Concerns mount before mini-budget that precarious financial position will spark run on sterlingBritain’s mounting debts will be unsustainable if the government presses ahead with sweeping tax cuts in a mini-budget on Friday, according to the Institute for Fiscal Studies thinktank.Fuelling concerns that the UK’s precarious financial position will spark a run on the pound, the chancellor, Kwasi Kwarteng, is expected to reverse an increase in national insurance payments and cut corporation tax at a cost to the Treasury of £30bn. Continue reading...

The social and environmental costs of wealth creation are becoming impossible to ignore, writes Jeremy Brettingham, while Barbara Williams says the key to our survival is not money but healthy ecosystems. Plus letters from Alan Knight and Damian GrantGeorge Monbiot calls for inspiring alternatives to the current disastrous ideology (Trussonomics is a fanatical, fantastical creed, and the last thing Britain needs, 17 September). A good place to start might be to finally dispel the convenient myth that amassing a lot of money is the same as creating wealth. To “make” lots of money basically involves taking bits of money from lots of other people, by fair means or foul.Wealth, on the other hand, is at its root “created” by using the resources of the Earth – whether that be the soil, plants, trees, water, rare minerals or hydrocarbons – and combining that with leveraging the differences in socioeconomic expectations between different social groups/countries. Continue reading...

Yvon Chouinard’s donation of his $3bn company is a step to kickstart change, but global actions are needed, writes Prof Phoebe Barnard of Stable Planet AllianceYvon Chouinard’s bold donation of his $3bn company for the public good (Yvon Chouinard – the ‘existential dirtbag’ who founded and gifted Patagonia, 15 September) felt like oxygen to all of us working to ensure a livable planet for the future – and raised questions about which moneyed leaders might follow. But how should such investments be made in humanity’s and the planet’s future?As I and my colleagues argued in the World Scientists’ Warnings series of papers and action framework, our planetary and societal crises are just symptoms of overshoot, with relatively simple root-cause solutions: stabilising and reducing human numbers and appetites. Climate change, road rage, water insecurity and plastics pollution aren’t independent crises – we shouldn’t be fighting them as if they are. Continue reading...

Capping electricity and gas for six months won’t provide long-term security, schools and hospitality firms fear, as business secretary hints at more support

Government warned measure would create housing bubble that does little to benefit first-time buyersCuts to stamp duty will hurt first-time buyers and stoke an inflationary bubble in the property market as house prices rise at the fastest rate for almost 20 years, the government has been warned.In the latest report detailing the tax cuts favoured by Liz Truss, the Times said Kwasi Kwarteng, the chancellor, was preparing to launch radical cuts to stamp duty as the “rabbit out of the hat” measure in his mini-budget to the House of Commons on Friday. Continue reading...

Hike in interest rates would be the biggest in 33 years and would heap renewed pressure on borrowersThe Bank of England is considering the biggest interest rate rise in 33 years to tackle soaring inflation, a move expected to cost millions of households more than £3bn in extra mortgage costs.City investors expect Threadneedle Street to raise interest rates by at least 0.5 percentage points, or even 0.75 percentage points, on Thursday at the next meeting of its monetary policy committee (MPC). Continue reading...

MPs had no chance to question Jacob Rees-Mogg’s announcement and no one is marking Kwasi Kwarteng’s homeworkThere can be no starker contrast between how the two political parties are judged on economic policy than the way the past fortnight has played out for Liz Truss.The astonishing scale of state spending to relieve the energy crisis and enable tax cuts has been announced with total omertà thus far on how much the proposals will cost the British taxpayer. Continue reading...

Over the past 14 years, older homeowners have continued to benefit – creating an unpleasant form of economic progressOn Thursday at midday the Bank of England’s monetary policy committee will announce an interest rate rise. Some City analysts have predicted the announcement will jack up the rate by 0.75 of a percentage point (mimicking that of the European Central Bank in early September) to a total of 2.5%. An upward jump of this size has not occurred since the Bank was made independent in 1997. And the last time interest rates have moved by more than half a percentage point in either direction was in the depths of the 2008 banking crisis, when they were cut rapidly in an effort to shore up the circulation of credit.Even if, as other observers expect, the announcement is merely of a rise of a 0.5 percentage point, it will be one more step on a staircase that is likely to reach at least 4% by early next year. Regardless of pace, these rises mark the conclusion of one of the most extraordinary economic policy experiments in modern history. The architects of this era – characterised by uniquely low interest rates – were unelected technocrats rather than politicians, and yet they leave a profound political and economic legacy of spiralling inequality, channelled above all through the ownership of housing.William Davies is a sociologist and political economist. His most recent book is Unprecedented? How Covid-19 Revealed the Politics of Our Economy Continue reading...

