Neither an Osborne-style handbrake or a Truss-style brick on the accelerator will do. Success depends on changing fiscal culture

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...

Exclusive: Rachel Reeves said to have dismissed concerns about policy, even though some claim it contains basic errors'

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.

Andy Haldane says there should be cause to pause' amid Treasury fears policy will not raise any money

Saudi Arabia is reportedly ready to abandon its unofficial price target of $100 a barrel for crude as it prepares to increase output

Chancellor hopes to open up more spending headroom in budget by arguing changes could drive up growthRachel Reeves is pushing for the UK's tax and spending watchdog to upgrade its national growth forecasts to reflect the economic boost Labour says can be achieved from its blitz of planning reforms.In a development that could open up additional spending headroom for the chancellor before next month's budget, the Treasury has held talks with the Office for Budget Responsibility to try to persuade its officials that unblocking the planning system could drive up growth. Continue reading...

Democratic nominee says she is better equipped to manage US economy and says rival made promises he did not meet'Kamala Harris sat for her first solo interview as the Democratic presidential nominee on Wednesday, laying out her plan to boost the middle class and condemning her rival, Donald Trump, on his comments over abortion.During the interview with MSNBC's Stephanie Ruhle, which was held in Pittsburgh, Pennsylvania, the vice-president painted Trump as a candidate focused on the rich at the expense of the middle class, and herself as better equipped to handle the economy. Continue reading...

Democratic presidential nominee fleshed out economic vision for middle class and small businessesMillions of Americans are struggling to make ends meet, Kamala Harris has said, as the Democratic presidential candidate fleshed out the economic agenda she hopes to adopt in the White House.Conceding that the cost of living in America is still just too high", the vice-president argued this was true long before" the Covid-19 pandemic ravaged the global economy, and she took office with the president, Joe Biden. Continue reading...

Exclusive: Watchdog may conclude that emigration of wealthy individuals could actually cost Treasury revenueKeir Starmer's promised tax crackdown on non-doms could yield no extra funds for the Treasury, leaving a 1bn hole in the government's planned spending for schools and hospitals.

Forecast upgrades UK to joint second after US but it is still expected to have highest inflation among G7 countries

Stephen Timms, DWP minister, says cut to winter fuel payments could encourage more pensioners to claim pension creditIn an interview with Sky News, Wes Streeting said waiting lists would be demonstrably lower" than they are now. He said:By the next general election, waiting lists will be demonstrably lower because I know that's how I will be judged, how the prime minister will be judged, how the government will be judged - people will judge us by our actions, not just our words ultimately.Advances in genomics and data mean the healthcare of the future will be more predictive, more preventative and more personalised than ever before.Detecting from birth a child's risk of disease so we can act to keep them well; spotting cancer earlier, saving countless lives; treating patients with targeted medicines.If the wealthy are told to wait months for treatment, they can shop around. But working people can't.And if they pay top dollar, the wealthy can be treated with cutting-edge equipment and technology. But working people can't. Continue reading...

This year's party conference is taking place in a city where Covid and austerity have led to high levels of economic inactivity

As the budget looms, where the party stands on investment in the UK economy, workers' rights and moreFor a second year running, corporate Britain descended on Liverpool for Labour's annual conference, in an event so packed with executives that some insiders joke the socialist gathering has developed into a full-blown Davos on the Mersey".Like last year, the exhibition and conference fringe had sponsored events, lounge areas and advertising from exhibitors including Gatwick, National Grid, Ikea and Specsavers. This year, however, business leaders were looking for clues about how Labour will govern after July's election landslide. Continue reading...

Rolling coverage of the latest economic and financial newsUK mortgage rates continue to fall, even though the BoE left Bank rate on hold last week.Data provider Moneyfacts has reported that the average 2-year fixed residential mortgage rate today is 5.43%, down from 5.45% yesterday Continue reading...

Central bank's governor warns consumers not to expect a return to near-zero rates

Trading relationships at breaking point' because of delays and costs, garden centres and nurseries warnExporters of plants and flowers from mainland Europe are turning their backs on supplying Britain as painful" new Brexit border checks are putting some trading relationships at breaking point", garden centres and nurseries have warned.The Horticultural Trades Association (HTA), which represents garden retailers and growers, said long-held links between British nurseries and EU suppliers were now being put under strain because of the delays and costs associated with the new border processes. Continue reading...

