Three drivers and a garage owner explain how rising costs have affected prices

No commitment yet to cut banking surcharge after corporation tax U-turn, with sector facing headline tax rate of 33%UK banks are steeling themselves for a windfall tax by stealth as the new chancellor tries to plug a £40bn hole in the public finances.City lobbyists at UK Finance are concerned that banks will not be compensated for Jeremy Hunt’s U-turn on corporation tax, which will now mean the levy rises from 19% to 25% next year. Continue reading...

From low-fat milk to olive oil, pet products to air transport, how costs have soared

Annual rate returns to double digits in September as households face cost of living pressures

Despite a deepening crisis, it wasn’t until homeowners were threatened that Westminster reactedIn the 1970s, psychologist Stanley Milgram instructed his students to board New York subway trains around the city, approach random members of the public and ask them for their seat without offering any justification. When the students returned, they reported that perhaps surprisingly, most people were willing to give up their seat. The students also said, somewhat less surprisingly, that they found the experiment almost impossibly difficult to conduct.This was what’s known as a “breaching experiment”, an attempt to understand the rules of social life by briefly and deliberately breaking them. Over the past month, Britain has witnessed an extraordinary breaching experiment conducted at scale: what happens if a government acts without regard for financial markets? The results have been highly illuminating, not only for what they tell us about the likely trajectory of Liz Truss’s leadership, but for what they reveal about a host of other elites, experts and commentators who collectively get to define what counts as “sound” economic policy. Continue reading...

UK heading for ‘Victorian levels of poverty’ unless pay and benefits rise with inflation, says union bodyOne in seven people in the UK are skipping meals or going without food, according to new polling data released by the Trades Union Congress (TUC).The data from an MRP poll by Opinium reveals that more than half of British people are cutting back on heating, hot water and electricity in the cost of living squeeze, and one in 12 have missed the payment of a household bill. Continue reading...

Longer delay might have been mildly embarrassing but would be the safer approachThe Bank of England, it seems, really did mean it when it said it would start selling gilts under its quantitative tightening, or QT, programme at the end of the month. OK, there will be a delay of a day because of the central banking equivalent of a TV scheduling clash – the chancellor will deliver his full medium-term fiscal plan on 31 October. But Threadneedle Street says it intends to press the QT button on 1 November.One can understand, of course, the desire to crack on with the job, since there has already been one postponement. That occurred on 28 September when the Bank was diverted by Kwasi Kwarteng’s disastrous mini-budget. Gilt yields surged, causing chaos for pension funds and creating a threat to UK financial stability. The Bank was bounced into becoming a temporary buyer of gilts – to the tune of £19bn – instead of a seller. Continue reading...

Rebellious backbenchers, underfunding and previous pledges mean there are no easy options for the new chancellorJeremy Hunt has warned that decisions of “eye-watering difficulty”, including cuts to public spending, will be required to repair the damage to the government’s finances after the failed mini-budget.After his screeching U-turn to scrap the unfunded tax promises made by his predecessor, Kwasi Kwarteng, expectations are rising that the chancellor will kickstart a renewed austerity drive as part of debt-cutting plans due to be announced on 31 October. Continue reading...

Start date put back by a day to avoid clash with chancellor’s announcement of debt-cutting plan

Report from one of the UK’s largest schemes is an early indicator of scale of the financial impact on retirement fundsBT’s pension scheme has revealed the value of its assets plummeted by an estimated £11bn in recent weeks, after the meltdown in UK government bond markets following Kwasi Kwarteng’s mini-budget.The disclosure in the annual report published by BT Pension Scheme (BTPS), one of the UK’s largest company retirement plans with almost 270,000 members, provides one of the first insights into the scale of the financial impact on funds. Continue reading...

European Commission proposes mechanism to cap “excessive and volatile” gas price moves, and to let member countries start jointly buying gasToday’s bond market stability follows a report that the Bank of England is set to delay the sale of billions of pounds of government debt.The pause, reported in the Financial Times, is meant to foster greater stability in gilt markets following the UK’s failed “mini” Budget.The Financial Times has learnt that the bank’s top officials have come to this view after judging the gilts market to be “very distressed” in recent weeks, a view backed by its Financial Policy Committee.Investors have also warned that the central bank’s plans to begin selling bonds in its portfolio at the end of this month could destabilise markets.Newly parachuted in UK finance minister, Chancellor Jeremy Hunt has succeeded in appeasing bond market vigilantes for now. UK government borrowing costs are hovering near yesterday’s low with 10 year gilt yields still below 4%. But the hard won truce could fall apart in the weeks to come, if his spending plans don’t deliver the detail investors crave for economic policy uncertainty to abate.This is likely to be why the Bank of England is reported to be further delaying the sale of billions of pounds of government bonds which it was originally due to offload earlier this month. It’s clear the bank is still unnerved by the potential for fresh instability in gilt markets given that so much uncertainty still remains about the government’s fiscal plans Continue reading...

