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As costs rose yet again last week, with a warning to expect 5%-plus fixed rates, we look at the options for homebuyersWould-be and existing homeowners, looking for some sense of certainty in the mortgage market, have been left bitterly disappointed.Last week’s UK inflation figures, which showed a slower-than-expected decrease, have sparked expectations that the Bank of England will raise interest rates above 5% by the end of the year – meaning that those borrowing to buy, or renewing their mortgage, soon will face significant cost increases. Continue reading...

Campaigners for tax reform say similar levies in Europe have helped to reduce inequalityA modest wealth tax on the richest 350 families in the UK could raise more than £20bn a year – enough to fund the construction of 145,000 new affordable homes a year – according to research by fairer taxation campaigners.A 2% tax on assets above £10m held by all members of the Sunday Times rich list could raise as much as £22bn, according to analysis by Tax Justice UK, the Economic Change Unit and the New Economics Foundation (NEF). Continue reading...

Naomi Eisenstadt, first programme lead, says there is lack of attention on what childcare is actually forNaomi Eisenstadt remembers her excitement as she started as the first director of the government’s Sure Start unit in 1999.“I felt like Lyndon Johnson had run up and asked me to set up Head Start,” she says, referring to the US president’s key 1965 policy to fight the “war on poverty”. Continue reading...

Scheme would be at retailers’ discretion, says government, following talks between PM and chancellor and the food sectorMinisters are working with supermarkets to voluntarily cap the price of basic food items in an effort to ease the UK’s cost of living squeeze, but insists it is not considering imposing price caps.With food and drink prices rising at the fastest pace in more than 40 years and no let-up in sight, the Treasury and supermarkets have been discussing a possible voluntary scheme for maximum prices for certain goods. These would be likely to include essentials such as bread and milk. Continue reading...

The economic challenges of the city’s downtown have sparked speculation of a so-called ‘doom loop’. But some say its emptiness may be part of the solutionThe operator of the gondola that services Salesforce Park, an oasis among the skyscrapers in downtown San Francisco, will tell you all about how the 5-acre (2-hectare) rooftop space you’re about to enter contains 1,600 plants, 600 trees and more than a dozen ecosystems.From this far up the fortress walls, the city looks like a futuristic utopia, with office workers milling about in the sun and free yoga on Fridays. Continue reading...

Praise from the IMF and optimism on inflation have given way to echoes of last autumn’s turmoilThere was only ever an outside chance that the Conservatives would win the next general election after the tumultuous period that resulted in Rishi Sunak becoming prime minister last October. The events of the past week mean the prospect of a fifth Tory victory is now vanishingly small.Ironically, things started so well for the government. On Tuesday, the chancellor, Jeremy Hunt, luxuriated in the praise bestowed on the UK from the International Monetary Fund as it upgraded its growth forecasts for the economy. Continue reading...

As every sector counts the mounting cost of our catastrophic break with Europe, Labour must find its nerveWhat do my friends the musicians Sting, John Etheridge and Tom McGuinness (of the Manfreds) have in common, apart from music? They have recently told me they are witnessing first-hand the frustrations of Brexit: loss of the benefits of freedom of movement, and the bureaucratic damage inflicted on one of this country’s widely recognised strengths, namely the creative arts.In this they are joined by most British manufacturers and members of the hospitality industry. These are struggling to find replacements for the EU workers who have been made to feel unwelcome and have been effectively banned, or voted with their feet. All their would-be employers think Brexit is hugely damaging to their respective businesses, and would like to reverse it. Continue reading...

Austerity, Brexit and catastrophic fiscal decisions have inflicted long-term damage to Britain’s productive capacity. Labour is offering the renewal it so badly needsIt has been a week of bad economic news. The latest data from the Office for National Statistics confirmed that inflation has fallen in the UK, but to 8.7%, slightly higher than had been predicted. This triggered a strong reaction in the bond markets, pushing up the cost of government borrowing to almost the same as it was in the wake of Kwasi Kwarteng’s mini-budget that tanked the markets last September.It is a sobering reminder of the lasting legacy of Liz Truss’s brief premiership. In just 49 days, she and her chancellor undermined long-term investor confidence to the extent that the UK government, once able to borrow at interest rates of almost zero, now faces some of the highest borrowing costs of developed nations, with these costs liable to rise even further as a result of only moderately bad economic news. It means that for the first time in decades, the UK is subject to the same sorts of external market pressures on its investment, tax and spending decisions as much less affluent economies. Continue reading...

