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Michael Simmons Michael Simmons

Britain is being pulled under by debt

Britain is slowly drowning in debt. Figures just released by the Office for National Statistics (ONS) show that in the financial year to July the state had to borrow £60 billion to tread water. That’s £6.7 billion more than by July last year and the third highest borrowing total for this period of the year since records began 32 years ago. Statisticians also managed to find almost another billion pounds in debt payments that now need to be added to the previous month’s figures.  When the Bank cut interest rates, something alarming happened in the borrowing markets There was better news, though, when looking at the month of July alone, with

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

Monday

James Forsyth James Forsyth

Can Kwarteng reassure the markets?

The Treasury has just released a statement saying that a medium term fiscal plan will be delivered by Kwasi Kwarteng on 23 November, accompanied by an Office for Budget Responsibility forecast. This plan will, the Treasury says, set out the government’s fiscal rules and how it intends to ensure debt falls as a percentage of GDP in the medium term. The Treasury also confirms the Times story this morning that there’ll be no new spending settlements, meaning an effective cut for departmental budgets. The question is whether the government can persuade the market that it is prepared to hang tough on public spending The Bank of England has also issued a

Kate Andrews Kate Andrews

The miscalculations exposed by Kwarteng and Truss’s Budget

The Chancellor’s first ‘fiscal event’ has revealed two major miscalculations – one by most of the political class and the other by the government. The political class broadly didn’t think Liz Truss’s government would actually push forward with its campaign pledges. It did. The government, for its part, appears to have badly underestimated the sceptical reaction of the markets to its economic agenda. Let’s take these in turn. First, anyone who is shocked by discussion of higher interest rates wasn’t paying attention during the leadership campaign. The attacks on ‘Treasury orthodoxy’ were frequent and explicit. Rishi Sunak insisted it was inappropriate to take aim at the Bank, while Truss called

Robert Peston Robert Peston

The Bank of England has no good options

How will and how should the Bank of England, and the Treasury, react to this morning’s continued fall in the value of the pound? I’ve been talking to former Bank of England executives and ex-Treasury officials, who make clear that the stakes are incredibly high and that reassuring markets will not be easy. This further devaluation in the currency is a serious problem for Chancellor Kwasi Kwarteng after his maxi ‘mini-Budget’ on Friday because it means the price of imports will continue to rise, stoking already-high inflation. And it raises the spectre that the government will struggle to borrow what it needs at acceptable interest rates, because of the falling

Sam Leith Sam Leith

In praise of the speeding crackdown

We all needed a laugh, what with the pound tanking and inflation running away, my old pal Kwasi delivering a Budget, probably for a bet, like Milton Friedman’s last cheese-dream, and the threat of nuclear annihilation starting to seem like a welcome turn up for the books. Said laugh has just been obligingly provided by the Metropolitan Police. They have just, without broadcasting the fact, decided to enforce the speed limit with the tiniest bit more rigour – and as a result, they’ve nicked more than two and a half times as many people for speeding in the first six months of this year than they did in the last

Fraser Nelson Fraser Nelson

Will the Bank of England now move to steady the pound?

After a weekend where the markets digested the Kwasi Kwarteng plan for growth, the pound hit $1.03 in early trading in Asia – the lowest rate since the dollar was invented in 1792. The fall was shortlived – it later rebounded to $1.07 – but the fact that it touched such a low at all has set off speculation that the Bank of England will stage an emergency intervention putting up interest rates by as much as one percentage point. ‘We’ve entered the part of the currency crisis where psychology takes over. That could mean the markets continue to test the Bank and the pound falls further, suggesting that the Bank

Saturday

Andrew Lilico

Kwasi Kwarteng’s growth gamble is a risk worth taking

New Chancellor Kwasi Kwarteng’s first ‘fiscal event’ was always going to be quite provocative and exciting. But in the end it went quite a lot further than expected. Far from pulling back when faced with the practicalities of being in office, Truss’s new administration did everything it had signalled, controversial or not, then threw in some even more controversial policies just for good measure. The centrepiece is the huge energy price package. The government estimates that this will cost £60 billion over the first six months. But since the policy involves capping wholesale prices and government subsidies to make up the difference, that £60 billion estimate is entirely subject to

