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Tag: Chancellor Jeremy Hunt

  • Rishi Sunak is being investigated for “Budget boost”

    Rishi Sunak is being investigated for “Budget boost”

    Investigations are being conducted into whether Rishi Sunak failed to disclose that his wife owns stock in a daycare center.

    Some of the initiatives outlined in the Budget are purportedly going to be advantageous for the nanny and childminder company Koru Kids, whose shareholders include Akshata Murty.

    Last month, when MPs questioned the prime minister about why the childcare policy favored private companies, they demanded that he “come clean” about the shares.

    He omitted bringing up Ms Murthy’s stock in the company when he spoke before the Liaison Committee.

    A fortnight earlier, Chancellor Jeremy Hunt announced a pilot of incentive payments of £600 for childminders joining the profession.

    Questioning why the sum doubles to £1,200 if workers sign up through an agency, Labour MP Catherine McKinnell asked if Mr Sunak had any interests to declare.

    ‘No, all my disclosures are declared in the normal way,’ he said.

    Koru Kids, which is one of six childminder agencies listed on the Government’s website, welcomed the new Budget incentives as ‘great’.

    At the time the possible conflict emerged, Mr Sunak’s press secretary said the interest would be included in the updated statement of ministers’ interests, due out in May.

    Parliament’s standards commissioner Daniel Greenberg opened the inquiry into the PM under rules demanding MPs are ‘open and frank’ when declaring their interests.

    Downing Street said Mr Sunak will clarify how it was declared as a ministerial interest, rather than to the Commons.

    ‘Members must always be open and frank in declaring any relevant interest in any proceeding of the House or its committees, and in any communications with ministers, members, public officials or public office holders,’ the standards watchdog wrote.

    A No 10 spokeswoman responded: ‘We are happy to assist the commissioner to clarify how this has been transparently declared as a ministerial interest.’

  • Chancellor Jeremy Hunt says Britain’s economy is ‘back’

    Chancellor Jeremy Hunt says Britain’s economy is ‘back’

    British Chancellor Jeremy Hunt claims that the country’s economy is “back” and that the Washington meeting of the International Monetary Fund (IMF) has praised his growth strategy.

    Following a barrage of criticism, his predecessor Kwasi Kwarteng departed the previous IMF meeting in October early.

    According to Mr. Hunt, the international lending organization noticed that he was “putting the British economy back on the right track”.

    The UK economy, according to the most recent data, did not expand in February.

    The IMF predicted on Wednesday that the UK economy will contract by 0.3% in 2023, ranking it among the worst-performing of the world’s major countries.

    When challenged over whether the UK’s current performance undermined his positive message, Mr Hunt said: “It’s other finance ministers who are telling me Britain is back”.

    Britain’s economy has only just recovered to the size it was prior to the pandemic, following months of industrial action, rapidly rising prices and labour shortages.

    On Friday nurses in the RCN union rejected the offer of a 5% pay rise and said they planned to strike again at the start of May. Meanwhile, NHS junior doctors in England are currently staging a four-day walkout over pay, ending at 07:00 on Saturday.

    The wave of industrial action affecting the UK in recent months has contributed to its lack of growth, the Office of National Statistics said this week.

    However, Mr Hunt said it was important to avoid fuelling further inflation through pay rises. He said Britain had avoided recession this year “so far”, and that he hoped to see faster growth and falling inflation in the months ahead.

    Measures in his March Budget to help businesses recruit more staff and to increase investment, including an increase in childcare funding, should stimulate growth, he added.

    Investor confidence in the UK was shaken last year during the short-lived government of prime minister Liz Truss, which saw Mr Kwarteng present an economic strategy that included major tax cuts without an explanation of how they would be funded.

    The outlook for the UK, which relies heavily on financial services, could be clouded by current uncertainty in the banking sector, following the collapse of three US banks and UBS’s emergency takeover of Credit Suisse.

    However, Mr Hunt said the UK had “a very robust, resilient banking system”, which was now in a much better position than it was before the 2008 financial crisis.

    “Am I confident in the resilience of our banking system, the second largest financial services centre in the world?’ Yes, I am,” he said.

    While the government is considering reforming some of the rules governing financial services, put in place after 2008, Mr Hunt said the plan was “absolutely not to unlearn the lessons of the financial crisis”.

    “We are looking at all of these things, but we’re not going to do it in a way that rows back on any of the very important protections that we have in place,” he said.

    But he said the growth of the UK’s tech and life sciences industries meant regulations needed to adapt.

    “We have a lot of high growth companies in the UK, and they need to have banking services that suit their needs. And that’s a difference from a decade ago,” he said.

  • Jeremy Hunt criticizes Joe Biden while announcing the UK’s green technology initiatives

    Jeremy Hunt criticizes Joe Biden while announcing the UK’s green technology initiatives

    In a jab at Joe Biden, Chancellor Jeremy Hunt outlined the government’s answer to the Americans’ massive investment in green technologies.

    The President’s 430 billion US dollar (£348 billion) program aims to green the economy by providing tax breaks for ecologically friendly technology.

    Nonetheless, the action has effectively blocked the UK and Europe from accessing American markets, and Commerce Secretary Kemi Badenoch criticized it as “protectionist.”

    Writing in The Times, Mr Hunt said Mr Biden was leading a ‘distortive’ global subsidy race, arguing that the long-term solution to the threat of protectionism was ‘not subsidy but security’.

    ‘Yes, we will continue to back industries of the future, however, we will target public funding in a strategic way in the areas where the UK has a clear competitive advantage,’ the Chancellor said.

    ‘We are not going toe-to-toe with our friends and allies in some distortive global subsidy race.’

    He went on to announce that the Government was investing £30 billion to support ‘our green industrial revolution, with an additional £6 billion for energy efficiency, and up to £20 billion for carbon capture, utilisation and storage’.

    ‘While taxpayer support is important to kick-start new industries, we need to leverage billions more in private capital,’ Mr Hunt said.

    ‘Ultimately, the best and only way to ensure our energy independence is to invest in domestic sources of energy that fall outside Putin or any autocrat’s control.

    ‘We will do that by pulling every lever at our disposal to scale up cheap renewables and new nuclear, while maximising economically viable North Sea oil and gas as we transition.’

    The Chancellor’s update to the green finance strategy, which is due to be published on Thursday, quickly drew criticism from Labour.

    The shadow climate and net zero secretary Ed Miliband accused the Chancellor of ‘waving the white flag in the global race for green jobs’.

    ‘Other countries are matching the ambition of the US, UK business says we must, but Tory dogma says No,’ the former Labour leader said.

    ‘Britain can’t afford a government that will make us losers in this race.’

    Mr Miliband added that the strategy outlined by the Chancellor placed the UK ‘outside the emerging mainstream’.

    ‘From Washington to Berlin… modern industrial policy requires active government, investing in partnership with business. Britain can’t afford another 5 years of this approach.’

  • UK only major economy to shrink in 2023 – IMF

    UK only major economy to shrink in 2023 – IMF

    International Monetary Fund (IMF) has said the UK economy will contract and perform worse than other advanced economies as household costs of living continue to rise.

    The economy will shrink by 0.6% in 2023, not slightly grow as previously predicted, according to the IMF.

    The IMF did add, however, that it believes the UK economy is now “on the right track” as a result of the Autumn Statement.