A deal between the White House and US House speaker has been agreed in principle, but still needs to pass a divided US congressJoe Biden and the House Republican speaker, Kevin McCarthy, have reached a deal “in principle” to raise the federal government’s $31.4tn debt ceiling, potentially averting an economically destabilising default on 5 June.With any new agreement still required to pass through a divided Congress, the risk that the Treasury department runs short of money to cover all its obligations does however remain. Continue reading...

Readers reveal how they have spent their time since retiring – be it helping with childcare, renting property, gardening or worrying about the futureBarbara was 59 when she decided she’d had enough of working. The former chief executive of a multi-academy trust, now 63, had always wanted to retire early, but didn’t think she could afford to.“I was quite burnt out and desperate to change my lifestyle. I worked 70 hours a week for years – it was just exhausting,” she says. “I was lucky to have a good pension, but also quickly realised that when you retire, you just don’t need as much money. All the activities that I do – my walking group and book group – they don’t cost anything.” Continue reading...

The once humble, low-cost staple more than doubles in price, putting many fish and chip shops at riskWhether it’s fried, baked or mashed, potatoes have traditionally been a low-cost staple food in the UK – but not any more.A surge in costs is clobbering high street chippies, while in the supermarket, oven chips and the once humble baking potato are casualties of soaring grocery prices. Continue reading...

High inflation likely to push interest rates above 5% and force up mortgage and loan payments just ahead of election

Chancellor says “only path to sustainable growth” is to bring down high prices behind cost of living crisis, as mortgage rates climb

Former culture secretary says prime ministerial diaries ‘are frequently wrong’The government has announced that £7m is now available for grants to fund “policy-relevant research on how the conservation and sustainable use of biodiversity can help address climate change and improve livelihoods of some of the world’s most vulnerable populations”. The money is available from the Global Centre on Biodiversity for Climate, set up by the UK government with £40m funding at the Cop26 climate summit.Railway catering workers have voted to strike in a dispute over pay, PA Media reports. PA says:Members of the Rail, Maritime and Transport union (RMT) employed by DHL, which provides catering services for Avanti trains, backed industrial action by 97% on a 66% turnout.The union said the workers had not been offered a pay rise despite the cost of living crisis.This is a fantastic ballot result for our members, and it is now time for DHL and Avanti to make an offer on pay.It is insulting that our members have not been offered anything despite the fact both DHL and Avanti are highly profitable. Continue reading...

Chancellor to support Bank of England’s decisions because ‘inflation is a source of instability’

Updated data shows economy went into reverse in first quarter with GDP falling by 0.3%Germany has entered a recession, revised official figures have revealed, after high prices took a bigger toll on the country’s economy than originally estimated.Data from the Federal Statistical Office showed Europe’s largest economy contracted by 0.3% in the first quarter of 2023, compared with the previous three months, when it shrank by 0.5%. The technical definition of a recession is two consecutive quarters of contraction. Continue reading...

Lenders forced to raise fixed-term deals after latest inflation figure pushed swap rates upwardsHouseholds looking for a new mortgage deal have been warned to expect 5%-plus fixed-rate deals in the coming weeks, after Wednesday’s inflation figures sent the money markets back into turmoil.Nick Mendes, the mortgage technical manager at the broker John Charcol, said on Thursday that he doubted there would be any two-year fixed-rate mortgages and probably few five-year deals priced at less than 5% in the coming weeks, as lenders are forced to reprice their mortgages upwards. Continue reading...

The average household energy bill will fall by £426 a year from July after Ofgem dropped its price cap following tumbling wholesale prices.

