The chancellor has refused to comment as sterling plummeted to an all-time low against the dollar, with speculation the Bank of England could intervene as soon as Monday. As he walked to his office in Westminster, Kwasi Kwarteng was repeatedly questioned by reporters about the turmoil in the markets caused by his sweeping tax cuts and the need for tens of billions of pounds in extra borrowing
Average price of homes coming to market in September increased by 0.7% on previous month to £367,760, says RightmoveHouse sellers have continued to raise their asking prices despite borrowers facing higher interest rates and the cost of living squeeze, data from property portal Rightmove shows.The average price of a home coming to market increased by £2,587, or 0.7% month-on-month in September to £367,760, according to the company. Continue reading...
Giving handouts to the rich is a fiscal and moral outrage, writes Prof Alan Walker; plus letters from Howard Fielding, Ivor Morgan, Richard Heller, Helen Briggs, John Platt, Jeffrey Borinsky and the parent of a City workerKwasi Kwarteng and Liz Truss’s mini-budget is a fiscal and moral outrage, because it ignores the extensive negative evidence from previous attempts to boost growth by giving handouts to the rich (Kwarteng accused of reckless mini-budget for the rich as pound plummets, 23 September). It is also a constitutional outrage. Apart from a very small group of relatively rich people, no one voted for this radical policy change. Hopefully the British public will recognise this as a reckless gamble aimed at bolstering Truss’s election prospects. Recent history shows, however, that the public cannot necessarily be relied upon to make wise political decisions, so our outrage must be transformed into practical action to persuade voters that there is a viable, socially just alternative to this morally bankrupt government.
Corporations are using rising costs as an excuse to increase their prices even higher, resulting in record profits. We need limited price controls to break this cycleOn Wednesday, policymakers at the Federal Reserve – America’s central bank – continued their battle against inflation with a third straight supersize interest-rate increase. And they warned that they’re not done. They’ll continue to raise borrowing costs until inflation is tamed.They assume that the underlying economic problem is a tight labor market, causing wages to rise – and prices to rise in response. And they believe interest rate increases are necessary to slow this wage-price inflation.Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com Continue reading...
A reckless dash for growth is nothing new. Ted Heath’s chancellor Anthony Barber tried one in 1971, but it didn’t turn out wellThe recklessness of chancellor Kwasi Kwarteng’s “budget for growth” evokes memories of the disastrous outcome of the last great Conservative “dash for growth”: the so-called “Barber boom” of 1971-73.I say so-called because the wildly expansionist policy of those years was essentially the work of PM Edward Heath. His preferred chancellor, Iain Macleod, had died within a month of taking office in 1970, and Heath was thenceforth the driving force in economic policy. Continue reading...
Liz Truss is banking on a failed policy. The focus should be on the real driving force behind economic growthAs millions of British families struggle to pay the costs of food, fuel and rent, Liz Truss and her chancellor, Kwasi Kwarteng, have unveiled their economic plan: cut taxes for corporations and rich people.The policies announced in the mini-budget – reversing planned rises in corporation tax and national insurance, cutting stamp duty, scrapping the top income tax rate – will put millions of pounds into the pockets of the wealthiest people, not to mention bankers, who will have the cap on their bonuses removed. Continue reading...
Labour has a better plan for growth than Kwasi Kwarteng’s sugar-rush of tax cuts. Now it needs to pitch it to votersBoris who? Theresa who? David who? The names escape her. Rishi who? Philip who? George who? The names elude him. Liz Truss and Kwasi Kwarteng, the devil-may-care duo of Downing Street, declare themselves an audacious break with the failed orthodoxies of the past and bold heralds of a new era for Britain.After the chancellor had finished unveiling his debt-financed bonanza of tax cuts on Friday, I heard one of the cabinet describe this as “a new administration” that had “only been in office for two weeks”. This is one of the oldest tricks in the Conservative playbook. Declare that you have arrived with a radically novel agenda to rescue Britain from the appalling mess inherited from your predecessors and hope that a frenetic display of activity will dizzy the public into forgetting that those predecessors were also Tories. In the case of Ms Truss, the feat can only succeed if voters are induced not to care that she was first given a ministerial job by David Cameron and has sat in the cabinet for eight of the dozen years that the Tories have been in power. In the case of Mr Kwarteng, he’d prefer us not to recall that he voted for every one of the Conservative budgets since 2010, the budgets he now repudiates for dooming Britain to a “vicious cycle of stagnation”. Continue reading...