    The UK outperformed many predictions last year, according to Chancellor Jeremy Hunt.

    But shadow chancellor Rachel Reeves said the figures showed the UK “lagging behind our peers.”

    In its World Economic Outlook update, the IMF, which works to stabilize economic growth, said the UK’s Gross Domestic Product (GDP) would shrink rather than grow by 0.3% this year.

    GDP is a measure for how well, or badly, an economy is doing and in a growing economy, each quarterly GDP figure will be slightly bigger than the quarter before.

    If a country’s GDP falls for two quarters in a row, it means it is in recession and its economy is doing badly. Typically, this means companies make less money and the number of unemployed people rises.

    The IMF predicted the UK would be the only country—across the world’s advanced and emerging economies—to suffer a year of declining GDP. Even sanctions-hit Russia is now forecast to grow this year.

    The IMF said its new forecast reflected the UK’s high energy prices and financial conditions, such as high inflation.

    IMF chief economist Pierre-Olivier Gourinchas told the BBC that for 2022, the UK had had “fairly robust” growth at 4.1%, which he said was “one of the strongest growth numbers in Europe”.

    “But it is true that we are forecasting a sharp slowdown in 2023, with growth that would turn even negative for the year.”

    He said the revision reflected the “fact that we have a very challenging environment in the United Kingdom”, which he said was caused by high energy prices as well as “high dependence on liquid natural gas”.

    Woman by radiator
    Image caption, High energy prices are driving up UK inflation

    The Bank of England has put up interest rates nine times since December 2021 in an attempt to reduce inflation – the rate at which prices rise. Mr Gourinchas said these rate rises fed “quickly into mortgages, because a lot of mortgages are adjustable rates”.

    “So a lot of homeowners with mortgages are seeing an increase in their mortgage payments.”

    Mr Gourinchas said another factor in the UK’s forecast was that employment was still below pre-pandemic levels.

    He said the plans outlined by the Treasury in the months since the Autumn Statement showed the UK was “certainly trying to carefully navigate these different challenges and we think that they are on the right track”.

    And the IMF said in 2024 it expected the UK economy to grow by 0.9%, up from a previous forecast of 0.6%.

    ‘Heading for recession’

    Sophie Lund Yates, senior equity analyst at Hargreaves Lansdown, told the BBC’s Today programme the UK was not the only major economy struggling and there was a chance it could “squeak out a little more positivity” than the IMF had predicted.

    “The Bank of England’s own predictions are slightly brighter than [the IMF’s’ have been],” she added.

    “But overall, we are heading for recession, and the big question is how deep that’s going to be.”

    Against the backdrop of growing expectations of a milder recession across the world, the IMF’s forecasts for the UK stand out, downgraded by just under a full percentage point since the autumn, and now expected to shrink by 0.6% this year.

    The IMF attributes this to rapid interest rate rises, tax rises, higher borrowing costs for businesses, and still high domestic energy prices. The fund said the UK was having to navigate a very complex environment, and that since the Autumn Statement, British policy was now “on the right track.”

    But if over the coming year this forecast proves to be correct, it raises questions as to why the UK will have missed out on a better global economic backdrop. The UK is now the only shrinking economy out of 15 published in this report.

    The Bank of England will publish its new forecast for the UK economy later this week, alongside an expected further rise in interest rates.

    The IMF’s bleak picture for the UK comes after Mr Hunt warned it was “unlikely” that there would be room for any “significant” tax cuts in the spring budget.

    The chancellor, who has been under pressure from some in his party to cut taxes to stimulate the economy, has said that lowering inflation “is the best tax cut right now”.

    Inflation hit 10.5% in the 12 months to December, close to a 40-year high.

    Prime Minister Rishi Sunak has pledged to halve inflation by the end of the year, although some economists have said price rises will slow without government policies, due to commodity prices and shipping costs decreasing.

    Andrew Bailey, the governor of the Bank of England, has also said inflation is likely to fall rapidly this year but has warned a UK recession is still on the cards.

    While the IMF predicts the UK economy will contract, it forecasts economic growth of 1.4% in the US, 0.1% in Germany and 0.7% in France.

    Mr Hunt said the IMF’s figures “confirm we are not immune to the pressures hitting nearly all advanced economies”.

    “Short-term challenges should not obscure our long-term prospects – the UK outperformed many forecasts last year, and if we stick to our plan to halve inflation, the UK is still predicted to grow faster than Germany and Japan over the coming years,” he added.

    Economic forecasters are not always 100% right when it comes to predicting the future. The IMF has said its forecasts for growth the following year in most advanced economies like the UK’s have more often than not been within about 1.5 percentage points of what actually happens.

    The IMF said the trend of central banks putting up interest rates to try to curb inflation and the war in Ukraine continued to “weigh on economic activity” across the world.

    But it said China’s reopening its economy from Covid restrictions “paved the way for a faster-than-expected recovery” globally.

    Overall, the IMF estimated global inflation had passed its peak and would fall from 8.8% last year to 6.6% in 2023 and 4.3% in 2024.

  • Government debt reaches record levels in November

    As government borrowing increased to £22 billion last month, Chancellor Jeremy Hunt cited the pandemic and Russia’s invasion of Ukraine as causes.

    According to official data, government borrowing reached its highest level for November since records have been kept since 1993.

    According to data from the Office for National Statistics (ONS), net public sector borrowing last month totaled £22 billion, excluding borrowing from public sector banks.

    The amount was £13.9 billion higher than November 2021 and almost £9 billion higher than October’s total.

    The increase occurred as the Energy Bill Support Scheme was expanded and interest payments increased to £7.3 billion.

    The Energy Bills Support Scheme – which is paying out £400 to households over a six-month period – cost the government £1.9bn in November.

    It also confirmed that the Energy Price Guarantee, which has capped energy costs to £2,500 for a typical household, was the main driver of a £4.7bn year-on-year increase in subsidies.

    Interest rate payments rose and were £2.4bn higher than a year ago.

    As inflation drove up prices, it also drove up the cost of government borrowing.

    As the retail price index rose so too did the government bonds linked to inflation, index-linked gilts. Payments on those index-linked gilts accounted for £4.2bn of the total interest rate payments made by the government last month.

    Debt as a whole across the public sector – excluding public sector banks – was £2,477.5bn at the end of last month.

    That is up £125.9bn on the same period last year but is now a lower portion of gross domestic product (GDP) – a measure of economic output. The amount of debt accounts for around 98.7% of GDP.

    Borrowing will only increase, according to economic research group Pantheon Macroeconomics.

    “We continue to expect public borrowing to overshoot the OBR’s (Office of Budget Responsibility’s) forecast in future years,” the group said.

    Chancellor Jeremy Hunt blamed the figures on the pandemic and Russia’s invasion of Ukraine.

    “Faced with the twin global emergencies of a pandemic and Putin’s war in Ukraine, we have taken significant action to support millions of businesses and families here in the UK,” he said.

    “We have a clear plan to help halve inflation next year, but that requires some tough decisions to put our public finances back on a sustainable footing.”

    Despite the increasing debt, the Institute of Chartered Accountants in England and Wales said there is cause for relief in the figures.

    “Chancellor Jeremy Hunt will be relieved that the deficit for the year-to-date only exceeded £100bn by £5bn, on track to stay within the Office for Budget Responsibility’s latest forecast of £177bn for the full year,” it said.