Matthew Lynn

This isn’t a return to boom and bust

Massive tax cuts. A huge budget deficit. And a wild dash for growth, stoking a short-lived boom, before it all ends in a spectacular crash. As the new government unveiled the widest ranging tax cuts since the 1980s, along with a huge increase in the budget deficit, City commentators and the wiser sort of newspaper pundit are already comparing it to the ‘Barber boom’ of 1972 or the ‘Lawson boom’ of 1988. Both of those ended very badly. In their dreams, Sir Keir Starmer and Rachel Reeves are probably already fantasizing about an ashen-faced Liz Truss and Kwasi Kwarteng calling in the IMF for an emergency bail-out – before getting

Friday

Kate Andrews Kate Andrews

How worrying is the falling pound?

How are markets responding to Kwasi Kwarteng’s mini-Budget? A sharp fall in the pound today has plenty of critics arguing that the tax-slashing announcements have already proved a failure. Sterling fell this afternoon to $1.09, bringing the currency to another 37-year low against the dollar. This is more than a 3 per cent dip in just one day. The euro took a hit too, but a smaller one at 1.5 per cent. It’s difficult to separate this new record low from today’s announcements – but also near impossible to draw direct correlation, as the pound and euro have both been in freefall against the dollar for weeks now. With the

Kate Andrews Kate Andrews

Truss and Kwarteng borrow their way to tax cuts

Levelling Up secretary Simon Clarke described today’s fiscal event as a ‘game changer’ for Britain’s economy. Was he right? The announcement from Chancellor Kwasi Kwarteng was not so much an ‘event’ as a major Budget, which ushered in £45 billion worth of tax cuts – the ‘biggest tax cutting event since 1972’, according to the Institute for Fiscal Studies. It’s a remarkable tax-cutting Budget, with praise coming in thick and fast from the free-market think tanks All that was expected was announced: the National Insurance levy brought in for health and social care – which came in back in April – will be scrapped from 6 November. The planned corporation tax

Nick Cohen Nick Cohen

Labour’s debt binge dilemma

Labour has a populist argument against Liz Truss’s spendaholic plans to borrow money from the international money markets and direct it into the bank accounts of the privileged. ‘What do you get?’ Rachel Reeves and Keir Starmer will ask the public. ‘And who picks up the bill?’ For the overwhelming majority of the population the answer to ‘what do you get?’ is ‘not much’. And to ‘who picks up the bill?’ is ‘me, people like me, and our children and grandchildren’. The Conservative class interest in rewarding its supporters looks like a gift to the opposition. But the gift is not as generous as it appears. For two months now,

Fraser Nelson Fraser Nelson

The audacity of Kwarteng’s tax cut for the rich

George Osborne dreamed about it and Rishi Sunak told friends that he’d like to do it if everything went well and he was feeling brave. But this morning Kwasi Kwarteng has gone ahead and done it.  The ‘additional rate of tax’ – set up by Gordon Brown as a trap for the Tories in 2009 – has just been abolished. Right now, those earning more than £150,000 per year will pay 48.25 per cent on every pound they earn (45 per cent income tax plus 3.25 per cent National Insurance). From April next year, it will fall to 42 per cent (40 per cent income tax plus 2 per cent NI).

Isabel Hardman Isabel Hardman

Not all Tory MPs are happy about Kwasi Kwarteng’s mini Budget

Rachel Reeves’ response to the not-a-budget was one of the best Budget responses a shadow chancellor has produced in Labour’s 12 long years of opposition. It helps that the ‘Plan for Growth’ was so striking and ideological: not only does it create a clear dividing line with Labour, it also creates a division with the Conservative governments that preceded it. Reeves got to her feet remarking on a ‘comprehensive demolition of the last 12 years’, something Kwasi Kwarteng himself signalled repeatedly, including in his announcements that he would repeal legislation introduced in 2017 and 2021.  Labour will have to compete with that backbench Tory opposition in order to be heard

James Forsyth James Forsyth

Truss and Kwarteng’s mini-Budget is a big gamble

Kwasi Kwarteng and Liz Truss are a Chancellor and a Prime Minister in a hurry, they know they have only got 18 months to get the economy growing if they are to win-re-election. So, they went all out in today’s non-budget Budget. Not only did they cancel the corporation tax rise and reverse the National Insurance increase but they abolished the higher rate of tax and brought forward the cut in the basic rate of income tax. This is all against the backdrop of an energy price guarantee that the Chancellor said would cost £60 billion over the next six months. This and the tens of billions of tax cuts

