Category Archives: Economic policy

Treasury watchdog to ask Kwarteng to hand over growth forecasts

Posted on by

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.

Continue reading...

Bank of England in £65bn scramble to avert financial crisis

Posted on by

Bank of England left with no action but to intervene after Kwasi Kwarteng’s mini-budget

The Bank of England has been forced into emergency action to halt a run on Britain’s pension funds after the impact of Kwasi Kwarteng’s ill-received mini budget prompted fears of a 2008-style financial crisis.

Threadneedle Street said the fallout from a dramatic rise in government borrowing costs since the chancellor’s statement had left it with no choice but to intervene to protect the UK’s financial system.

Continue reading...

Truss ‘standing by Kwarteng’ as Treasury defends plans despite market turmoil – as it happened

Posted on by

No 10 says PM has faith in chancellor, as Treasury minister says tax cuts are the ‘right plan’. This blog is now closed

Q: When would you get debt falling as a proprotion of GDP?

Starmer says Labour does want to get that down.

Continue reading...

‘Fiscal sustainability’ plus rising borrowing costs could add up to cuts

Posted on by

To make the sums work, some suggest Kwasi Kwarteng may include deep spending reductions in his medium-term fiscal plan

When Kwasi Kwarteng met City figures on Tuesday, the Treasury said he had “reiterated the government’s commitment to fiscal sustainability”: though the grim faces of attendees in the official photos suggested they may not have been terribly reassured.

Some analysts are now warning that with borrowing costs rising sharply, and the chancellor determined not to water down his radical tax plans, “fiscal sustainability” points to one thing: spending cuts.

Continue reading...

Labour delegates urged to back PR to end ‘trickle-down democracy’ – UK politics live

Posted on by

Latest updates: Labour delegate says current electoral system allows Tories to get away with measures like ‘protecting bankers’ bonuses’

In June, as the RMT union launched what has become an ongoing series of strikes, Keir Starmer ordered Labour frontbenchers and shadow ministerial aides not to join picket lines. This infuriated leftwing Labour MPs and some union leaders, notably Sharon Graham, the general secretary of Unite.

At one point it looked as if there might be a huge row at conference about whether shadow ministers should or should not be allowed to join picket lines. But, in an interview with the Today programme this morning, Graham suggested that a truce of sorts has been agreed – even if the two sides do not entirely see eye to eye.

My issue about this … isn’t necessarily around one person on a picket line because, quite frankly, that isn’t the issue. The issue is the mood music [ordering shadow ministers not to join picket lines] suggests. It suggests a mood music that being on the picket line is somehow a bad thing. It’s a naughty step situation.

The party who is there to stick up for workers should not give the impression – that’s the problem, it gives the impression – that they are saying picket lines are not the place to be. And I think that it was unfortunate. I think it was a mistake. I think, to be honest with you, Labour knows it was a mistake. And I don’t actually think it’s holdable.

When people go on strike it is a last resort at the end of negotiations. And I can quite understand how people are driven to that … I support the right of individuals to go on strike, I support the trade unions doing the job that they are doing in representing their members.

I’m incredibly disappointed that as delegates we’ve been excluded from this key part of the conference’s democratic process.

This is an unprecedented move silencing members’ voices. Our CLP sent us here to Liverpool to promote our motion on public ownership and a Green New Deal, but we’ve been unfairly denied that right.

Continue reading...

City sceptical about benefits of scrapping cap on banker bonuses

Posted on by

Sources at largest banks say the did not lobby for move nor expect it to result in major changes to pay packets

When City of London executives were summoned to No 11 Downing Street earlier this month, they were promised reforms that would boost growth, attract talented bankers and usher a new era of prosperity for financial services.

But what the chancellor, Kwasi Kwarteng, failed to mention to bank bosses was that their pay would become a lightning rod for controversy in the mini-budget that followed.

Continue reading...

Tories gambling with the finances of British people, says Starmer

Posted on by

Labour leader attacks ‘casino economics’ in wake of £45bn package of tax cuts announced by chancellor

Sir Keir Starmer has accused the government of “gambling the mortgages and finances” of the British people with its “casino economics”.

Speaking before his party’s conference in Liverpool, the Labour leader tweeted: “Tory casino economics is gambling the mortgages and finances of every family in the country. Labour will secure growth for working people, that benefits all communities. My government will deliver a fairer, greener future.”

Continue reading...

Time is against Liz Truss as she bets big on plan to turn economy around

Posted on by

With an election two years away, any failure of her radical approach could shred the Tories’ credibility

When Liz Truss flew to the US this week on her first foreign trip as prime minister, she was unequivocal about how she would achieve her mission in office: “Lower taxes lead to economic growth, there is no doubt in my mind about that.”

There was not a quiver of self-doubt in her voice as she gave a round of television interviews at the top of the Empire State Building expanding on her plans for the economy and saying she was “willing to be unpopular” to push them through.

Continue reading...

