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Michael Simmons Michael Simmons

The problem with removing the child benefit cap

Despite having a £30 billion fiscal hole to fill Rachel Reeves might be about to splash the cash. If reports are to be believed, in the coming weeks the lifting of the two-child benefit cap will be announced. The cost is £3bn every year.  The cap was introduced under George Osborne to stop families claiming the child element of UC for three or more children. A committee of ministers and officials are due to make a series of recommendations to tackle child poverty before the November Budget, and it’s now widely expected that this will include scrapping the cap.  But will lifting it do anything to improve child poverty? There

Spotlight

Featured economics news and data.

Ross Clark Ross Clark

No, Ed Miliband: zonal pricing won’t cut energy bills

Is Ed Miliband going to announce a move towards a zonal electricity market, where wholesale prices would vary between regions of Britain? It would appear to be on cards following the Energy and Climate Secretary’s interview on the Today programme in which he said he was considering the idea. Miliband’s apparent support for the plan follows intense lobbying by Greg Jackson, CEO of Octopus Energy as well as support from the National Energy System Operator (NESO), the new government-owned company which oversees the grid. However, zonal pricing is bitterly opposed by others in the energy industry, including Chris O’Shea, the generously-moustached CEO of Centrica, and Dale Vince, CEO of Electrocity

Sunday

Chris Reiter and Will Wilkes

Can German cars survive Donald Trump?

In 2003, Donald Trump took delivery of a Mercedes-Benz SLR McLaren, a $450,000 German supercar that blended precision engineering with Formula 1 bravado. Photographed grinning over its bodywork in Manhattan, he looked every bit the unabashed playboy flaunting a new toy. Two decades on, he’s threatening to hammer the very firm that built it – and Germany’s car industry as a whole – with a 25 per cent tariff on European auto imports. Germany’s post-Cold War boom was built on a single assumption: that ever-deeper globalisation was here to stay. As we explore in our book Broken Republik and its German sibling Totally Kaputt?, the country’s carmakers made an all-in

Saturday

James Heale James Heale

Michael Heseltine on Thatcher, Boris and Badenoch

30 min listen

An MP for 35 years, Michael Heseltine served as Environment Secretary and then Defence Secretary in Margaret Thatcher’s government. Following his well-publicised resignation in 1986, he returned to government under John Major and was Deputy Prime Minister for the last two years of Major’s premiership. Once seen as a potential successor to Thatcher and Major, he has sat in the Lords since stepping down as an MP in 2001, and in recent years has been an outspoken critic of Brexit. Lord Heseltine sits down with James Heale to discuss his thoughts on the current Labour government, how to fix Britain’s broken economy and why devolution should go further. ‘Deeply depressed’

Matthew Lynn

Give holiday home owners a break

If you have had your eye on a bungalow along the Devon coast, a cottage in the New Forest, or a tastefully painted terrace in one of the sea-facing villages in Norfolk, this could be your moment. Many holiday home owners are choosing to sell up to avoid a hike on council taxes. From next week, local authorities will be allowed to charge double the normal rate for second home owners. Average bills are set to rise from £2,280 to £4,560. This crackdown is likely to be popular. After all, who has sympathy with those who own two homes, when many young people are struggling to get on to the

Friday

Tom Bower

The flight of the millionaires will impoverish Britain

Steel magnate Lakshmi Mittal is considering leaving the UK because of the Labour government’s abolition of the ‘non-dom’ tax regime. This confirms that Keir Starmer’s politics of envy is successfully destroying the British economy. Mittal would join tens of thousands of millionaires and billionaires – British and foreign – who have already abandoned Britain to avoid paying even more tax: all of them ranked among the 1 per cent of British residents, contributing 29 per cent of all the taxes raised by HMRC. These tax exiles had been willing to pay fair taxes, but many baulked at Starmer’s decision not only to tax their offshore income but also their foreign-based

Matthew Lynn

Who’s going to miss WH Smith?

WH Smith is opting for the oldest trick in the corporate playbook. It is changing its name. It might have been better to get some new carpets – or at least to freshen up some of the display counters. As the chain’s high street shops are sold off, they will be rebranded as TG Jones, whoever the heck he was. Sure, a few nostalgics might mourn the passing of one of the oldest names on the British high street. And yet, the blunt truth is that the brand was already dead – and no one will miss it now.  If you want to buy some over-priced water, or pick up

Michael Simmons Michael Simmons

Britain narrowly escapes recession – again

The Office for National Statistics (ONS) has just confirmed that the economy ‘grew’ by 0.1 per cent in the last three months of 2024. Its final estimate for the last quarter of last year confirms that Britain’s economy continues to float just above recession territory. The very modest growth in the final quarter was driven by the services sector, also 0.1 per cent, which outweighed a 0.3 per cent contraction in construction. On a per-head basis, GDP fell by 0.1 per cent. Each quarter from October 2023 to June last year had GDP growth revised upwards by 0.1 percentage points, with the ONS’s Chief Economist, Grant Fitzner, saying: ‘Today’s updated

Ross Clark Ross Clark

What happened to the post-Covid roaring twenties?