John Connolly John Connolly

Kwasi Kwarteng’s £45 billion tax cuts

Chancellor Kwasi Kwarteng has just announced a surprise 5p cut to the top rate of income tax and a 1p cut to the basic rate of tax. Together with stamp duty cuts and others, it will reduce tax by £45 billion by 2026-27 according to the Treasury’s analysis. The IFS says this is the biggest tax cutting event in half a century. Kwarteng confirmed that the National Insurance rise will be reversed, with the tax going down from November. Stamp duty will also be cut. Kwarteng argues that this will put money back into the economy and kick start growth, but without an OBR forecast there is no formal assessment of the actual

Thursday

Kate Andrews Kate Andrews

Why the interest rate rise might frustrate Liz Truss

Rising interest rates is a key pillar of Trussonomics. Liz Truss herself has always stopped short of saying this explicitly, pointing fingers instead at the Bank of England for its failure to curb spiralling inflation. But the economists advising her have made clear, in no uncertain terms, that they think interest rates have been too low for too long.  Right from the start of her leadership campaign, Truss was far more vocal about her criticisms of the Bank; a point made even clearer once she entered No. 10 and her Chancellor Kwasi Kwarteng set up bi-weekly meetings with the Bank’s governor Andrew Bailey. With this new pressure being applied on the

Wednesday

The Spectator

In search of Trussonomics

When Liz Truss entered the leadership race there was no such thing as ‘Trussonomics’. She began her campaign with no real expectation of winning and without any serious guiding philosophy. Rishi Sunak did her a great service by portraying her throughout the leadership campaign as a crazed tax-cutter, a disciple of Ronald Reagan. But in truth, her economic policy was nowhere near as coherent as Sunak made out. Truss just about scraped through the soundbite war of the debates, but without any real pro-growth, tax-cutting agenda. All she pledged to do during her campaign was to freeze forthcoming corporation tax rises and shave 1 per cent off National Insurance. This

Martin Vander Weyer Martin Vander Weyer

Is this really the moment to scrap bankers’ bonuses?

Chancellor Kwasi Kwarteng – keen to sharpen the City’s competitive edge, we’re told – wants to remove the legislative cap, imported from Brussels in 2014, that limits bankers’ bonuses to 100 per cent of their base salary, or up to 200 per cent with shareholder approval. That raises interesting questions. Was the cap a good idea in the first place? If not, why wasn’t it binned as soon as we left the EU? Is now the ideal moment to do so? And are bankers still a breed of greedy bastards? The answer to the first question is certainly not. This column called the cap a ‘boneheaded’ measure that would merely

Matthew Lynn

The painful road to lower inflation

In the end, it could have been worse. The Federal Reserve might have followed Sweden’s lead, with a whole one point rise in interest rates, or it could have even decided to short-circuit the whole process and go straight for a 1.5 per cent increase. Instead, it opted for the safer course, imposing a 0.75 per cent increase in rates much as the market expected. Even so, it made one thing absolutely clear. It is not going to let up in its battle to bring inflation back under control – and the rest of the world will have no option but to follow its lead. The markets were primed for

Kate Andrews Kate Andrews

Will Truss’s plans to spend big work?

Big spending announcements tend to come alongside big press conferences. During the pandemic years, furlough announcements, extensions and business support were delivered in front of a podium, with rough figures usually attached to each policy. It was the same for the energy crisis, at the start. But as the costs of the support schemes rose, we started to lose transparency. The £9 billion announcement in February came with a headline figure and a rough breakdown of where the money would come from. The £15 billion announcement in May came with a headline figure, but much of the funding stream was glossed over, assumed to be borrowed. These multi-billion pound support

Toby Young Toby Young

Why has PayPal cancelled the Free Speech Union?

I thought one of the benefits of being cancelled – I lost five positions in quick succession at the beginning of 2018 – is that it immunises you from being cancelled again. After all, what more dirt could be thrown at me? The offence archaeologists did such a thorough job four years ago, sifting through everything I’d said or written dating back to 1987, that there was nothing left to dig up. But it turns out that was naive. Last week I got cancelled again. The instrument of my downfall was PayPal, the technology company that supports online money transfers and operates as a payment processor for online businesses, auction