by Robert Booth Social affairs correspondent on (#63EJ3)
‘Full earnings’ account for wellbeing as well as financial reward – and make income gap look even worseIf you seek happiness, try captaining a ship or tiling walls for a living. But choose to be a judge, a housing officer or a theme park attendant, and prepare for a measure of misery.Groundbreaking research into UK employees’ “full earnings”, which tries to account for wellbeing as well as cash income, has revealed the jobs where the reality of the working day undermines the benefit of salary and those that offer the greatest rewards in addition to salary. Continue reading...
Decision about how to fight inflation follows increase by unprecedented 0.75 percentage pointsInterest rates across the eurozone must continue to ratchet upwards to tackle rapidly rising inflation, European Central Bank policymakers said.The ECB’s call to prioritise the fight against inflation with further increases in the cost of borrowing came after it raised rates by an unprecedented 0.75 percentage points on Thursday to 1.25%. Continue reading...
Anti-corruption measures and progressive taxes among actions recommended by leading academicsUkraine’s government needs to overhaul its tax and spending policies or risk an economic crisis that could “cripple its ability to sustain the war effort”, according to a group of leading economists.With inflation racing to more than 20% and a debt crisis looming, President Volodymyr Zelenskiy must introduce reforms to stabilise the economy’s shaky foundations, they warned. Continue reading...
by Peter Walker Political correspondent on (#63DPW)
Government likely to seek replacement amenable to its plans of economic growth through tax cutsLiz Truss has underlined her apparent intention to rip up recent economic policies by removing Tom Scholar as the most senior civil servant in the Treasury, despite warnings that his experience could prove vital this winter.Before becoming prime minister, Truss railed repeatedly against what she called “Treasury orthodoxy”, notably the predictions that her plan to make large and unfunded cut taxes could raise inflation and increase interest rates. Continue reading...
Christine Lagarde warns that eurozone economic growth is weakening, but EBC plumps for record increase in borrowing costs to curb inflationThe pound is dipping back towards yesterday’s 37-year lows, as concerns that Britain is sliding into recession hit the markets.Sterling is back below $1.15 against the US dollar, as investors fret about the extra borrowing needed to fund the energy rescue package.The pound has shifted up slightly from lows not seen against the dollar since 1985, when Ronald Regan was in power and Freddie Krueger had returned to screens as the monster under the bed.Now the energy shock is the nightmare to deal with on Downing Street, with Liz Truss set to unveil her expensive subsidy plan later today to deal with the bill horror. Continue reading...
European Central Bank sets aside recession fears to increase rates by 0.75 of a percentage point to 1.25%The European Central Bank has raised interest rates across the eurozone by a record margin to combat soaring inflation that has reached double figures in some of the currency bloc’s 19 member countries.Setting aside concerns that higher rates would add to the current squeeze on consumers’ disposable incomes and increase the depth of a looming recession, the central bank’s 25-member governing council raised its key benchmarks by an unprecedented 0.75 of a percentage point to 1.25%. Continue reading...
The UN’s call for windfall taxes must be taken up by governments to help break the power of greedy cartelsAs Winston Churchill reportedly said in the 1940s as he was working to co-form what would become the United Nations: “Never let a good crisis go to waste.” It is advice the giant oil and energy corporations and Opec, enabled by politicians, have taken to heart. This is reflected in the price of petrol and our ballooning heating bills.A new study calculated that the oil and gas industry has made more than $2.8bn (£2.4bn) a day in profits over the past half-century. In the second quarter of 2022, Exxon posted a profit of $17.9bn, the highest any publicly listed oil company has ever reported. Chevron hauled in $11.6bn, while Shell reported $11.47bn and BP $9.3 bn, its biggest windfall in more than 14 years. Continue reading...
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?There is a flattering story that the Treasury likes to tell about itself. Picture the scene in March 2020, Covid spreading fast around the world and countries implementing shutdowns and border closures. Boris Johnson, the prime minister, underestimating the problem, Matt Hancock, the health secretary, dithering. Government ministers praying for a modest death rate before herd immunity kicked in.Then, from the chaos, emerges someone with a real plan and a crack team: the new chancellor, Rishi Sunak, and behind him, the Treasury, peopled with the top brains of the civil service. “Whatever it takes,” says Sunak, as hundreds of billions of pounds are found and committed to the nation’s safety. The Treasury rolls out an extensive furlough and business support scheme. This ensures that the economy remains afloat while people can stay safe at home. Continue reading...
by Richard Partington and Kalyeena Makortoff on (#63BSD)
New chancellor on charm offensive in Square Mile says Bank of England independence ‘is sacrosanct’The government has moved to quash City speculation that Liz Truss is set to interfere with the political independence of the Bank of England, amid a currency depreciation in which the pound hit the lowest level against the dollar since 1985.In a charm offensive in the Square Mile as sterling came under renewed selling pressure on Wednesday, the new chancellor, Kwasi Kwarteng, used his first full day in the job to try to calm jittery financial markets amid growing concerns over the new prime minister’s economic policy. Continue reading...
