Category Archives: Economics

Half of poorest countries have cut health spending despite Covid, says Oxfam

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Analysis of budgets finds rich nations, including UK, ‘exacerbated explosion of economic inequality’

Many of the world’s poorest countries have cut health spending during the last two years, sometimes to make debt repayments to rich creditors, according to a report by Oxfam that shows inequality between rich and poor nations worsening during the coronavirus pandemic.

Analysis of national budgets across 161 nations found that despite the biggest global health emergency in a century, half of low- and lower-middle-income countries cut health spending, while almost half cut their welfare budgets and almost three-quarters cut education spending.

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Unfunded tax cuts mean UK ‘will need £60bn spending cuts’

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IFS says Kwasi Kwarteng’s mini-budget will leave ministers making serious reductions in public services

Kwasi Kwarteng will need to find £60bn of savings by 2026 to fill the gap left by unfunded tax cuts and the costs of extra borrowing triggered by a panicked reaction on international money markets to the chancellor’s “mini-budget”, according to the Institute for Fiscal Studies.

The UK will also struggle to hit the chancellor’s 2.5% growth target, with economic forecasts by the investment bank Citigroup that the IFS uses to underpin its analysis showing the UK will struggle to grow at more than 0.8% on average over the next five years.

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Cutting oil output risks global economy, warns US Treasury secretary

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Janet Yellen’s comments come as figures show business activity declining across most UK regions

The world’s biggest oil-producing nations cutting production at a time of soaring energy costs is “unhelpful and unwise” for global economic growth, the US Treasury secretary has warned, amid intense pressure from sky-high inflation.

Ahead of meetings hosted by the International Monetary Fund in Washington this week, Janet Yellen said the move by Opec+ – the oil production cartel led by Saudi Arabia, plus Russia – risked undermining the world economy.

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Truss and Kwarteng will face fury of Tory MPs in week of crisis meetings

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The PM and chancellor will try to stop panic spreading through the party after their high-risk economic plan threatens a ‘death spiral’

The prime minister, Liz Truss, and the chancellor, Kwasi Kwarteng, will face the wrath of Tory MPs at a succession of crisis meetings in parliament this week as their high-risk economic policies hit their poll ratings and spread panic in all wings of the party.

After a turbulent first five weeks at No 10 and an ill-disciplined, chaotic annual conference in Birmingham last week, Truss is expected to address the 1922 Committee of Tory backbenchers on Wednesday evening after taking on Keir Starmer at prime minister’s questions.

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Behind Moscow’s bluster, sanctions are making Russia suffer

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High oil and gas revenues notwithstanding, Putin’s ability to fight is being eaten away as the months go by

Fears that Russia is navigating its way around sanctions are unfounded, according to experts who say Moscow is suffering a bigger hit than institutions such as the World Bank have been predicting.

Some analysts have interpreted the strength of the rouble, the size of the warchest of cash available to Vladimir Putin and the Kremlin’s ability to redirect exports destined for Europe to willing southern neighbours as a signal that the arsenal of sanctions deployed against Moscow is failing to bite.

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Public sector job losses could pass 100,000 if government refuses pay rises, says IFS

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Chancellor must top up budgets or face industrial action and further recruitment issues, thinktank warns

More than 100,000 public sector workers would lose their jobs this year if the government refuses to fund higher than expected pay awards for nurses, doctors, teachers and care workers, according to the Institute for Fiscal Studies.

The IFS said the chancellor, Kwasi Kwarteng, faced a choice of either topping up public sector budgets or accepting the likelihood of industrial action, further problems recruiting and retaining staff, and a decline in quality of services already under extreme strain.

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Kwarteng considers extending mortgage guarantee scheme

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Initiative may continue beyond December as bank bosses raise concerns over mortgage market

The chancellor is considering extending the government’s mortgage guarantee scheme after UK bank bosses raised concerns over the state of the UK’s mortgage market at a high-level meeting at No 11 Downing Street.

The meeting on Thursday – which was attended by chief executives including Alison Rose of NatWest, Charlie Nunn of Lloyds Banking Group, HSBC UK’s Ian Stuart, Mike Regnier of Santander and TSB’s Robin Bulloch – was scheduled amid mounting fears about the potential fallout from rapidly rising mortgage rates.

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IFS: Millions in Britain ‘face stealth tax raid’ under Liz Truss’s plans

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For every £1 given workers by cutting tax rates £2 was being taken via freeze on income tax thresholds, thinktank calculates

Millions of households are facing a “stealth” tax raid under Liz Truss’s government despite her promise to support workers through the cost-of-living crisis by lowering their tax bills, Britain’s leading economic thinktank said on Wednesday.

The Institute for Fiscal Studies (IFS) has calculated that for every £1 given to workers by cutting headline tax rates, £2 was being taken away through a freeze on the level at which people begin paying tax on their earnings.

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Fears grow over oil price as Opec+ agrees to bigger than expected output cuts

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Cartel curbs production by 2m barrels a day despite strong US pressure, further squeezing supplies

The Opec oil cartel and its allies have agreed to a bigger than expected cut in oil production targets despite significant pressure from the US.

The Opec+ group of oil-producing nations signed up to a cut in output of 2m barrels a day, surpassing predictions earlier in the week of cuts of 1m to 1.5m barrels, squeezing supplies in a tight market.

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Ukrainian economy will shrink at rate eight times that of Russia, World Bank forecasts

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Kyiv economy will contract by 35% in 2022, compared with a 4.5% fall in Russian GDP

Ukraine’s economy will shrink at a rate eight times that of Russia this year as a result of the war triggered by Moscow’s invasion in February, the World Bank has estimated.