    Source: SkyNews.com 

     

     

     

  • Autumn statement: Millions to pay more in tax as chancellor cuts top-rate threshold and lays out plan to plug ‘black hole’

    The chancellor said he “tried to be fair” and said his plan would lead to a “shallower” recession and £55bn in savings. However, the OBR said disposable incomes will fall by 7.1% in real-term costs – the lowest levels since records began in 1956/7, taking incomes down to 2013 levels.

    Millions more Britons will pay more tax as Jeremy Hunt cut the top-rate threshold and announced freezes on several other taxes in his autumn statement.

    The total amount of savings from the autumn statement has been costed at £55bn, through tax rises and cutting government spending.

    However, in real-term costs, UK households’ disposable incomes will fall by 7.1% over the next two years – the lowest levels since records began in 1956/7, taking incomes down to 2013 levels, according to the independent Office for Budget Responsibility.

    Some of the main announcements:

    • Higher rate of tax threshold reduced to £125,140
    • Benefits and state pension to rise in line with inflation
    • Windfall tax extended to March 2028 and increased to 35%
    • Electric cars no longer exempt from road tax from April 2025
    • An extra £2.4bn per year on schools
    • NHS to get £3.3bn and adult social care £1bn next year and £1.7bn in 2024
    • Freeze on income tax personal allowance, national insurance and inheritance tax thresholds
    • Minimum wage increases to £10.42 an hour
    • Social housing rent increases capped at 7% from next year.

    The chancellor said the government is introducing two new fiscal rules: that underlying debt must fall as a percentage of GDP by the fifth year in a rolling five-year period: and public sector borrowing over the same period must be below 3% of GDP.

    He said he had “tried to be fair” in his decisions by asking those “with more to contribute more” and avoided tax rises that “most damage growth”.

    Mr Hunt promised to “protect the vulnerable” and said his plan to plug what he previously called a fiscal “black hole” will lead to “a shallower downturn and lower energy bills”, while revealing his three priorities: “stability, growth and public services”.

    But opposition parties and unions have accused the chancellor of holding the country back, with Labour saying the plan means “working people are paying the price” for the Tories’ “failure”.

    Higher tax rates for the wealthiest and energy companies

    The chancellor said the 45p higher rate of tax will now be payable from £125,140, as opposed to the current £150,000.

    He said those earning £150,000 or more will now pay just over £1,200 more a year.

    Mr Hunt also expanded and increased the windfall tax, so from 1 January 2023 until March 2028 energy giants will have to pay 35%, instead of the current 25% on their profits.

    And there will be a temporary new 45% levy on electricity generators, which is in addition to the tax on the companies that provide energy to households and businesses.

    He also said electric car owners will no longer be exempt from vehicle excise duty from April 2025.

    And he announced the government, as expected, will proceed with the building of the new Sizewell C nuclear plant in Suffolk, which will create 10,000 highly skilled jobs and provide energy to the equivalent of six million homes over 50 years.

    However, there was no mention of fuel duty in the statement, as the law means it goes up by the Retail Price Index – which is set to be 23% in March next year.

    The OBR said that would add £5.7bn to the government coffers and would be a “record cash increase” and the “first time any government has raised fuel duty rates in cash terms since 1 January 2011, with an expected rise of around 12p a litre on petrol and diesel.

    It is understood the government is not making a decision on fuel duty now but will in the spring budget next year.

    Extra cash for schools and the NHS

    Much of the chancellor’s statement had been pre-briefed following the economic turmoil the mini-budget created after his predecessor announced surprise unfunded tax cuts.

    But Mr Hunt did pull a rabbit out of his hat as he announced an extra £2.3bn each year will be invested in schools for the next two years.

    As was expected, he increased the NHS budget by £3.3bn and said he has asked former Labour health secretary Patricia Hewitt to advise on how to make sure the new Integrated Care Boards work properly. They were introduced in April and are aimed at bringing NHS services in local areas together.

    Adult social care will get £1bn more next year and £1.7bn in 2024 and he said altogether, along with previous commitments, that means the government is committing to a “record £8bn” package for the health and social care system.

    ‘Stealth taxes’

    There will be a freeze on income tax personal allowance, the main National Insurance thresholds and inheritance tax thresholds for a further two years, until April 2028.

    These have been branded “stealth taxes”, with the freeze on income tax to bring in £6.8bn for the government as more people will be pushed into a higher tax bracket.

    On personal income allowances, he said the dividend allowance will be cut from £2,000 to £1,000 next year then to £500 from April 2024.

    The annual exempt amount for capital gains tax, which is paid on the profit of selling an asset that has increased in value such as property, will also be cut from £12,300 to £6,000 next year then to £3,000 from April 2024. It means people will have to pay tax at a lower threshold than before.

    Cost of living and minimum wage help

    On help for energy bills, Mr Hunt said the Energy Price Guarantee will continue for a further 12 months from April 2023 at a higher level of £3,000 per year for the average household. It is currently capped at an average of £2,500.

    There will also be additional cost of living payments next year for the most vulnerable, with £900 for households on means-tested benefits, £300 for pensioner households and £150 for those on disability benefits.

    Social housing rents will have their increases capped at a maximum of 7% in 2023-24, he added.

    And the hourly minimum wage will increase by 9.7% from April next year to £10.42 from the current £9.50.

    Pensions and benefits rise

    Mr Hunt committed to maintaining the triple lock on pensions, which promises to increase the state pension each year in line with the highest of inflation, average earnings or 2.5%. At the moment, that is inflation which reached a 41-year high on Wednesday of 11.1%.

    From April, pensions will rise in line with inflation of 10.1%, meaning an £870 annual increase.

    Benefits will also rise in line with inflation while a further 600,000 people on Universal Credit will be made to meet with a work coach to get more people into the workforce and in better-paid jobs.

    Defence and overseas aid

    Defence Secretary Ben Wallace had previously said he would quit if the government did not stick to spending 3% of GDP on defence by 2030.

    He has tempered his tone since as the economy dived but will have been disappointed by Mr Hunt announcing he is committing to “at least 2%”.

    On overseas aid, the chancellor said it will remain at 0.5% as he said the “significant shock to public finances” means it will not be possible to return to the 0.7% target.

    Source: Sky news.com 

     

  • Hunt pledges to increase NHS budget

    Moving onto the NHS, Jeremy Hunt says he knows how hard those in the healthcare sector work.

    “The biggest issues are workforce shortages and pressures in the social care sector. So today I addressed them both,” he says.

    Referring to himself in his former role as health and social care select committee chair, Mr Hunt notes that a proposal was put forward for a long-term healthcare workforce plan.

    He tells MPs an independently verified plan for the number of doctors, nurses and other professionals needed in five, 10 and 15 years’ time will be implemented.

    On social care, he says there are 1.6 million employees “working incredibly hard” under enormous struggles.

    But he notes that he has “very real concerns” about whether local authorities will be able to deliver the Dilnot social care reforms “immediately”.

    “So I will delay the implementation of this important reform for two years, allocating the funding to allow local authorities to provide more care packages,” he tells MPs.

    Mr Hunt also confirms he has “decided to allocate for adult social care additional grant funding of £1bn next year and £1.7bn thereafter”.