New chancellor promises City bosses ‘radical’ plan for economic growth and smooths over Truss’s threat to review Bank’s remitThe new chancellor, Kwasi Kwarteng, has used his first meeting with bank bosses to reiterate his support for the Bank of England’s independence, and promise that the new government was poised to unveil a “radical” plan for economic growth.Kwarteng, who previously led the business department, told 14 executives from City firms, including HSBC, NatWest and Barclays, that the government was pursuing “unashamedly pro-growth” policies that would involve slashing taxes and regulations, while creating the right conditions for investment and innovation. Continue reading...
by Joanna Partridge and Richard Partington on (#63A81)
UK retailers and pubs rise on FTSE after outline emerges of new prime minister’s plan to tackle rising billsLiz Truss’s expected energy price freeze could stop inflation in Britain from rising further and reduce the severity of the recession that is forecast to hit the country this winter, economists have said.As details of the new prime minister’s plan to tackle soaring household bills emerged on Tuesday, some of the UK’s largest pub groups, food chains and retailers were among the biggest risers on the London stock market as investors bet that support for struggling families would bolster household spending across the economy. Continue reading...
Builders report customers are putting new work on hold as inflation reaches 40-year highBuilding firms suffered a squeeze on activity for a second month in a row during August as new orders slowed to their lowest level since the summer of 2020 in the latest sign that a UK recession is looming.With inflation at a 40-year high, construction businesses reported that their customers were putting new work on hold, forcing them to stop buying materials and hiring staff. Continue reading...
Brexiter tells Guardian that new PM understands need for tax cuts and orthodoxy must be challenged to revitalise economyWhen Liz Truss was asked by the BBC’s Nick Robinson whether she could name any economists who thought cutting taxes was the right medicine for the economy, Boris Johnson’s soon-to-be successor replied: “Patrick Minford.”It was a case of history repeating itself, coming four decades after the same question was put to another Conservative prime minister. After 364 economists wrote to the Times attacking the 1981 budget as deflationary the then Labour leader, Michael Foot, asked Margaret Thatcher whether she could name two economics professors who supported her strategy. Continue reading...
She takes office with a screeching handbrake turn on her flagship policy – how can anybody ever trust her judgment now?It should have been Liz Truss’s moment of triumph, her chance to bask in the glory of a whooping crowd.Yet victory, when it came, felt curiously flat. Gone was the bouncy, confident, shoot-from-the-hip Truss who emerged over two long months of hustings, after a wobbly start. When Britain’s new prime minister rose to the lectern to embrace a narrower win over Rishi Sunak than expected – narrow enough to make you wonder if he could even have won, had he played it differently – the old, slightly flat, stilted speaking manner was back. In Truss, that’s a sure sign of nerves. Perhaps only now does she feel the weight of what lies ahead.Gaby Hinsliff is a Guardian columnistGuardian Newsroom: What does Liz Truss’s leadership mean for the UK? Join our panel including Hugh Muir, Jessica Elgot, Owen Jones and Salma Shah as they react to the announcement of the new PM in this livestreamed event. On Tuesday 6 September 8pm BST | 9pm CEST | 12pm PDT | 3pm EDT. Book tickets hereDo you have an opinion on the issues raised in this article? If you would like to submit a letter of up to 300 words to be considered for publication, email it to us at guardian.letters@theguardian.com Continue reading...
Tax cuts and spending pledges could spook global markets and trigger a collapse in sterling, Deutsche Bank warnsBritain could face a 1970s-style balance of payments crisis in which the pound crashes if Liz Truss’s government loses the confidence of international investors, one of Europe’s biggest banks has warned.In a note entitled “Crunch time for sterling”, published on the day Truss won the Conservative leadership race, Deutsche Bank’s foreign exchange analyst Shreyas Gopal said a large, unfunded and untargeted package of tax cuts and spending pledges could alarm global markets. Continue reading...
