Economy

Is the government ready to start cutting taxes? After taking the burden to a post-war high, it seems ministers are preparing to change direction – in one area, anyway. This morning Jeremy Hunt announced that the energy levy on oil and gas companies, known as the ‘windfall tax’, will come to an end in 2028 – a direct response to growing fears that the effective 75 per cent tax on profits was driving business and investment out of the country. Divestment from the North Sea has become a heavily contested topic. Keir Starmer announced that Labour would ban all new production in the North Sea, perhaps putting into perspective for

The UK will narrowly avoid a formal recession this year. That’s the consensus that is emerging based on the current data. This morning’s Economic Outlook from the OECD – which forecasts 0.3 per cent growth in 2023 – reflects similar projections from the IMF’s latest update and the Office for Budget Responsibility, which have revised their figures upwards in recent months. But to what extent will this modest growth actually be felt by Brits? Here the picture is far less positive. Inflation – which remains stubbornly high, in Britain especially – continues to eat away at real wages. The OECD predicts that the UK will continue to suffer from some

Liz Truss’ fallen star has been rising again of late (at least a few degrees above the horizon) as gilt yields return to the heights they reached during her brief premiership. Together with sluggish GDP figures this has led many to wonder whether she was not right, after all, to make growth the absolute priority of her economic policy. Whether she can maintain her momentum following her latest intervention, adding her name to the 50 Conservative MPs calling for the abolition of inheritance tax, is another matter. There would be nothing more fatal to the Tories than to go into the next election offering one tax cut – for millionaires

Do you hate airport e-gates? Me too. The instructions are poor, the facial recognition frequently fails and the ‘Don’t abuse our staff’ posters tell you you’re trapped in a system that’s bound to annoy. Last Saturday it went from bad to worse, when all 270 e-gates at UK entry points stopped working. ‘A technical nationwide border system issue’, the Home Office called it. But I think we should know who’s responsible – and a Hollywood-hacker-style trawl has led me to a 2021 report by David Neal, ‘independent chief inspector of borders and immigration’. Neal reveals that a single-supplier contract for UK e-gates was awarded in 2013, until 2023-24, to a

Britain is paying a terrible price for two decades of fiscal incontinence. Our borrowing costs have risen to the highest amongst advanced economies. Core inflation (which excludes food and energy) is actually rising. Mortgage costs are spiking as expectations mount that interest rates will be raised once again. Chancellor Jeremy Hunt has conceded he would be comfortable with a recession if it brought down inflation. We have been living beyond our means, and the day of reckoning is here.  Rishi Sunak has lost any claim of being a ‘safe pair of hands’ at the tiller; all the opposition really needs to do is sit back and watch the Conservatives lose the

It wasn’t long ago that supermarkets stood accused of selling food too cheaply. Their price wars and two-for-the-price-of-one deals were destroying farmers, undermining local shops and making us fat. How long ago that now seems, with the government now considering 1970s-style price controls. While the measures would apparently be voluntary, they would fix the prices of a number of basic foodstuffs – the sort which Jack Monroe keeps her eyes on. The price of price-fixing is likely to be more pictures of empty shelves, which of course will be blamed on Brexit You don’t need to have studied economics in any depth to understand the problem with price controls. In

The government has been claiming since the start of the year that it’s on a mission to ‘halve inflation’ – despite having virtually no control in this area. Still, this week Rishi Sunak ramped up the narrative when the latest set of data showed the headline rate falling from 10.1 per cent on the year in March to 8.7 per cent in April. It was false optimism. And it’s backfired. Markets quickly saw past the headline rate and looked at all the worrying news underlying it: mainly that core inflation actually rose, nearing 7 per cent on the year in April. Borrowing costs have spiked since then: 10-year gilt yields hit 4.37 per cent

The government is delighted with today’s inflation update. Rishi Sunak released a clip this afternoon, talking about his government’s efforts to ‘halve inflation’ by the end of the year. ‘I know it’s still tough’ he says, but ‘the plan is working, and we are delivering.’ The problem is that it is not in his gift to deliver on his particular pledge. The economics in this video rival his chancellor’s coffee cup video from a few months back – in that they simply don’t add up. Politicians do not control inflation. They have no reliable mechanism for doing so. Windfall taxes do not bring down inflation, as he suggests in the video; and

We learned this morning just how much the government is struggling to keep its promise to bring down the national debt. But news from the International Monetary Fund (IMF) will be lifting spirits in No. 10. Perhaps it can make good on another pledge: to grow the economy. The IMF has once again revised its figures for estimated GDP growth, and it’s good news for Britain. Following on from a fairly dramatic lift last month in which the IMF halved its recession forecast for the UK, but still predicted a contraction, the Fund has once again upgraded its forecasts, now predicting 0.4 per cent growth this year. Moreover, the UK has been lifted from

One of the UK’s biggest economic problems is having so many people out of work – and the slowest return to pre-pandemic workforce levels in Europe. This is costly and slows growth, as taxpayers foot the bill for benefits while employers struggle to fill vacancies. Today’s figures show that it is getting better – but slowly.  The official unemployment count crept up to 3.9 per cent in the latest statistics. This is, ironically, a good sign as it shows more people are actually looking for work (about 12 per cent of the working-age population are on out-of-work benefits, although this is a figure that ministers seldom update and never publicise).