The People's Bank of China announces a host of policy support measures but some experts fear they may not be enoughChina's central bank unveiled its strongest suite of economic stimulus measures since the start of the Covid pandemic, underlining the difficulty it faces in reviving an economy grappling with a prolonged property crisis and strong deflationary pressures.Governor Pan Gongsheng said the People's Bank of China will cut the amount of cash that banks must hold as reserves - known as reserve requirement ratios (RRR) - by 50 basis points. The People's Bank of China will also cut a key policy rate by 0.2 percentage points to 1.5%. Continue reading...

The chancellor suggested that she might need to rewrite her fiscal rules. That would be a good thingThere was no screeching U-turn in Rachel Reeves' speech to delegates at the Labour party conference. Butmake no mistake, the chancellor is changing course. Earlier this month she had warned of a painful" budget. In Liverpool, Rachel Reeves said her optimism for Britain burns brighter than ever". In a matter of weeks, the tone has gone from doom to dreaming. This was necessary because Ms Reeves had, as the former Bank of England chief economist Andy Haldane noted, erred by creating a sense of fear and foreboding" which threatened to undermine a potential economic recovery. Consumer confidence was sinking. Labour's poll lead over the Tories on the economy disappeared. Something had to be done.But it is unclear whether Ms Reeves has done enough. She did reiterate that Tory overspending meant tough decisions" lay ahead. It appears a selffulfilling prophecy is at play here. When people hear that economic conditions are expected to worsen, they may delay activities that stimulate the economy. While the nuances in the chancellor's speech might be missed, Ms Reeves must hope that voters hear her promise of no return to austerity".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...

Chancellor says 22bn gap in current spending budget and state pension rise meant she had to make decision on means-testing fuel paymentsIn interview this morning Rachel Reeves, the chancellor, defended her own decision to accept clothing donations worth 7,500 when she was in opposition.Speaking on the Today programme, she said:I can understand why people find it a little bit odd that politicians get support for things like buying clothes.Now, when I was an opposition MP, when I was shadow chancellor of the exchequer, a friend of mine who I've known for years [Juliet Rosenfeld] - she's a good personal friend - wanted to support me as shadow chancellor and the way she wanted to support me was to finance my office to be able to buy clothes for the campaign trail and for big events and speeches that I made as shadow chancellor.It's never something that I planned to do as a government minister, but it did help me in opposition.It's rightly the case that we don't ask taxpayers to fund the bulk of the campaigning work and the research work that politicians do, but that does require, then, donations - from small donations, from party members and supporters, from larger contributions, from people who have been very successful in life and want to give something back.We appreciate that support. It's part of the reason why we are in government today, because we were able to do that research work, and we were able to do that campaigning.Unite and the Communication Workers Union (CWU) have put forward motions which were due to be debated on Monday afternoon, with strong support expected from other unions.Sources said unions were told late on Sunday that the debate is being moved to Wednesday morning. Continue reading...

Conference speech was light on detail and not the pivot away from doom and gloom that critics wanted

Fiscal policy uncertainty ahead of the Autumn Budget is biggest fear for companies, survey finds, while Germany's malaise continuesNewsflash: Rightmove has said it will carefully consider" the new, inproved, takeover offer from REA Group, and respond in due course".In a statement to the City, Rightmove confirms it has received a third proposal from REA, which it dubs unsolicited, non-binding and highly conditional".Rightmove is an exceptional company with a very clear strategy, a consistent track record of delivery and a strong management team. The Board is confident in the Company's short and long term prospects, and sees a long runway for continued shareholder value creation.Based on the implied value and structure of REA's first and second indicative non-binding proposals, we considered these proposals to be uncertain, highly opportunistic and unattractive. Accordingly, the Board unanimously rejected them. Continue reading...

Private-sector activity growth slows for second consecutive month, hitting services and manufacturing

Trump predicted the Eighth Wonder of the World' for Wisconsin but the promised jobs bonanza never came about and Democrats say they are the ones who deliverLess than 30 miles south of the Fiserv Forum, the Wisconsin convention center where Republicans confirmed Donald Trump as their nominee for president for the third time, lies the site of a project Trump predicted would become the Eighth Wonder of the World".While still in office, the then president traveled to Mount Pleasant in Racine county to break ground on a sprawling facility that the electronics manufacturing giant Foxconn had agreed to build - in exchange for billions of dollars' worth of subsidies. Continue reading...

