The Conservative fixation on shrinking the state is fiscally reckless and detached from political realityJust as every problem resembles a nail to someone equipped only with a hammer, the faintest glint of good economic news entices Conservative MPs to call for tax cuts. Earlier this week, new data showed that government borrowing in the second quarter of the year was 11.3bn lower than had previously been forecast by the Office for Budget Responsibility (OBR). The windfall is explained by higher revenues. That in turn is largely a function of frozen income tax thresholds - a stealthy tax rise that scoops more people into the higher rate as their earnings increase.Tory MPs have not hesitated to call for cuts. Most frame the argument in terms of economic stimulus - the conviction that growth will be restored as people spend money that would otherwise have been deducted from their pay. Iain Duncan Smith made an auxiliary motive explicit: If the economy is not growing we will lose the election," the former Tory leader said. Continue reading...

My friend Jonathan Perraton, who has died aged 58 of a heart attack, was a senior lecturer and post-Keynesian economist with an internationalist outlook. Publishing extensively across a range of economics journals, he famously identified strong and weak versions of Thirlwall's law, pivotal to the literature on the constraints placed on low-income countries by export demand.He was a long-serving and well-regarded member of the economics department at the University of Sheffield, and a rep for the University and College Union. He taught international economics to a generation of students, for whom he was a wonderfully inspiring lecturer. Continue reading...

She made the comment in response to repeated claims she is neglecting her duty as an MP. This live blog is now closedRishi Sunak is expected to carry out a reshuffle this year. At one point No 10 was keeping open the option of holding it straight after the Uxbridge, Selby and Somerton byelections, and more recently the assumption has been that it would happen after recess.This morning in the Times Steven Swinford says that it is coming in two parts. He says that a limited reshuffle will take place soon, primarily to replace Ben Wallace, who is standing down as defence secretary, and that a wider reshuffle has been postponed until later in the year.NEW A mini-reshuffle among ministers is expected at the end of next week.Tipped to leave the Cabinet are Defence secretary Ben Wallace and Scottish secretary Alister Jack. Both are quitting as MPs next year. @Steven_Swinford says there will be a wider reshuffle in October.Environment minister Trudy Harrison, Health minister Will Quince and Levelling Up minister Dehenna Davison also set to leave HMG. All MPs quitting Parliament. Liam Fox, Penny Mordaunt, Anne Marie Trevelyan, Mark Harper are tipped to replace Ben Wallace. Continue reading...

Poor performance in services industry and manufacturing is mirrored in eurozoneBritain's policymakers have been put on recession alert after a closely watched measure of economic health showed the UK gripped by a Europe-wide slump in private sector activity.In a sign that higher interest rates are leading to a rapid slowdown in growth and choking inflation, the latest monthly business health checks showed weakness in the UK services and manufacturing sectors and the poorest performance since the Covid lockdown in early 2021. Continue reading...

Former CEO Alison Rose, who stepped down in July, will be paid as she sees out a 12-month notice periodThe pound, which started to drop in the wake of the poor Eurozone PMI data, has taken another tumble after UK figures pointing to similar woes at home.The pound is currently down around 0.5% versus the US dollar at $1.26. Continue reading...

The country's property crisis is causing damage that requires Xi to make liberal or market reformsThe long days of summer are proving to be rather too long for the government in Beijing. In an attempt to stabilise the faltering real estate market, the authorities announced earlier this week a modest decline in interest rates that was underwhelming in scale and intent.Those who recall the bad old days in which the west was buffeted by successive crises such as those involving Northern Rock, Bear Stearns and Lehman Brothers will recognise the futility of lower interest rates in stemming systemic problems in real estate and finance when the problem has nothing to do with interest rates being too high. And so it is in contemporary China, where the government is battling to stabilise an unstable economy. Continue reading...

