The PM's messianic zeal to dismiss consensus - over HS2, health, education - echoes the errors of the Thatcher yearsIt's all about him. That much was clear from Rishi Sunak's conference speech last week and the interview he gave the BBC soon afterwards. I want to change our country," he told his interviewer, before adding: I want to change the way we do politics."There was the occasional reference to the government, other members of the cabinet and the Conservative party, but mostly we found out what his plans were going to be after almost a year in No 10. Continue reading...
The Nobel prize winner and author of new book Economics in America argues economists must get back to serving societyWhen Angus Deaton arrived in the US four decades ago, he imagined he had something to say about economic inequality and how to tackle it that Americans might want to hear. Instead, the great economic minds of the time told him to shut up.The Scottish-born winner of the 2015 Nobel prize for economics struggled at first to understand why there was so little interest in a subject most European economists regarded as a central concern of post-war policies to reduce poverty and build more equitable societies. Continue reading...
Data comes as central bank seeks to guide the US economy to soft landing' to avoid a recessionThe US workforce added 336,000 jobs last month, much more than expected, as the world's largest economy remained resilient in the face of higher interest rates.The sharp acceleration in hiring saw non-farm payrolls rise during September by almost double the rate anticipated by economists. Readings for July and August were also revised higher, with 236,000 and 227,000 jobs added, respectively. Continue reading...
Persistently high interest rates have had chilling effect on consumer spending, says trade bodyThe World Trade Organization has halved its forecast for global trade growth this year in response to rising interest rates that have dented consumer spending power in the US, Europe and Asia.The 164-member trade body slashed its estimate from April that predicted the global trade in goods would grow by 1.7% in 2023, saying it needed to be scaled back to 0.8%. Continue reading...
Kristalina Georgieva discusses protracted high interest rates and first term dominated by two unthinkable' eventsThe head of the International Monetary Fund has warned that victory in the fight against inflation could spell trouble for financial markets by forcing central banks to keep interest rates high until 2025.In a Guardian interview before next week's IMF annual meeting in Marrakech, Kristalina Georgieva said there was a risk of borrowing costs staying high for a protracted period, with knock-on effects for asset prices. Continue reading...
by Richard Partington Economics correspondent on (#6F9W1)
Inflation expectations have pushed up government's long-term cost of borrowing, which is expected to slow economyBorrowing costs for governments around the world have risen to the highest level in decades as investors bet that stubbornly high inflation will force global central banks to leave interest rates higher for longer.UK 30-year bond yields - which dictate the country's long-term cost of borrowing - rose to the highest level since 1998 on Wednesday, surpassing the levels seen a year ago in the panic after Liz Truss's mini-budget. US Treasury yields have climbed to a 16-year high, while EU nations and Japanese government borrowing costs have also risen sharply. Continue reading...
Economic arm of UN says pro-growth stance needed, with interest rate rises increasing inequalityCentral banks risk tipping a stalling global economy into a full-blown recession unless they relax their 2% inflation targets and adopt a more pro-growth stance, the economic arm of the UN has warned.Pointing to evidence of a looming debt crisis in poor countries, the UN said the sharp rises in interest rates from the major central banks since 2021 had increased inequality and reduced investment but proved a blunt anti-inflation weapon. Continue reading...
by Richard Partington Economics correspondent on (#6F8DP)
Average food basket down by 0.1% amid fierce supermarket competition, says the British Retail ConsortiumFood prices dropped in the UK in September for the first month in almost two years, according to retail industry figures, offering consumers some respite amid the cost of living crisis.The British Retail Consortium (BRC) said price reductions for dairy, margarine, fish and vegetables and fierce supermarket competition helped to bring down the cost of an average food basket by 0.1% compared with the previous month. Continue reading...
