Letters: What happens if interest rates rise?

Spinning plates Sir: Kate Andrews is right to highlight the looming risk of inflation (‘Rishi’s nightmare’, 6 March), but to say that the UK has known barely any inflation for almost a generation misses a very painful point. It may be true for consumer prices. Low interest rates and quantitative easing, along with other ill-advised stimuli, have caused huge inflation over the past two decades in the single greatest expense throughout most working people’s lives: the cost of housing. Along with rash promises such as the triple lock, it has been responsible for a vast transfer of wealth from young to old, from the less well-off to the more affluent,

George Osborne takes a pop at Rishi Sunak’s tax hike

Last week Rishi Sunak presented his second Budget to the House of Commons. Today, three former Chancellors weighed in. Speaking at an online event hosted by the Institute for Government, Norman Lamont, Alistair Darling and George Osborne joined the Institute’s director Bronwen Maddox to discuss the state of the UK economy, and how their past experiences lead them to reflect on recent events. There was a surprising amount of consensus from the panel – not on the best way to handle or manage the economy, but about what is politically possible. Fuel duty came up multiple times as an area of policy that doesn’t gel with the government’s stated commitments

Katy Balls

Sunak’s NHS pay rise headache

Will the government press on with a 1 per cent pay rise for nurses? Despite the Chancellor announcing tax rises in his Budget, it’s a recommendation over NHS pay that is proving the most contentious for ministers. The Department of Health has recommended a 1 per cent rise to the independent panel that advises the government on NHS salaries. This is below what had been expected — with nurses’ unions campaigning for a pay rise as high as 12.5 per cent. Government aides are keen to stress no decision has been made as the independent body is not due to make its recommendation until May.  Speaking today before the health select committee,

Starmer’s Labour is doomed but it’s not his fault

Keir Starmer has caught a lot of flak this week for his response to the Budget. The complaints are that he wasn’t strong enough, his opposition to corporation tax rises was a mistake and that he had nothing to really say that managed to stick with the public. It has added to a sense of Starmer’s leadership of the Labour party being on a downward spiral. Yet Starmer has probably done as well in his opening year as Labour leader as anyone could have. He isn’t the problem – it’s his party. The reality is that Labour couldn’t win the next election with anyone in charge. The problem goes well beyond

Why is the SNP afraid of issuing its own government bonds?

Rishi Sunak’s budget appeared to offer some good news to Scots, not that the SNP saw it that way. An additional £1.2 billion in Barnett funding was handed over to Scotland’s government. This is on top of £9.7 billion in extra spending delivered over the past year for pandemic support. But the SNP Scottish government took a different view. ‘While I welcome some of the announcements today, it is clear the Chancellor has not matched Scotland’s ambition for economic recovery and supporting households,’ said Scottish Finance Secretary Kate Forbes. Forbes and her colleagues often point out that ‘Scotland’s ambition’ includes more borrowing powers. Throughout the pandemic, the SNP has been at

Immigration is no longer a political problem

Ask voters what the most important issue facing Britain is and just 2 per cent say immigration. Even when you expand it to the most important issues, the figure only reaches 6 per cent. This is a dramatic turnaround from 2015 when 56 per cent listed immigration as one of the top issues facing the country. In my Times column today, I ask what explains this shift. The end of free movement and the resumption of border control has taken much of the heat out of the issue In part, it is Covid. Before the pandemic, net migration to Britain was running at 313,000. In the past year, though, hundreds

Sunak’s Covid budget offers a glimpse of Britain’s Brexit freedoms

Rishi Sunak’s planned corporation tax hike is a reminder of the importance he sets by trying to put the public finances on a sounder footing. He think that his room for manoeuvre in this crisis has been, in part, because the public finances were in reasonable shape before it.  The vaccination programme remains this government’s most important economic policy As I say in the magazine this week, his concern about debt has long been about the cost of servicing it (which remains low) rather than its precise level. But the debt pile is now so large that small movements in interest rates have big consequences. But straightening out the public

Kate Andrews

Rishi’s nightmare: will inflation crush the recovery?

At first, it seems to make no sense. Britain is in the middle of the worst economic crash in recorded history, with a Chancellor who is famously keen on low taxes, spending control and sound money. But Rishi Sunak this week presented a Budget that seems inspired, in parts, by Labour’s last manifesto. Debt surging to £2.8 trillion. Public spending up by a quarter in a year. And taxes: soon going up. Corporation tax, freezes to the personal tax threshold. The explanation most Tories comfort themselves with is that Sunak wants to explain to a high-spending Prime Minister that today’s cash splurge is tomorrow’s tax rise. But in truth, Sunak

Martin Vander Weyer

The case for keeping business taxes low

Why should business pay tax at all? That’s a provocative but forlorn question to ask in Budget week. Business pays corporation tax on profits because that’s what voters expect, partly because many are conditioned to believe profit is a sin and partly because all would prefer to pay less tax themselves. Investors pay tax on capital gains because — as the American bank robber Willie Sutton said of his crimes — that’s where the money is. And companies pay more tax as business rates on premises because that’s the easiest way to collect contributions towards public services from which they benefit — but it’s also an easy levy to relieve

Portrait of the week: A Covid Budget, a Cotswold meteor and Angelina Jolie sells Churchill’s painting

Home First-dose coronavirus vaccinations totalled more than 20 million. A study suggested that in the over-eighties, a single dose of either the Pfizer or Oxford-AstraZeneca vaccine was more than 80 per cent effective at preventing hospitalisation. Hospital admissions of 8,452 in the week ending 27 February were 22 per cent down on the week before that. At dawn on 28 February, total UK deaths (within 28 days of testing positive for coronavirus) had stood at 122,705, including 2,340 in the past week, down by 32.3 per cent on the week before that. Six people with the Brazilian variant of coronavirus were detected in Britain, but one could not be traced.