    He says combined with the savings from the delayed Dilnot reforms and more council tax flexibilities, this means an increase in funding available to the social care sector of up to £2.8bn next year and £4.7bn the year after.

    “We want Scandinavian quality alongside Singaporean efficiency” in the NHS, Mr Hunt says.

    He tells MPs he has asked former Labour health secretary Patricia Hewitt to help ensure new “integrated care boards” work properly.

    The chancellor says the NHS budget will increase in each of the next two years by an extra £3.3bn which totals a “record £8bn package for our health and social care system” overall.

    Source: Skynews.com 

  • Hunt says NHS must tackle waste

    Jeremy Hunt goes on to ask the NHS “to join all public services in tackling waste and inefficiency”.

    “We want Scandinavian quality alongside Singaporean efficiency – both better outcomes for citizens and better value for taxpayers”, the chancellor says.

    “That doesn’t mean asking people on the frontline to work harder, but rather asking challenging questions on how to reform all public services for the better,” he adds.

    A packed Commons chamber watches the chancellor
    BBCCopyright: BBC A packed Commons chamber is watching the chancellor Image caption: A packed Commons chamber is watching the chancellor

    There are clear attempts here by the chancellor to avoid some of these political decisions being framed as “tax rises”.

    Instead, for taxes like income tax and national insurance he is freezing the threshold at which people start paying certain levels of tax.

    What this means in practice, though, is that if people’s wages go up but the tax levels stay the same, they may not feel as big an impact from that wage rise.

    That’s because they’re paying more in taxes than they otherwise would have.

    Hunt says: “Because we want school standards to continue to rise, we’re going to do more than protect the school budget – we’ll increase it.”

    He says in 2023 and 2024 the government will invest an extra £2.3bn in schools.

    He says that the government’s message to school staff is: “Thank you for your brilliant work… the Conservative government is investing more in the public service that defines all our futures.”

    Turning to education, Chancellor Jeremy Hunt says “providing our children with a good education is not just an economic mission, it’s a moral mission”.

    He says the UK has “risen nine places in the global league tables for maths and reading in the past seven years”.

    He says he is “concerned” that school leaders don’t always have the skills they need to enter the workplace.

    He says he has appointed Sir Michael Barber as an advisor to work on implementing a “skills reforms programme”.

    Source: BBC.com 

  • Hunt kicks off autumn statement

     The chancellor is on his feet at the despatch box in the House of Commons to reveal the government’s new economic policies.

    Mr Hunt begins by saying that “teachers, nurses and many others” are worried about the future given the economic climate.

    He says today he will unveil a plan to revive the economy.

    “We are honest about the challenges and we are fair in our solutions,” he tells MPs.

    “We will also protect the vulnerable,” he adds.

    He says the plan will lead to “a shallower downturn” and “lower energy bills”.

    The chancellor says the government has three priorities within the autumn statement – “stability, growth and public services”.

    Beginning with stability, he tells MPs “the furlough scheme, the vaccine rollout and the response of the NHS did our country proud, but they all have to be paid for”.

    Mr Hunt says the Bank of England has “my wholehearted support” and confirms that the government “will not change its remit”.

    The chancellor says “credibility cannot be taken for granted and yesterday’s inflation figures show we must continue a relentless fight to bring it down, including a rock solid commitment to rebuild our public finances”.

    He continues: “The OBR (Office for Budget Responsibility) forecast the UK’s inflation rate to be 9.1% this year and 7.4% next year.

    “They confirm that our actions today help inflation to fall sharply from the middle of next year.

    “They also judge that the UK, like other countries, is now in recession.

    “Overall this year, the economy is still forecast to grow by 4.2%.”

    Source: Skynews.com 

  • Jeremy Hunt: Everyone will have to pay more tax

    Chancellor Jeremy Hunt says, everyone will have to pay more tax under plans due to be announced on Thursday.

    “I’ve been explicit that taxes are going up,” he told the BBC’s Laura Kuenssberg.

    He also confirmed that he would provide more information about additional assistance for people struggling with energy bills, but warned that there would be constraints.

    Labour accused the Conservatives of creating a “total mess” of the economy.

    Shadow chancellor Rachel Reeves said Mr Hunt was choosing to tax working people while doing “little to close tax loopholes which mean some of the wealthiest don’t pay their fair share”.

    Mr Hunt was speaking to the BBC just days before he is due to deliver his tax and spending plans in Parliament as part of the Autumn Statement.

    The BBC has been told the chancellor is set to announce spending cuts of about £35bn and plans to raise £20bn in tax.

    It comes as the UK faces major economic challenges, with soaring living costs and a warning from the Bank of England that the country is facing its longest recession since records began.

    It also follows the mini-Budget of former Prime Minister Liz Truss and her then chancellor, Kwasi Kwarteng, which led to market turmoil and a jump in government borrowing costs. Many of those policies have since been reversed by Mr Hunt.

    Independent forecasts are understood to have identified a gap of around £55bn in the public finances – although some economists have questioned the size of the ‘black hole’.

    ‘Unappetising announcements’

    Laura Kuenssberg, Presenter, Sunday with Laura Kuenssberg

    “Everyone is going to pay more tax” – not the kind of political message any minister would ever choose to say out loud.

    But that is the clear statement from Chancellor Jeremy Hunt, preparing the ground for a pretty unappetising set of announcements he is going to make this Thursday.

    As ever at this stage in the cycle, the occupants of No 11 are coy about giving any specifics. But alongside that bold and important statement that genuinely will affect everyone in one way or another, it is abundantly clear that public services are in for a hard time with no guarantee there’ll be extra cash to help them cope with the costs of inflation.

    And if that wasn’t enough, the help that everyone has been receiving with their energy bills will come to an end for many.

    These are important days for the new chancellor, and new Prime Minister Rishi Sunak, painting a grim scenario for the next few years.

    It will take much political skill to be able to get the public on their side, and back these decisions. Money is short, but significantly behind in the polls, and political goodwill towards the government is too.

    It also won’t have escaped people’s notice that the chancellor accepted Brexit had costs for the economy too. Wrapped up in suggestions that there were lots of opportunities still to come, it’s a rare acknowledgement from a Conservative politician.

    Speaking to the BBC, Mr Hunt acknowledged his plans would “disappoint people” – but he promised to protect the “most vulnerable”.

    “We have the plan to see us through choppy waters… we will make the recession we are in as short and shallow as possible.”

    The BBC has been told Mr Hunt is planning to freeze tax thresholds – the levels of income at which people begin to pay more tax – until 2028.

    While he did not confirm these plans when appearing on Sunday with Laura Kuenssberg, the chancellor said: “I think I’ve been completely explicit that taxes are going to go up, and that’s a very difficult thing for me to do because I came into politics to do the exact opposite.”

    He did not spell out which taxes could go up, but increasing income tax, VAT or National Insurance would break a promise made in the Conservative’s 2019 manifesto.

    Some Conservatives MPs have raised concern about increasing taxes, with former party leader Iain Duncan Smith telling Sky News it could lead to a “deeper” recession.

    Addressing the concerns of his colleagues, Mr Hunt said the previous leadership had tried that approach, “in other words a plan that doesn’t show how, in the long run, we can afford it”.

    “We have tried that, we saw it didn’t work.”