Foreign Office minister Gillian Keegan replies to Joe Biden pouring scorn on tax cuts for the rich and businessesOne of Liz Truss’s ministers has said her government’s approach can in “no way” be described as “trickle-down economics”, despite the prime minister urging world leaders to join the UK in introducing far-reaching tax cuts.Gillian Keegan, a Foreign Office minister, said the £100bn-plus package of support for households and businesses on energy bills showed that this was not the government’s philosophy. Continue reading...

Figure of £11.8bn comes as high inflation drives interest payments to a record for the month

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The US central bank is expected to announce a sharp rise in interest rates on Wednesday in an attempt to tackle the cost of living crisisFederal Reserve chair Jerome Powell warned last month that there would be “pain” ahead as the US central bank struggles to contain a surge in inflation unseen in 40 years. Powell will offer some indication of how much pain he expects on Wednesday.The Fed is expected to announce another sharp rise in interest rates on Wednesday afternoon after the conclusion of its latest meeting. It will also update its economic forecasts for the US economy. Continue reading...

The land of the free is heading for ‘developing country’ status, based on a UN index that ranks quality of life. The UK’s not doing much betterWhat do you call a country where nearly one in 10 adults have medical debts and a broken bone can boot you into bankruptcy? A country where a city of more than 160,000 residents recently had no safe drinking water for weeks? A country where life expectancy has dropped for the second year in a row and poor people sell their blood plasma in order to make ends meet? A country where the maternal mortality rate of black women in the capital is nearly twice as high as for women in Syria?You call it one of the richest countries in the world. Continue reading...

MPC is dominated by people with little ‘real world’ knowledge and prone to groupthink, says ex-committee memberMembers of the Bank of England’s interest-rate setting body should be appointed by the devolved administrations and by English MPs in order to counter groupthink, a former member of Threadneedle Street’s monetary policy committee has said.David Blanchflower said the committee was dominated by people with little knowledge of the “real world”, and greater diversity of thought was needed to ensure the interests of ordinary people were reflected. Continue reading...

Sir Bob Kerslake calls on government to protect at-risk tenants as it did during pandemicThe former head of the civil service has warned of a looming “catastrophic” homelessness crisis caused by the cost of living unless the government reintroduces the eviction ban that protected tenants during the Covid-19 pandemic.Sir Bob Kerslake, who chairs the Kerslake Commission on Homelessness and Rough Sleeping, said a failure to act “could see this become a homelessness as well as an economic crisis and the results could be catastrophic; with all the good achieved in reducing street homelessness since the pandemic lost, and any hope of the government meeting its manifesto pledge to end rough sleeping by 2024 gone”. Continue reading...

Warning of increasing inequality as global wealth report shows average wealth per adult in NZ jumped US$114,000 in 2020New Zealanders have topped the world for the biggest annual jump in wealth, however one prominent economist warned the figures were further evidence of growing inequality in a country that is experiencing “a rise of the landed gentry”.The global wealth report by investment bank Credit Suisse shows New Zealand experienced the biggest spike in average wealth per adult, ballooning by US$114,000 (NZ$193,248) in 2020 to bring the total average wealth per adult to US$472,153 in 2021 – a 32% year-on-year increase. Continue reading...

Reports that stamp duty will be cut with PM to use UN speech to argue for far-reaching tax reductions, putting her at odds with Joe BidenLiz Truss is to urge world leaders to join Britain in introducing far-reaching tax cuts despite US president Joe Biden pouring scorn on “trickle down economics” ahead of their first bilateral talks in New York.In a speech to the United Nations on Wednesday, the prime minister will argue the free world must prioritise economic growth to deny authoritarian states like Russia the chance to manipulate the global economy. Continue reading...