European countries scramble to store as much gas as possible before winter as they brace for shortagesGas prices surged on Monday and the pound and euro slumped after Russia shut down a big pipeline indefinitely.Russia has used its control of gas supplies to exert pressure on European countries in retaliation against sanctions imposed after its invasion of Ukraine. Gazprom, the Russian state-controlled gas company, closed the Nord Stream 1 pipeline from Russia to Germany on Friday, saying it had found a leak requiring repair. Continue reading...
Thatcherism was disastrous 40 years ago, but the new prime minister seems intent on reviving it to meet the crises of 2022Liz Truss and her likely chancellor of the exchequer, Kwasi Kwarteng, belong to a particular generation, many of whom once asked their parents: “Can a man be prime minister?” Not even four years old when Margaret Thatcher took power, 15 when she lost it and well into adulthood before the Tories were finally defeated, their earliest political awakenings would have taken place against the long backdrop of Thatcherism.This biographical context is acknowledged in the notorious political tract that Truss and Kwarteng co-authored with Priti Patel, Dominic Raab and Chris Skidmore, Britannia Unchained, published in 2012. “All five authors grew up in a period where Britain was improving its performance relative to the rest of the world,” it says. “The 1980s, contrary to the beliefs of many on the left, were a successful decade for Britain.” Their objective is to resurrect political dreams from their own childhood.William Davies is a sociologist and political economist. His most recent book is Unprecedented? How Covid-19 Revealed the Politics of Our EconomyGuardian Newsroom: What does Liz Truss’s leadership mean for the UK? Join our panel including Hugh Muir, Jessica Elgot, Owen Jones and Salma Shah as they react to the announcement of the new PM in this livestreamed event. On Tuesday 6 September 8pm BST | 9pm CEST | 12pm PDT | 3pm EDT. Book tickets hereDo you have an opinion on the issues raised in this article? If you would like to submit a letter of up to 300 words to be considered for publication, email it to us at guardian.letters@theguardian.com Continue reading...
by Richard Partington Economics correspondent on (#6392Q)
Activity in manufacturing and services fell last month as businesses struggle with soaring costsLiz Truss will become the UK’s next prime minister with the economy on the brink of recession, according to figures that show private sector activity fell last month as businesses struggle with soaring costs.The latest snapshot from S&P Global and the Chartered Institute of Procurement and Supply (Cips) revealed a “severe and accelerated” decline in manufacturing output in August, alongside weaker activity in the UK’s dominant service sector. Continue reading...
by Phillip Inman and Richard Partington on (#638T8)
Nadhim Zahawi’s successor will have to provide support as the country grapples with falling into recessionThe chancellor picked by Britain’s new prime minister will face a daunting array of issues from the moment he or she takes office.Whoever takes the hot seat in the Treasury will find themselves in a similar position to Rishi Sunak in March 2020 when the pandemic hit and the economy faced being shutdown for several months. Continue reading...
by Zoe Wood Consumer affairs correspondent on (#638J7)
Retailer’s research shows people want to spend money on enjoying life day to day as cost of living continues to riseFor close to a century, John Lewis has been “never knowingly undersold”, but the retailer is now positioning itself as being there “for all life’s moments” as it adapts to a profound shift in spending habits driven by Covid-19 and rising living costs.The pledge is designed to tap into what the department store chain is billing as the “moments economy”, as Britons spend smaller amounts on enjoying day-to-day life – from hosting a dinner party to celebrating a dog’s birthday – rather than splurging on set-piece events such as foreign holidays. Continue reading...
Incoming prime minister’s only priority over next few weeks should be to avoid meltdownThe waiting is almost over. Conservative party members have made their choice. This week a new prime minister will be installed in Downing Street at the most testing time imaginable. Even February 1974, when Harold Wilson came to power and ended Britain’s three-day week, doesn’t really match up to the omni-crisis with which Boris Johnson’s successor has to grapple. Arguably, it is the grimmest inheritance since Winston Churchill’s in May 1940.All the smart money is on Liz Truss winning the race, although in retrospect it may come to be seen as a Pyrrhic victory because the new prime minister will arrive in office with the economy about to hit the wall, energy bills soaring, the pound crashing and the global financial markets selling off. Continue reading...
As we wrestle with the disaster of Brexit and loss of the single market, our next PM is ruining Anglo-French relationsDuring a blissful holiday in the Vaucluse I managed to avoid any news about this dangerously absurd Conservative leadership election – that is, apart from one classic Truss gaffe.Yes, the news that Liz Truss had declared that “the jury is out” on the UK’s future relations with France most certainly struck a dissonant chord with Kate McKinley, who runs the Mourchon winery in Séguret. She informed me of it with a despairing air, adding also that President Emmanuel Macron had reacted with the tolerance that has become his lot in matters of Anglo-French relations as long as the Brexiters reign over here. Continue reading...