    On energy costs, Mr Hunt praised his predecessor Mr Kwarteng for introducing a price cap on the typical household energy bill.

    The energy price guarantee had been due to last for two years, but after taking over from Mr Kwarteng, Mr Hunt announced it would expire in April.

    Speaking to the BBC, he said he would set out what further support would be given to those struggling on Thursday.

    However, he emphasised that future help had to be “done on a sustainable basis” and there would have to be “some constraints”.

    Asked if he was ditching the energy plan set out by former prime minister Boris Johnson, the chancellor said he admired Mr Johnson’s “big visions” but added there were elements of “cakeism” – a reference to the phrase: “Have your cake and eat it.”

    He said he wanted to “deliver the exciting things he outlined” but that actions had to be credible and affordable.

    On whether Brexit had damaged the economy, Mr Hunt said: “I don’t deny there are costs, but there are also opportunities.”

    He said the coronavirus pandemic had prevented the UK from taking advantage of opportunities open to it after leaving the European Union.

    Labour’s Rachel Reeves said she recognised there would be “constraints” on what the government could do, partly because of “mistakes the government has made”.

    However, she added: “Just because you have to make difficult decisions it doesn’t mean you have to make the same decisions.”

    She said Labour had “no plans” to raise the income tax or national insurance and would focus on closing “loopholes” in the tax system.

    The Liberal Democrat’s Treasury spokesperson Sarah Olney said: “Hardworking families look set to be clobbered with yet more unfair tax hikes because the Conservative party crashed the economy.”

    Source:

     

  • UK “fastest growth in the G7” says Jeremy Hunt

    Jeremy Hunt previously told Laura Kuenssberg “this year we have the fastest growth in the G7. We’re catching up fast in that respect”.

    The International Monetary Fund (IMF) predicts that the UK economy will grow by 3.6% in 2022. This is faster than any other country in the G7, a group of the world’s richest countries.

    However, the latest figures show the UK economy shrunk by 0.2% between July and September and the Bank of England has forecast a “very challenging” two-year recession.

    Despite stalling growth at the moment, the UK economy is bigger than it was in 2021 when the country was under lockdown for the first few months of the year.

    The IMF now expects the UK to grow by 0.3% in 2023, down from its previous estimate of 0.5%.

     

  • Chancellor’s plan looks very different to his predecessor’s

    The chancellor has hinted that he could make changes to the labour market to try and drive growth.

    Jeremy Hunt said UK unemployment is at a 40-year low, but 600,000 people have left the workforce since the pandemic, and he admitted that has put a strain on businesses as they struggle to recruit.

    He said he will address this in Thursday’s Autumn Statement. Could it mean a change to immigration rules to allow companies to recruit more people from abroad?

    He also acknowledged that Brexit has brought in more costs for businesses, but said the UK needs to embrace the opportunities.

    His central message was that inflation is the biggest factor affecting household budgets. It “insidiously” eats away at people’s spending power, he said.

    The chancellor promised to set out a balanced and fair approach to address short-term pressures like energy prices and the cost of food and household goods. But he also wants to give businesses the tools to help them grow.

    Expect his plans to be vastly different from his predecessor’s uncosted tax giveaways. “We need a plan that stands the test of time,” he concluded.

    DISCLAIMER: Independentghana.com will not be liable for any inaccuracies contained in this article. The views expressed in the article are solely those of the author’s and do not reflect those of The Independent Ghana

    Source: BBC.com 

  • Rishi Sunak promises to condemn Putin’s regime at the G20

    Rishi Sunak has promised to “call out Putin’s regime” at an international summit in Indonesia.

    On Sunday afternoon, the prime minister will travel to Bali for a G20 summit of the world’s largest economies.

    British officials had planned for this meeting assuming Russia‘s president would attend.

    The prime minister was expected to join other world leaders in publicly condemning Vladimir Putin.

    But Moscow said last week he wouldn’t be attending and the Kremlin would be sending Russia’s foreign minister, Sergei Lavrov, instead.

    So the words of anger will be directed at him.

    Speaking before setting off for Indonesia, the prime minister said: “Putin’s war has caused devastation around the world – destroying lives and plunging the international economy into turmoil.

    “This G20 summit will not be business as usual. We will call out Putin’s regime, and lay bare their utter contempt for the kind of international cooperation and respect for sovereignty forums like the G20 represent.”

    The G20 is a hotchpotch of countries with little in common beyond big economies.

    A block of flats in Mykolaiv after being hit by a Russian missile
    IMAGE SOURCE, SHUTTERSTOCK Image caption, None of the other G20 leaders want to pose for a smiling photo with Russia amid its invasion of Ukraine

    An economic forum whose members have been hammered, economically, by one of their own, Russia.

    So the backdrop is awkward, to say the least.

    There won’t even be one of the basic diplomatic niceties of these gatherings this time, what is known as the family photo, where the leaders pose for a group picture.

    The other leaders refuse to be seen smiling in the presence of Russia.

    Recent precedent suggests another usual staple of these affairs, what is known as a communique, a set of agreed conclusions published at the close of the summit, probably won’t happen either.

    Almost three weeks into the job, this is Mr Sunak’s second overseas trip as prime minister, after last week’s dash to the COP27 climate summit in Egypt.

    He managed to see a good number of fellow European leaders in Sharm el-Sheikh.

    The trip to Bali will mean he can meet plenty from the Indo-Pacific region, a part of the world the government has been increasingly focused on since Brexit.

    And, perhaps, a first chance to meet US President Joe Biden.

    Meanwhile, back home, as Laura Kuenssberg writes, Chancellor Jeremy Hunt will continue preparing what is called the Autumn Statement, a budget in all but name, to be delivered on Thursday, just hours after the prime minister gets back home.

    Downing Street is seeking to frame both the summit and the Autumn Statement as responses to the same shock: the consequences of the war in Ukraine.

    A desperate global economic situation, as they describe it, with big domestic implications, that they seek to be trusted to grapple with, after the chaos of the Liz Truss administration.

    But a fractious summit followed by what many will see as a bad news Budget won’t make for an easy week for Mr Sunak.

     

  • Rishi Sunak to attend COP27, reversing his decision to skip it in order to focus on the economy

    Rishi Sunak has said he will attend the COP27 climate summit in Egypt in a U-turn from his previous snub.

    Rishi Sunak has said he will go to COP27 in Egypt, in a reversal of his previous snub.

    In a statement on Twitter, the prime minister said: “There is no long-term prosperity without action on climate change.

    “There is no energy security without investing in renewables. That is why I will attend COP27 next week: to deliver on Glasgow’s legacy of building a secure and sustainable future.”

    The pressure was growing on the PM after Boris Johnson confirmed to Sky News yesterday that he would be going to the climate summit.

    Labour’s deputy leader, Angela Rayner, said Mr Sunak had to be “dragged kicking and screaming into doing the right thing”, and called the U-turn “embarrassing”.

    Ed Miliband, the shadow climate secretary, said: “The prime minister has been shamed into going to COP27 by the torrent of disbelief that he would fail to turn up.

    “He is going to avoid embarrassment not to provide leadership.”

    Caroline Lucas, the Green Party’s only MP, said: “Glad to see Sunak’s screeching U-turn on COP27, but what an embarrassing mis-step on the world stage.

    “Let this be a lesson to him – climate leadership matters.