Tributes paid to one of the UK's foremost economics commentators who was also ambassador to WashingtonPeter Jay, the former BBC economics journalist and diplomat, has died at the age of 87, his family has announced.Colleagues in the political and media world paid tributes after he died peacefully at home" on Sunday. Jay was one of the country's foremost economics commentators of his time, spending time as the economics editor for the BBC and the Times.Additional reporting by PA Media Continue reading...

Unison and GMB understood to be likely to back motion to reverse policy

Exclusive: 100bn-a-year cost of obesity to UK makes clear economic case for use of drugs such as Ozempic, says reportSpiralling healthcare costs and productivity losses from the global obesity crisis far outstrip the cost of new weight-loss drugs, according to a report, which also calls on governments to prioritise prevention by promoting a healthy diet and exercise.In the UK, Germany and the Netherlands, there is a clear economic case for these medications, the report says, as the annual cost of the diabetes drug Ozempic is lower than the cost of additional healthcare needed by people with obesity. The cost of the weight-loss injection Wegovy is higher, but still dwarfed by the overall economic cost to society of obesity, according to the research by ING Bank, shared with the Guardian. Continue reading...

Before first conference speech by a Labour chancellor for 15 years, downbeat tune may have been overcookedAs the last Labour chancellor to address the party's annual conference, Alistair Darling had plenty to be downbeat about. This time 15 years ago, the global financial system was in meltdown, Britain was heading for its deepest recession since the second world war, and Labour was bracing for electoral defeat.This year, after ending more than a decade in the political wilderness in July's election landslide, Rachel Reeves ought to be taking the conference stage in Liverpool on Monday with a spring in her step as Darling's first Labour successor. Continue reading...

The former top civil servant at the Department for International Development has warned a lack of oversight in spending echoes corrupt contracts awarded during CovidThe billions of pounds spent on housing asylum seekers is ripe for the kind of scam and scandal" that emerged in the contracts awarded during the Covid pandemic, the Observer has been told.A crippling collapse of the systems and expertise monitoring the use of Britain's aid budget over several years means that there has been a dangerous lack of oversight of the 4.3bn spent annually on asylum seekers in the UK, according to a damning assessment of Whitehall's control over the spending. Continue reading...

Amid rising costs and a lack of productivity in the construction sector, some say relaxing building standards could help. But others aren't convinced

Labour's talk is all of tax rises and spending cuts. When will we see growth? You can order your own copy of this cartoon Continue reading...

With petrol prices and inflation both low, motorists can absorb a reversing of Sunak's 5p cut - and it could even boost electric car salesA chancellor desperate for ready cash, as Rachel Reeves finds herself, has one immediate source of new funds: increasing the tax on petrol again.More than 14 years have passed since fuel duty was last increased, in 2010. That's a legacy of concessions by the Conservatives to the car lobby. Now it's time to tell drivers that the days of annual freezes are over, and that the UK's car mileage tax needs to be higher to reduce emissions and limit climate change. Continue reading...

Bank of England may have kept rates steady this week but TSB, NS&I and others have all announced cutsInterest rates may have been kept on hold this week, but the direction of travel is clearly downwards, with savers being urged to check the returns they are getting and switch to a better deal now if their rate isn't competitive.On Thursday, the Bank of England kept its base rate at 5% after cutting it in August, though many economists think there will be another cut, to 4.75%, at the next meeting on 7 November, plus maybe a few more next year. However, the painful" budget taking place on 30 October adds a fair bit of uncertainty to the mix. Continue reading...

Ruling out of rises to four main taxes could lead chancellor to make economically damaging' decisions, says thinktankRachel Reeves has one hand tied behind her back" as she considers how to balance the books next month in her first budget, a leading economic thinktank has said, after she ruled out increases to the four main taxes that account for 75% of all revenues.The Institute for Fiscal Studies (IFS) said Labour had promised not to raise income tax, national insurance, VAT or corporation tax before the budget, heightening speculation that Reeves will seek to increase revenues from rises in capital gains tax, inheritance tax and stamp duty on property sales. Continue reading...