Biden said last week gas prices are too high, and announcement would market 14m extra barrels from strategic reserveThe Biden administration plans to sell oil from the Strategic Petroleum Reserve in a bid to dampen fuel prices before next month’s congressional elections, three sources familiar with the matter have said.Joe Biden’s announcement is expected this week as part of the response to Russia’s war on Ukraine, one of the sources said. Continue reading...

The defeat of free market ideology will be worthless if it results in a fear of public spending and an unquestioning faith in the marketsHow should Labour and progressives react to the astonishingly rapid collapse of Liz Truss’s economic agenda? The temptation will be to rejoice. Rejoice at the crushing rejection of trickle-down neoliberalism, the humiliation of the Conservative party and the growing likelihood of a Labour majority.But these will be pyrrhic victories if “Trussgate” leads to a re-embracing of the fiscal conservatism that has dominated British politics for most of the last quarter-century, together with an unquestioning faith that markets know best. The new chancellor, Jeremy Hunt, has committed to public spending cuts across government departments, alongside reversing Truss’s tax cuts. In other words, it’s back to austerity. Hunt has even appointed Rupert Harrison to his new council of economic advisers – the architect of George Osborne’s austerity strategy in the early 2010s and currently adviser to American investment management firm Blackrock.Josh Ryan-Collins is associate professor of economics and finance at the UCL Institute for Innovation and Public Purpose Continue reading...

Company warns that next 12 months will be tougher, with economy likely to go into recessionThe UK housebuilder Bellway has said demand for houses has moderated since the summer and it expects the number of sales to be roughly flat over the next year against a backdrop of rising interest rates and a deteriorating economy.The company completed a record 11,198 homes in the year to 31 July, up 10.5% on the previous year, as a booming housing market drove £3.5bn of revenues, up 13% and also a record. Continue reading...

Latest updates: In BBC interview, Liz Truss refuses say if her vision is ‘dead’ and vows to fight next electionJudging by what Conservative MPs have been telling journalists in private over the last few days, the consensus (but not unanimous) view among Tories seems to be that Liz Truss will have to be replaced as party leader before the next election. But very few MPs are saying that in public, and Sky’s Tom Larkin, who is running a spreadsheet of Tories calling for Truss’s resignation, has only got three names on it.Damian Green, the former first secretary of state, was on the Today programme and you would expect him to be on the Larkin list. He is chair of the One Nation Conservatives caucus, the group most horrified by Truss’s experiment with hardline free market ideology. But he insisted that Truss did have the credibility to carry on as PM, despite the fact she is abandoning most of the key tax policies at the heart of her leadership campaign. He explained:She is a pragmatist - she’s realised that the first budget didn’t work in spectacular fashion, so she’s now taken the sensible view that we will now try something else, and she’s appointed a very sensible chancellor in Jeremy Hunt.I obviously don’t know what he’s going to say, but clearly what he’s going to do is already beginning to reassure the markets, and I hope will continue to do so afterwards.Yes, because if she leads us into the next election, that will mean that the next two years have been a lot more successful than the past four weeks have been. That would not only be good for the Conservative party, that would be particularly good for the country as well, so I think everyone would welcome that. Continue reading...

Bensons hopes move will widen appeal to younger customers as Eve chief blames ‘economic tsunami’ for demiseBensons for Beds has bought Eve Sleep hours after the online mattress specialist called in administrators, having succumbed to what its chief executive described as an “economic tsunami”.Bensons, which has 166 stores and is owned by the private equity group Alteri Investors, said it had bought the website, brand and other related assets of Eve, including its creative content, in an attempt to widen its appeal to a younger customer. Continue reading...

Four advisers, including George Osborne’s ex-chief of staff, named, with chancellor seeking to repair damage from mini-budget

Yield on 30-year UK government bonds plummets as chancellor reverses more of Kwarteng mini-budgetUK government borrowing costs fell sharply and the pound rallied after Jeremy Hunt said he would cut short the emergency price freeze on consumer energy bills and cancel most of unfunded tax cuts in last month’s mini-budget.The yield – or interest rate – on 30-year UK government bonds fell by more than 0.4 percentage points on Monday after the chancellor’s statement, with a decline in borrowing costs across the board for short- and long-dated bonds. Continue reading...

