote Conservative than Labour is now over 60. Continue reading...
Research concludes Labour warnings of tough budget may have sapped optimism about the economyUK business confidence has dropped to its lowest level since the general election, as firms grow more pessimistic about the economic outlook.Amid fears that the Labour government's warnings of a tough budget in October have hurt the economy, the latest Lloyds Bank Business Barometer has found that business optimism weakened this month to its lowest level since June. Continue reading...
The renewal Britain desperately needs requires borrowing and optimism. Isn't that what we voted for?John le Carre, who taught at Eton for a time, once said the trouble with that school was that it taught people to win, but not to rule.Now, as my Greek master used to say, one should beware of generalisations. Nevertheless, in the case of two recent Old Etonian prime ministers, I think le Carre's observation was spot on. I refer, of course, to David Cameron's monumental misjudgment in calling the 2016 referendum that landed us with the mounting cost of Brexit. And to Boris Johnson's role in that fiasco, not least in wrecking Theresa May's attempt to save something from the ruins by staying in the customs union, if not the full works of the single market. Continue reading...
Anura Kumara Dissanayake wants a better deal from the IMF to reduce suffering during the country's punishing debt crisisSri Lanka is at a historic juncture. Faced with its worst economic crisis since the Great Depression and having defaulted on its external debt for the first time, the country recently saw unprecedented protests demanding systemic change. The former president Gotabaya Rajapaksa was literally chased away in 2022, as protesters stormed his residence and swam in his pool. The political parties and their offshoots that have ruled the country since independence are unravelling. Take Anura Kumara Dissanayake. He polled just 3.8% of the vote during the previous presidential election in 2019. This week, he was sworn in as president.The new president belongs to the Janatha Vimukthi Peramuna (JVP) party and leads the new centre-left National People's Power (NPP) coalition. The JVP engaged in two major insurrections in the early 1970s and late 1980s, which resulted in the loss of tens of thousands of lives - mass violence was committed by both the JVP and the state. But the party has come a long way from its mix of revolutionary Marxist-Leninism and Sinhala ethno-nationalism, having moved into the centrist mainstream. From its roots in the rural south of the country, the party remoulded its base in the suburbs and small towns and even wooed the middle classes by taking up the issue of corruption. Its electoral capture of state power was contingent on the unprecedented economic crisis, as it waited patiently for the political winds to turn. Continue reading...
S&P 500 index of major US companies registers near 34% gain on year ago amid expectation of interest rate cutsA fall in US inflation expected to pave the way for further cuts in interest rates pushed stock markets to record highs on Friday.Ending a week of gains that began when the Chinese authorities approved a huge economic stimulus package, the S&P 500 index of major US companies soared above 5,750 to register a near 34% gain on a year ago. Continue reading...
by Richard Partington and Kiran Stacey on (#6R3RS)
The chancellor has signalled that she may change some of the government's fiscal rules in her speech. What are they - and what could that mean?Rachel Reeves is considering changes in next month's budget to the government's so-called fiscal rules, which govern how much it can spend.The changes are aimed at paving the way for billions of pounds more investment in the UK economy, to help decarbonise the economy and reboot growth. Continue reading...
Readers respond to an editorial about the chancellor dismissing a return to austerity in her speech to Labour conferenceYour leading article was right to highlight the challenge that the chancellor faces in demonstrating fiscal responsibility while reviving the economy (23 September). As it pointed out, the London School of Economics published a report in January - of which I was a co-author - that made a compelling case for an increase in annual public investment of about 26bn per year, equivalent to 1% of GDP, to jolt UK productivity and economic growth out of its rut. This would pull the UK out of bottom place in the G7 league table for public investment, and would promote confidence in private investors that having skin in the game would mean the government would provide supportive policies to ensure healthy long-term returns.Our report made a further case that the strongest returns would be secured from green investment that accelerates the transition to a sustainable, inclusive and resilient economy by tackling even more effectively damage from climate change, biodiversity loss and other environmental degradation, including air and water pollution. Continue reading...
Welfare politics | Economic growth | Jam tomorrow | Cleo Sylvestre | Class sizesOnly toffs can afford nannies (The right calls it the nanny state'..., 23 September). So for the rest of us the jibe nanny state" is irrelevant and should be barred. What we need are supportive parents, and many are insufficiently resourced to provide fully for their children. So we need the maternal" - alias welfare - state rather than the current Thatcherite austerity ill-fare one.