Mini-budget 2022: pound crashes as chancellor cuts stamp duty and top rate of income tax – live

Posted on by

Tax cuts to cost Treasury around £37bn in 2023-24, official figures reveal

There are no urgent questions in the morning, and so Kwasi Kwarteng, the chancellor, will be delivering his statement soon after 9.30am.

The Commons starts sitting at 9.30am, but they always begin with prayers in private, and so Kwarteng will be up a few minutes later.

The last time they did it one third of the beneficiaries were people buying second homes or buy to let, so we are sceptical that this is the magic bullet to increase homeownership. What we really need to do is to build more houses and to help get people onto the property ladder by increasing the supply of housing.

When this has been done before, it has often fuelled an already hot market and many of the beneficiaries have been people buying a second or third home, rather than the first time buyers that we really want to help who are often trapped in private rented accommodation where they’re paying as much in rent every month as they would in a mortgage.

Continue reading...

Kwarteng accused of reckless mini-budget for the rich as pound plummets

Posted on by

Strategy of sweeping tax cuts gets hostile reception from markets and economic thinktanks, leaving some Tory MPs aghast

Kwasi Kwarteng has been accused of delivering a reckless mini-budget for the rich after his £45bn tax-cutting package sent the pound crashing to its lowest level against the dollar in 37 years.

In a high-risk strategy designed to revive Britain’s stagnant economy, the new chancellor announced more than £400bn of extra borrowing over the coming years to fund the biggest giveaway since Tony Barber’s ill-fated 1972 budget.

Continue reading...

UK in recession and further interest rate hikes probable, Bank warns Kwarteng

Posted on by

Threadneedle Street makes clear on eve of tax-cutting mini-budget that plans risk triggering more rate rises

The Bank of England has warned Kwasi Kwarteng the economy is in recession and it will most probably need to push interest rates higher after Friday’s tax-cutting mini-budget.

On the eve of a major package of support from the chancellor designed to break what he called the economy’s “cycle of stagnation”, Threadneedle Street said the UK economy was heading for a second consecutive quarter of falling output, with gross domestic product set to shrink 0.1% in the three months to September.

Continue reading...

‘Not every measure will be popular’: Truss says voters may not like all her pro-growth measures – UK politics live

Posted on by

Latest updates: prime minister says she is willing to implement unpopular policies to try to boost growth in the UK

Rosie Cooper has indicated that she intends to stand down as Labour MP for West Lancashire to take up a new job as chair of the Mersey Care NHS foundation trust. In her statement announcing the move Cooper says that events in recent years have “undoubtedly taken their toll” – a reference to Cooper being targeted by a neo-Nazi who was jailed for life in 2019 for plotting to kill her.

Cooper’s statement implies she will resign and trigger a byelection. At the last election she had a majority of more than 8,000 over the Conservatives, and in a byelection Labour would be expected to hold the seat very easily.

Continue reading...

Kwasi Kwarteng urged to allow release of OBR forecasts with mini-budget

Posted on by

Tory chair of Treasury committee says independent forecasts vital to provide reassurance to markets

The Tory chair of the Treasury select committee has urged Kwasi Kwarteng to allow independent forecasts for the public finances to be published alongside his mini-budget on Friday.

Mel Stride released a strongly worded statement urging more clarity around the effects of the new chancellor’s fiscal interventions.

Continue reading...

Kwarteng plan to lift cap on bankers’ bonuses infuriates unions

Posted on by

Unite leader deplores prospect of post-Brexit deregulation drive ‘when millions are struggling’

Unions have reacted with fury to the prospect of the government scrapping a cap on bankers’ bonuses, as ministers geared up for a return to near-normal politics next week, topped by an emergency mini-budget on Friday.

Kwasi Kwarteng, the chancellor, who will set out plans for tax cuts and give more details about the government’s plans to limit rising energy bills, is also considering whether to shed the legacy of an EU-wide cap on bonuses of twice an employee’s salary, imposed after the 2008 financial crash.

Continue reading...

Kwarteng ‘tells Treasury to focus entirely on growth’ as Tory peer defends sacking of senior civil servant – as it happened

Posted on by

The new chancellor is reported to have told Treasury staff there was a need to ‘do things differently under fresh leadership’. This live blog is now closed

At the lobby briefing yesterday Downing Street admitted that Liz Truss had not completed her government reshuffle. New appointments were suspended following the death of the Queen.

According to an analysis by Arj Singh for the i, 55 posts remain unfilled. Singh says that, to fill all the posts that Boris Johnson had in his government, Truss will need to appoint 21 junior ministers in the Commons, nine Commons whips and 25 Lords ministers.

The removal of Sir Tom Scholar as the lead permanent secretary at the Treasury should be a cause for celebration.

Having worked in his department for nearly two years I saw at first hand the malign influence of the Treasury orthodoxy at play. Whether it was foot-dragging and passive resistance to creating a Treasury office in the north (in Darlington), which he fiercely resisted, or the botched arrangements in the construction of the bounceback loans during the pandemic, all roads led back to him.