Andy Burnham, Labour mayor of Greater Manchester, says news would be profoundly depressing'In a report last week the Institute for Fiscal Studies said the current parliament was likely to mark a decisive and permanent shift to a higher-tax economy".In its report, it also said that although this was partly because of the pandemic, government decisions taken before Covid were a more important factor. It said:Only during and in the immediate aftermath of the two world wars have government revenues grown by as much as they have in the period since 2019. To some extent, this ought not to be a surprise: the Covid-19 pandemic represented the most significant economic dislocation since the second world war. But while the response to the pandemic and its after-effects does explain some of the tax rises announced in recent years, it is far from the only - or even the most significant - explanation. Instead, tax rises have largely been the consequence of a desire for higher government spending on things that pre-date the pandemic (such as manifesto promises to expand the NHS workforce and hire more police officers, and a September 2019 declaration to be turning the page on austerity').I disagree with that analysis. One of the biggest reasons that we've had to see taxes go up is because our debt interest payments have gone up as a result of the energy shock. That has an enormous pressure on the public purse.The other thing I disagree with the IFS on - normally I don't disagree with them, I do this time - is their suggestion this is a permanent rise in the level of taxation. I don't believe it has to be. If we are prepared to take difficult decisions about the way we spent taxpayers' money, to reform the deliver of public services, to reform the welfare state, there's a chance to bring taxes down. But there aren't any short cuts. Continue reading...
High interest rates blamed for year-on-year fall with price of average home 14,500 lower than September 2022.UK house prices fell by 5.3% in the year to September, with drops in price in every region of the country as rising interest rates squeeze the market.The house price index by Nationwide, the biggest British building society, showed that seasonally adjusted prices stalled over the month in September, after a 0.8% drop in August. Continue reading...
by Richard Partington Economics correspondent on (#6F75N)
Local government has been steadily squeezed by austerity, inflation and centralisation. Greater devolution is neededIn most of Britain's towns there are buildings hinting at a more prosperous past. Vast stone public libraries, swimming baths and theatres; all encircling the grand town halls that once controlled them. Many are long shut, converted or owned by someone else. But the symbolism remains - local government used to do stuff.Today, England's councils are in the worst crisis since the foundation stones of these municipal palaces were laid. Continue reading...
Public spending hikes and pro-poor tax cuts might fix the economy and be popular enough to stop the far rightWith poverty rising, a recession approaching and annual inflation topping 120% in Argentina, it is unsurprising that voters are fed up. They would be forgiven for wanting change in the upcoming presidential election. However, voting for a far-right candidate, Javier Milei, would be a serious mistake. Mr Milei admires Donald Trump, trades in misogyny and says the outrageous to get noticed. Despite what Mr Milei claims, the Pope is not an emissary of the evil one" nor is the climate crisis a socialist lie".After winning Argentina's primary election this summer, Mr Milei is, depressingly, in pole position to clinch the presidency. His pitch is that Argentina's interventionist, welfarist economic model has failed. Mr Milei is a fan of the free market missionary Milton Friedman. He thinks inflation results from too much of the Argentinian currency, the peso, being in circulation. Mr Milei's solution is to shrink the state and replace the peso with the dollar. Friedman's ideas have been debunked. But they are held with religious fervour by adherents such as Mr Milei.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...
Labour's Stella Creasy elicits confirmation of higher charges to firms, which some say risk further fuelling food inflationThe government has admitted it will cost businesses 330m each year in additional charges when new post-Brexit border controls on animal and plant products imported from the European Union are implemented next year.Lucy Neville-Rolfe, a minister of state in the Cabinet Office, confirmed the estimated annual cost adding that the UK needs tighter border controls to protect our international reputation" in a letter to Labour MP Stella Creasy, the chair of the Labour Movement for Europe. Continue reading...
The Conservatives could be out of office for two terms. Labour has the chance to govern with seriousness and restore trustIn his classic work The Decline and Fall of Practically Everybody (1951), the New York Herald Tribune humorist Will Cuppy's verdict on Attila the Hun was: Attila's career teaches that you may get by for a while, but it can't last."Without wishing to push the comparison too far, I think Cuppy's observation epitomises the situation our present prime minister - they come and go, these Conservative prime ministers - now finds himself in. Continue reading...
by Richard Partington Economics correspondent on (#6F5JV)
Thinktank says Tories have overseen the biggest increase in taxes during a parliament since records began in 1951UK households are facing an average tax rise of 3,500 a year by the next election, the country's leading economics thinktank has said - the biggest increase over a parliament on records dating back more than 70 years.The Institute for Fiscal Studies (IFS) said that on current forecasts the Conservatives were on track to raise 100bn more annually by 2024 than if taxes as a share of national income had stayed the same as in 2019. Continue reading...