Data from the High Pay Centre thinktank showed FTSE 100 bosses collected an average 500,000 pay rise last year, taking their median pay to 3.9mJeremy Hunt has played down the prospect of pre-election tax cuts despite news that the public finances are in less bad shape than the government's spending watchdog forecast in the spring budget, our economics editor Larry Elliott writes.Stronger tax receipts from an economy that has so far avoided recession meant the UK's budget deficit stood at 4.3bn last month - the fifth highest for a July since modern records began in 1993 but 1.7bn below the estimate from the Office for Budget Responsibility.As inflation slows, it's vital that we don't alter our course and continue to act responsibly with the public finances. Only by sticking to our plan will we halve inflation, grow the economy and reduce debt.The Treasury thinks changes to growth, inflation and interest rates put pressure on the public finances and insists it will not be deterred from its focus to get debt - which now stands at just under 2.6tn - falling over the medium term. Continue reading...

CBI data showing slowdown in activity is latest sign Bank interest rate rises are slowing economy

Labour leader says sluggish economy has driven up prices and is holding back students and apprentices

Chancellor says government must not alter course as interest rate rises add to cost of debtJeremy Hunt has played down the prospect of pre-election tax cuts despite news that the public finances are in less bad shape than the government's spending watchdog forecast in the spring budget.Stronger tax receipts from an economy that has so far avoided recession meant the UK's budget deficit stood at 4.3bn last month - the fifth highest for a July since modern records began in 1993 but 1.7bn below the estimate from the Office for Budget Responsibility. Continue reading...

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Political tightening and an anti-espionage law make it harder for outsiders to gauge the situation. How accurately can insiders do so?A spate of recent statistics shows that the Chinese economy is faring poorly. The country was supposed to rebound after ditching its draconian zero Covid" policies, but, after an initial revival, things have gone awry. Earlier this month it slipped into deflation. Key indicators, including industrial production, investment and retail sales, came in well below expectations.The most concerning figure, however, is the one that we can't see. The youth unemployment rate was suspended from the monthly economic data release, having reached a record 21.3% in June - suggesting not only that July was grimmer, but that improvement is not expected soon. The government has stopped publishing swathes of statistics in recent years. While there are many reasons for that, and while some may still be released to data firms, it has probably helped to bury some bad news, and makes it harder to cross-reference information. Chinese economists are also under pressure to avoid discussing negative indicators. Continue reading...

A profit warning from housebuilder Crest Nicholson compounded fears of a housing market slowdown, as Rightmove data revealed a further drop in asking pricesAJ Bell investment director Russ Mould said that while weak house price data (as was hardly a surprise", Crest Nicholson's profit warning has laid bare the the scale of the impact of a housing slowdown on the housebuilding sector."Sales of new homes have plunged alarmingly and, while not all developers in the space are created equal, the news, allied to Rightmove's latest reading on the property market, has had a knock-on effect on share prices in the rest of the sector this morning.The 7,000 drop in the average asking price observed by Rightmove in the last month, allied to a big drop in transaction volumes, is the kind of statistic to make estate agents distinctly uneasy. Continue reading...

We'd like to hear from non-EU immigrants to the UK - particularly from Nigeria, Zimbabwe and India - who have been granted UK work visas in the past yearWe're interested to hear from non-EU immigrants who have recently been granted work visas for the UK.Whether you're already in the UK or intend to come and work in the UK in the near future, we'd like to hear when you applied for your work visa, how long it took to be approved, what jobs your visa allows you to work in and what motivated you to apply. Continue reading...

Some blame falling global demand, but borrowing by government and property sector has held back growth

Central bank reduces one-year loan prime rate but surprises analysts by leaving five-year rate unchanged

Whether it is on the economy, the NHS or small boats, the prime minister is failing to meet the targets by which he said his government should be judgedEven when seen through Daily Mail headlines, things do not look good right now for Rishi Sunak's five priorities. At the new year, the prime minister announced five measures by which he expects to be judged. Two were social: reducing NHS waiting lists and stopping the Channel small boats. Three were economic: halving inflation (at that time running at 10.7%), growing the economy and reducing national debt. With an election looming, such goals matter more than usual.Last week was duly designated NHS week" in the government's summer publicity push. It was not a success. Embarrassingly, the NHS waiting list for England has just risen to 7.6 million people, the highest since the figure began to be consistently monitored in 2007. In a hospital photocall last week, Mr Sunak himself admitted that progress had stalled". Continue reading...