Covid has pushed many states’ debts above annual income, but the UK has lower credibility than some with lendersBritain is about to become a member of a club it has avoided joining for six decades – that of nations with a 100% debt-to-GDP ratio.Such is the size and scale of the rescue packages needed to prevent the energy crisis overwhelming millions of families and avoid thousands of businesses going bust, a debt ratio that shot up from 83% to 94% in the first months of the pandemic and touched almost 104% in 2021, is now on course to stay in three figures for the rest of the decade. Continue reading...
Numbers come as Jerome Powell says Federal Reserve intends to continue interest rate hikes to try to tamp down inflationThe US added another 315,000 jobs in August as the jobs market remained strong amid signs of a worsening economy.The US jobs market lost 22m jobs in early 2020 at the start of the pandemic but roared back after the Covid lockdowns ended. It has remained strong despite four-decade-high rates of inflation and slowing economic growth. In July, the US unexpectedly added 526,000 new jobs, restoring employment to pre-pandemic levels. Continue reading...
by Richard Partington Economics correspondent on (#636AH)
Talk on picket line in Felixstowe and high street in Ipswich says new PM has just weeks to tackle crisisOn the picket lines outside the port of Felixstowe there is a feeling breaking point has been reached. Against a soundtrack of Bob Marley’s Get up, Stand Up pumping out over speakers, all the talk among the throng of dockers outside Britain’s biggest container terminal is of wages failing to keep pace with soaring living costs.“People have had enough,” says Donna Crichton, one of the many represented by the Unite union in the eight-day strike, which ended without resolution last week. The 41-year-old, who lives at home with her parents, says buying or renting a home is a pipe dream when living costs are going through the roof. Continue reading...
Each day brings more news about a spiralling catastrophe – the economy is crying out for major government interventionThe gigantic scale of the oncoming economic shock becomes clearer by the hour. Click – and there’s Goldman Sachs predicting a 22% inflation rise next year. Click again and Bloomberg reports UK energy companies will make £170bn in excess profits over the next two years. If interest rates do hit 4%, banks too will roll in unearned mortgage money, plus shedloads from money loaned to the government. Fine profits will be made from national misery.Each day dawning reveals how everything, everywhere, is at a perilous tipping point. Martin Lewis warns that lives will be lost from cold and hunger, amplified by Sir Michael Marmot’s warning yesterday of children in grave peril. Lewis is not “catastrophising”, he says: “This is a catastrophe, plain and simple unaffordable.” If only he were to be the new chancellor … carry on with your own Jack Monroe-and-Marcus Rashford dream team.Polly Toynbee is a Guardian columnist Continue reading...
Analysts say manufacturing recession has begun as new orders fall amid soaring inflation and economic uncertaintyUK factory production slumped in August at the fastest rate since the early Covid-19 pandemic lockdown month of May 2020 after manufacturers suffered a sharp reversal in new orders from domestic and overseas customers.Analysts said a manufacturing recession had begun after firms reported that clients had “postponed, rescheduled or cancelled agreements” in response to economic uncertainties, soaring inflation and component shortages. Continue reading...
Funding still needs to be approved but could offer breathing space amid country’s economic turmoilThe International Monetary Fund has tentatively offered Sri Lanka a $2.9bn (£2.5bn) loan to help the country recover from the worst economic crisis since it gained independence from Britain in 1948.The funding is meant to provide some breathing space for Sri Lanka, which is scrambling to restructure nearly $30bn in debt to creditors including China, India and a string of international banks. Continue reading...
Of course financial markets are jittery: the government has gone awol and the economy is tankingThe man most likely to lose the fight to become Conservative leader is threatening dire consequences if he is disappointed. Pointing to volatile financial markets, Rishi Sunak warned this week that investors will dump British assets if Liz Truss becomes prime minister and then borrows tens of billions to give away. Pressing ahead with tax cuts and public spending while ignoring the risk of an investors’ revolt is, says the former chancellor, “complacent and irresponsible”.A degree of rhetorical licence is granted to electoral combatants, and Mr Sunak has enjoyed his full quota this summer. The once mild-mannered MP has spotted a dangerous “lefty woke culture” from which only he can protect “our history, our values, our women”. Indeed, the further behind he has fallen, the more extreme the vows for what he will do if he wins. But even the boy who cried wolf called it right once, and this latest claim will undoubtedly be taken more seriously. After all, its author once worked in the City for those money managers he sees as so jittery. Continue reading...