Tanzania government blamed for violence against villagers in national park, while thousands more people face losing their homesThe World Bank is investigating allegations of killings, rape and forced evictions made by villagers living near the site of a proposed tourism project it is funding in Tanzania.The bank has been accused of enabling" alleged violence by the Tanzanian government to make way for a $150m (123m) project ministers say will protect the environment and attract more tourists to Ruaha national park. Continue reading...
Survey finds parents under pressure, as second study finds some are leaving workforce because of costsParents of nursery and primary school-age children are facing more than 600 of extra childcare costs a month, a study has found, as employers demand staff spend more days in the office.More than half of parents said they had come under increasing pressure to increase time spent at their desks, in response to a survey by the flexible childcare provider Pebble. Continue reading...
Millions holding on with their fingertips' due to high interest rates, squeezed wages and Covid costs, says the European TUC boss, Esther LynchWorkers across Europe are holding on with their fingernails" and face a bleak winter ahead, as high interest rates exacerbate the cost of living crisis, the European TUC leader, Esther Lynch, has warned.With eurozone interest rates at record levels, 2023 will be remembered as a time of great economic injustice", Lynch told the Guardian. The European Trade Union Confederation (ETUC) represents 45 million workers from across the continent, including the UK. Continue reading...
Thinktank chief and former Bank MPC member gloomy about stubborn inflation and labour shortagesThe UK economy will shrink this year and in 2024, according to a report by a leading US thinktank that said stubborn inflation and a shortage of workers would damage the prospects for growth more than most analysts expect.The Washington-based Peterson Institute for International Economics (PIIE) said a drop in GDP this year of 0.3% would be followed by a fall of 0.2% next year while the eurozone and the US were on course for growth this year and next. Continue reading...
Study in the journal BMJ Public Health suggests premature deaths will rise 6.5% this yearThe cost of living crisis will probably cause thousands of premature deaths in the UK and significantly widen the wealth and health gap between the richest and poorest, a study has suggested.Millions of Britons have been hit hard with levels of inflation not seen since the 1970s as a result of the war in Ukraine, Covid, Brexit and economic policy. Poorer households have borne the brunt as they spend a larger proportion of their income on energy, the cost of which has soared. Continue reading...
We're keen to hear from UK workers aged 50 and over what their reasons are for working part-time, and how this is affecting their livesRecord numbers of people in their 50s and older are in part-time work, according to new data from the Office for National Statistics, with one quarter of workers in their 50s working part-time.The data reveals that 3.6 million older people are working part-time in the UK, a 12% increase since 2021. 42% of the UK's part-time workers are now aged over 50. Continue reading...
Country needs successful firms to grow and struggling ones to shrink, says Resolution FoundationThe UK needs more businesses to fail, or at least shrink, to solve the economy's long-running productivity crisis, a study has argued.The country's lack of economic dynamism", whereby weaker firms or lower productivity sectors shrink, and more productive ones grow, has caused GDP to be 4% lower between 2008 and 2019 than it would otherwise have been, according to a paper published on Monday by the Resolution Foundation. Continue reading...
Without economic stability the country is likely to be left without solid foundations for recoveryLehman Brothers was still in business, Gordon Brown was the prime minister and George Bush was US president. The last time the Bank of England held interest rates above 5%, the world economy was very different. There were warning signs, but few could have predicted the severity of what happened next.Fifteen years later, the Bank again used its September meeting to keep interest rates on hold, bringing to a halt its most aggressive round of rate increases in decades, with rates set at 5.25%, the highest level since 2008. For many, the end of ever-higher rates could not have come soon enough. Continue reading...