UK PM is reviving the idea that cutting taxes for the better off ultimately benefits everyone. The IMF disagreesTrickle down economics was highly fashionable on the political right in the 1980s, when both Ronald Reagan in the US and Margaret Thatcher championed the idea. It resurfaced in America under both George W Bush and Donald Trump, and it is now undergoing a revival in Britain under the new prime minister, Liz Truss.The theory of trickle down economics is simple. Governments should cut taxes for the better off and for corporations because that is the key to securing faster growth. Entrepreneurs are more likely to start and expand businesses, companies are more inclined to invest and banks will tend to increase lending if they are paying less in tax. Continue reading...

Money markets suggest the Bank of England could raise rates from 1.75% to 2.5% this week, and 3.75% by end of 2022, as policymakers try to get to grips with soaring inflationThe jump in demand for home insulation products hasn’t protected Kingfisher’s shares this morning.They’re down 5%, and on track for their worst day in almost two months, after the DIY chain reported sales and profits have dropped in the first half of the year. Continue reading...

‘Race to the bottom’ on tax on company profits has failed to boost economic growth, says IPPRBusiness investment in the UK fell to the lowest rate in the G7 group of wealthy nations despite corporation tax cuts, the government has been warned, as ministers prepare £30bn of giveaways targeted at companies and higher-income workers.The Institute for Public Policy Research (IPPR) said a “race to the bottom” on the headline tax rate on company profits had failed to boost investment and economic growth in Britain over the past 15 years. Continue reading...

Olaf Scholz travels to UAE to secure gas supplies amid concern that crisis is out of control“Not pasta then?” Germans quipped earlier this month, on hearing that of all things, a toilet paper manufacturer had gone bust.After all, while toilet paper was the second most sought-after supermarket item during the height of the pandemic, pasta was the first. Consumers were strictly rationed to just one or two packets of rolls to ensure that no one went without. But having boomed during the pandemic, the luxury brand Hakle from Düsseldorf – known for “bringing comfort since 1928” with its three-ply rolls – has bombed as a result of the energy crisis. It is the first large German consumer goods producer to collapse because of soaring energy and raw material costs, and there is much to suggest that it will be followed by many more. Continue reading...

Inflation is high, interest rates are rising and the stock market is down 18% … but small businesses are still hiringAre we in a recession? Because if we are, it’s a very strange one.Sure, we’ve had two quarters of negative economic growth. Manufacturing demand is shrinking. Construction and housing market activity has slowed. Tech companies are contracting. Financial services and real estate firms are laying people off. Inflation and energy costs remain stubbornly high, interest rates are rising and the stock market is off 18% from the beginning of the year. Just Google “recession” and you’ll find that the housing market is in one, major banks and investors are warning of one and Europe is heading for one. Over 80 financial advisers say a recession “is coming” and one bigwig investor believes that it’s going to be a “whopper”. Continue reading...

Britain’s problems are not high taxation or overregulation but poor growth caused by low investmentCrunch time will come quickly for Liz Truss. After 10 days of national mourning to mark the death of Elizabeth II, Britain’s economic problems will return to centre stage this week. On Thursday the Bank of England announces its latest decision on interest rates. The following day Kwasi Kwarteng’s debut as chancellor will be the latest in a string of mini-budgets. Both will be significant occasions.In one sense, Truss has benefited from attention being on the monarchy rather than on politics during her first two weeks in the job. She has been able to settle in at Downing Street and think about what to do with her new-found power. In cricketing parlance, the prime minister has had time to play herself in. Continue reading...

After sacking the his top official, the new chancellor’s next act was politically crass and insensitive. It does not bode wellOne of the themes of the coverage of our late Queen’s life has been what a good sense of humour she had. But I did not see any references to the day it fell to her to make her speech at the opening of parliament on 21 June 2017.On that day her monarchical duty, in the Queen’s speech, was to outline the proposed legislation that would prepare the UK for its departure from the European Union. Continue reading...

