Economy

Months ago I said the Bank of England would face a barrage of criticism and a challenge to its independence for failing to raise interest rates enough last year during the post-Covid economic rebound and then for putting them up big time now as we head into recession. So it has proved. And by the way, this does not mean that Bank independence has failed, or that allowing politicians greater sway over how much and when interests rise, would be better. It probably wouldn’t be. The Bank should stop pleading that its failure to call the inflationary turn early enough is irrelevant Nor does it mean Liz Truss would be

The Bank of England has warned that Britain will fall into a recession this year. Its Monetary Policy Report, released today, predicts that the economy will shrink from October, with the downturn lasting until the end of 2023. The Bank of England also hiked interest rates from 1.25 per cent to 1.75 per cent, the biggest rise for 27 years. The Bank of England’s Monetary Policy Committee has never previously raised the base rate by 0.5 per cent in its 25 years of existence. Previously it has only upped rates in quarter-point stages (and there haven’t been many of those, especially in recent years). The rise will, of course, affect

As the Tory leadership contest rumbles on, questions are being fired at Liz Truss and Rishi Sunak about what they’ll do to tackle the economic crisis facing Britain. The Foreign Secretary has promised to suspend green levies and Sunak said he would axe VAT on household energy – something he had ruled out as chancellor. But there are mounting fears neither of these strategies will go far enough to help a public facing the devastating combination of rising bills and soaring inflation. Analysis published today by the National Institute of Economic and Social Research think-tank paints a stark economic picture, warning of soaring inflation – forecast to hit 11 per

That was quick. Less than 15 hours after pledging a robust reform of public sector pay, Liz Truss has performed a u-turn on plans to bring national pay bargaining to an end. It comes after criticism mounted that slashing pay for new frontline staff was not the most obvious way to handle an escalating cost-of-living crisis. In a sense, it’s a crime of poor timing rather than poor policy. National pay bargaining has long been questioned as a fair way to compensate staff on the government payroll. In part it’s due to the reasons laid out by Truss: there are obvious differences in the cost-of-living throughout the country, which might

The Tory leadership race is becoming a test of patience. Today Rishi Sunak has laid out his plan to slash tax: not in a matter of days or weeks, as Liz Truss has pledged to do, but by the end of the next parliament. He’s promised to reduce the base rate of income tax by 20 per cent, by taking 1p off income tax in 2024 (as already pledged) and an additional 3p over the next parliament. As Fraser Nelson notes on Coffee House, the timing of this announcement is working against him: it’s easily characterised as a u-turn on tax cuts, when in truth the former Chancellor is far

It’s a platitude that France and Britain are rivals and have been for centuries. But, since the 1904 Entente Cordiale, the rivalry is more a question of competition than conflict. Always, in the darkest hour, each sided with the other, even if post-war they didn’t fully recognise the other’s contribution. Britain congratulated itself over the Dunkirk evacuation when in truth without French troops holding off the Germans, the ‘plucky’ armada would never have completed its mission; to this day the French believe that American troops were more numerous than British in the Normandy landings.  With the passing of the French war-time generation the postwar moral debt to Britain and residual goodwill

You will never measure the depth of our troubles if you listen to the contenders for the Tory leadership. Rishi Sunak and Liz Truss talk as if the 21st century never happened. They cannot see how the world has changed. Like the devotees of an ancient cult, they imagine that it is possible for a prime minister in the 2020s to follow the programme of Margaret Thatcher from 40-years ago. Their lines sound so antiquated because they have no plausible vision for creating a modern, united country. Then, who does? Rather than watch the contest, I have been reading the best modern historians as they struggle to find order amid

Is the eurozone heading for another 2010-style sovereign debt crisis? Today comes the news that inflation in the eurozone hit 8.9 per cent in the year to July. Although it is a record high, it is not as quite as towering as inflation in Britain – at 9.4 per cent. However, what it does do is expose the vulnerability of the eurozone – and how Italian public debt threatens to undermine it. This week, the yield on Italian ten-year government bonds rose to 3.5 per cent as investors began to wonder again if the country can honour its debts. Granted, it’s not quite as high at the rates of over

There’s an almighty debate ongoing in the US about what exactly a ‘recession’ is. Treasury secretary Janet Yellen said the US economy is not shrinking, saying it is in a state of ‘transition’, not recession. But in a clip from 2000 being circulated on Twitter that is comically apt, Bill Clinton said ‘a recession is two quarters in a row of negative growth’. Regardless of who’s right, the US is currently in Bill Clinton’s definition of a recession. Figures show that the economy shrank by 0.2 per cent in the second quarter of this year, following a 1.6 per cent fall in the first quarter. Over the year, the US economy is now 0.9

Is Rishi Sunak spooked? Today’s big tax announcement – his plan to temporarily slash VAT on energy bills this winter should he become Prime Minister, saving the average household £160 – is being viewed as a U-turn. This comes after the former chancellor used the first four leadership debates to double down on the importance of fiscal responsibility and not rushing tax cuts. With Sunak behind Liz Truss in the Tory membership polls by a ratio of roughly two-to-one, is this a desperate bid to improve his standing with grassroots voters? Or is something else going on? Whenever the cost-of-living crisis comes up, Sunak – on paper – has the