by Kalyeena Makortoff Banking correspondent on (#66CF1)
Nationwide warns inflation and rising interest rates will weigh down housing marketUK house prices fell last month at their fastest rate for two and a half years as the fallout from Liz Truss’s disastrous mini-budget put buyers off, according to Nationwide which warned inflation and rising interest rates would weigh on the market in the coming months.The price of an average home dropped 1.4% to £263,788 in November, according to the building society’s house price index, accelerating a slowdown that saw prices fall 0.9% in October. It was the third monthly decline in a row, and the biggest drop since June 2020. Continue reading...
by Peter Hannam Economics correspondent on (#66CAV)
Sydney sneaks into Top 10 as rising energy prices send inflation soaring globally, Economist Intelligence Unit survey findsNew York was the world’s most expensive metropolis in 2022, sharing the unwanted title with Singapore, as soaring energy prices doubled the inflation rate across the major global cities, according to the Economist Intelligence Unit’s annual survey.Last year’s leader Tel Aviv dropped to third, while Sydney snuck into the Top 10 and Moscow and St Petersberg in Russia scaled the rankings by as much as 88 places as sanctions and buoyant oil prices propelled prices higher, the EIU’s Worldwide Cost of Living report found. Continue reading...
Three years into the pandemic, China is still relying on snap lockdowns and mass testing – and that could spell trouble for the global economyProtests against pandemic restrictions in China could unleash a new wave of volatility into a global economy already racked by inflation, energy shocks and the war in Ukraine.The government’s continued reliance on lockdowns, quarantine orders and mass testing to limit the spread of the virus has provoked the biggest protest movement in decades. But there’s little evidence that authorities are willing to diverge from the path they have taken. Continue reading...
Rise in cost of essentials will hit poorer households, already struggling with higher energy bills, hardestUK food price inflation hit a new high of 12.4% in November as the price of basics such as eggs, dairy products and coffee shot up.Fresh foods led the increase in prices – with inflation rising to 14.3% from 13.3% in October – with rises expected to continue into next year according to the latest data from the British Retail Consortium trade body, which represents most big retailers, and the market research firm NielsenIQ. Continue reading...
by Patrick Butler Social policy editor on (#66AKV)
Tory-led Essex authority is on brink of bankruptcy and has appealed to government for emergency bailoutA Tory-led council has admitted a series of disastrous investments in risky commercial projects caused it to run up an unprecedented deficit of nearly £500m and brought it to the brink of bankruptcy.The staggering scale of the catastrophe at Thurrock council in Essex – one of the biggest ever financial disasters in local government – is contained in a report made to the council’s cabinet, which reveals it has lost £275m on investments it made in solar energy and other businesses, and has set aside a further £130m this year to pay back investment debts. Continue reading...
Huge subsidies for US-based low-carbon manufacturers are posing big problems for EU leadersIn a slick General Motors advert aired during last year’s Super Bowl, the actor and comedian Will Ferrell took patriotic umbrage at Norway’s ability to sell more electric vehicles per capita than the US. “Norway’s beating us at EVs!”, Ferrell lamented, before promoting GM’s latest battery technology to the watching millions.Almost two years on, the angst is being felt on the other side of the Atlantic. Following on from President Joe Biden’s “Buy America” rules for infrastructure, his Inflation Reduction Act (IRA) will deliver, from January, almost $370bn worth of subsidies and tax breaks to US-based companies involved in the transition to a low-carbon economy. Around $50bn will come in the form of tax credits to persuade Americans to buy electric vehicles made in North America (Canada and Mexico were included in the deal after initially being left out). Continue reading...
Homebuyers face higher interest costs, as lending figures slump to lowest monthly total since June 2020The chaos in the mortgage market that followed Kwasi Kwarteng’s now infamous mini-budget led to a 10% fall in the number of mortgage approvals during October.According to the latest figures from the Bank of England, the number of mortgages approved by lenders slumped from 66,000 in September to 59,000 last month – the lowest monthly total for mortgage approvals since June 2020. Continue reading...
by Richard Partington Economics correspondent on (#6699N)
The economic outlook for China is not good however its leaders respond to anti-lockdown protestsFor much of the world there has been hope for some time that the worst economic shocks from the Covid pandemic are in the rearview mirror. In China, however, there are important reminders that risks to the world economy still remain.Three years since the virus first spread, protests in several Chinese cities against the Beijing government’s strict zero-Covid policies have reignited concerns in financial markets over the economic costs of the pandemic. Global oil prices have fallen back, while the Chinese yuan and stock markets across Asia have taken a hammering. Continue reading...