Boris Johnson letter complains process is ‘unfair’ towards him and confirms he is asking new lawyers to represent him. This live blog is closedAnd here is Suella Braverman’s apology, from her letter to Rishi Sunak. She says:I am deeply committed to all the Nolan principles of public life, including honesty, integrity and openness, and I regret that these events have led some to question my commitment. I have at all times been truthful and transparent, and taken decisions guided by what I believed was right and appropriate given my office, not by any personal motivation. Another principle, of course, is leadership: ministers must hold themselves – and be seen to hold themselves – to the highest standards. I have always strived, and will continue to strive, to do this.As I say, in hindsight, or if faced with a similar situation again, I would have chosen a different course of action. I sought to explore whether bespoke arrangements were possible, given my personal circumstances as a security-protected minister. I recognise how some people have construed this as me seeking to avoid sanction – at no point was that the intention or outcome. Nonetheless, given the fundamental importance of integrity in public life, I deeply regret that my actions may have given rise to that perception, and I apologise for the distraction this has caused.Thank you for your letter and for your time discussing these matters with me.Integrity, professionalism and accountability are core values of this government and it is right and proper that where issues are raised these are looked at professionally to ensure the appropriate course of action is taken. Continue reading...

LSE researchers estimate that extra barriers on EU food imports have pushed up bills by £250 on averageBritish households have paid £7bn since Brexit to cover the extra cost of trade barriers on food imports from the EU, according to researchers at the London School of Economics (LSE).The university’s latest report estimating the impact of leaving the bloc on UK food prices found that trade barriers were consistently hampering imports, pushing up bills by an average £250. Continue reading...

The shadow chancellor has a vision for social democracy in an age of economic shocks and uncertainty – New Labour this isn’tThe mythology of political history insists that politicians’ speeches are important. A lifetime in political journalism tells me different. Political speeches have got to be made, and some politicians are good at them – Michael Heseltine, the best I have ever heard – but most speeches are events of the moment. They are decorative, not determinative. Most do not matter much and are rightly forgotten, even the good ones.There are, though, occasional exceptions. Rachel Reeves’ speech to the Peterson Institute in Washington DC on Wednesday has a claim to be one of those with a longer shelf life. Not because it was an oratorical tour de force stuffed with smart lines. It wasn’t. Some of Reeves’ terminology, such as her embrace of what she calls “securonomics”, is a distracting barrier to understanding what is otherwise a key idea. But that’s a small point. This speech matters a lot. It matters because the ideas and commitments it contains are serious – and because it addresses something indisputably important.Martin Kettle is a Guardian columnist Continue reading...

Rolling, live coverage of business, economics and financial markets as consumer price index inflation reaches 8.7%, well above forecastsUK inflation dropped to 8.7% in the year to April, the first time it has dropped below 10% since August and the lowest since March 2022.Yet that steep fall – long expected because of the big increase in energy prices in April 2022 – has not all been happy news. It was less dramatic than expected by economists.Sugar 47.4%Olive oil 46.4%Eggs 37%Low-fat milk 33.5%Cheese and curd 30.6%Flours and other cereals 30%Pasta products and couscous 27.7%Ready-made meals 20.8%Butter 20.1%Bread 18.6%Jams, marmalades and honey 17.9%Fish 14.2%Pizza and quiche 11.9%Fruit 10.8%UK inflation has come in higher than pretty much anyone, including members of the Bank of England’s committee, expected in April.This undoubtedly makes life harder for policymakers and no doubt raises the chance of yet another 25bp rate hike in June. Continue reading...

Energy prices have fallen, and farming and manufacturing costs have eased, so why are food prices still accelerating?

Rate drops to 8.7% but food price rises remain close to 45-year high

From olive oil to jam and clothing to transport, how costs have soared

In today’s newsletter: It’s good news – but the figure is still a bit higher than expected, even as energy costs decline. As the latest data is released, we look at its ongoing impact – and what it means for you

UK ministers will use improved forecast to claim plans are working – but IMF also urged more action to protect vulnerable peopleJeremy Hunt was quick to welcome the International Monetary Fund’s improved economic forecasts. Britain was now on track for the lowest rate of growth outside a recession in the postwar era. Still, it was a “big upgrade” from the Washington-based fund compared with a month ago, the chancellor said.In its annual article IV health check on the British economy, the IMF said it expected gross domestic product to grow by 0.4% this year, tearing up its estimate in April of a 0.3% contraction. Continue reading...