In its latest report on Europe and central Asia, the Washington-based institution said the Ukrainian economy would contract by 35% in 2022, compared with a 4.5% fall in Russian GDP.

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Kwarteng bringing forward debt plan could calm markets, says top Tory MP

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Mel Stride, chair of Treasury committee, says move could also mean smaller interest rate rises

Kwasi Kwarteng’s decision to bring forward his debt-cutting plan could help to calm markets and mean smaller future interest rate rises than would otherwise have been the case, according to the Conservative chair of parliament’s influential Treasury watchdog.

Mel Stride, a Tory MP and the chair of the Treasury committee, said moving the government’s fiscal statement to October from 23 November could restore some confidence, depending on the content of the plan and the detail of the new forecasts from the Office of Budget Responsibility.

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Ukraine ‘must revamp labour laws and step up privatisation to fix economy’

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President’s economic adviser says country must speed up reform of industries after Russia’s invasion

Ukraine needs to revamp its labour laws and redouble efforts to privatise thousands of companies to repair its economy, its president’s economic adviser has said.

Alexander Rodnyansky, an adviser to the president, Volodymyr Zelenskiy, said the war-torn country needed to speed up efforts to reform industries as it looked to rebuild after Russia’s invasion.

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Kwasi Kwarteng set to address Tory conference with authority on the line after 45% tax rate U-turn – UK politics live

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Chancellor expected to give changed address after confirming plan to axe top rate of income tax has been scrapped

Q: Where does this leave your credibility?

Kwarteng says he has been in parliament for 12 years. He says ministers do sometimes change their minds.

I decided, along with the the prime minister, not to proceed [with the policy].

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Liz Truss admits she should have ‘laid ground better’ before mini-budget and says cabinet not consulted about 45% top rate tax cut – live

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Latest updates: PM vows to press ahead with mini-budget plans and dismisses objections to top rate of tax being axed

Q: Are you absolutely committed to getting rid of the 45% rate of tax?

Yes, says Truss.

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Kwarteng is sticking to his guns on tax and spending cuts. But what he really needs is luck

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The chancellor appears unwilling to reverse any of the measures in his mini-budget. If he is to survive, it may be down to factors beyond his control

Kwasi Kwarteng’s inept handling of the government’s finances since he took office last month has left Liz Truss cornered. The prime minister must play for time and piece together a rescue plan by the end of November, along with a more rounded budget that preserves her tax-cutting agenda while also appearing responsible to financial markets watchful for the next misstep.

Treasury officials, rudderless after the departure of two permanent secretaries (Tom Scholar and deputy Charles Roxburgh) in the space of four months, will be under pressure to find a formula that also satisfies the cautious instincts of the government’s independent economic forecaster, the Office for Budget Responsibility (OBR), which is inclined to dismiss policy “quick wins” as ineffectual until evidence proves otherwise.

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Serco injected £60m to prop up pension fund after market meltdown

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£1bn scheme is latest to scramble to raise cash after chancellor’s tax-cutting mini-budget sparks turmoil

The pension scheme trustees at the government contractor Serco have been forced to tap the company for £60m of emergency support after the UK’s financial markets meltdown this week.

Serco’s £1bn pensions scheme is the latest to scramble to raise cash after a plunge in the pound and a meltdown in UK bond prices triggered calls on fund managers to provide collateral for niche financial products they had taken out to hedge against swings in the value of their investments.

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Why OBR forecast is being held back until Kwarteng’s next fiscal plan

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Huge policy changes are needed to get UK back on track – so early publication would give an incomplete picture

The message the government wanted to get out was clear. After less than a month as prime minister, Liz Truss had converted from vocal scourge of Treasury orthodoxy to an active supporter.

Given the fallout in financial markets after the not-so-mini-budget, Truss and her chancellor, Kwasi Kwarteng, laid on a heavily stage-managed meeting on Friday with officials from the Office for Budget Responsibility, the Treasury’s independent economic forecaster, to try to smooth over the mess.

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Truss and Kwarteng to hold back OBR forecasts for six weeks

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PM and chancellor say they will not publish projections until late November despite them being ready next week

Liz Truss and Kwasi Kwarteng will refuse to release forecasts from the Office for Budget Responsibility (OBR) until more than six weeks after receiving them, despite calls for them to be published as soon as possible.

The prime minister and chancellor said they would only publish the independent forecasts on 23 November alongside a fiscal statement, despite them being ready on 7 October.

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Treasury watchdog to ask Kwarteng to hand over growth forecasts

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Tory chair Mel Stride says watchdog needs to hear how chancellor will boost growth, and suggests one option might be via immigration

Kwasi Kwarteng will be called before parliament’s Treasury watchdog and asked to hand over independent growth forecasts, as its chairman said there is “not a very broad path” out of the current economic situation.

Mel Stride, a Conservative MP and chair of the Treasury committee, said Kwarteng was “very, very unlikely to reverse” the £45bn of unfunded permanent tax cuts he announced last Friday, even though that is an option. The alternative, he said, was to act quickly to “demonstrate to the markets that growth is realistic”. The third option would be deep cuts to public spending, but that would be difficult given the current pressure of inflation, Stride said.

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Homeowners warned of ‘significant’ rise in UK interest rates

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Bank of England’s chief economist speaks out after mini-budget, with financial markets expecting rates to reach up to 6%

Britain’s homeowners have been warned to brace themselves for a “significant” increase in interest rates from the Bank of England in response to Kwasi Kwarteng’s tax-cutting mini-budget last week.

Huw Pill, Threadneedle Street’s chief economist, added to the concerns of millions of mortgage payers who have already seen hundreds of home loan products pulled by lenders in anticipation of a big increase in the cost of borrowing.

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