    “Now he urgently needs to increase UK ambition on emission reduction targets & pay what we owe to global climate funds.”

    Mr Sunak initially said he was not going to head to the conference in Sharm El-Sheikh due to “other pressing domestic commitments”.

    But the PM faced a raft of criticism, with Labour leader Sir Keir Starmer accusing him of displaying a “failure of leadership” and Greenpeace UK saying he was not taking climate change “seriously enough”.

    Within days, Downing Street changed course, saying the PM’s attendance was “under review”, depending on progress around preparation for the economic statement, set for 17 November.

    A No 10 source told Sky News that Mr Sunak and Chancellor Jeremy Hunt have made “good progress” on the autumn statement after working on it over the weekend and this week.

     

  • ‘Rough’ tax rises on the way

    The autumn statement this month will likely encompass “rough” tax rises, Sky News has been told.

    The warning from a source in the Treasury comes after Chancellor Jeremy Hunt and Prime Minister Rishi Sunak met yesterday morning.

    They discussed what is being characterized as an eye-watering black hole, and agreed that tough decisions will be needed on tax rises as well as spending.

    It comes ahead of the 17 November autumn statement.

    It is reported that the pair are eyeing fixing income tax bands, so they can increase receipts as wages grow.

    But they agreed those with the “broadest shoulders” should bear the greatest burden.

    The source said: “It is going to be rough.

    “The truth is that everybody will need to contribute more in tax if we are to maintain public services.

    “After borrowing hundreds of billions of pounds through COVID-19 and implementing massive energy bill support, we won’t be able to fill the fiscal black hole through spending cuts alone.”

    The Resolution Foundation thinktank – who we will hear more from shortly – warned that tax cuts were “likely” as the government faces an “unpalatable menu” of ways to fill a black hole in the finances they estimate at £40bn.

    Source: Skynews.com

     

  • Briefings about the ‘tough’ tax rises to come show Sunak’s awareness of where Truss went wrong

    When Liz Truss unveiled the now infamous mini-budget, even her cabinet colleagues didn’t know what was coming. Rishi Sunak is taking no such risks.

    Late last night, the Treasury issued a briefing to friendly newspapers – seen by Sky News – setting out the “eyewatering” scale of the fiscal black hole, which means “everyone” will need to pay more tax.

    Following a meeting between the prime minister and Chancellor Jeremy Hunt to discuss the Autumn Statement on 17 November, they “agreed that tough decisions are needed on tax rises, as well as on spending”, the Treasury stated.

    A Treasury source said: “It is going to be rough. The truth is that everybody will need to contribute more in taxes if we are to maintain public services.

    “After borrowing hundreds of billions of pounds through COVID-19 and implementing massive energy bill support, we won’t be able to fill the fiscal black hole through spending cuts alone.”

    They also briefed that while there will be pain all around, those with the broadest shoulders will bear the highest burden – something former chancellor George Osborne, the architect of austerity, also used to say.

    It’s expected income tax thresholds will be frozen – dragging tens of thousands more people into the 20p and 40p tax rates in the coming years, and the windfall tax could be extended.

    But day-to-day spending is also expected to be squeezed, with the possible exceptions of the NHS and defense, on departments already struggling with inflation.

    Some in government say they expect Mr Sunak to raise benefits by inflation as promised in a signal of fairness to the most vulnerable, but no decisions have been made yet.

    This is rolling the pitch – preparing the public and MPs for grim news and setting out priorities.

    It allows interest groups within his party, and external groups and charities, to make their cases in advance and hopefully avoid some of the worst pitfalls.

    But it’s a high-wire act – the last time spending was squeezed like this, under the austerity drive of David Cameron and George Osborne from 2010, they had years to craft a narrative around it.

    This time, Rishi Sunak made clear on the steps of Downing Street that a lot of the economic damage is self-inflicted by his predecessor Liz Truss and her failure to balance the books, although borrowing to tackle COVID is a key driver too.

    Many voters who turned to the Conservatives for the first time in 2019 will have heard Boris Johnson saying austerity was over, indeed that he had always thought it was “just not the right way forward for the UK”.

    The PM does not have long to craft a case that it is now time for everyone to tighten their belts – and to try and ensure the balance looks fair.

    Source: Skynews.com

     

  • Prime Minister to keep Jeremy Hunt as chancellor – Former deputy governor of the Bank of England

    The former deputy governor of the Bank of England says the future Prime Minister will have to keep Jeremy Hunt as chancellor.

    Prof Charlie Bean has been telling BBC Radio 4’s World At One programme that appointing a new chancellor would “generate volatility”.

    He says any change to Hunt’s economic programme would be “problematic”,

    “It is a significant tying of hands.”

    Prof Bean praises Hunt for doing “quite a good job” of calming the markets and setting out a broad direction by “unwinding two-thirds” of the cost of Kwasi Kwarteng’s mini-budget which caused financial chaos last month.

    He says there could be some “tweaking at the margins” of Hunt’s plans – but it would be “problematic” if the new PM came in and said they wanted a more significant change in the economic package ahead of the financial statement on 31 October.

     

  • Government borrowing soars, as retail sales fall far more than predicted

    Surging inflation means the cost of servicing government debt hit a record level last month, according to figures from the ONS, which also reported that consumers were now back buying less than they were before the COVID pandemic.

    The latest official data on the state of the public finances and consumer spending makes for grim reading as the country awaits its next leader.

    The Office for National Statistics (ONS) reported that public sector net borrowing came in at £20bn last month – £3bn more than economists had expected.

    The report pointed to a record debt interest payment total of £7.7bn for the month of September – much of which could be attributed to rising inflation as a quarter of payments on the £2.4trn debt mountain are linked to the RPI measure.

    Government spending increased by £5.8bn to £79.3bn as a result of the jump in interest, the ONS said.

    It separately revealed that retail sales volumes fell 1.4% on the previous month, meaning that “consumers were now buying less than before the pandemic”.

    It was likely to reflect not only the deteriorating cost of living crisis that has squeezed consumer budgets this year but also the impact of store closures for the funeral of the Queen.

    The Queen's funeral flanked by navy
    Image: Many retailers closed their stores out of respect for the Queen on the day of her state funeral on 19 September

    The borrowing figures cover the start of Kwasi Kwarteng’s short and turbulent tenure as chancellor.

    He was appointed on 6 September before being fired weeks later following the market chaos that followed the tax giveaway mini-budget on 23 September.

    While the contentious measures have now been largely overturned by the new Chancellor Jeremy Hunt, the backlash temporarily raised the interest rate demanded by investors to hold UK government debt.

    That has fed into fixed-rate mortgage costs.

    Kwasi Kwarteng waves to the media as he leaves 11 Downing Street after being sacked. Pic: AP
    Image: Much of the borrowing – the second-highest September total on record – came while Kwasi Kwarteng was chancellor

    It also led to the pound falling to a record low against the US dollar – with continued sterling weakness adding to the country’s import costs and therefore inflation.

    The chancellor’s medium-term fiscal plan, due on Halloween, will aim to restore market confidence in the UK’s public finances.

    But it will now fall under the oversight of a new PM following the resignation of the ill-fated mini-budget’s architect, Liz Truss.

    The Tories expect their new leader to be in place in a week’s time – days before Mr Hunt is due to outline how he plans to balance the books while also maintaining a measure of support for struggling households and businesses.