Governor optimistic over economic recovery but concedes Bank has ‘lessons to learn’ after forecast errors

New IMF report shows “a big upgrade to the UK’s growth forecast” says Jeremy Hunt, with UK expected to grow by 0.4% this year not shrink by 0.3%

All the methods of cost of living calculations come with benefits and limitationsOn its website the Bank of England has a tool allowing users to find out how prices have changed ever since King John was on the English throne back in 1209. By its calculations, goods and services costing £10 six years before Magna Carta was sealed would today cost £16,427.96.With the latest cost of living figures due out on Wednesday morning, Threadneedle Street’s ready reckoner puts the UK’s inflation record into historical perspective. It also highlights the many different ways – official and unofficial – in which changes to the cost of living are calculated. Continue reading...

Wages remain a problem, but rising numbers of skilled non-EU workers appear to be helping the NHS, social care, and indeed the overall UK economyThe UK public policy landscape is littered with disasters. From record NHS waiting lists to the de facto legalisation of petty crime and serious sexual assault, to the environmental damage created by the privatised water and sewerage companies.With immigration figures on Thursday likely to show that net migration in 2022 was the highest level on record, it’s tempting for politicians and commentators to add immigration to this list – although many have already done so on the basis of what, charitably, are wild, uninformed guesstimates. For Labour, immigration levels play into the narrative that 13 years of Tory rule have broken the country. For the ethno-nationalist right inside and outside government, well represented at the National Conservative conference last week, the idea that our culture and national identity are threatened by an influx of mostly dark-skinned foreigners is foundational.Jonathan Portes is professor of economics and public policy at King’s College London and a former senior civil servant Continue reading...

Jeremy Hunt should squeeze public spending and cut debt, says Washington-based bodyThe International Monetary Fund has upgraded its forecasts for UK growth, saying the country will no longer fall into recession this year, but warned the government against tax cuts it said would fuel inflation and result in a long period of high interest rates.In a message to the chancellor, Jeremy Hunt, that he should maintain his planned squeeze on public spending, the Washington-based body said tax policy should stay “aligned with monetary policy in the fight against inflation”. Continue reading...

Jeremy Hunt to meet food manufacturers over prices as Kantar says rate is still ‘incredibly high’UK food price inflation remains at its third-highest level since the financial crisis, with the annual rate at which the cost of groceries is increasing at the elevated level of 17.2%, retail industry data shows.Prices barely eased during the four weeks to 14 May to only marginally below April’s 17.3% figure, according to the latest release from the analytics firm Kantar, representing the third-highest rate of grocery inflation since 2008. Continue reading...

Micron products will be banned from key infrastructure projects in China due to ‘serious network security risks’

US efforts to stifle China’s chip industry are thought to be part of a wider plan to hinder Beijing’s preparations for warSigns of the burgeoning conflict between the US and China can be spotted in many different places, from balloons in the sky to videos on TikTok. But nowhere is it more apparent than on the microscopic wafers of silicon, otherwise known as semiconductors.Semiconductors, or microchips, are tiny pieces of technology that power everything from microwaves to military weapons. The industry is worth more than $580bn (£466bn), but even that figure belies their importance to the global economy. Their existence powers several trillion dollars’ worth of goods and processes; without them the global economy would shudder to a halt. Continue reading...

Energy bills and a tight labour market continue to cloud predictions of a steep decline by the end of the yearTo tackle inflation, the Bank of England is keeping a close eye on the UK’s tight jobs market, ultra-high energy prices and the crippling cost of food.These are the three main factors that have sent inflation rocketing over the last 18 months. The question is, has Britain reached a turning point and how quickly will inflation fall? Continue reading...

Average SVR at highest level for more than 15 years as number of home loan products available jumpThe average standard variable rate (SVR) for mortgages has climbed to its highest level for more than 15 years, so many people sitting on one of these could save several hundred pounds a month by switching to a fixed-rate deal.That was one of the key takeaways from data issued this week that also signalled that rates on new fixed-rate mortgage deals may start to rise again. Continue reading...

Leaders expected to form council that will discuss response if states such as Russia and China boycott trade for political reasonsThe UK and other G7 countries are planning collective action against Russia and China if they threaten trade boycotts for political reasons, announcing a new body to deal with “economic coercion”.Rishi Sunak will urge “bold and pragmatic collective action” against hostile states that stop trading with other countries when they disagree with their geopolitical decisions. Continue reading...