Bankers’ bonuses, the NHS and tax cuts that favour the rich are all causing jitters on the benches behind the new prime ministerIt is less than a fortnight since Liz Truss formed a new government after a summer of bitter Conservative party infighting. It is just days until her chancellor reveals significant plans that are likely to dominate British politics and frame the next election.Yet the Palace of Westminster has rarely been so becalmed. As mourners have wound their way into Westminster Hall to pay their respects to the Queen, a building that would ordinarily be a hotbed of political jousting, plotting and intrigue has instead become a site of pilgrimage, respect and quiet reflection. Continue reading...

This week’s decision could pit Bank of England governor Andrew Bailey against an expansionary PM and chancellorA lightning strike from the Bank of England awaits. Having delayed its decision until after the period of national mourning for the death of the Queen, Threadneedle Street could this week launch the biggest rise in borrowing costs for at least 25 years.Announcing its plans a day before Kwasi Kwarteng’s mini-budget on Friday, the central bank is widely expected to use a fast and forceful rate increase to show its commitment to tackling soaring inflation – despite the gathering storm clouds for the British economy. Continue reading...

The Kardashian children, and others, are working in adult spaces for the family business, whether the parents admit it or notThe events of this week provoke much introspection about hereditary privilege, inherited power and our culture’s strange default to aristocracy. By which I mean, there appeared a stunning article in the Wall Street Journal announcing that the young children of pop celebrities are acquiring their own fashion stylists.The 10-year-old daughter of Kourtney Kardashian; her nine-year-old cousin, the daughter of Kim Kardashian and rapper Kanye West; Beyoncé and Jay-Z’s 10-year-old girl and the five-year-old daughter of tennis champion Serena Williams are named in the article. Continue reading...

As the UK government trumpets growth and tax cuts, the monster of inflation lies in wait Continue reading...

Just when we need visions of a better world, the prime minister is proclaiming the toxic gospel of neoliberalismSoon, the focus will return, and the collapse of many people’s economic prospects will dominate once more. As winter approaches, it will become clear that our politics is spectacularly lacking in answers.Why? Because the doctrine destroying our condition of life is the doctrine Liz Truss has promised to extend to new extremes. She is fanatically devoted to an ideology misleadingly called Thatcherism or Reaganism (as if they invented it), but more accurately described as neoliberalism.George Monbiot is a Guardian columnist Continue reading...

On Black Wednesday anniversary, sterling hits 37-year low against dollar and 17-month low against euroFears that the British economy is already in recession after a slump in retail sales last month triggered heavy selling of the pound on international money markets taking it to a 37-year low against the dollar.With average UK wages continuing to fall behind rising prices and the Bank of England expected to push up interest rates next week, sterling fell by more than 1% against the US currency to $1.135, its lowest since 1985. Continue reading...

Falls against the dollar are prompted partly by concern about Liz Truss’s economic and energy policies

Rationing and empty shelves have become commonplace as the government struggles to pay salaries and food subsidiesAssaad sits outside his cafe in central Tunis, heavy metal shutters locked behind him. There is no sugar, he says, and he cannot operate without it. Sugar, like coffee and countless other subsidised staples for Tunisians, is in very short supply.Rationing has become commonplace, while supermarkets and small local shops have yawning gaps on shelves once crowded with everyday products. Government announcements on the food shortages have been confusing, attributing the absence of basic foodstuffs both to speculators and selfish hoarders. Continue reading...

Champagne will be uncorked in Canary Wharf – and along with it, a clear them-and-us narrativeThe timing is, to say the least, curious. Britain is facing its biggest cost of living crisis in decades. Workers are angry about crashing living standards. And yet one of the first things on the new government’s agenda is to scrap the cap on bankers’ bonuses. Kwasi Kwarteng may announce the decision as part of his mini-budget next Friday.Make no mistake, there is an argument for what the chancellor is planning, namely that the cap hasn’t worked. Critics said when the EU brought in its legislation in 2014 that banks would find a way round the cap by simply paying higher salaries, and they have been proved right. Placing limits on one part of a package (the bonus) but imposing no constraints on the other part (basic pay) never made any sense. If the idea was that bankers needed to be paid less, it would have been more logical to go the whole hog and impose a cap on total remuneration.Larry Elliott is the Guardian’s economics editor Continue reading...