Good connectivity is the lifeblood of a modern, thriving economy – so how much is the ongoing disruption costing UK plc?Crunched up, sat on a suitcase by the door of an overflowing toilet. Two hours standing up. Or seated, but stuck in purgatory (somewhere near Hatfield), as the conductor tells passengers: “I’m sorry, we’re trapped”. And that’s if the train is running at all.Britain’s railways shouldn’t be like this. In their 2019 manifesto the Conservatives promised a “transport revolution”, though it’s doubtful they planned this to involve a near rebellion on the 18:33 to Leeds. Continue reading...
The EU did wonders for the economy: that was why we joined. Our departure from it is now all too obviously costing us that prosperityWhen recently asked on the Today programme to cite chapter and verse on the subject of Brexit “opportunities” Michael Gove, the secretary of state for all seasons, was hopelessly out of his depth.However, Gove missed a trick. What he should have said, but as a signed-up Brexiter obviously could not, was that the only “opportunity” arising from Brexit was to conduct a scientific experiment to demonstrate that the whole idea was a mistake. Moreover, it was a confidence trick on the British public, the majority of whom now realise that they have been had. Continue reading...
House prices may be falling as interest rates climb, but there’s no respite for tenants as property shortages biteIt’s a tale of two markets: while private rents have soared to record highs in the UK, making life precarious for tenants, the for-sale sector has slowed sharply and property values have started to fall, with sharper declines predicted for next year.The latest house price index from Nationwide, Britain’s biggest building society, along with Bank of England mortgage lending data due this week, should shed further light on the severity of the UK’s housing slowdown. Continue reading...
by Jon Ungoed-Thomas and Michael Savage on (#667WG)
First such accord after leaving EU was predicted to bring £15bn boost but UK now lags rivalsThe first major free trade agreement signed by Britain after Brexit has been branded a failure after new figures showed exports had fallen since it came into force.Liz Truss signed a “historic” deal with Japan as trade secretary in October 2020, describing it as a “landmark moment for Britain”. It was claimed it would boost trade by billions of pounds and help the UK recover from the pandemic. Continue reading...
by Peter Hannam Economics correspondent on (#667VD)
In new book The Price of Time, economist Edward Chancellor explores the role central banks have played in the snowballing challenges of the past quarter centuryTwenty years ago, a youngish economist destined to become a household name in Australia issued a warning to central banks everywhere.“[L]owering rates or providing ample liquidity when problems materialise but not raising rates as imbalances build up, can be rather insidious in the longer run,” he said. Continue reading...
Three women tell how low pay and the high cost of childcare make it difficult or impossible to have a jobIn his autumn statement, chancellor Jeremy Hunt promised to address the labour shortage by conducting a “thorough” assessment of the barriers and incentives to work. Since the pandemic, an extra 630,000 working age adults in the UK have become economically inactive, while job vacancies are close to a record high.To put the brakes on an exodus from the British job market, Hunt announced measures including a crackdown on benefit claimants. However, he made no mention of childcare provision. Continue reading...
For too long pledges have gone unmet, so at Cop28 new solutions need to be explored• Gordon Brown is the WHO ambassador for global health financingOn Sunday, loud cheers from Sharm el-Sheikh greeted the announcement of a new initiative – the global loss and damage fund – to right historical wrongs by compensating climate-hit developing countries. This breakthrough brought back memories of another, the £100bn a year agreed at the 2009 Copenhagen climate summit to help poor countries mitigate the effects of the climate crisis.That money has never fully materialised. If our 13 years’ experience of the £100bn fund that never was is anything to go by, eulogies of praise will soon turn into allegations of betrayal. The president of next year’s Cop28 will have to answer for yet another fund without funders. Far from the loss and damage fund narrowing the credibility gap on climate action, it is likely to bridge nothing if money fails to flow from rich to poor. Continue reading...
Housebuilders also see share price falls as interest rate rises and cost of living crisis deter potential buyersShares in one of the UK’s biggest estate agent chains and some of the largest British housebuilders fell on Friday, amid the latest warnings about the outlook for the housing market, as potential homebuyers are squeezed by rising interest rates and the cost of living crisis.The share price of LSL Property Services, one of the UK’s largest estate agent chains, tumbled by as much as 11% after it warned on profits for the second half of the year and said conditions in the housing market had become more challenging than anticipated. Continue reading...