James Forsyth

What Rishi Sunak could learn from the vaccine rollout

Barely a year has passed since Rishi Sunak’s first Budget. Its centrepiece was a £30 billion stimulus designed to calm nerves about Covid-19 even though barely 500 cases had been diagnosed in the country. The Commons chamber was packed, with not a mask in sight. Few that day would have thought that in a year’s time the country would be in its third national lockdown and the economy would have suffered its worst slump since the Great Frost of 1709. The pandemic has made a mockery of nearly every optimistic prediction. The government is now moving with extreme caution. Even though vaccines have a greater effect with every passing day,

This was a Budget for the end of the Covid crisis

The Chancellor’s crisis management has been excellent. The Budget was another reflection of that, as Rishi Sunak unveiled further significant, targeted support to the areas of the economy that needed it most. Over the last year, fiscal policy has acted as the main shock absorber for the economy. Including measures announced today, a massive £352 billion has been spent on Covid support. This approach has been fully justified, with low inflation, rates and yields providing ample fiscal space. Debt dynamics have allowed the government to borrow cheaply from investors. Also, as we have seen over the last year, the Bank of England’s Quantitative Easing programme has led it to become


Caroline Lucas finds Rishi Sunak’s weak spot

Rishi Sunak’s Budget has been greeted fairly favourably. The Chancellor has succeeded in avoiding sparking uproar on the Tory backbenches. And Labour’s response was muted. But not everyone is happy. Step forward Caroline Lucas. The Green party MP, beamed in to the Commons from Brighton (where else?), found a fatal flaw in Sunak’s announcement: ‘I say in all seriousness, our nation’s health and prosperity would be better served by a Chancellor who cared rather more about hedges and hedgehogs and less about hedge funds’ Mr S is glad to finally hear MPs sticking up for the issues that matter…

Rishi Sunak is a prime minister in waiting

It is always a pleasure to see a first-rate mind in action, as we did during today’s Budget. Equally, when a Chancellor gives such an assured performance, especially if his Prime Minister is, shall we say, controversial, it makes people think. The bubble reputation is a fickle business, especially when Tory MPs are the umpires. In recent weeks, Rishi Sunak’s share price wobbled. Bears came into the market. Was this youngster as good as people had been saying?  There were grumblings on the backbenches – admittedly not an unusual sound in the modern Tory party – about the prospect of tax increases. By the time the Chancellor sat down, the

Lloyd Evans

Rishi reveals his calculating streak

Before the budget, the TV pundits like to tell us about divisions between the PM and his next-door neighbour. The story is that boom-and-bust Boris can’t wait to splurge cash on a set of mega-projects that would put a Persian emperor to shame. Build a bridge. Burrow a tunnel. Concrete over an estuary and plonk an airport on top. He wants to tarmac his way out of trouble. But the smooth and neatly combed Chancellor, Rishi Sunak, plans to create fiscal stability and to take things from there. He looked every inch the central banker as he delivered his budget today with his gleaming hair and immaculate blue suit. Next

Katy Balls

Five things we learnt from the Budget

Since Rishi Sunak became Chancellor, he has been more focussed on spending money than raising it. Sunak has borrowed more in his first year in his job that Gordon Brown did in his whole time as chancellor. While today’s Budget saw Sunak extend several relief schemes, he also used it to take a few tentative steps to showing how he plans to put the economy on a solid footing following the pandemic.  Stressing that fairness and honesty would define his approach, Sunak did what many in his party had warned against and raised taxes. Here are five things we learnt from Sunak’s Budget: 1. Corporation tax will increase to 25 per cent

Nick Tyrone

Labour is right to be scared of Rishi Sunak

Labour is terrified of Rishi Sunak. Today’s Budget showed exactly why. The Chancellor put in an impressive performance: It was assured and hit the right notes at the right times. It also laid the groundwork for a narrative on the economy that will work very well for the Tories. Sunak told voters that George Osborne’s cuts created the money that comprised the Covid recovery spending. This ties together the whole of the last decade of Tory rule in a neat package – something Boris Johnson has avoided doing with his ‘I’ve only been Prime Minister for five minutes’ routine. Labour folk will now complain and shout ‘Tory austerity!’ until they are blue in the face.

James Forsyth

Why Rishi Sunak is hiking corporation tax

It might seem a strange thing to say about a Chancellor who is presiding over an annual deficit of £355 billion, but Rishi Sunak is a fiscal conservative. This is what explains his decision to hike corporation tax to 25p in 2023. He thinks that this move is necessary to begin to put the public finances on a sounder footing. The increase in corporation tax is offset by the so-called ‘super deduction’. This allows companies to write off 130 per cent of the cost of an investment against tax for the next two years. The aim is to try and boost investment and help address this country’s long-standing productivity problems.