Even in normal times, the private sector relies heavily on public money, infrastructure and services, writes Prof Mary MellorTaking back control of malfunctioning markets must mean challenging neoliberal economics and the myth of market supremacy (Editorial, 29 August). The market is not the sole source of money and wealth. The public economy is equally important – and vital when markets fail or in times of crisis. Even in normal times, the private sector relies heavily on public money, infrastructure and services. The biggest myth of all is that public expenditure is funded from the (private) taxpayer’s pocket. There is a growing alternative economics which shows that it is the state’s capacity to create money that underpins the market, through the authorised banking system and government spending.The illusion that the latter is based solely on borrowing from the private sector or taxation is sustained by the ambivalent role of central banks. When national debt is held by the (national) central bank, the reality is that the government effectively owes the debt to itself. Public spending is not inflationary if it is balanced by taxation. Continue reading...
Heaping pressure on incoming prime minister, 10-year government bond yields shoot up to 2.78%Fears of a long recession and the likelihood of higher public spending to cope with the cost of living crisis have sent the interest rate on Britain’s debts soaring towards its biggest monthly rise in almost 40 years.Ten-year UK government bond yields, which are a proxy for the effective interest rate on public borrowing, hit 2.78% to register the biggest monthly rise since September 1986. Continue reading...
Five-sticker packs for football tournament in Qatar are 12.5% more than for Russia 2018Inflation has come for the football sticker album. Collecting and completing the official Panini Fifa World Cup Qatar 2022 album will cost fans an average of about £870.Panini, which first produced a World Cup sticker album for the 1970 tournament in Mexico, has priced five-sticker packs for the Qatar 2022 album at 90p each. That is a 12.5% increase on the 80p cost of a five-sticker pack for the Russia 2018 album. For Euro 2016 a pack cost 50p. Continue reading...
We are overconsuming the Earth’s resources and are increasing our ecological debt every year, writes Barbara WilliamsThank you for sharing Emmanuel Macron’s warning about the “end of abundance” (Report, 24 August). It is heartening to see a glimmer of realism creep into a speech by a politician. Humanity has now been exceeding the biocapacity of Earth for well over 50 years, and it beggars belief that both politicians and voters still believe that pursuing GDP might solve the ecological collapse that has been caused by this measure of “wellbeing”.We are increasing our ecological debt every year, leaving less and less scope for our children to survive. What we really need is a global aspiration to unite us in all our diversity, to peacefully and equitably aspire to shrink back within the biocapacity of our planet. Continue reading...
Peter Danielian disputes a claim that the UK is the sixth-richest country in the worldAlthough I agree with the main points of Aditya Chakrabortty’s article (These are energy bills many Britons simply can’t afford. Some will pay with their lives, 26 August), it is not correct to say that the UK is the “sixth-richest country in the world”. We have the sixth-largest economy (GDP), but GDP should not be used to compare nations’ wealth, which depends on the size of the population. India has the fifth-largest GDP, but I doubt many would describe it as rich; Denmark has a small GDP but is much richer than the UK.How rich a citizen is depends on per-capita GDP and how equitably it is distributed. It is better to use purchasing power parity (PPP) to compare individual wealth – this takes account of the per-capita GDP and the cost of living in each country. By this measure, the UK is ranked 30th in the world. The list of countries above us does include the expected tax havens and oil-rich countries with small populations, but notably includes Ireland (fifth) and most of the western and northern EU countries.
by Richard Partington Economics correspondent on (#632EB)
Goldman Sachs warns inflation could inflation peak above 22%, adding more pressure to households and businessesInflation in the UK could top 22% next year, close to the post-war record set in 1975, if wholesale energy prices remain at current high levels, Goldman Sachs has warned.Highlighting the pressure on households and businesses, the US investment bank said inflation could peak at 22.4% next year if wholesale gas and electricity prices continue to spiral over the winter. Continue reading...
Investment bank warns inflation could exceed 20% if UK energy price cap rises 80% in January, while baseline forecast has inflation rising to almost 15%Russian energy giant Gazprom has intensified the squeeze on Europe’s energy market, by cutting supplies to France’s Engie.Engie says it has been told that Gazprom will reduce gas deliveries starting today, due to a disagreement over some contracts.“As previously announced, Engie had already secured the volumes necessary to meet its commitments towards its customers and its own requirements, and put in place several measures to significantly reduce any direct financial and physical impacts that could result from an interruption to gas supplies by Gazprom.”“Very clearly Russia is using gas as a weapon of war and we must prepare for the worst case scenario of a complete interruption of supplies. Continue reading...