Category Archives: Economic policy

Bank of England warns interest rates will remain high for at least two years

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Policymakers vote for quarter-point rise to 5.25% – the 14th hike in a row – but BoE rules out prospect of recession

The Bank of England has warned businesses and households that the cost of borrowing will remain high for at least the next two years as it raised interest rates for the 14th consecutive time to 5.25%.

Ruling out the likelihood of a recession over the next two years, policymakers blamed strong wages growth in recent months for the need to increase interest rates by 0.25 percentage points to the highest level for 15 years.

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Jeremy Hunt oversaw signing of San Marino low-tax treaty backed by Tory donor

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Exclusive: Maurizio Bragagni, who has given over £700k to Tories and £30k to chancellor, attended event

Jeremy Hunt oversaw the signing of a low-tax treaty with San Marino championed by a leading Tory donor, who with his companies has given more than £700,000 to the party and £30,000 to the chancellor.

Maurizio Bragagni, a prominent businessman and diplomat for San Marino, was present in No 11 when a “double taxation” treaty between the UK and San Marino was signed in May.

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Tax relief system needs overhaul to prevent abuse, say MPs

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Treasury committee report says tax system is too complicated and finds two-thirds of relief policies are uncosted

Almost £200bn of tax reliefs handed to businesses and individuals each year should come under greater government scrutiny to prevent fraud and abuse, according to an all-party group of MPs.

The Treasury committee said in a report published on Wednesday that “a systematic review” into more than 1,000 tax reliefs was needed after MPs found HM Revenue and Customs did not have the resources to monitor how tax breaks and deductions were used.

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Keir Starmer: ‘We can’t win power by spending. We need to reform and create wealth’

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Exclusive: Labour leader urges left to ‘care more about growth’ and rules out spending ‘vast sums of money’

Labour will only succeed in winning power and rebuilding Britain if it prioritises economic growth, wealth creation and radical reform of public services over reckless spending promises, says Keir Starmer.

With four days to go before a crucial set of parliamentary byelections, the Labour leader delivers the most robust defence to date of his strategy for returning his party to power after 13 years, in an exclusive article for the Observer. Starmer takes on, directly, those who say his agenda is dull and uninspiring, insisting that the hard grind of rebuilding economic credibility must come first, as opposed to Labour retreating to its normal “comfort zone” of promising “vast sums of money”.

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Labour must ‘give people something to vote for’, says Unite head

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Sharon Graham, of UK’s second largest union, says party lacks ambition and is not showing itself as distinct alternative to Tories

Labour should “talk about what they can do to change Britain”, the leader of the UK’s second largest trade union has said.

Sharon Graham, the general secretary of Unite, said the union could reduce the amount of money it gave to Labour if the party’s leadership did not back more of its policy priorities, saying “people want something to vote for”.

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Bank of England’s quantitative easing scheme let ‘inflation take root’

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UK economy became reliant on cheap money due to the Bank’s actions, warns former permanent secretary to the Treasury

The Bank of England’s quantitative easing money-printing programme enabled high inflation to take root in Britain, while creating “windfall gains” for the rich, a former Treasury mandarin has warned.

Nick Macpherson, who was permanent secretary to the Treasury under the last Labour government and during David Cameron’s premiership, said the central bank’s £895bn bond-buying stimulus programme had gone “too far” and made the inflation shock hitting Britain worse.

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From Brexit to Beyoncé: why UK inflation is still so painfully high

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The cost of living is falling in Europe and the US but is still rising in Britain. We look at the major culprits

The Bank of England has struggled to understand why inflation remains high in the UK. It has fallen in France, Germany, the US and especially Spain, where inflation dropped to 2.9% in May compared with the UK figure of 8.7%. Here we look at the many reasons for the current crisis.

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Labour piles pressure on Sunak with plan to prevent ‘mortgage catastrophe’

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Shadow chancellor Rachel Reeves says party would force banks to take a range of steps to protect borrowers

Labour has piled further pressure on Rishi Sunak to take action to help struggling mortgage holders as the Bank of England prepares to raise interest rates again to levels not seen since before the 2008 financial crash.

Rachel Reeves, the shadow chancellor, said on Wednesday that if Labour were currently in power, it would force banks to offer a range of support to borrowers, including letting them move on to interest-only mortgages and extending their repayment period.

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UK homeowners face huge rise in payments when fixed-rate mortgages expire

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More than 2.4m deals are ending in 2024, raising fears of financial timebomb

More than a quarter of UK homeowners on a fixed-rate mortgage are heading for sharp increase in monthly payments before the next election, in a financial timebomb that will rock the Conservatives just as voters prepare to choose the next government.

With the Bank of England expected to increase its key interest rate next week for the 13th time, figures shared with the Guardian by UK Finance, the banking industry trade body, show more than 2.4m fixed-rate homeowner deals will expire between now and the end of 2024.

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No point in food price measures without targeting small stores, Which? warns

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Consumer group tells chancellor ‘blanket approach’ will not address poor households’ access to affordable food

UK ministers’ efforts to reduce soaring food shopping bills “won’t touch the sides” without measures to make small grocery stores more affordable for low-income households, the chancellor has been warned.