With its growth slowing, China's future is uncertain. We should be grateful if the change is not suddenChina's economy is going through a rough patch. Growth is slowing and its property bubble has well and truly burst. Unemployment is rising.So what, you might say? Every country has difficult periods when past excesses catch up with it. Eventually the economic cycle turns and recovery begins. China is the world's second biggest economy and has grown at a stupendous pace over the past four decades. It plays a pivotal role in the global economy and has invested heavily in advanced manufacturing and AI. Sure, it has problems but it will emerge from them relatively unscathed. Continue reading...

The Tories, and even Labour, tell us that the country made a decision in 2016'. Yes it did, and now it repents of that choiceThe UK is no longer part of the EU. It's not for us to take back the people who land in the UK." So said a European Commission official about the impasse in this country's relations, or non-relations, with our former European partners.As abject poverty and wars feed the seemingly endless flow of desperate asylum seekers, it becomes clear that the migration crisis is not going away. But the callous response of British ministers - a remarkable proportion of whom are themselves descended from immigrants - really sticks in the craw. Continue reading...

With defence spending booming, China onside and murky deals filling gaps left by sanctions, the Kremlin believes it can weather a damaged rouble, but will Russians stomach welfare cuts if they come? The dark fleet' delivering Russia's oilAs the Kremlin took urgent measures to stabilise the plummeting rouble last week, one thing became clear: rampant spending on its war machine and social welfare programmes could not go on for ever. Few observers believe the Russian economy is in danger of imminent collapse. But it has reached a point, they say, where the Kremlin may have to weigh the cost of spending trillions of roubles on its war with Ukraine, and withstanding unprecedented sanctions, while maintaining prewar levels of public spending.In the grand scheme of things, as long as Russia continues to spend so madly - both war spending and on expensive imports - the rouble is not going to improve fundamentally," said Alexey Eremenko, associate director at consultancy Control Risks. There's a structural issue underlying it all ... A good question is whether we are at the point yet where the Kremlin has to seriously slash war spending or accept serious damage to the public welfare." Continue reading...

Evergrande has filed for bankruptcy protection and firms covering 40% of Chinese home sales have defaultedChina's property crisis has deepened with two major developers facing severe financial difficulties that threaten to send shock waves through the country's economy and beyond.Evergrande, the poster child for the woes of China's property sector, filed for chapter 15 bankruptcy protection in New York on Thursday. The provision permits the company to protect its US assets and will allow cross-border bankruptcy proceedings as it undergoes a restructuring. Continue reading...

Regulator prepares to lower its cap on energy prices and will make announcement next weekOfgem's price cap, which governs what millions of people pay for their gas and electricity, is expected to fall to 1,925 when it is announced next week, according to the latest forecast from analysts at Cornwall Insight.This means a 7% reduction in the amount that the average household pays for its energy every year. It will be the lowest the cap has been since March 2022.JVT's one-of-a-kind approach to communicating science over the past two years has no doubt played a vital role in protecting and reassuring the nation, and made him a national treasure. Continue reading...

Figures give fuel to claims that profiteering has played a big part in the UK's high levels of inflationBritish companies have boosted their profitability, according to the latest official figures, insulating themselves against cost pressures and fuelling claims that profiteering has played a big part in the UK's inflation story.In a week when Joe Biden said he was only winning the war against inflation in the US because corporate profits were declining, figures released on Thursday by the Office for National Statistics showed UK business profits increased in the first quarter of 2023. Continue reading...

Cost of borrowing will probably stay elevated for foreseeable future, making it harder for governments to service debtsWhat a difference two years make. In 2021, when interest rates were near zero in the US and the UK and slightly negative in the eurozone and Japan, the consensus was that they would remain low indefinitely. Astonishingly, as recently as January 2022, investors put the probability of rates in the US, eurozone and the UK rising above 4% within five years at only 12%, 4%, and 7%, respectively. After adjusting for expected inflation, real interest rates were negative and projected to stay that way.In fact, despite the US Federal Reserve and other central banks' aggressive monetary tightening, real interest rates remained significantly negative until late 2022. Moreover, long-term rates increased more moderately than short-term rates: by October 2022, the yield curve had inverted, signalling that financial markets were expecting central banks to reduce short-term rates in the near future. This sentiment stemmed from the widespread expectation that the US and global economies would enter recession. Continue reading...