Despite ambitious green goals, the country’s over-reliance on Russian gas has forced it back to coal and expensive importsSay what you will about Vladimir Putin, but his war on Ukraine did open European eyes to some long-underrated truths. One is that even after more than 70 years of relative peace on the continent, neglecting military security poses grave dangers. Another is that the “green dream” of modern economies powered exclusively by renewable energies remains out of reach – and reliable access to cheap energy supplies remains essential.While the first truth became starkly apparent as soon as Russian troops crossed into Ukraine on 24 February, the second has only gradually penetrated public awareness. In fact, many have called for an embargo on European imports of Russian gas, arguing that this would not only undermine Moscow’s ability to wage its war, but also accelerate progress toward green Nirvana – all at minimal cost to Europe in terms of lost GDP. Continue reading...
Deputy governor Dave Ramsden makes comments as CBI snapshot predicts tough winter for UK factoriesInterest rates may need to start falling again if cost of living pressures abate more quickly than the Bank of England expects, a senior policymaker at Threadneedle Street has said.Dave Ramsden, one of the Bank’s deputy governors, said he was currently supporting fresh increases in the cost of borrowing but raised the possibility that a weakening economy may require a cut. Continue reading...
Consumer body says one in three lone parents forced to miss meals or visit food banks to make ends meetClose to a third of single parents have resorted to skipping meals to make ends meet because of rising food costs, according to research revealing the household types worst hit by the cost of living crisis.Three in 10 single parent households surveyed said they had missed meals as a consequence of runaway food prices. That compared with one in seven parents in couples and an overall figure of 14% in the poll by the consumer group Which? Continue reading...
by Presented by John Harris, produced by Frankie Tobi on (#665NP)
The Guardian’s John Harris is in the West Midlands to talk to teachers, librarians and the local council about how more than a decade’s worth of real terms cuts is taking its toll on services Continue reading...
New Zealand’s reserve bank delivered its largest rate hike in history on Wednesday, piling pressure on the country’s homeownersRosie Smyth and Richard Larsen, along with their toddler daughter, had spent years looking for an affordable home in Lyttelton, a small port town at the edge of Christchurch where Smyth grew up.They were hunting in the midst of New Zealand’s housing affordability crisis, when prices rose to nearly nine times the average income. The market had a frenetic quality – every month seemed to bring a new rise, and with it the feeling, Smyth says, that if you didn’t get in now, prices could permanently dance out of reach. Continue reading...
by Richard Partington Economics correspondent on (#6655R)
Departure of more than 500,000 workers since Covid risks stoking inflation, says Huw PillThe surge in people quitting the British workforce because of ill health or early retirement could force the Bank of England to further increase interest rates, its chief economist has warned.Huw Pill said the departure of more than half a million workers from the jobs market since the Covid pandemic risked stoking inflationary pressures, long after the shock from sky-high energy prices is likely to fade. Continue reading...
UN gains mandate for talks next year that could bring reforms to existing tax policy and new conventionDeveloping nations could have a greater say over global tax rules after winning a diplomatic tussle at the United Nations in New York on Wednesday.A new resolution, agreed by UN members, gives the body a mandate to kickstart intergovernmental talks on tax. Continue reading...
We speak to four working people who are struggling to keep pace with their billsWith households braced for the biggest fall in living standards since records began, as food prices continue to soar and many struggle to pay their energy direct debits this winter, four people share why they are taking on a second job. Continue reading...
New Zealand’s reserve bank says spending levels still need to be reduced with rate rises, in order to tame inflationNew Zealand’s reserve bank has forecast that the country will tip into recession in 2023, and has lifted the official cash rate by an unprecedented 75 basis points, to 4.25%.The cash rate hike, announced on Wednesday, is the largest in the central bank’s history, and comes as it attempts to rein in New Zealand’s 7.2% inflation rate. Continue reading...