Bank of International Settlements also warns US bank failures and cryptocurrencies could reduce trustCentral banks risk losing public trust if they fail to bring down high rates of inflation found across the developed world, according to the boss of the body that advises them.Agustín Carstens, the director of the Bank of International Settlements, said central bankers needed to maintain a tough stance against inflation or else risk a new generation of consumers who had never experienced rapidly rising prices losing faith in their independent role. Continue reading...

John Allan to stand down after allegations of inappropriate behaviour, while latest Sunday Times rich list shows first fall in the number of billionaires since financial crisis

Ann Widdecombe may not sympathise in any case, but rising costs have not affected all butties equallyMore than half of us are worried about the rising cost of eating, as food prices rise at their fastest rate since 1977.But that did not stop Ann Widdecombe landing herself in a pickle on Tuesday by suggesting people who could not afford cheese sandwiches should simply forgo them. Continue reading...

Resolution Foundation says it is not clear that politicians are prepared for another year of food price risesThe rising cost of food will overtake the price of energy as the driving force behind inflation over the summer, hitting poorer households the hardest, a leading thinktank has forecast.Grocery bills that had rocketed by almost 20% during the past year would continue to increase, replacing energy prices that were expected to begin falling over the next few months, the Resolution Foundation said. Continue reading...

David Miles says working from home, stalling population growth and higher interest rates will shape marketThe era of “massive” house price rises in the UK may be about to end, according to a senior economist at the government’s spending watchdog.David Miles, a member of a key committee at the Office for Budget Responsibility, said one of the main factors that would make runaway house price growth less likely was the increase in working from home. Continue reading...

Study of ‘youth economy’ shows youngsters are able to prise cash out of parents despite cost of living crisisWhile millions of parents are battling for pay rises that keep up with the cost of living, Britain’s youngsters have received an 11% increase in their average annual “income”, outpacing inflation, according to new data.The figures on children’s pocket money and earnings – part of what was claimed to be the most in-depth study of the UK’s “youth economy” – also found that six-year-olds had enjoyed the biggest “pay rise”, in the form of a 34% annual increase. Continue reading...

The Tories have failed to pursue the obvious answers to this crisis, punishing ill people and NHS strikers insteadBritain has a sick economy. That’s not a metaphor for the flatlining of growth over the past year, but a statement of fact. Never before have so many people been out of the labour force due to long-term sickness or disability. Never before has there been such a loss of human potential.Better health is desirable in itself. Ill-health makes people miserable, so it shouldn’t really matter whether or not there were economic benefits from reducing the number of people who might want to work if they fell well enough to do so. Gross domestic product is not everything.Larry Elliott is the Guardian’s economics editorDo 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...

Australian wages are rising by closer to 4% than 3%. That’s how fast they should grow when inflation is less than 3%, not 7%

Jeremy Hunt says the government can open borders for care homes and construction workers that are facing worker shortagesOn Brexit, Jeremy Hunt is pressed by the moderator about the challenge that Brexit has posed for many businesses in the room for the BCC conference this morning.He’s sidestepped the question a bit, saying that “any change in your trading relations with your biggest trading partner presents challenges” but notes that the surge in energy prices linked to the war in Ukraine have also hampered businesses. Continue reading...

Rishi Sunak’s Farm to Fork meeting, the first of its kind, failed to address solutions to inflation, soaring costs and food security, say attendersRishi Sunak’s Downing Street food summit has been described as “empty" by food and farming industry representatives, who rounded on the prime minister for failing to discuss soaring inflation or set out measures to safeguard British food production.The Farm to Fork summit, the first meeting of its kind, brought together farmers, food producers and some of Britain’s largest supermarkets. Continue reading...

The White House and Republicans in Congress are currently in a standoff over how much the government can borrowThe US faces an “unprecedented economic and financial storm”, the treasury secretary, Janet Yellen, warned on Tuesday as Joe Biden met with his Republican counterparts for the latest in a series of tense talks over the US debt ceiling.Time is quickly running out to find a solution, said Yellen. Without raising the debt limit, the US government will default on its bills, a historic first, with likely catastrophic consequences. Federal workers would be furloughed, global stock markets would crash and the US economy would probably drop into a recession. Continue reading...