Latest jobless rate higher than economists predicted, Bureau of Statistics unemployment figures show

Interest rates are too blunt an instrument for an economy so finely balanced. It's time to use taxesThe plan is working," is how Rishi Sunak greeted Wednesday's news of a fall in the rate of inflation. If we stick to the plan I've set out, we'll get it done."Up to a point, prime minister. Mr Sunak's plan" is really nothing of the sort. It is an aspiration to halve the rate by which prices are rising rather than, as is commonly assumed, for prices to fall. And he wants to do this without a hand raised by any of his ministers. It is not the business secretary, Kemi Badenoch, who controls oil and gas prices, but traders in commodity markets - and rather than watching Whitehall, they have their eyes peeled for moves by Vladimir Putin or Opec. It is not Jeremy Hunt at the Treasury who sets interest rates, but Andrew Bailey and his colleagues at the Bank of England. And the people of Threadneedle Street may be alarmed by core inflation, which strips out volatile items such as food and fuel, remaining stubbornly high. With only four months before his self-imposed deadline, this looks like one life goal the man in No 10 will miss. Continue reading...

Proposals said to include forcing large exporters to convert up to 80% of their foreign currency into roublesVladimir Putin is reportedly planning to hold a meeting with Russian policymakers on Wednesday in order to discuss reintroducing some capital controls to help prop up the struggling rouble.Citing a Russian finance ministry proposal, the Financial Times said large exporters could be forced to convert up to 80% of their foreign currency into roubles in order to raise demand for the currency. Continue reading...

UK inflation has dropped to its lowest since February 2022, following cut in energy price cap, but IPPR warns economy could fall into recession

Both sides of constitutional debate use Gers data to argue case for and against independence

Overall rate of inflation falls but costs are still increasing in some sectors, so another interest rate rise looks likely

From fruit juice to carpets and cars to hotels, how the cost of everyday items varies

Lower energy costs behind drop in annual rate in July, as wage increases finally overtake price rises

UK regular pay growth highest since 2001 while unemployment rate rises unexpectedly; rouble recovers afters Bank of Russia raises rates at extraordinary meetingThe statement doesn't mention the rouble, which dropped to its lowest level in nearly 17 months yesterday. The Russian currency has been boosted by the central bank's move.It now takes 95 roubles to buy a dollar, whereas yesterday the exchange rate was at 102 roubles per dollar at one stage.The decision is aimed at limiting price stability risks.Inflationary pressure is building up. As of 7 August, the annual rate of inflation rose to 4.4% while current price growth rates continue to increase. Over the last three months current price growth amounted to 7.6% on average in annualised terms on a seasonally adjusted basis. The same core inflation measure went up to 7.1%. Continue reading...

Further tough decisions will be needed while the Kremlin continues to spend large sums on its Ukraine invasion

Emergency decision is intended to halt slide after currency dropped to weakest point in almost 17 months

ONS data shows employers shed workers on back of slowdown in economic activity

Bank will discuss interest rate after high spending on war in Ukraine and drop in export revenues put further pressure on Russia's economyRussia's central bank has announced it will hold an extraordinary meeting on Tuesday to discuss the level of its key interest rate after the rouble fell to its weakest point in almost 17 months.The currency has been steadily losing value since the beginning of the year and slid past the psychologically important level of 100 to the dollar on Monday morning. Continue reading...

Only serious, long-term business investment will help structural problems and inequalitiesBritain's economy has barely grown for 18 months. The level of activity today is pretty much the same as it was when Russia invaded Ukraine in February 2022 and gave an added boost to already strong inflationary pressure.The sideways drift is noteworthy in itself. Economies don't very often have prolonged periods when they operate at stall speed; they either bounce back or slip into recession. Not since the late 1950s has the UK experienced anything like its recent torpor. Continue reading...