Which?, the consumer group, has written to Jeremy Hunt over concerns that a blanket approach to lowering supermarket bills will not address the problem of accessibility to affordable food, after reports that ministers are considering a voluntary price cap scheme.

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Rishi Sunak warned over possible UK recession in 2024

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High inflation likely to push interest rates above 5% and force up mortgage and loan payments just ahead of election

Rishi Sunak has been warned the UK economy could be in recession next year as stubbornly high inflation pushes interest rates to more than 5% before the next general election.

Setting the stage for a further rise in borrowing costs on mortgages and loans for millions of households, economists predicted the Bank of England could be forced to drive Britain’s economy into a recession to tame inflation.

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Rishi Sunak’s upbeat view on economy stokes claims he is out of touch

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On flight to Japan for G7, PM says ‘economic optimism is increasing’ and insists Brexit is working

Rishi Sunak has been accused of being out of touch with ordinary families after claiming the economy was looking up and people’s household incomes were “hugely outperforming” expectations despite the cost of living crisis.

On a flight to Japan for the G7 summit of world leaders, the prime minister said that despite consumers struggling with high inflation and the cost of food and energy, there were “lots of signs that things are moving in the right direction” with the economy.

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State to take control of TransPennine Express after ongoing poor service

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Northern rail network to be run by state-owned operator of last resort when contract expires on 28 May

TransPennine Express (TPE) is to be run by the state after ministers announced that the failing rail company would not have its contract renewed.

The transport secretary, Mark Harper, said the northern rail network would be run by the state-owned operator of last resort after passengers experienced disruption, cancellations and a significant decline in the extent and reliability of the service.

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UK ministers under scrutiny for failure to publish Treasury spending details

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Department is worst for publishing spending data, records show, with ministers apparently in breach of guidelines

Treasury ministers appear to have broken government guidelines by failing to publish details of their department’s spending for several months, and in some cases more than two years.

Public records show the Treasury is the worst department in Whitehall for publishing key data on what its officials are spending public funds on, despite its role overseeing spending across government.

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Bank of England predicted to raise interest rates one more time in May

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Increase to 4.5% will be last rise in current cycle, former rate-setter Michael Saunders predicts

The Bank of England is likely to increase interest rates one more time in May, to 4.5%, before inflation falls “sharply” over the rest of the year, a former rate-setter has predicted.

Michael Saunders, who was a member of the monetary policy committee until August, said the UK was nearly at a “turning point” for interest rates, which have risen sharply over the past year as policymakers tried to curb a surge in prices caused by an increase in energy costs.

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Senior UK civil servants could strike after ‘unconscionable’ pay offer

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Government’s limiting of average pay rise to between 4.5% and 5% prompts fresh strike dates and possible FDA ballot

The UK’s most senior civil servants could take their first strike action in more than a decade after ministers imposed an average pay rise of between 4.5% and 5%, in a move described as “unconscionable” by union leaders.

The Cabinet Office published pay remit guidance limiting awards to an average of 4.5%, plus an additional 0.5% for the lowest pay bands.

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Deadline to sell off UK government’s NatWest shares extended to 2025

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Recent banking turmoil fuels decision to delay offloading portions of its remaining 41% stake

A plan to whittle down the government’s stake in NatWest has been extended by another two years, after weeks of banking turmoil that hit the lender’s shares and temporarily fuelled fears over a fresh financial crisis.

UK Government Investments (UKGI), which manages the shares on behalf of the Treasury, said the scheme to strategically sell portions of the British taxpayer’s shareholding – after NatWest’s near-£46bn state bailout in 2008 – would now run until August 2025.

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Pacific trade deal is more useful to Joe Biden than it is to the UK’s economy

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Hailed by Tory MPs as a Brexit benefit, CPTPP membership actually turns the UK into a willing pawn in Washington’s geopolitical game

Tory MPs hailed the UK’s entry last week into the Indo-Pacific trading bloc as a major step on the road to re-establishing Britain as a pioneer of free trade.

It was a coup for Rishi Sunak, said David Jones, the deputy chairman of the European Research Group of Tory Eurosceptics, who was excited to be aligned with “some of the most dynamic economies in the world”.

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Kemi Badenoch casts doubt on growth projections for Asia-Pacific trade deal

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Comments threaten to worsen already tense relationship between senior ministers and civil servants

Kemi Badenoch has cast doubt on her department’s projections for how much the Asia-Pacific trade deal the UK government has signed will help economic growth.

The government announced overnight it had joined the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTTP), which includes Australia and Japan, after two years of negotiations.

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Jeremy Hunt backed Labour plan last year for tax break on NHS pensions

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Labour says chancellor had time to draw up more targeted changes rather than including wealthiest savers

Jeremy Hunt previously backed Labour’s idea of giving a pensions tax break only to NHS staff, despite ruling out such a move in this week’s budget because it would not come into force quickly enough.

The chancellor was chair of the health select committee last year when members wrote a report calling for the NHS pension scheme to be overhauled to encourage senior doctors to stay in their jobs.

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