It has become customary for Budgets to unravel within 48 hours of being delivered. Rachel Reeves didn’t have much in the way of fiscal announcements to deliver on Wednesday, but even what she did have to say seems to be falling apart. It has since transpired that the Office for Budgetary Responsibility (OBR) did not take into account any risks from a transatlantic trade war when downgrading its growth forecast for 2025 from 2 per cent to 1 per cent. This is an additional risk which is almost certain to erode her newly-clear fiscal headroom and lead to more tax rises in the autumn Budget. If Reeves was hoping for

Ross Clark Ross Clark

Rachel Reeves should leave ISAs alone

Voters won’t want to thank Rachel Reeves if the Office for Budgetary Responsibility (OBR) turns out to be right in its forecast for zero real growth in earnings in 2026 and 2027. But static earnings could turn out to be the least of problems for households. They will take an even dimmer view of the Chancellor if they wake up to find half their savings have evaporated. But that is what may well happen if, as Treasury documents suggest, Individual Savings Accounts – or ISAs – are reformed in the next Budget to discourage people from holding cash and encourage them to stuff their savings into the stock market instead. 

Thursday

Michael Simmons Michael Simmons

Are tax hikes on the horizon?

Tax rises are almost certainly coming, Britain’s leading fiscal think tank has said. Those taxes are most likely to fall on pensioners and the wealthy, according to Paul Johnson, director of the Institute for Fiscal Studies (IFS). ‘There is a good chance that economic and fiscal forecasts will deteriorate significantly between now and an autumn Budget. If so, she will need to come back for more, which will likely mean raising taxes even further,’ the IFS director said. The tax burden is already just a year away from reaching its highest level in history – beating levels not seen since 1948. Reeves continues to blame a ‘changing world’ for the economic

Ross Clark Ross Clark

Trump has Britain in a bind over car tariffs

The government has less than a week to decide how to respond to Donald Trump’s announcement of 25 per cent tariffs on car imports to the US. Keir Starmer and Rachel Reeves still seem to think that Trump might exempt Britain, but there is little sign of that coming out of Washington. Unless Peter Mandelson turns out to possess rather more diplomatic skills than most people will credit him with, the Prime Minister will be faced with an uncomfortable choice: does Britain retaliate, thus risking an escalation of the transatlantic trade war, or does it suck it up and watch as Britain’s beleaguered car industry suffers even more than it

Katy Balls Katy Balls

Can Reeves avoid further tax rises?

Rachel Reeves wakes to a swathe of tricky front pages this morning after the Spring Statement in which the Office for Budgetary Responsibility (OBR) slashed next year’s growth forecasts. The Chancellor also announced extra welfare cuts in order to meet her fiscal rules. The verdict on the statement isn’t exactly positive, with Reeves facing criticism from both left and right. The Daily Mail brands Reeves ‘deluded’ and the Daily Telegraph warns of ‘five years of record taxes’. The Guardian splashes with ‘Reeves accused of balancing books at expense of the poor’ while the Financial Times says ‘Tax rise fears cloud Reeves’s fiscal fix’. Reeves could take some small comfort from the

Martin Vander Weyer Martin Vander Weyer

UK tax on US tech is a useful bargaining chip

The Digital Services Tax (DST) is a relatively easy bargaining chip to give away in a last-ditch bid to appease Donald Trump, whose final menu of tariffs on UK exports to the US is expected imminently. First tabled by Philip Hammond as chancellor in 2018 and enacted by his successor, Sajid Javid, two years later, this 2 per cent levy on tech multinationals with more than £25 million of UK digital revenues was always seen as a raid on the likes of Apple, Amazon, Netflix, Google, Meta and Microsoft,  though it must by now also catch Shein and other Chinese operators – and was always a provocation to the White