After a budget reversal, the prime minister is sticking with her party – the trouble is, it’s not sticking with herIs the Conservative party a sinking ship? Events on Monday suggest so. The captain, Liz Truss, was missing from the deck for much of the afternoon. Her second in command had been thrown overboard last week after a disastrous mini-budget. To right Ms Truss’s listing ship of government, the new first mate and chancellor, Jeremy Hunt, dumped the ballast of her tax changes. The policy now is to increase the pay of bankers and see household energy bills rise next April by 75% to an average of £4,400 a year. Coming under fire from Labour, Ms Truss sent out her cabinet colleague Penny Mordaunt, a former Royal Navy reservist, to defend what remains of her programme.Ms Truss has not left her party. But it appears to have left her. With little chance of winning the next election, it is not surprising that she faces a mutinous crew. Her premiership is disappearing not because of a coup d’état, or the official opposition, but as a consequence of her own incompetence. Instead of a promised revolution in economic thinking, Ms Truss has effected a restoration of the failed ideology of book-balancing austerity. This is bad news for Britain. Cutting public services will damage the country’s prospects, already hampered by a shrinking workforce as well as rising energy bills and mortgage costs. Continue reading...

We look at the reasons why Jeremy Hunt is taking action and the economic consequencesJeremy Hunt has said he will scrap most of the unfunded tax cuts in the mini-budget, in the latest government U-turn designed to boost the financial markets’ confidence.Days after replacing Kwasi Kwarteng as chancellor, Hunt said he would cancel all the remaining measures in the ill-fated tax and spending plan that had not yet been legislated for. Here are the reasons why he is taking action. Continue reading...

Pound holds gains and gilt yields remain lower as new chancellor rips up Trussonomics, pushing tax take to 70-year high this parliament

New chancellor made no mention of policy in economic update but Treasury sources confirm he will go ahead with controversial move

Description of mini-budget as ‘seismic’ in one pro-Tory paper proved correct – though perhaps not in the intended sense

UK chancellor’s tightening of fiscal policy will lead to weaker growth and a deeper recession

Emergency surgery on Trussonomics was vital, but years of grind now lie aheadJeremy Hunt did his best to deploy a reassuring bedside manner. But the Conservative party’s surgeon came bearing bad news. He had seen the X-rays, and it all had to come out. Not just the obviously gangrenous parts of Liz Truss and Kwasi Kwarteng’s budget, like her corporation rate tax cut or the abolition of the 45p tax rate, but pretty much everything still within reach of his scalpel. Goodbye indefinitely, proposed penny off basic income tax; farewell, IR35 reforms to benefit self-employed contractors. Even Truss’s energy bill bailout – the one thing that was still popular when everything else had turned sour – will be universal only until next spring, after which it will be capped and targeted towards the most vulnerable.More painful for the country, however, may be the news that this emergency surgery is just the start. There would be hard decisions on tax and spending to come in his full statement on 31 October, Hunt warned. In March 2020, Rishi Sunak promised to do “whatever it takes” to get us through Covid, which meant spending billions. Now Hunt is promising grimly to do whatever is necessary to restore market confidence, which means very much the opposite.Gaby Hinsliff is a Guardian columnist Continue reading...

New chancellor scraps virtually all tax cuts, leaving PM Liz Truss humiliated and imperilled

Jeremy Hunt has announced the government will reverse almost all of the tax measures announced in the mini-budget that have not been legislated for so far. The new chancellor said the basic rate of income tax would remain at 20% 'indefinitely' until economic circumstances allow for it to be cut. Together with keeping the corporation tax rise and the 45p additional rate, the measures will raise £32bn a year. Here are the main points from his televised statement

Jeremy Hunt has ripped up most of Liz Truss’s disastrous mini-budget, scrapping nearly all of her planned tax cuts and drastically scaling back the government’s flagship plan to cap rising energy prices. The new chancellor said the only tax cuts would be those already being put in place – the move to reverse the recent rise in national insurance, and a cut to stamp duty. Here is his full televised statement on the medium-term fiscal plan

The chancellor has announced mini-budget repair measures – here are the main points, with political analysis

UK chancellor brings forward major announcement of mini-budget repair measures as Liz Truss fights for survival

Shelters are overwhelmed as pet owners grappling with inflation surrender their dogs, cats – and guinea pigsThe great pet adoption boom peaked in April and May 2020 with nearly one in five US households, or 23 million, giving animals new homes during the pandemic, according to the ASPCA. But as our return to a sense of normalcy has coincided with historic inflation rates, pet owners are forced to re-evaluate their priorities.Pet food costs have outpaced general inflation by 0.6% (9.1% versus 8.5% in total Consumer Price Index last month) and a single surprise veterinary bill can launch 42% of pet owners into debt, according to a recent Forbes study. As a result, shelters around the US are seeing an increase in owner surrenders and a steep decline in adoptions with no sign of improving. Continue reading...

