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The prospect of a pre-election interest rate cut by the Bank of England has been damaged by official figures showing no progress in bringing down the pace of wage growth.

Data from the Office for National Statistics (ONS) showed basic pay rising at an annual rate of 6% in the three months to April.

That was flat on the figure reported by the ONS for the past two months. Upwards pressure came from the government’s 9.8% rise in the National Living Wage, which took effect in April.

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When the impact of inflation was taken into account, the wage rate stood at its highest level since July 2021 at 2.9%.

The pay measure that includes bonuses actually rose to 5.9% from 5.7%, according to the ONS

While it is good news for voters as it leaves pay growth at way more than double the 2.3% inflation rate, it will not help persuade the Bank of England that the time is right for an interest rate cut when it reveals its latest decision on 20 June.

Rishi Sunak would be keen for the Bank, which is independent of the government, to impose a cut to borrowing costs on that date to bolster his case that the outlook for household and consumer finances is improving.

With the Conservatives far behind Labour in the polls, the employment figures from the ONS are the last before polling day on 4 July.

The data also showed a rise in the unemployment rate to 4.4% from 4.3%, though this figure comes with a big health warning from the ONS due to continuing reliability issues with its labour force survey.

The same caution was applied to the figure covering the number of people of working age judged to be economically inactive.

That stood at 9.4 million and was up on the previous month due to a rise in long term sickness and care demands.

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The ONS said: “This month’s figures continue to show signs that the labour market may be cooling, with the number of vacancies still falling and unemployment rising, though earnings growth remains relatively strong.”

What this all means for the Bank

The big picture is definitely mixed. The jobless rate figure in particular may have some influence in Threadneedle St as it signals further damage to the economy from higher interest rates.

The Bank has hinted that an interest rate cut is likely in the coming months but it remains worried about sticky services inflation and the pace of wage growth fuelling more price rises in the economy.

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Basic pay increases have outpaced the rate of inflation since last June, boosting consumer spending power on the face of it, but household budgets have remained squeezed.

The cost of living crisis, exacerbated by unprecedented raw energy price hikes following Russia’s invasion of Ukraine, has evolved over time to even extend to the Bank’s medicine to supress inflation.

There were 14 consecutive interest rate increases from December 2021 up until last summer aimed at dampening demand to help bring price growth down.

The rate hikes drove up the cost of borrowing, with mortgage holders for example facing additional bills of hundreds of pounds more per month on average as low fixed rate terms expired.

New deals proved eyewatering in comparison.

With the main consumer prices index measure of inflation running at 2.3% – above the Bank’s 2% target – members of the rate-setting committee have acknowledged progress but they are unlikely to follow the European Central Bank in cutting rates this month.

Financial markets saw just a 10% chance of a rate cut from 5.25% to 5% on 20 June.

Most of the money is on September.

However, those predictions could yet shift.

The ONS is also set to release this week the preliminary growth figures for the economy in April. They are predicted by economists to show zero growth for the month, largely due to the impact of poor weather.

The following week sees the publication of the latest inflation figures.

How political parties have reacted

Commenting on the jobs data, shadow Work and Pensions Secretary Liz Kendall said: “Today’s figures confirm that the Tories have no hiding place after 14 years of abject failure.

“On Rishi Sunak’s watch, a record number of people are out of work due to long-term sickness at terrible cost to them, to business and the taxpayer, and we remain the only G7 country whose employment rate still isn’t back to pre-pandemic levels.

“Labour’s plan will get Britain working by cutting NHS waiting lists, introducing a new national jobs and careers service, making work pay and supporting people into good jobs across every part of the country.

“It’s time to stop the chaos, turn the page and start rebuilding Britain.”

Liberal Democrat Treasury spokesperson Sarah Olney said: “This Conservative carousel of chaos has our economy on a rollercoaster ride and the British people are sick and tired of it – it’s time for a change.”

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‘Godfather’ of AI warns arms race risks amplifying dangers of ‘superhuman’ systems

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'Godfather' of AI warns arms race risks amplifying dangers of 'superhuman' systems

An arms race for artificial intelligence (AI) supremacy, triggered by recent panic over Chinese chatbot DeepSeek, risks amplifying the existential dangers of superintelligence, according to one of the “godfathers” of AI.

Canadian machine learning pioneer Yoshua Bengio, author of the first International AI Safety Report to be presented at an international AI summit in Paris next week, warns unchecked investment in computational power for AI without oversight is dangerous.

“The effort is going into who’s going to win the race, rather than how do we make sure we are not going to build something that blows up in our face,” Mr Bengio says.

He warns that military and economic races “result in cutting corners on ethics, cutting corners on responsibility and on safety. It’s unavoidable”.

Mr Bengio worked on neural networks and machine learning, the software architecture that underpins modern AI models.

He is in London, along with other AI pioneers to receive the Queen Elizabeth Prize for Engineering, the most prestigious global award for engineering, in recognition of AI and its potential.

He’s enthusiastic about its benefits for society, but the pivot away from AI regulation by Donald Trump‘s White House and frantic competition among big tech companies for more powerful AI models is a worrying shift.