I hope very much that our new prime minister will build on her excellent decision and remove responsibility from the Treasury for driving economic growth. It has no idea how to deliver this. The system obsesses about measuring inputs, counting out the money distributed to departments, but has little clue of how to measure outcomes. Departments are infantilised in their management of money, with savings being automatically clawed back to the centre. This of course removes any incentive to think innovatively, creatively or cost-effectively.

Continue reading...

How is Liz Truss’s government challenging ‘Treasury orthodoxy’?

Posted on by

Sir Tom Scholar’s removal as Treasury’s top mandarin signals attempt to change department’s view of the world

Sir Tom Scholar’s removal as the Treasury’s top mandarin was a brutal statement of intent by Liz Truss’s new government. The message was clear: the days when Britain’s economic strategy would be determined by bean counters were over. From now on, growth rather than balancing the books would be the priority.

That is the theory. In practice, removing what Truss sees as the “dead hand” of Treasury orthodoxy from the running of the economy is likely to prove difficult. The fact that all four deputy governors of the Bank of England are Treasury old boys is an example of its influence on the economic policy-making machinery. There have been attempts in the past to cut Whitehall’s most powerful department down to size. Sooner or later, all have failed.

Continue reading...

Liz Truss holds first cabinet meeting as Thérèse Coffey denies claim PM put loyalty before competence – UK politics live

Posted on by

Health secretary says Truss did not focus too much on rewarding friends as new ministers attend first cabinet meeting

According to a report by Jason Groves in the Daily Mail, Liz Truss may announce an end to the ban on fracking this week. During the leadership campaign she said she wanted to allow fracking, but only in areas where there was a clear public consensus in favour.

On the Today programme this morning Lord Deben, the Tory peer who chairs the Committee for Climate Change, said fracking was not a solution to the UK’s energy problems. He explained:

The price of gas is not affected by the relatively small amount that we can get, in addition to the North Sea or indeed from fracking.

This is an international price and we would be paying the same price we got out of the fracked gas as we are for the gas we’re using now.

Continue reading...

Tory leadership: Nadine Dorries steps down and returns to backbenches – as it happened

Posted on by

Latest updates: culture secretary will not serve in Truss’s cabinet and is expected to receive peerage from Boris Johnson

Philip Hammond, who was chancellor when Theresa May was prime minister, has joined Rupert Harrison, another Tory Treasury alumnus (see 10.02am), in criticising the Truss camp this morning for disparaging Treasury orthodoxy. Hammond told Times Radio:

When I hear people talking about Treasury orthodoxy, I do worry that what they might sometimes be talking about are economic facts of life. And yes, the Treasury will ensure that politicians, however senior, are confronted with the realities of the economic facts of life. “Yes, Minister, you may wish to do this. But you need to understand that the consequences will be as follows.” And we can’t legislate to change the laws of economics, unfortunately. And I think Liz Truss understands that very well.

Obviously, I worked very closely with her. She was chief secretary to the Treasury when I was chancellor, she understands the laws of economics as well as anybody does. And it’s essential that the political solutions that a government crafts, go with the grain of the laws of economics, because if you try and confront the laws of economics, you will come unstuck.

I think it is right and unavoidable that the government needs to provide support to people dealing with these huge energy bills as a short term solution, but we have to be clear, and I think [Truss] will be clear, that this can only be government support to deal with the immediate emergency energy prices being sky high, largely because of the war in Ukraine.

At the same time we’ve got to be honest about the fact that energy bills in the future are going to be higher than they were, traditionally, as we move to ensure energy self sufficiency, and to decarbonise our economies. That has always been the case; decarbonisation doesn’t come free.

Continue reading...

British rural voters ‘ignored’ by Liz Truss and Rishi Sunak

Posted on by

Tory leadership hopefuls ‘taking countryside voters for granted’ and neglecting pressing issues, says CLA business group

Neither of the candidates for leadership of the Conservative party has made a convincing pitch to rural voters, despite that demographic being one of the biggest sources of Tory power, the head of the UK’s biggest rural business organisation said.

Mark Tufnell, president of the Country Land and Business Association (CLA), which represents about 30,000 landowners and rural businesses, said Liz Truss and Rishi Sunak had done too little to show how they would boost the countryside economy and deal with pressing concerns such as planning, rural broadband, and farm support.

Continue reading...

No one should be cut off if they can’t afford energy bills, says Zahawi

Posted on by

UK chancellor says more help will be provided to heat homes this winter but does not explain how

The chancellor, Nadhim Zahawi, has said households should not be cut off if they cannot afford their energy bills, as the Treasury examines a range of options to help consumers cope with the cost of living crisis.

Zahawi promised that the government would expand on the £37bn package of aid announced earlier this year to help households tackle soaring energy costs. He told Sky News: “No one should be cut off because they can’t afford their bills.

Continue reading...