Economy

‘I told you so’ – the most irritating four words in the English language, dripping with self-satisfaction and schadenfreude. So, forgive me. A year ago I – or rather, ‘we’, the House of Lords Economic Affairs Committee of which I was chair – told you, the great British public, that the UK risked economic catastrophe. A cross-party group including Corbynites and Thatcherites, we came to one crushing conclusion: unless this government took tough decisions this Parliament, the UK’s sky-high debt might well become unsustainable.  A year on, what had been the subject of intense but largely ignored scrutiny in Lords’ Committee Room 2A has, at last, become the dominating issue. Being

Donald Trump’s political and legal assault on the Federal Reserve has provoked concern and indignation from the defenders of central banks’ operational independence. Amid the sound and fury, some simple points are being forgotten. Whether or not this distracts central bankers from their main goal of controlling inflation is a matter of debate First, public trust and confidence in central banks is critical if banks are to be operationally independent. That trust was shaken when many central banks lost control of inflation in 2021, erroneously seeing it as ‘transitory’. In the inquest that followed, many central bankers blamed this mistake squarely on their forecasting models. Clearly models had much to answer

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

It will at least give the cabbies something to genuinely complain about. Amid all the wheezes that Chancellor Rachel Reeves is plotting to fix the ‘black hole’ in the public finances, she is now considering a ‘taxi tax’. Ahead of November’s Budget, it has been floated that VAT may well be applied on all cab rides. But this plan is likely to end up backfiring badly on Reeves – and the government more broadly.  According to reports this week, the Chancellor is likely to impose a blanket 20 per cent rate of VAT on all taxi rides. Right now, taxi firms outside of London do not have to charge VAT

There really is no good news for Rachel Reeves as she prepares her second Budget. This morning’s borrowing figures are not just bad; they hint at a sense of hopelessness, that Britain is sliding inexorably towards a very deep fiscal crisis. This is yet another fiscal black hole for Reeves to fill, along with another about to be created by the OBR In August, the government had to borrow £18 billion, £3.5 billion more than in August 2024. This is in spite of £40 billion worth of tax rises (or rather tax rises which were hoped to raise an extra £40 billion) in last year’s Budget. Government receipts are indeed up

The Bank of England has held interest rates at 4 per cent. Threadneedle Street’s Monetary Policy Committee (MPC) voted seven to two to keep rates where they are. The fact inflation now sits at almost double the Bank’s 2 per cent target outweighed concerns about the slackening jobs market and what its impact on Britain’s lacklustre growth. Two members voted to cut rates to 3.75 per cent, but the overall decision is no surprise. There’s a growing sense that the bulk of committee members feel they perhaps made a mistake in cutting rates last month with inflation still climbing. Markets don’t expect another cut this side of Christmas and the

Tesla does not look like a great investment right now. The competition from better and cheaper Chinese electric vehicles is savage and Elon Musk’s outspoken political views have tarnished the brand, at least among the eco-conscious liberals who first adopted it. And yet, Musk has just spent $1 billion (£733 million) of his own money on its shares. His investment only makes sense as a bet on its robotics unit – but that is still very high risk for the company’s pugnacious CEO.  No one could ever accuse Musk of not putting his money where his mouth is. While Tesla may be under more pressure than ever, yesterday he sank