    A survey by the City watchdog found that almost 32 million people, or 60% of adults, were already finding it a heavy burden or somewhat of a burden to pay their bills because of the growing cost of living crisis.

    The Financial Conduct Authority’s financial lives survey, which was taken between February and June, said the total was up six million from 2020 when the economy went into lockdown to fight the COVID-19 pandemic.

    Another closely watched survey, compiled by GfK, found that confidence among British consumers remained close to the lowest level on record last month.

    The chancellor said in the wake of the ONS data: “Strong public finances are the foundation of a strong economy.

    “To stabilise markets, I’ve been clear that protecting our public finances means difficult decisions lie ahead.

    “We will do whatever is necessary to get drive down debt in the medium term and to ensure that taxpayers’ money is well spent, putting the public finances on a sustainable path as we grow the economy.”

  • Pat McFadden: The Conservatives have “lost all economic credibility”

    Earlier today, Armed Forces Minister James Heappey stated that the mini-budget was approved by the entire cabinet.

    He stated that the full cabinet had agreed to it before it was submitted to the Commons, and he also continued to make the case for the Ministry of Defence to preserve its promised money, despite the fact that Chancellor Jeremy Hunt was expected to tell all government departments to find savings.

    Now, Pat McFadden, Labour’s shadow chief secretary to the Treasury, has said the “frank admission” that ministers approved the disastrous mini-budget showed the Conservatives had “lost all economic credibility”.

    “They couldn’t run a bath let alone a major G7 economy,” he said.

    “They have put a Tory premium on people’s mortgages and reduced the UK to nervously watching its gilt yields day by day.

    “Labour will match the financial stability the country needs with a proper plan for growth based on the efforts of the whole country, not tired and failed trickle-down economics.”

     

  • Liz Truss: ‘I will lead Conservatives into the next general election’

    Liz Truss has insisted that she will lead the Conservatives into the next general election, despite U-turns that have left her fighting for her authority.

    The Prime Minister apologized for making mistakes after new chancellor Jeremy Hunt scrapped almost all of her tax-cutting proposals to calm market turbulence.

    She went on to say that her month-old premiership “hasn’t been perfect,” but that she had “corrected” flaws.

    And she said it would have been “irresponsible” not to change course.

    In an interview with the BBC, she said she was still committed to boosting UK economic growth, but acknowledged it would now take longer to achieve.

    “I remain committed to the vision, but we will have to deliver that in a different way,” she said.

    It comes after a dramatic day at Westminster after Mr Hunt announced that nearly all the tax cuts announced at last month’s mini-budget would be scrapped.

    The decision has been welcomed by investors but has left Ms Truss’s economic agenda in tatters only weeks into her time in No 10.

    Liz Truss told the BBC’s Chris Mason she was “sorry for the mistakes that have been made”.

    In her interview, Ms Truss said she accepted responsibility for going “too far, too fast” – and she wanted to “say sorry for the mistakes that have been made”.

    She added that she remained committed to a “low tax, high growth economy” – but preserving economic stability was now the “priority”.

    “I do think it is the mark of an honest politician who does say ‘yes, I’ve made a mistake. I’ve addressed that mistake. And now we need to deliver for people.

    “It would have been completely irresponsible for me not to act in the national interest in the way I have.”

    Shadow Treasury minister James Murray said the PM’s apology “after weeks of blaming everyone else” would not “undo the damage” caused by her mini-budget.

    “No sorry can change the fact that this crisis was made in Downing Street but is being paid for by working people,” he added.

    Jeremy Hunt in the Commons
    IMAGE SOURCE, JESSICA TAYLOR/UK PARLIAMENT Image caption, Liz Truss sat in the Commons for half an hour as Mr Hunt outlined the U-turns to MPs

    Ms Truss watched on silently as Mr Hunt delivered a Commons statement to explain to MPs why the economic strategy, outlined last month by Kwasi Kwarteng, was being torn up.

    The chancellor warned that “decisions of eye-watering difficulty” on tax and spending remain ahead of an economic statement on 31 October, when he will give further details of a plan to reduce the UK’s debt burden.

    He said further windfall taxes on energy companies – a policy repeatedly rubbished by Ms Truss during her Tory leadership campaign – could not be ruled out, along with changes to the pension triple lock.

    Ms Truss refused a Labour request to explain the U-turns to MPs herself before Mr Hunt’s statement, with Commons leader Penny Mordaunt saying the PM had been “detained on urgent business”. The prime minister later arrived in the Commons taking her seat beside Mr Hunt before he began his statement.

    Labour leader Sir Keir Starmer accused the PM of leaving an “utter vacuum” in government, while one of his MPs jibed she had been “cowering under a desk”.

    In total, £32bn of the £45bn in tax cuts announced at last month’s mini-budget have now been ditched, including plans to cut the basic rate of income tax from 20p to 19p from April.

    Cuts to dividend taxes and VAT-free shopping for international tourists have also been scrapped, along with a freeze on alcohol duty rates.

    Leadership threats

    The government’s energy support package, a policy repeatedly championed by Ms Truss in defence of her premiership, will also be scaled back after six months.

    The reversals have prompted some Tory MPs to talk privately about how Ms Truss could be ejected from office, despite party rules preventing a formal leadership challenge for a year.

    Tactics reportedly under consideration include submitting no-confidence letters in a bid to force party bosses into a rule change or changing the rules to allow MPs to bypass party members and pick a new leader themselves.

    Liberal Democrats leader Ed Davey called for a general election, telling the BBC “the damage has already been done” by the mini-budget.

    Shadow Chancellor Rachel Reeves echoed calls for Ms Truss’s removal, telling BBC Breakfast the “only thing left from the Prime Minister’s plan is higher mortgage rates and higher bonuses for bankers”.

    Ms Reeves said Labour would fund a longer-running energy bill support package by scrapping non-dom status.

    However, there is little agreement over who should take over from Ms Truss if she is removed.

    Defence Secretary Ben Wallace has quashed rumours that he could replace Ms Truss should she resign.

    Speaking to the Times, he said he will be holding on to his current job and accused Tory MPs of playing “political parlour games”.

    Five of the PM’s own MPs have called publicly for her to resign, with others briefing journalists that they think her time in office is up.

    Ms Truss has been holding meetings with her cabinet ministers and backbench MPs as she tries to reassure her party of her grip on power.

    She also met Sir Graham Brady, who chairs the committee that decides the Tory party rulebook.

    The committee’s treasurer has confirmed a rule change is possible, but suggested “probably 60-70%” of the party’s MPs would have to support the move.

  • Tory MPs sent message from PM and chancellor following mini-budget U-turns

    Following this morning’s announcement from new Chancellor Jeremy Hunt that “almost all” tax cuts announced in the mini-budget have been scrapped, he and the PM have sent a message to all Conservative MPs.

    “The prime minister and the new chancellor are in lockstep and committed to long-term reforms,” the message says.

    It adds that the government is “still going for growth” – despite the mass of mini-budget U-turns – and suggests that global factors are to blame for the economic turmoil.

    “When we get it wrong, we will say no,” it continues.

    It comes as Prime Minister Liz Truss seeks to hold onto her premiership following a tumultuous first few weeks in office.

    A total of four Conservative MPs are now publicly calling for Ms Truss to go.