The chancellor’s plans manage to be both the best ever and economically incoherent, depending on who you listen toAllister Heath, Daily Telegraph Continue reading...
The markets have no faith in the mini-budget and the British people will soon feel its effectsBritain is on the cusp of a financial crisis. On Friday, the prime minister, Liz Truss, and the chancellor, Kwasi Kwarteng, comically parading false claims of their toughness, elected for the softest of economic options.In a “mini-budget” – an obvious misnaming to avoid presenting elementary fiscal arithmetic required by law for a proper budget – they pretended to shrink the state’s financial claims while launching an unprecedented extra £411bn of public borrowing over the next five years as a “plan for growth”. Never in British public life has the gap between rhetoric and reality been so gaping. Continue reading...
Money spent on the green transition or skills would reap a dividend. But this cash is just going to the richThe billions of pounds of extra borrowing signalled by Kwasi Kwarteng in his not-so-mini budget can be justified as long as the money isn’t flushed down the toilet.Funds for renewable energy projects or to boost skills training would generate a return over the next decade. Continue reading...
The new chancellor launches his economic plan for growth. But is it just so much hot air?• You can order your own copy of this cartoon Continue reading...
Boris Johnson was far more eco-conscious than recent Conservative predecessors. But this mini-budget is a reversion to typeThe dash for growth by Kwasi Kwarteng means unshackling City bankers and property developers from the taxes and regulations that prevent them from paving over what’s left of Britain’s green and pleasant land.The humble concrete mixer will be elevated to exalted status. There will be more executive homes built on greenfield sites. More distribution sheds dotted along busy A-roads. And more urban renewal of the kind that involves tearing down buildings in a plume of dust and carbon emissions to replace them with something not much better, at least not in environmental terms. Continue reading...
Analysis by Resolution Foundation shows 95% of UK population will be worse off after chancellor’s actionsThe chancellor’s mini-budget will disproportionately benefit London and the south-east, a new analysis has found, marking a sharp U-turn from the levelling up strategy of the previous government.According to the Resolution Foundation, an independent thinktank, households in London and the south-east could gain an average of £1,600 next year from Friday’s fiscal statement. This is three times as much as those in Wales, the north-east and Yorkshire, which it predicts will gain an average of £500. Continue reading...
Labour leader attacks ‘casino economics’ in wake of £45bn package of tax cuts announced by chancellorSir Keir Starmer has accused the government of “gambling the mortgages and finances” of the British people with its “casino economics”.Speaking before his party’s conference in Liverpool, the Labour leader tweeted: “Tory casino economics is gambling the mortgages and finances of every family in the country. Labour will secure growth for working people, that benefits all communities. My government will deliver a fairer, greener future.” Continue reading...
Strategy of sweeping tax cuts gets hostile reception from markets and economic thinktanks, leaving some Tory MPs aghastKwasi Kwarteng has been accused of delivering a reckless mini-budget for the rich after his £45bn tax-cutting package sent the pound crashing to its lowest level against the dollar in 37 years.In a high-risk strategy designed to revive Britain’s stagnant economy, the new chancellor announced more than £400bn of extra borrowing over the coming years to fund the biggest giveaway since Tony Barber’s ill-fated 1972 budget. Continue reading...