Study says global economy is in steepest slowdown after a post-recession recovery since 1970The world may be edging toward a global recession as central banks simultaneously raise interest rates to combat persistent inflation, the World Bank has warned.The three largest economies, – the US, China and the eurozone – have been slowing sharply, and even a “moderate hit to the global economy over the next year could tip it into recession”, the bank said in a study. Continue reading...

Living Wage Foundation finds 78% of those polled say they are shorter of money than everAlmost 80% of the UK’s lowest-paid workers say they are now facing the toughest financial squeeze of their lifetimes, according to new research by the Living Wage Foundation.Liz Truss has averted a further increase in utility bills with her “energy price guarantee” – a radical measure that could cost taxpayers more than £100bn – but many poorer households are already struggling to make ends meet. Continue reading...

Economists accuse bondholders of standing to make huge profits at the expense of the crisis-hit countryMore than 100 economists and academics have urged international lenders to crisis-stricken Zambia to write off a significant slice of their loans during financial restructuring talks this month.Zambia is seeking up to $8.4bn (£7.3bn) in debt relief from major lenders, including private funds run by the world’s largest investment manager, BlackRock, to help put its public finances back in order. Continue reading...

Chancellor may lift EU-era restriction in hope of making UK more attractive to financial sectorThe focus is back on banker pay after it emerged that the chancellor, Kwasi Kwarteng, is considering scrapping the City bonus cap as part of the government’s wider pro-growth agenda.What is the banker bonus cap? Continue reading...

Here are four key areas to watch ahead of the review making its recommendations to the treasurer

Chancellor reportedly plans to lift the EU-imposed banker bonus cap as part of post-Brexit reforms; John Lewis says ‘uniquely uncertain’ outlook puts staff bonuses at riskBritain’s competition watchdog has decided to carry out an in-depth investigation into Microsoft’s $69bn purchase of the Call of Duty maker Activision Blizzard after the US tech giant failed to offer remedies to allay competition concerns.The Competition and Markets Authority (CMA) reiterated its warning that:it is or may be the case that this merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom. Continue reading...

The new chancellor is trying to wrongfoot Labour. That’s an easier game than living up to his pledgesEver since he was a boy, Kwasi Kwarteng has shown rare skill in wrongfooting opponents. At an interview for a place at Cambridge University, the Etonian heard the tutor confess that this was his first time interviewing entrance candidates. “Don’t worry, sir,” beamed Master Kwarteng. “You did fine.” The cheek paid off. He got in.After only one week as chancellor, he is now trying a similar strategy against the Labour opposition. In his sights is what he dubs “the same old economic managerialism”, as practised by the Treasury and the Bank of England. While praising his new department as an excellent finance ministry, good at keeping a lid on the deficit, he has instructed staff that their entire focus must “be on growth”. Continue reading...

Inflation eases because of a fall in petrol prices while food prices rise at fastest rate since mid-2008, driven by milk, cheese and eggsJames Smith, developed markets economist at ING, has looked at core inflation in more detail.Headline inflation will rise a little further having eased back below 10% in August, and it’s likely to stay around 11% into early next year before falling back more dramatically. However, the Bank of England is watching wage growth more closely, as the hawks worry that worker shortages could lead to core inflation staying more persistently above target.With the government due to cap the average household energy bill at £2,500, up from around £2,000 now, we expect a peak in the region of 11% in October. That’s compared to 16% in January which is what we’d forecasted before the support was announced. Continue reading...

Businesses may have to wait until November, although package could still be activated next monthBritish businesses have been warned by government officials that they will have to wait longer than households for financial support with their energy bills amid delays in launching the £150bn scheme, according to reports.Company bosses are increasingly worried about the prospect of delays to the arrival of support because fixed energy contracts come to an end in October for hundreds of thousands of firms. Continue reading...

MPC members will look at other developments in UK and abroad in mission to increase interest rates

Unexpected dip in August is first easing of upward pressure on cost of living in almost a year

Bank holiday for state funeral could send productivity plummeting at a time when country is struggling for growthBritain’s fragile economy was already teetering on the edge of recession even before the death of Queen Elizabeth II last week. That prospect now looms a lot larger, as businesses cancel events amid the period of national mourning culminating in the bank holiday for the late monarch’s funeral.Economists say high street shops closing their doors or operating reduced hours on Monday, alongside the loss of a full working day, will lead to a sharp fall in output at a time when Britain is struggling for growth momentum amid the cost of living crisis. Continue reading...