    Source: Sky News 

     

  • The pound surges as the chancellor moves to calm markets

    On Monday, the pound gained and government borrowing costs fell as investors welcomed the news that Chancellor Jeremy Hunt is speeding up tax and spending cuts.

    In morning trading, sterling gained 1% against the dollar, trading around $1.13.

    The interest rate – or yield – on UK government bonds fell as a result of the announcement.

    The drop in yields suggests financial markets are welcoming the prospect of changes to economic plans.

    Monday is the first time the UK government bond market has reopened since the Bank of England’s emergency support programme ended on Friday.

    On Friday, Prime Minister Liz Truss sacked Kwasi Kwarteng as Chancellor and said the mini-budget “went further and faster than markets were expecting”.

    The mini-budget was blamed for causing turmoil in the financial markets. The aftermath of Mr Kwarteng’s announcements on 23 September saw the pound slumped to a record low of $1.03 and the cost of government borrowing rise sharply.

    “The chancellor will make a statement later today, bringing forward measures from the Medium-Term Fiscal Plan that will support fiscal sustainability,” a Treasury spokesman said.

    Mr Hunt is expected to fast-track many billions of pounds worth of tax and spending measures from his debt plan, announcing them a fortnight earlier than expected.

    It is the latest of a series of U-turns on policies announced in the mini-budget.

    The announcement of the £18bn U-turn on corporation tax on Friday and the firing of Mr Kwarteng did not appear to reassure investors, with UK government borrowing costs climbing on Friday afternoon.

    Investors warned that whatever Mr Hunt announces will need to “add up”.

    “I think you’ll see a positive reaction to the statement, assuming that the math adds up a bit more than it did before,” Shanti Kelemen, chief investment officer at M&G Wealth, told the BBC.

    “What we saw on Friday, as we had markets rise in the lead up to the news that Kwarteng was resigning, but then as soon as it happened, we had a sell-off afterwards.

    “So I think it’ll be important that the actual content of what’s being delivered adds up and has some more meat and numbers behind it than what we’ve seen previously.”

    The Bank of England stepped in to stabilize the financial markets following the mini-budget, announcing an emergency bond-buying scheme.

    Ms Kelemen said that the latest moves from the chancellor showed he acknowledged the government’s role in reassuring the markets.

    “They’ve recognized that the uncertainty is damaging the economy,” she said.

    “You also see the Bank of England won’t be supporting markets this week. So I think it shows the government is taking a bit more responsibility rather than relying on the Bank of England to buy all the debt.”

    The shift in the government’s economic policies and market turmoil in recent weeks has led to Goldman Sachs downgrading its forecasts for UK economic growth.

    The investment bank revised its 2023 UK economic output forecast from a 0.4% drop to a 1% contraction.

    Goldman said it expected a “more significant recession in the UK” in part due to “significantly tighter financial conditions” and the planned higher corporation tax rate from next April.

    Consultancy Pantheon Macroeconomics said the prime minister’s decision to appoint Mr Hunt as chancellor had “done little to shrink the risk premium embedded in UK assets”.

    “Households and businesses, therefore, are still facing a huge increase in their borrowing costs,” their analysts said.

    They added the forthcoming real-term reduction in government spending looked “set to be bigger than in the 2010s”.

     

  • Defense Secretary Ben Wallace could resign if Jeremy Hunt scraps defence spending boost

    Defence spending had been set to rise to 3% of GDP by 2030-but Chancellor Jeremy Hunt refuses to make that commitment.

    The UK’s new chancellor has raised the possibility of ditching a key pledge by Liz Truss to boost defence spending – a move that would likely be a resigning matter for her defence secretary, Ben Wallace.

    Jeremy Hunt on Saturday refused to commit to lifting the amount of money spent on the armed forces to 3% of national income by 2030, as promised by the prime minister.

    He also said the Ministry of Defence, like all other departments, would have to make additional savings.

    Mr Wallace, one of the most experienced and well-regarded members of the embattled prime minister’s cabinet, has fought hard over the past three years to secure much-needed increases in defence spending at a time of growing security threats.

    Asked whether any backtracking on defence spending goals would be a resigning issue, a defence source said Mr Wallace would hold the prime minister to the pledges made.

    This includes a commitment to increase defence spending to 2.5% of gross domestic product (GDP) by 2026 from around 2% at present and then to 3% of GDP by 2030 in what would equate to around an extra £157billion over eight years.

    But speaking about tough times ahead, Mr Hunt told Sky News: “I’m going to ask all departments to find more efficiencies than they were planning to find.”

    He repeated this on Radio 4’s Today programme and was asked specifically if a “difficult tough decision” would be taken over the defence budget.

    Mr Hunt replied: “We do need to increase defence spending, but I can’t make a promise to you here and now about the timings of that.”

    He continued: “The long-term ability to fund an increase in defence spending will depend on stability in the economic situation and a healthily growing economy.”

    Pressed on how he was leaving open the possibility of the 3% defence spending pledge not being delivered by 2030, Mr Hunt said: “I am leaving open all possibilities this morning. I wish I could give you more detail, but I will be presenting to parliament in a fortnight on Monday exactly what is going to happen and the answer to all those questions.”

    He was referring to 31 October when the chancellor is due to issue a fiscal statement.

    As well as a failure to commit to defence spending, Mr Hunt also made a flawed assessment that long-term defence spending can only be secured if there is economic stability.

    In reality, there can be no economic stability without security.

    The energy price rise – as the prime minister keeps saying – is caused by Vladimir Putin using energy as a weapon, reducing the flow of Russian oil and gas to pressure Western nations to stop their crucial support to Ukraine, which has helped thwart his invasion so far.

    Had the Conservatives – and Labour before them – genuinely demonstrated the mantra that national security is their first priority the UK would not have seen successive governments slash defence spending and military capability over the past three decades.

    NATO allies are less likely to invest in defense if the UK doesn’t

    Hollowed-out defences – and this is a simplification of a time that also included the disastrous Iraq and Afghanistan wars – have left the UK and fellow European NATO allies less able to deter the existential threats posed by authoritarian regimes like Russia’s.

    So, it makes no sense to use the economic crisis, triggered in part by Russia’s war in Ukraine, as a reason to backtrack on a vital need to rebuild the UK’s armed forces.

    Russia’s Vladimir Putin, Xi Jinping of China, North Korea’s Kim Jong-un, and all other leaders who prefer authoritarian rule over the values of democratic governments – human rights, rule of law, and other freedoms – will be laughing.

    Britain is one of the strongest voices in NATO, urging increased defence spending among all 30 allies – it is a live debate right now, with hopes to lift a minimal expenditure target to 2.5% of GDP from 2%.

    If the UK were to lead by example and reduce ambitions to grow defence spending, it would make it far less likely other European allies will feel under pressure to boost their budgets.

    The MoD has a largely poor track record of procurement, with programmes to build warships, aircraft, and tanks too often running billions of pounds over budget and delivered late or not at all. That is inexcusable and also needs to change.

    But ordering more efficiencies is going to make a bad situation even worse.

    Many people have tried and failed to make the MoD and the armed forces more efficient.

    The thing is, the UK’s military, security and intelligence services are too vital to fail and too important not to fund adequately, especially at a time of war in Europe, and the very real threat of escalation with Russia and China.