Mental health issues and lack of faith in government support are driving desire to change statusMental distress and financial insecurity has pushed 40% of self-employed workers to say they would switch to a salaried job if they could secure the same income, according to an academic study that has tracked self-employment trends during the Covid-19 pandemic.About one in eight would accept a 20% pay cut to get out of self-employment, such is the damage done to their mental health and the expectation that government support will not be forthcoming should another crisis wreck their business. Continue reading...
There is no sign that furlough drove people away from the labour market, and research on Roosevelt's New Deal found that big government bound the country togetherLiz Truss is back in the news, but a small state is out of fashion - or at least with the punters. The new British social attitudes survey finds that seven in 10 of us think it's definitely government's job to control prices, up from three in 10 in 2006. Only 30% wanted public spending increased in 2009; now that's 55%.This has libertarians turning in their Tufton Street graves. But they should relax. Partly that's because the surge in support for big government shouldn't be a surprise and may be temporary. The survey was carried out in autumn 2022, when people faced unpayable energy bills without government support. And it followed a pandemic posing health and economic challenges individuals couldn't hope to address alone. Continue reading...
by Richard Partington Economics correspondent on (#6F0ZP)
Her worst ideas were reversed, but today's economy is similarly floundering as Sunak prepares for his own autumn budgetImagine an alternative world. Liz Truss has just completed her first year in office this weekend, having miraculously survived when her mini-budget triggered the worst political and economic meltdown since Black Wednesday.Andrew Bailey has been fired as Bank of England governor, the Office for Budget Responsibility has been abolished and the Treasury has been reformed: it's no longer a bastion of orthodoxy but a ward of No 10's pro-growth coalition. The International Monetary Fund has been ignored - despite the pound hitting a record low against the dollar - while high inflation and borrowing costs have fuelled a soaraway government deficit. Continue reading...
Some surveys predict recession, but with pay and confidence rising, they may be wrong. That's the best we, and the PM, can hope forAnother year of stagnation beckons. Well into 2024, we'll see the UK economy lurch from side to side, like a zombie, unable to move forward. While the government wrestled with the fallout from last year's Liz Truss mini-budget and the Bank of England killed off what enthusiasm was left by raising interest rates, it was inevitable a sense of stultifying gloom would dominate this year. But now it looks like next year will be much the same.Predictions from some independent economists and business groups even show that a recession in which the economy goes backwards for much of 2024 is more likely. Continue reading...
The US Fed is planning tough reforms, but earlier intervention could have prevented collapses at Silicon Valley Bank and othersBank capital is back in the financial headlines. In late July, US banking regulators, led by the Federal Reserve, announced plans to finalise the Basel 3 reforms (which banks like to call Basel 4, owing to their significant impact). The aim, according to a joint agency proposal, is to improve the strength and resilience of the banking system" by modifying large capital requirements to better reflect underlying risks, and by applying more transparent and consistent requirements.The announced proposals are tougher than many expected. They will cover more banks - including some that had benefited from Trump-era concessions - and they will require banks to include unrealised losses from securities in their capital ratios (among other changes). Overall, US regulators expect the most complex banks to increase their capital by 16%. Continue reading...
Republicans believe they stand to gain from the dispute but there is a divide between sympathy and disdain for the workersA strike pitting a resurgent trade union against the US's three biggest carmakers has exposed key differences in labour relations among Republicans - even while animating their assault on Joe Biden's self-styled Bidenomics" policies.Led by Donald Trump, the former president and 2024 party frontrunner, Republican hopefuls have seized on the stoppage by 13,000 United Auto Workers (UAW) members at General Motors, Ford and Stellantis production facilities in Missouri, Michigan and Ohio to highlight rumbling economic discontent as a catalyst to recapturing the White House. The UAW is demanding a 40% pay raise, shorter hours and better pensions for its members - and is threatening to spread the strike to other plants if its terms are not met. Continue reading...
Decision to hold rate at 5.25% will be good news for mortgage holders and firms but reflects dramatic weakening of economic activity Business live - latest updates