Consumers are nervously awaiting the budget, reports data provider GfK, while national debt hits highest level since 1960s

Debt pile increases by 4.3 percentage points in year to August, adding to challenge for chancellor Rachel Reeves

Concerns over government plans wipe out progress made this year to rebuild household morale

A radical rebrand will get people off benefits and into training and work. The system must be robust, but also humaneJobcentres are the least well-used" and least well-loved" of all public services, a failure at the heart of the economy that helps account for the biggest contraction in the workforce since the 1980s. So said the employment minister, Alison McGovern, as she launched a report from the Institute for Employment Studies, a commission she worked with closely. It makes a fierce critique of the system as it stands. She packs a punch, rejecting a system in which all the blame falls on the individual and that ignores social obstacles: the millions of people waiting for NHS treatment, the absence of childcare, the lack of buses to work, age discrimination, and punitive jobcentre work coaches instructed to push people into any old job", however dead-end and insecure.Promising a radical culture change", which will re-badge the government's approach as a jobs and careers service, McGovern will throw the doors open for all. By only taking benefit claimants, jobcentres have had a stigma that deters employers as well as jobseekers. Work coaches will become advisers, trained to offer universal careers guidance. There may even be hot drinks, making this a service based more on tea and sympathy than fear and sanctions (stopping benefits). Yes, there will always be conditionality", but watch the balance shift rapidly towards help. Here's how bad it is: half a million people who are in employment currently have to attend a jobcentre every week to prove they spent 35 hours either working or seeking more hours or better-paid jobs; their partners are called in to attest to their own job-seeking. Abandon that compulsion on the already employed and 2,500 advisers will be freed up to offer deeper, better consultations - finding options, easing obstacles, offering training - with less time spent policing benefits.Polly Toynbee is a Guardian columnist Continue reading...

S&P 500 climbs 1.7% for highest close since July, while Dow Jones and Nasdaq also welcome risesWall Street scaled all-time highs on Thursday as global markets welcomed the US Federal Reserve's first interest rate cut in four years.The benchmark S&P 500 climbed 1.7% to close at its first record high since July. The Dow Jones Industrial Average rose 1.3% and also hit a record. The technology-focused Nasdaq Composite rallied by 2.5%. Continue reading...

Bank voted on Thursday not to change borrowing costs - but Andrew Bailey says cuts likely to resumeThe governor of the Bank of England has signalled readiness to resume interest rate cuts despite keeping borrowing costs unchanged on Thursday at 5%, amid concerns over lingering high inflation.Andrew Bailey said the central bank was now gradually on the path down" from borrowing costs that were among the highest since before the 2008 financial crisis. I think interest rates are going to come down, I'm optimistic on that front," he said. Continue reading...

Cautious Bank of England governor says we need to be careful not to cut too fast or by too much", after leaving borrowing costs unchanged in 8-1 vote

Opposition disputes costings in study and accuses authors of cherrypicking worst-case scenario projects' from around the world

CPI rise is below expectations for second month running, but Bank knows headline figure is far from the whole story

Annual rate in August unchanged, and hovering above Bank of England's 2% target

Increase of 11% in a year far outstrips grocery inflation in UK, according to the consumer group Which?Shoppers may face a choccy horror show this Halloween after the price of chocolate shot up 11% in the past year - far outstripping increases for other foods across UK supermarkets.Britons opening their doors to trick-or-treaters could decide to cut back on spending for 31 October, as the cost of chocolate rose sharply in the year to the end of August, way above wider grocery inflation of 2.7% over the same period, according to research by the consumer group Which? Continue reading...

Institute for Employment Studies says UK has 800,000 fewer people in work or looking for work since before CovidThe UK has suffered the biggest contraction in its workforce since the 1980s, costing the public finances at least 16bn a year in lost tax receipts, according to a study.Hundreds of thousands of people have quit the labour market since the pandemic and never returned, undermining the strength of the economy and leaving the government out of pocket, according to the Institute for Employment Studies.The UK is one of the only countries in the developed world to have seen employment fall post-pandemic: slipping from having the eighth-highest employment rate in the world to 15th.The reduction can be blamed on fewer people entering work in recent years rather than more people leaving it, with 90% of the growth in economic inactivity" due to more people off work for at least four years or who have never worked at all.The solution to the crisis could include reforming employment support to guarantee help for those who need it; ending the compliance culture' in jobcentres; and creating new Labour Market Partnerships to meet local priorities and join up delivery. Continue reading...