Wednesday

Michael Simmons Michael Simmons

The five bombshells in the OBR’s economic outlook

There is perhaps no document more useful for understanding the state of the nation than the Office for Budget Responsibility’s ‘Economic and Fiscal Outlook’. The 180-page document, released as soon as the Chancellor sits down after a Budget or financial statement, can not only seal the fate of a government but also tell us where the country is heading. Today was no exception. The OBR’s outlook was filled with bombshell after bombshell. Here are five of the most shocking findings in the report: 1. The OBR’s housing forecasts suggest Labour is nowhere near to achieving its target of building 1.5 million new homes in this parliament – which Rachel Reeves already

Michael Simmons Michael Simmons

Reeves’s Spring Statement was written for the OBR

Rachel Reeves didn’t want today’s Spring Statement to be seen as a budget, but a budget it has turned out to be. The Chancellor has had to find £15 billion of spending cuts across welfare and the rest of government. Rising borrowing costs at the start of the year chipped away at her headroom and the Office for Budget Responsibility (OBR) has now confirmed that the £10 billion margin she left herself in the autumn was wiped out. Had the Chancellor not acted today she would have broken her ‘ironclad’ fiscal rule by more than £4 billion – a £14 billion swing since the Budget. The spending cuts Reeves has

Isabel Hardman Isabel Hardman

Rachel Reeves’s non-Budget is very bad news

Rachel Reeves framed her Spring Statement around the insistence that Labour’s Plan for Change was already working, which meant that any changes she was having to make today had to be framed as small ‘adjustments’, rather than the sort of change of course that would allow the Conservatives to claim she was delivering an ‘emergency budget’.  She insisted that she was sticking to only one fiscal event a year, but the Chancellor did have to make a number of admissions in today’s speech, chief among them that the OBR had cut its growth forecast for the year from 2 per cent to 1 per cent. She said she was ‘not

Coffee House

Spring Statement: Rachel Reeves says 2025 growth forecast halved

Rachel Reeves delivered some bad news in her Spring Statement: the UK’s growth forecast has been halved to 1 per cent for 2025. But the Chancellor revealed that the Office for Budget Responsibility has upgraded its longer-term growth estimates from 2026. Reeves also announced a benefits shake-up and a crackdown on tax avoidance. Here’s how it unfolded on our live blog:

Ross Clark Ross Clark

Falling inflation may have rescued Rachel Reeves

Clothing retailers have saved Rachel Reeves from having to go naked into the debating chamber. As the Chancellor rises to deliver her Spring Statement today, she will have the comfort of knowing that the Consumer Prices Index (CPI) has fallen from 3.0 per cent to 2.8 per cent – and unexpectedly at that. The main reason is that clothing retailers cut their prices by 0.3 per cent in February – against a 2.1 per cent rise in February 2024. The fall will help ease pressure on households, but nothing like as much as it will ease pressure on Reeves herself. A revival of the cost-of-living crisis is the last thing

Michael Simmons Michael Simmons

Is Reeves brave enough to give the economy the medicine it needs?

Rachel Reeves has wanted to downplay the significance of the Spring Statement this afternoon. But with every leaked proposal and briefing, the statement feels increasingly like a full-blown Budget. Soaring borrowing costs, and a growth forecast set to be slashed in half, have wiped out the Chancellor’s £10 billion headroom against her ‘ironclad’ fiscal rules. Reeves’s statement could now include civil service reforms, NHS productivity measures and an ‘austerity-lite’ stance on future spending. There will be no major tax decisions, barring a possible extension to fiscal drag. But today’s announcement is a crucial one for the Chancellor. Reeves’s didn’t expect the outlook for Britain’s economy to be so bleak. Yet

Ross Clark Ross Clark

Rachel Reeves’s Spring Statement looks like a missed opportunity

The Spring Statement was supposed to be a fiscal non-event, but instead, it is shaping up to be a mini-Budget. We have been primed, however, to expect only spending cuts – not tax rises (and presumably not tax cuts either). So what can we expect? So far, Liz Kendall has announced changes to welfare benefits that are supposed to save £5 billion a year by 2029–30, the last – partial – financial year of this parliament. In addition, it has been mooted that reforms to government administration – perhaps meaning up to 50,000 job losses in the civil service – will save £2 billion by the same year. Why the

Tuesday

Matthew Lynn

If Bailey won’t call for radical growth reforms, no one will

It was hardly the message Chancellor Rachel Reeves would have been looking for a day before a Spring Statement which could well make or break her political career. The Governor of the Bank of England, Andrew Bailey, delivered a speech yesterday warning that growth was going to prove very hard over the next five years. The Governor is completely right to emphasise how hard it will be to expand the economy. But he should be making the case for far more radical reforms. If he won’t, no one else will. Bailey is staying within the ‘managed decline’ consensus To paraphrase PG Wodehouse on Scotsmen, ‘the difference between the Governor and