Sterling has tumbled by over three cents to 37-year low, and UK gilt yields are surging, after Kwasi Kwarteng announced huge unfunded tax cutsKwasi Kwarteng’s (expected) pledge to “turn the vicious cycle of stagnation into a virtuous cycle of growth” hasn’t sparked much excitement in the City.The blue-chip FTSE 100 index has lost 0.6% this morning, dropping to its lowest since mid-July.The FTSE 250 index has lost 22% so far this year, with the latest 0.5% rate hike from the Bank of England adding to tightening concerns at a time when growth is flat to non-existent.It is expected that the government will unveil a new “fiscal event” later in a mini-budget which should involve tax cuts and increased spending in an attempt to stimulate growth. It remains to be seen how effective such moves might be, given the wider pressures affecting economies globally.” Continue reading...
by Phillip Inman and Richard Partington on (#63ZPN)
Thinktank says someone earning £1m will gain £40,000 as top rate, basic rate and national insurance reducedAlmost half of the personal tax cuts in the mini-budget will go to the richest 5% of the population, according to analysis by leading economic thinktanks.Highest earners will gain the most from Kwasi Kwarteng’s giveaways after the chancellor cut the top rate of tax for people paid more than £150,000 from 45p to 40p – although big earners in Scotland will not benefit from this. Continue reading...
By cutting taxes instead of investing to grow the economy, Kwarteng’s borrowing spree will have ugly economic consequencesWhen is a budget not a budget? When the government does not want there to be any informed analysis of its economic impacts. The only reason the Treasury has insisted Kwasi Kwarteng’s statement was a “fiscal event” and not a budget – despite a range of measures far exceeding the contents of most budgets – is that, since George Osborne’s tenure, chancellors of the exchequer have been required by law to ask the Office for Budget Responsibility (OBR) to conduct an independent analysis of the measures taken.And why has the government been so keen to avoid such scrutiny? Because the economic impacts are likely to look very ugly. It is more or less impossible to find an economist who supports the government’s approach, or an economic model able to justify it. Indeed, the financial markets have already given their negative verdict. Continue reading...
by Richard Partington and Angela Monaghan on (#63ZHW)
Sell-off as investors take fright at prospect of surge in government borrowing to cover huge tax cutsThe pound fell below $1.09 on Friday for the first time since 1985 as investors took fright at the prospect of a surge in government borrowing to pay for the sweeping tax cuts in Kwasi Kwarteng’s mini-budget.Issuing a punishing verdict on the chancellor’s “dash for growth”, traders sent sterling tumbling on Friday in a broad-based sell-off in response to the huge rise in public borrowing required to finance his plans. Continue reading...
Kwasi Kwarteng has delivered his first budget since being appointed to Liz Truss's cabinet. On Friday, in a statement before parliament, the UK chancellor laid out plans to cut stamp duty, scrap bankers' bonuses and get rid of the highest band of income tax. The Treasury has released a document showing the newly introduced tax cuts will cost about £37bn in 2023-24
Levelling up secretary Simon Clarke hits out at critics before chancellor’s budget announcementThe levelling up secretary has described the suggestion that the chancellor’s mini-budget will be “trickle-down economics” as leftwing “nonsense”.Simon Clarke made the comments before a tax-cutting budget to be announced on Friday. Continue reading...
In today’s newsletter: The newly appointed chancellor will deliver his first ‘fiscal event’ in Parliament today – but will it make a difference?Good morning. For a “mini” budget, today’s announcements by new chancellor Kwasi Kwarteng will have some pretty maxi consequences. At 9.30 this morning, Kwarteng will set out significant tax cuts, explain how he will pay for the energy price freeze and announce new “investment zones”. He will tell MPs that his plans will help break the “vicious cycle of stagnation”.Coming the day after the Bank of England said the economy was in recession and put interest rates to their highest level since 2008, even as the pound fell to its lowest level against the dollar since 1985, all this is likely to have a more significant economic impact than many full-scale budgets of previous years – but the Treasury has refused to publish the Office for Budget Responsibility’s (OBR) analysis of exactly what their plans will mean.Ukraine | The first full day of Russia’s mobilisation produced emotional showdowns at draft centres and even signs of protest, as reports emerged claiming Russia could conscript far more than its stated 300,000 soldiers. Meanwhile, five Britons released from Russian captivity were reunited with their families.Religion | Northern Ireland’s 2021 census has shown Catholics outnumber Protestants for the first time. While neither group have a majority, this is a landmark moment for a state that was a century ago supposed to have a permanent Protestant majority.Fracking | Ministers face a furious backlash from Conservative MPs after overturning a manifesto pledge to pause fracking until it is proved safe, and then indicating drilling could be imposed without local support. The new energy secretary Jacob Rees-Mogg has dismissed worries about earthquakes as “hysteria”.Diplomacy | Liz Truss has said she is considering relocating the British embassy in Israel from Tel Aviv to Jerusalem, in a controversial move that would break with decades of UK foreign policy and follow in the footsteps of Donald Trump.Iran | The death in custody of an Iranian woman that has sparked widespread protests must be “steadfastly” investigated, Iran’s president Ebrahim Raisi has said. At least 31 people are feared to have died during protests sparked by Mahsa Amini’s death while being held by the morality police. Continue reading...
