Economy

This Budget is probably Jeremy Hunt’s last fiscal event before the election, and the Chancellor will want to at least set a fair wind for the Conservatives to head into polling day. That means giving voters a sense that sticking with the Tories is the safer option, offering them giveaways on tax and the sense that more tax cuts might be to come – as well as avoiding the sort of post-Budget rows that can define a government in all the wrong ways. Hunt is expected to cut National Insurance by a further two percentage points, on top of the 2 point cut he made in the autumn. This is

Slashing Whitehall waste is a pledge that brings to mind Augustine’s prayer for the Lord to make him virtuous – but not yet. It is something repeatedly promised by governments, but rarely delivered. Here we are again, days out from the final Budget before voters go to the polls in a general election, and Jeremy Hunt is announcing a crackdown on bureaucracy in the public sector. He intends to reduce the civil service headcount by 66,000, returning it to pre-pandemic levels. Do we need a Department for Culture, Media and Sport? Voters are likely to feel cynical. Britain’s public sector is riddled with entitlement and waste at levels described by the Chancellor as

When is the government going to stop pretending that chopping down trees in North American forests and shipping them across the Atlantic to burn them in UK power stations is a zero-carbon form of energy? The environmental-friendliness of Drax power station in North Yorkshire has been called into question yet again this week after BBC Panaroma investigation reported that some of the woodchips being burned there have allegedly been sourced from established ‘old growth’ forests in Canada rather than recent plantations. Drax has not commented on those specific allegations, but the investigation has thrown the issue back into the spotlight. How and where the wood is sourced has a dramatic

In a week’s time, Jeremy Hunt will stand up at the despatch box and unveil the Spring Budget. This event has long been seen by Tory MPs as a key marker ahead of the general election. It is the last big set piece event in the calendar between now and the short campaign. Ministers, too, have raised expectations about what could be in it – with Rishi Sunak telling The Spectator in December to expect a ‘gear shift’ in taxation. However, the problem for Sunak and Hunt is that they are likely to disappoint. Despite the government recouping record revenues in January, the public finances are not as healthy as

Does Jeremy Hunt have the cash to spend on tax cuts in his spring Budget next week? That’s the billion pound question that the Institute for Fiscal Studies (IFS) focused on during its pre-Budget briefing this morning, hosted by Director Paul Johnson and Deputy Director Carl Emmerson.  As Ross Clark notes on Coffee House, the latest rumours suggest that the Chancellor is pivoting away from an income tax, inheritance tax or stamp duty cut (the last of which is considered most desirable by economists, including those over at the IFS, due to how badly it distorts the housing market and weighs down growth). Instead he may be opting for another penny

The Competition and Markets Authority report on the housing sector should be a boost to the Yimby policy machine. It expressed grave concerns about the housing market operating like a cartel, and said that much of this was enabled by the current planning system.  The CMA was tasked with looking at the housing market a year ago, because targets are consistently missed, prices are consistently rising, and there are allegations that tactics such as ‘land banking’ are used to drive up profits. The result was a strong indictment of the planning system as it currently stands.  The report found that under-staffed planning departments, combined with a veto-heavy system, made getting

It is of course good news that the Ofgem price cap for a dual fuel household bill will fall from £1,928 to £1,690 from April (that is the bill paid by the average householder). It means that there should be strong downwards pressure on inflation (the Consumer Prices Index) in April. Barring a jolt in inflation in other goods and services or an acceleration in earnings it ought to mean the Bank of England finally has the courage to cut its base rate, probably in May. None of that, though, should distract from the fact that energy prices in Britain remain far too high. For one thing, the huge fall

It has been a miserable few years for our quality of life. People have gotten used to that sinking feeling every time you read a price tag at the supermarket, receive an electricity bill or – particularly for younger generations – think about someday buying a house.This squeeze comes from prices rising faster than wages, and has resulted in the biggest slump in living standards since records began. According to the Office for Budget Responsibility’s latest forecasts, household incomes will still be 3.5 per cent below pre-pandemic levels over the coming year. The immediate causes of this crisis are well-known. The Bank of England printed too much money during Covid,

Jeremy Hunt needed some good news this morning, when the monthly public sector finance update was released by the Office for National Statistics (ONS). Having promised meaningful tax cuts last month – and then rowed back expectations this month – the Chancellor was hoping for a notable surplus and reduction in borrowing to give himself a bit more room within his fiscal rules to cut tax. January delivered. The ONS reports a surplus of £16.7 billion in January 2024 – not only double the surplus of the same month last year, but a record-breaking surplus (in nominal terms) since records began. Receipts jumped up to £111.4 billion – almost £4 billion more

We’re not cutting interest rates because we think the recession may already be over and we’re not even sure we are in recession anyway. That was the gist of Governor of the Bank of England’s evidence to the House of Commons Treasury Select Committee this morning. Bailey fell back on the traditional excuse of CEOs who get it wrong and send their businesses into a downwards spiral: the weather Andrew Bailey reminded the committee of what happened ten years ago when Britain seemed to be on the verge of a triple dip recession. In the end, revisions of the GDP figures revealed that we had never even entered a double

Maybe the Office for National Statistics should stop seasonally adjusting its data. That is the lesson from today’s retail sales figures, which show a strong rebound in sales volumes of 3.4 per cent in January. All areas of spending were up except clothing, which was down by 1.4 per cent. The overall figures might sound promising, but all they really do is to cancel out December’s fall of 3.3 per cent. Look at the figures for the past three months and sales are pretty flat, falling by 0.2 per cent in that time. The high street is in a stupor, just like the economy as a whole. Why did retail appear

At the start of last year Rishi Sunak made the promise to ‘get the economy growing’ one of his five major pledges. Today he is confronted with headlines that the UK fell into recession at the end of last year, as the Office for National Statistics reported this morning that the economy contracted by 0.3 per cent between October and December 2023. This fall in the fourth quarter followed a fall of (an unrevised) 0.1 per cent in the third quarter. That’s two consecutive quarters of negative growth – the technical definition of recession. Today’s revelation is going to spark debate about what constitutes a recession. The technical definition has been met, but