Inflation slowed for the second consecutive month as energy costs fallPrices in the US remained stubbornly high in August even as the overall pace of inflation slowed for the second consecutive month. The news sent US stock markets into a tailspin, with the Dow Jones index losing nearly 1,300 points.The Consumer Price Index (CPI), the Bureau of Labor Statistics’ monthly cost of living survey, found prices were 8.3% higher last month compared with August last year. The figure was down from an annual rate of 8.5% recorded in July and 9.1% in June, the highest rate in four decades. Continue reading...

The new chancellor is reported to have told Treasury staff there was a need to ‘do things differently under fresh leadership’. This live blog is now closedAt the lobby briefing yesterday Downing Street admitted that Liz Truss had not completed her government reshuffle. New appointments were suspended following the death of the Queen.According to an analysis by Arj Singh for the i, 55 posts remain unfilled. Singh says that, to fill all the posts that Boris Johnson had in his government, Truss will need to appoint 21 junior ministers in the Commons, nine Commons whips and 25 Lords ministers.The removal of Sir Tom Scholar as the lead permanent secretary at the Treasury should be a cause for celebration.Having worked in his department for nearly two years I saw at first hand the malign influence of the Treasury orthodoxy at play. Whether it was foot-dragging and passive resistance to creating a Treasury office in the north (in Darlington), which he fiercely resisted, or the botched arrangements in the construction of the bounceback loans during the pandemic, all roads led back to him.I hope very much that our new prime minister will build on her excellent decision and remove responsibility from the Treasury for driving economic growth. It has no idea how to deliver this. The system obsesses about measuring inputs, counting out the money distributed to departments, but has little clue of how to measure outcomes. Departments are infantilised in their management of money, with savings being automatically clawed back to the centre. This of course removes any incentive to think innovatively, creatively or cost-effectively. Continue reading...

Investors brace for further interest rate rises, as US CPI rose 8.3% in the year to August, dashing hopes of a larger fall, and food inflation is highest since 1979In the City, shares in online grocer Ocado have tumbled almost 10% after it warned customers are cutting back.My colleague Julia Kollewe explains:Ocado has warned that annual sales will drop because customers are trading down to value products and buying less overall amid a worsening cost-of-living crisis.The online grocer, which is owned partly by Marks & Spencer, said sales rose 2.7% from a year ago in the 13 weeks to 28 August, an improvement from the drop in the previous quarter.“At the same time, there remains extreme tightness with vacancies nonetheless remaining near record levels and economic inactivity reversing its recent falls to rise to its highest level since 2016. This was caused by people at opposite ends of the career ladder; largely driven by those aged 16 to 24 years and those aged 50 to 64 years. This participation gap in the labour market means hiring became even more challenging for employers.“While many people’s thoughts may be elsewhere at the moment, the cost-of-living crisis continues to be reflected in a squeeze on real terms pay. Despite historically strong nominal regular pay growth, real wages were down -2.8% on the year - one of the largest falls on record. Continue reading...

Lidl also reports big sales increase as research shows discount stores benefiting as shoppers economiseAldi has overtaken Morrisons to become the UK’s fourth largest supermarket for the first time, as grocery inflation hit a new record of 12.4% last month.Higher supermarket prices in August, adding £571 to the average annual grocery bill, encouraged more shoppers to closely manage their budgets, with the discount grocers benefiting, according to the market research company Kantar. Continue reading...

The sterling crisis of 30 years ago reinforced Britain’s ambivalence towards the European projectThis 16 September will mark 30 years since “Black Wednesday”, when the British pound was ignominiously ejected from the exchange rate mechanism (ERM) of the European monetary mystem. Not all anniversaries are occasions for celebration. This one certainly is not.Black Wednesday was “a day of disaster” from which John Major’s government never recovered. It had been Major, as chancellor of the exchequer in Margaret Thatcher’s government, who led Britain into the ERM in 1990, overriding the objections of his balky prime minister. Continue reading...