by Richard Partington Economics correspondent on (#63YZC)
From soaring inflation and gas prices to tax take and national debt, these are the trend lines that frame Kwasi Kwarteng’s calculationsKwasi Kwarteng will announce the details of his mini-budget on Friday with Britain already in a recession. In only his third week in the job, the chancellor is expected to announce sweeping tax cuts and further details on the government’s energy price freeze, in an emergency support package worth more than £150bn.It comes after the Bank of England reported that Britain’s economy fell into recession earlier this year amid the cost of living crisis. Here are the five key charts that will underpin the chancellor’s statement. Continue reading...
by Written by Aeron Davis, read by Andrew McGregor an on (#63YZB)
It’s true that the UK Treasury thrives under the pressure of a crisis, from the 2007 financial crash to the Covid pandemic – but is its self-hyped reputation as the bedrock of government stability really deserved?Archive: BBC, Telegraph, The Guardian, ITV, UK Parliament Continue reading...
by Larry Elliott, Jessica Elgot and Richard Partingto on (#63YQW)
Threadneedle Street makes clear on eve of tax-cutting mini-budget that plans risk triggering more rate risesThe Bank of England has warned Kwasi Kwarteng the economy is in recession and it will most probably need to push interest rates higher after Friday’s tax-cutting mini-budget.On the eve of a major package of support from the chancellor designed to break what he called the economy’s “cycle of stagnation”, Threadneedle Street said the UK economy was heading for a second consecutive quarter of falling output, with gross domestic product set to shrink 0.1% in the three months to September. Continue reading...
For postal workers, firm’s proposal to hold talks at conciliation service Acas is one to consider seriouslyStrictly speaking, Royal Mail’s management is not saying it is ripping up the nine-year-old deal with the Communication Workers Union that, until strikes in recent weeks, had helped to keep a lid on industrial disputes. Instead, as the bosses see things, they are exercising the company’s right to give notice of an end to protections within the agreement in the event of nationwide strikes.The distinction could be significant should the CWU go to court. For now, though, it’s the signal that matters. The message from management is that it is prepared to raise the stakes in a dispute over pay and working practices. Challenging the “agenda for growth” agreement – or just elements of it – was always a possible next escalation. Now it has happened. Continue reading...
Tax cuts and more borrowing are likely to feature on Friday as the chancellor gambles on growthThe chancellor, Kwasi Kwarteng, stands up in the Commons on Friday morning to reveal his “emergency budget”. Here’s what we know so far: Continue reading...
As the rich get richer, former trade minister John Battle has a sense of deja vu about Liz Truss’s economic policiesIn 2011, the economist Branko Milanovic pointed out that the employee bonuses paid out by the investment bank Goldman Sachs in 2009 (the “credit crunch” days) were equal to the combined earnings of the world’s 224 million poorest people. The response of the coalition was the austerity years. As the number of “ultra high net worth” people rises to a new record (Number of global ultra high net worth individuals hits record high, 20 September), it is with an appalling sense of deja vu that I envisage a Liz Truss government squeezing already damaged public services in a vain attempt to run away from “redistribution”. What about trying fairer shares and even a statutory maximum wage (including bonuses)?