Bank tips economy to shrink 1% in downgraded forecast, but also predicts lower inflation and interest ratesThe UK is likely to enter a deeper recession than previously expected next year, while interest rates and inflation will be lower than forecast, according to revised analysis from Goldman Sachs.The US investment bank downgraded its outlook for Britain, in analysis released on Sunday, forecasting the UK economy would shrink by 1% next year, down from its previous estimate for a 0.4% contraction. Continue reading...

Analysts expect more financial jitters after Bank of England ends intervention, while new chancellor tries to project calmCity investors are bracing for a week of renewed choppy trading in UK financial markets as Liz Truss’s government attempts to regain control and the Bank of England steps back from its emergency intervention.Before markets reopen for the first time since the Bank halted its multibillion-pound support programme on Friday, analysts said renewed turbulence on Monday despite Kwasi Kwarteng’s sacking as chancellor could not be ruled out. Continue reading...

Former Tory minister to call for Truss to go in interview after new chancellor warns of difficult spending decisions. This live blog is now closedSome “very difficult” decisions are going to have to be taken on tax and spending, which is not going to increase as much as people hopes, Jeremy Hunt has said this morningIn an interview for Laura Kuenssberg’s show on BBC 1, the new chancellor reiterated a warning that all government departments would be asked “to find efficiencies.” Continue reading...

Jeremy Hunt is trying to reassure hedge funds but UK’s reputation for political stability has been shreddedThe markets have tasted blood and are eager for more. Liz Truss has sacked Kwasi Kwarteng as chancellor and ditched another piece of the mini-budget announced less than a month ago, but she now faces another week in which financial turmoil and political intrigue create a toxic mix.Monday will be a crucial day for the prime minister. If sterling heads towards parity with the dollar and rising bond yields put upward pressure on mortgage rates, Truss may soon be handing in her resignation to King Charles. Continue reading...

Experts say raising rates ‘isn’t working’ and that the real culprits are corporate pricing, energy costs and supply chainA fresh round of US inflation data released last week showed persistently high prices, raising more questions about whether the Federal Reserve’s interest rate hikes are missing what many economists contend are the real inflationary culprits: corporate pricing, energy costs and supply chain disruptions.The news is further stirring fears of unnecessary economic pain should the Fed push America into recession. Continue reading...

There’s relief among Conservative MPs as the new chancellor seeks to bring stability back to governmentSenior Conservatives on Saturday welcomed Jeremy Hunt’s arrival as chancellor, saying he had effectively “taken over” running the government from Liz Truss after he unceremoniously dumped her tax-cutting agenda on his first day in office.One senior Conservative MP said it was a huge relief to have someone in charge at the Treasury who was able to admit to recent mistakes and had made it his mission to restore the government’s credibility with the markets. “It is just so good to have a grownup in the room, someone who commands respect and who has experience after this period of utter madness.” Continue reading...

It was no good for the PM and Kwasi Kwarteng to dismiss U-turns on their growth plan as ‘distractions’, the damage is doneFirst the dynamic duo, Liz Truss and Kwasi Kwarteng, were going to “hit the ground running”; then they claimed they hadn’t prepared the ground they were going to hit. What their marriage of culpable ignorance and arrogance in fact achieved was something greeted with astonishment not only by them, but worldwide: they hit the pound running.The Conservative party took a long time to recover from Black Wednesday, 16 September 1992, when the pound was ejected humiliatingly from the European Exchange Rate Mechanism – the ERM – membership of which had become the fulcrum of their economic policy. Continue reading...

New chancellor signalled Liz Truss’s economic plan largely defunct and is expected to delay 1p cut in income taxJeremy Hunt said that Liz Truss’s mini-budget went “too far, too fast” as the new chancellor effectively signalled the demise of the prime minister’s economic vision.Political and economic circles spent Saturday sizing up Hunt after he used a series of broadcast interviews in the morning to suggest Truss’s immediate economic plan is now largely defunct. Continue reading...