Former Tory cabinet minister and arch Eurosceptic claims his rights to privacy infringed by inquiry into lobbying. This live blog is now closedOwen Paterson taking UK to human rights court after lobbying scandalStarmer says Britain is trapped in a “vicious cycle of stagnation”.The UK has had the worst record for growth in centuries, he says. He says a new model is needed. And this should be a turning point.They put our public finances in a perilous position, wasted the chance to transform our potential in an era of low interest rates, and created an economy with weak foundations.But the war didn’t ban onshore wind. The war didn’t scrap home insulation. And the war didn’t stall British nuclear energy. Continue reading...
Fixed interest rate deals starting to drop and could ‘fall further still’, says MoneyfactsThe average rate on a five-year mortgage deal has dropped below 6% for the first time since the disastrous mini-budget two months ago that ended up costing Kwasi Kwarteng his job as chancellor.Moneyfacts, a financial data provider, said that the average five-year fixed mortgage rate had dropped below 6% for the first time in seven weeks. The reduction is good news for would-be borrowers but rates could “fall further still”, it suggested. Continue reading...
Most countries’ forecasts cut as Ukraine war prompts ‘largest energy crisis since the 1970s’The UK will be the second weakest performer of the world’s big economies next year as the global economy continues to suffer the knock-on effects of the biggest energy shock in four decades, a leading international institution has warned.The Paris-based Organisation for Economic Co-operation and Development said only Russia of the members of the G20 group of leading developed and developing nations would suffer a bigger contraction than Britain in 2023. Continue reading...
Losses on government bonds and higher debt interest caused by rising inflation add to October figureGovernment help with energy bills and the impact of a slowing economy helped push UK public borrowing last month to the fourth highest level for an October on record, official figures have shown.The Office for National Statistics said the gap between the state’s spending and its revenues widened by £4.4bn to £13.5bn last month as payments began under the energy support scheme. Continue reading...
Controversial briefings to the press by senior government figures reflect a change in the zeitgeistThe short, disastrous premiership of Liz Truss is beginning to look like the endpoint of a political trajectory that began with the Brexit referendum in 2016. The spectacular detonation of Kwasi Kwarteng’s mini-budget by unimpressed markets was the moment when ideology met reality, and the Conservative party’s sovereigntist delusions were finally tested to destruction. In its aftermath, the high tide of Brexit has gone out, and a slow voyage back to economic sanity at last appears to be under way.On Monday, Ms Truss’s successor, Rishi Sunak, was obliged to spend much of his visit to the CBI conference in Birmingham denying suggestions that the government was hoping to pivot to a closer Swiss-style relationship with the European Union. Switzerland enjoys significant and profitable access to the single market, and participates in EU research and education programmes, while making payments to the EU and aligning with its law. According to a Sunday Times report, government figures have privately discussed the possibility of just such a relationship for Britain. “Let me be unequivocal about this,” Mr Sunak countered robustly. “Under my leadership, the United Kingdom will not pursue any relationship with Europe that relies on alignment with EU laws … I voted for Brexit. I believe in Brexit and I know that Brexit can deliver.” Continue reading...
£4.6bn is an eye-watering amount for consumers to stump up – transparency from the government is long overdueThe most startling number in the Office for Budget Responsibility’s economic outlook last week – aside from the gloomy big-picture forecasts – was found in a one-sentence footnote on page nine. “The total cost of the Bulb Energy bailout has reached £6.5bn, with £4.6bn of that in 2022-23 included in the autumn statement,” it stated baldly.Let those figures sink in. Since March, when the OBR forecast that nationalisation of the bust energy supplier would cost £2.2bn, the figure has increased by the equivalent of almost £3,000 for each of Bulb’s 1.5m customers. As one energy trader puts it, even under the April-to-September price cap of £1,971 and even with high wholesale prices, it ought it be almost impossible for Bulb to clock up losses of that size during the low seasonal period for consumption. Continue reading...
Shadow secretary for climate change and net zero accuses global leaders of ‘fiddling while the world burns’. This live blog has closedRishi Sunak is speaking now.He says when he became PM, he said he would put stability and confidence at the heart of the government’s agenda. Continue reading...
Readers on whether Jeremy Hunt’s budget will help to revive the UK’s public services and tackle economic problemsSeeing a Tory government increase taxes on nearly everyone is incredible (Biggest hit to living standards on record as Hunt lays out autumn statement, 17 November). At last the Tories realise that, to have a civilised society, we need well-funded public institutions providing the services needed to make it work for all.Or do they? In your standfirst online you write: “Austerity is pushed back until after the next election amid evidence of higher energy bills and a protracted recession”, which indicates that the Tories hope this is a temporary measure. This is despite the fact that we now know why we are in such a deep mess: the last decade of severe funding cuts to all public bodies is clearly the fault of previous Tory government policies. Continue reading...