DJ Donald Trump’s musical choice | Trickle-down theory | Churchill’s 99% tax rate | Cheating at chess | Woman-free WordsearchYou report that, as host DJ at Mar-a-Lago, Donald Trump routinely finishes an evening with the hymn How Great Thou Art (80s hits and nuclear secrets: security concerns plague Trump’s Mar-a-Lago, 20 September). As a deputy organist, called on to play it on several occasions, I eventually realised why doing so had made me uneasy: the Horst Wessel song, the Nazi party’s anthem, is rhythmically identical.
Central banks are putting rates up as currencies slide against dollar but Japan and Turkey buck trendJapan has intervened to prop up the yen for the first time since 1998, after it hit a 24-year low as its central bank resisted the trend for higher interest rates.Tokyo was forced to take action in the foreign exchange market to shore up its weakening currency, after the Bank of Japan (BoJ) maintained its ultra-loose monetary policy on Thursday. Continue reading...
UK central bank predicts economy shrank for second quarter in a row, after shops closed and many stayed at home for Queen Elizabeth II’s state funeralNorway’s central bank has joined the rate-hikers.The Norges Bank has lifted its benchmark interest rate by 50 basis points, to 2.25%, and signalled that the policy rate will probably be raised further in November.Many will be facing a squeeze on finances given the rapid rise in prices at the same time as the policy rate is being raised.But a faster rate rise now reduces the risk of inflation becoming entrenched at a high level and thereby the need for a sharper tightening of monetary policy further out. Continue reading...
From mortgages and the housing market to credit cards and loans, half-point increase will have an impactThe Bank of England has voted to hike interest rates by 0.5 percentage points to 2.25% - the seventh rise since last December. So what does this mean for your finances? Continue reading...
by Richard Partington Economics correspondent on (#63XXM)
In a three-way split decision, MPC signals inflation risks outweigh short-term threat of recessionBritain’s economy is now in recession, the Bank of England has said, as it raised interest rates to tackle the worst bout of inflation for 40 years.A majority of the Bank’s nine-member monetary policy committee (MPC) voted to increase the key base rate by 0.5 percentage points to 2.25% – its highest level since 2008 – judging that the risks of inflationary pressures becoming entrenched outweighed the short-term dangers to the economy. Continue reading...
The half-point rise wasn’t the limit of the measures announced by a central bank accused – until now – of acting too slowly on inflationDespite believing that Britain is already in the early stages of a recession, the Bank of England voted to raise interest rates by 0.5 percentage points at the latest meeting of its monetary policy committee.That’s the first unusual aspect of the latest pronouncement from Threadneedle Street. In the past, a slowing economy – let alone one already going backwards – would be the signal for lower borrowing costs. Continue reading...
The PM’s assault on economic orthodoxy is a leap in the dark with every prospect of backfiring spectacularlySince launching her bid to be prime minister in July, Liz Truss has talked non-stop about the need to challenge Treasury orthodoxy and run the economy differently. Friday marks the day when the talking ends and Britain gets a taste of what Trussonomics actually means.Let’s be clear: Kwasi Kwarteng’s statement to MPs on Friday is much more than a run-of-the-mill fiscal event. Mini budget doesn’t really do it justice either. Most full-blown budgets matter little and are quickly forgotten. This one is a very big deal indeed.Larry Elliott is the Guardian’s economics editor Continue reading...
Despite 8% rise in sales over past six weeks, retailer worries that energy costs will dampen consumer spendingJD Sports has warned it remains “cautious” about trading over the coming months as surging inflation and worker strikes threaten to curb consumers’ spending power and disrupt its supply chain.The sports retailer said that although sales over the past six weeks were 8% higher than a year earlier, it was aware that rising prices linked to a jump in energy costs could impact its earnings as shoppers cut spending. Continue reading...
Ray Fair’s latest analysis suggests Democrats will get 46.7% of the national vote – and he usually comes within 3% of the final tallySince 1978 Ray Fair, professor of Economics at Yale University, has been using economic data to predict US election outcomes. His bare-boned, strictly by the numbers approach has a fairly impressive record, usually coming within 3% of the final tally.Sadly for Democrats – if Fair’s on track again this time – the Biden administration will struggle to keep control of Congress in November’s crucial midterm elections. Continue reading...