Britain depends on the kindness of strangers to get by in the world. It doesn't have to be like thisBritain has its back against the wall to an extent unparalleled in its peacetime history. In all the other financial struggles we have faced - the currency crises of 1931, 1949, 1976 and 1992 - we could fight our way out by belt-tightening and devaluing the pound within a structure of secure trading relationships, anchored first by empire and later the EU.Our international assets exceeded our liabilities by a huge degree. Our national debt was well structured, built on long-term bonds whose servicing requirements were always manageable. We retained great industrial strengths. We were fundamentally creditworthy. Even when the financial crisis broke in 2007/8, the low national debt meant the country could put its balance sheet behind its banks and bail them out. Continue reading...

Paul Johnson, of the Institute for Fiscal Studies, issues plea for honesty from Labour and the Conservatives about tax and spending choices ahead of electionUnveiling significant tax cuts before next year's general election would put Britain's scary" public finances in further peril and risk the nightmare scenario of even higher interest rates, one of the country's most influential economists has said.Paul Johnson, director of the Institute for Fiscal Studies, also made a plea for honesty from both main parties over the profound tax and spending choices they would face should they win power. Continue reading...

The MPC will look closely at this week's earnings and inflation figures, but energy volatility could also come into playThere is a firm view in the City that Bank of England policymakers have at least one more interest rate rise in them, but much depends on the latest official prices data - out this week - and how quickly inflation is falling.Financial markets are betting that there is a 80% chance of a 0.25 percentage-point rise, to 5.5%, when the Bank's monetary policy committee (MPC) next meets on 21 September. Continue reading...

Data suggests prices are rising even though production costs are flat. Yet wages remain policymakers' chief concernThere is a chart in the Bank of England's latest report on the economy which illustrates that price gouging may still be a factor in pushing up inflation.What unions and academics have complained about for more than two years - and policymakers at the central bank have downplayed - is that corporate profits could be pumping up inflation as much as rising wages. Continue reading...

Joe Biden taps C Kirabo Jackson, a labor economist known for research on economics and education, for CEA roleJoe Biden is tapping C Kirabo Jackson, a labor economist whose research advocates robust public spending on schools, to fill out the president's three-member Council of Economic Advisers (CEA), according to a White House official.The selection suggests public education will be a key area of focus for Biden's brain trust ahead of a 2024 re-election bid expected to turn on the strength of the economy. The position does not require Senate confirmation. Continue reading...

The UK economy beats forecast with growth by 0.2% between April and June, including surprisingly fast 0.5% growth in June alone

GDP increases by 0.2% in April to June on back of recovery in car manufacturing, says ONS

UK in bottom half of income table across 38 rich nations as US and Italy see growth but Canada, France and Germany declineA sharp rise in tax payments and cuts to energy subsidies in the UK were to blame for a steep fall in household incomes during the first three months of the year, according to the Organisation for Economic Cooperation and Development (OECD).In a review of its 38 member states, the OECD said the UK was in the bottom half of the income table after households faced a steeper rise in tax payments than their counterparts in the US, France and Germany. Continue reading...

As the store enters administration, shoppers talk about its convenience, bargains, range of goods - and supply issues

RICS house price balance drops again ... as more mortgage holders fall into arrears and Wilko takes difficult decision' to enter administration

Consumer price inflation data shows prices fell by 0.3% year on year in JulyChina's economy has fallen into deflation after consumer prices fell year on year last month for the first time in more than two years, official data shows, as slowing domestic spending weighs on the country's post-Covid economic recovery.The consumer price index, the main gauge of inflation, fell 0.3% in July, the National Bureau of Statistics of China (NBS) said, having flatlined in June. A survey of analysts had anticipated a 0.4% year-on-year decline. Continue reading...

Trade with rest of world is shrinking and youth unemployment is at 20% but state interventions are expectedChina's economy is struggling. The recovery after the lifting of Covid-19 restrictions is faltering. Its trade with the rest of the world is shrinking. A decade-long boom in house prices has come to an end.The most obvious manifestation of the troubles besetting the world's second biggest economy is that China is now officially in deflation. In the US, the UK and the eurozone, prices are rising - albeit not quite as fast as they were a few months ago - but in China they are actually falling. Continue reading...