In the shadow of the Truss debacle and with hard times ahead, the chancellor faced a ‘politically impossible’ job, according to a former Tory minister. But the party’s morale is at rock bottomBack when it all began on 22 June 2010, the then Conservative chancellor of the exchequer, George Osborne, delivered what he described as “this unavoidable budget”.A package of savage spending cuts and painful tax rises lay at its heart. “Today we have paid the debts of a failed past,” Osborne said. “And laid the foundations for a more prosperous future.” The message was that the Tory-led coalition was riding to the rescue to put right the wrongs of 13 years of Labour government, and, after a short sharp shock of austerity, soon all would be a bed of economic roses. Continue reading...
The UK’s money troubles spread from inflation and higher interest rates to sluggish productivity. But how do we compare with our European neighbours?Dire, grim, dismal: all words used to describe the UK’s economic situation after Thursday’s autumn statement.In recent decades, the UK’s GDP growth averaged somewhere between the higher rate of the US and the lower rate in the eurozone. That’s starting to change, Carsten Brzeski, global head of macroeconomics for ING Research, told the Observer. “It took Brexit for the UK to converge with the eurozone economy,” he said. “The outlook is very similar to what we’re seeing in continental Europe.” Continue reading...
The chancellor’s plan leaves non-doms in clover and the rest of the country in recession• You can order your own copy of this cartoon Continue reading...
A tired Tory party has resorted to yet more deregulation, after the 40-year failure of its first attemptThursday’s budget proved to be a red letter day for the City of London. In the moments after Jeremy Hunt delivered his perfumed message to the Square Mile, shares in all the big players, from HSBC to Legal & General, climbed back to where they had been before September’s disastrous mini-budget.Bankers, fearing the worst for their bonuses in the days before the fifth financial statement of the year, could look forward to filling their savings accounts once again. Like energy bosses, the chiefs who guard the financial district feared a windfall tax and worse – the retention, post-Brexit, of EU regulations that prevent the insurance and fund management industry from indulging in reckless behaviour. Continue reading...
The Burns family is still recovering from Covid’s financial fallout but now higher bills and rising taxes are hurting too“We want it to get better, we want some light,” says Alison Burns. Her family is feeling the financial pain caused by Covid and now the cost of living crisis. “But while the government keeps throwing everything at us, I can’t see any light at the end of the tunnel. How is any of this going to be made better?”Burns, who lives with her husband, Steven, and two children, Lewis and Alice, in Borehamwood, Hertfordshire, says money is tight. “Like a lot of people our finances haven’t recovered from Covid and all these budgets have hurt each and every way,” she says. “It is people who are working and on the breadline that are suffering the most.” Continue reading...
No one likes having to pay more, but hard times and Jeremy Hunt’s autumn statement have put the issue at the centre of politicsElections hinge on the people in the middle. The same goes for Jeremy Hunt’s autumn economic statement this week. In the space between the statement’s modest increases in personal taxes on the richest on the one hand, and its increased support for the poorest on the other, Thursday’s package was marked by a major revenue-raising squeeze on the living standards of the many millions in the middle. This represents one of the biggest political gambles by any government in modern times, the more so because this is the same government that helped create the very problem it is now struggling to solve.This large group of taxpayers and voters has gone by many aliases down the years – among them Middle Britain, the squeezed middle and the just-about-managing. Not everyone who falls into any of these categories thinks of themselves in the same ways, and there are certainly many large contrasts of wealth and living standards among them. In personal finance terms, they stretch all the way from anyone who will now miss out on the more targeted cost of living support for their heating costs from April, through to those whose incomes will be dragged into higher tax bands in the coming years as a result of the freezes on allowances.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.
Paul Johnson, director of the Institute for Fiscal Studies, said the British people had 'just got a whole lot poorer', during a livestream in which his thinktank shared its analysis on the autumn statement and broader economic climate. Explaining the scope of the burden this would place on the public, Johnson said we have entered a new high tax, large state era. 'I would be most surprised if the tax burden gets back down to its longterm pre-Covid average at any time in the next several decades,' he said
Economics | The Guardian