As the row between the US president and the Gulf kingdom over increasing oil production escalates, the UK arms industry giant may have to choose which of its two lucrative customers to side withThe UK has long had an awkward relationship with Saudi Arabia, but that unholy alliance now faces a stern test. After Joe Biden reacted angrily to the Opec+ decision to cut oil production, workers at BAE Systems’ fighter jet factory at Warton, on the banks of the Ribble in Lancashire, will have an eye on the fallout from the oil cartel’s decision.The US president had hoped to persuade the world’s largest oil producer to ramp up production in order to lower oil prices, which have fed into surging inflation and fears over a global recession. Biden had been cultivating relations with Saudi Arabia’s de facto ruler, Mohammed bin Salman, illustrated by a fist bump in Jeddah in July. But despite all that, Prince Mohammed defied Biden, with Opec+ opting for a cut in output, a move that was seen as siding with fellow cartel member Russia, helping prop up its arms revenues. Continue reading...

The chancellor sparked alarm among trade union leaders by promising ‘very difficult decisions’ for government budgetsHealth chiefs, public sector unions and teaching leaders expressed horror on Saturday after the new chancellor, Jeremy Hunt, appeared to usher in a fresh era of austerity, and the threat of more misery for cash-strapped hospitals and schools.In his first interviews since dramatically replacing Kwasi Kwarteng on Friday, Hunt provoked widespread alarm by promising “very difficult decisions” for government budgets. Continue reading...

Tax-cut U-turns won’t be enough to balance the books, so the new chancellor will look at cutting public service budgets. But there is an alternativeJeremy Hunt is unlikely to give his name to a new economic model or ground-breaking method of boosting growth. Trussonomics is dead and all the new chancellor can do in the midst of the current crisis, and given the constraints he has immediately placed upon himself, is replace it with an orthodox mix of public spending cuts and tax rises to win favour with the financial markets.In his first interview as chancellor, Hunt was sombre about the task facing him. Continue reading...

Countries have responded to a series of shocks by looking out for themselves, which could increase volatility and uncertaintyThe message from last week’s annual meeting of the International Monetary Fund was clear. War, pandemic and rampant inflation have put the global economy under severe strain. The mood was edgy, often fractious.The Americans had a go at Saudi Arabia for orchestrating production curbs designed to push up the cost of oil. The Indians were unhappy with the aggressive increases in US interest rates, which they saw as exporting America’s problems to the rest of the world. Continue reading...

Uncertainty is everywhere from financial markets and high street to households. We answer key questions that thousands are asking on housing, pensions and investmentsWhat does the economic uncertainty mean for house prices?

Analysis by unions suggests firms can afford to pay workers more, as handouts have soared £440bn above inflation since 2008Payouts to shareholders have increased three times faster than workers’ wages since the 2008 financial crash, according to a new analysis that unions claim shows companies can afford to pay higher salaries.Shareholder handouts, through both dividends and companies buying back their own shares, have soared £440bn above inflation since 2008. Meanwhile, wages have fallen, growing £510bn less than inflation. The gap has widened since the financial crash. Before the crisis, dividends grew at double the rate of wages. Continue reading...

Former occupant of No 11 Downing Street finally sacked after financial institution chief’s remarks in Washington

Increase adds up to a £26bn rise for homeowners, says Resolution Foundation thinktankMore than five million families could see their annual mortgage payments rise by an average of £5,100 between now and the end of 2024, heaping fresh pain on households already struggling with higher food and energy bills.The increase adds up to a £26bn mortgage rise for homeowners, according to the analysis by the Resolution Foundation thinktank which said nearly a fifth of British households would have to spend more on their housing costs by the end of 2024. Continue reading...

Source close to sacked chancellor briefs Times that ‘wagons are still going to circle’ around embattled prime minsiterThe Conservative peer, Ed Vaizey, said he disagreed with the international trade secretary, Greg Hands, who earlier said Kwasi Kwarteng’s early return is not unusual. “It is quite unusual for this to happen,” he said.Speaking to Sky News, Vaizey said the chancellor cutting his trip to the US short is “not a good sign”. He said:I’m afraid the chancellor coming back a day early doesn’t fill one with confidence.The fact that people were speculating about the prime minister’s leadership this early in her premiership is not ideal, but I think he’s just got to bite the bullet. He’s got to try to give the markets confidence in the British economy.If he can do that then perhaps he can say: ‘Well, I had to do some difficult choices, slightly humiliating choices, but the result is stabilisation and I can move forward.’ Continue reading...

Sterling fell, FTSE 100 lost its gains and bond yields rose after PM’s press conference failed to announce new direction

On 30 September, the then chancellor’s mini-budget triggered a chain of events that led to a dramatic downfallIt is three weeks since the now former chancellor Kwasi Kwarteng delivered his not-a-budget budget, a package of £45bn of unfunded tax cuts.To say the so-called growth plan spooked investors in the financial markets would be an understatement; the response was a damning indictment of economic policies that were at the heart of Liz Truss’s pitch to be Conservative leader and prime minister. Continue reading...