‘Superhuman systems becoming more powerful’

“We are building systems that are more and more powerful; becoming superhuman in some dimensions,” he says.

“As these systems become more powerful, they also become extraordinarily more valuable, economically speaking.

“So the magnitude of, ‘wow, this is going to make me a lot of money’ is motivating a lot of people. And of course, when you want to sell products, you don’t want to talk about the risks.”

But not all the “godfathers” of AI are so concerned.

Take Yann LeCun, Meta’s chief AI scientist, also in London to share in the QEPrize.

Yann LeCun, Meta's Chief AI scientist
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Yann LeCun, Meta’s Chief AI scientist

“We have been deluded into thinking that large language models are intelligent, but really, they’re not,” he says.

“We don’t have machines that are nearly as smart as a house cat, in terms of understanding the physical world.”

Within three to five years, Mr LeCun predicts, AI will have some aspects of human-level intelligence. Robots, for example, that can perform tasks they’ve not been programmed or trained to do.

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But, he argues, rather than make the world less safe, open-source AI models such as DeepSeek – a chatbot developed by a Chinese company that rivals the best of America’s big tech with a tenth of the computing power – demonstrates no one will dominate for long.

“If the US decides to clam up when it comes to AI for geopolitical reasons, or, commercial reasons, then you’ll have innovation someplace else in the world. DeepSeek showed that,” he says.

The Queen Elizabeth Prize for Engineering prize is awarded each year to engineers whose discoveries have, or promise to have, the greatest impact on the world.

Previous recipients include the pioneers of photovoltaic cells in solar panels, wind turbine technology and neodymium magnets found in hard drives, and electric motors.

Science minister Lord Vallance, who chairs the QEPrize foundation, says he is alert to the potential risks of AI.

Organisations such as the UK’s new AI Safety Institute are designed to foresee and prevent the potential harms AI “human-like” intelligence might bring.

Science minister Lord Vallance
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Science minister Lord Vallance

But he is less concerned about one nation or company having a monopoly on AI.

“I think what we’ve seen in the last few weeks is it’s much more likely that we’re going to have many companies in this space, and the idea of single-point dominance is rather unlikely,” he says.

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Treasury Committee demands HMRC answers on sanctions regime after Sky News investigation

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Treasury Committee demands HMRC answers on sanctions regime after Sky News investigation

The Treasury Select Committee has sent a formal notice to HM Revenue & Customs demanding answers to critical questions about how it has been enforcing trade sanctions on Russia, following a Sky News investigation into the government department.

Last month Sky News reported that while HMRC had issued six fines in relation to sanction-breaking since 2022, it would not name the firms sanctioned or provide any further detail on what they did wrong. HMRC also admitted it had no idea how many investigations it was currently carrying out into sanction-breaking.

The admissions raised questions about the robustness of Britain’s trade sanctions regime, described by government ministers as the toughest in British history.

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How robust are UK-Russia sanctions?

While the UK has introduced rules preventing the export of certain goods to Russia, banned items are still flowing into the country via third countries in the Caucasus and Central Asia. Some suspect that part of the reason these flows continue is that HMRC is not enforcing the rules as robustly as it could be.

Following Sky News’ investigation, the chair of the Treasury Select Committee (TSC), Dame Meg Hiller, has written a letter to the chief executive of HMRC, Sir Jim Harra, with 10 questions about HMRC’s conduct in the enforcement of sanctions.

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Among the questions, the TSC chair asks: “Why doesn’t HMRC publish information on breaches in sanctions in a similar way to the Office for Financial Sanctions Implementation (OFSI), which gives the details of the company, how it breached sanctions and the amount of penalty issued?”

Many other countries around the world – most notably the United States – routinely “name and shame” those who break sanctions, in part as a deterrent and in part to inform other businesses about what it takes to break the rules. But HMRC instead protects the privacy of those who break sanctions.

The TSC has been scrutinising the sanctions regime in recent months, examining loopholes in the legislation and its enforcement. HMRC has been asked to respond to the letter by 17 February.

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Millions face council tax rise of more than 5% after government gives green light to bigger hikes

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Millions face council tax rise of more than 5% after government gives green light to bigger hikes

Millions of people face council tax hikes over normal thresholds after the government allowed six areas to boost rates above the usual 5%.

More than two million people will be hit by increases of between 5 and 10%.

Windsor and Maidenhead Council wanted to increase council tax by 25% but the plan was blocked – instead it will go up by 9%.

Newham Council will go up by the same amount, while Bradford Council will put up taxes by 10% and Birmingham, Somerset and Trafford councils will all put up rates by 7.5%.

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Speaking to Sky News’ Kay Burley, health and social care minister Karin Smyth defended the above normal increases – saying “many more councils” asked for permission to hike taxes, but were refused.

She said the ones given the nod “are particularly desperate” and need the money to keep “basic services running”.

The Labour MP was quick to blame the Conservatives, saying local government was left in a “really, really dark state” by the previous government.

How do councils increase tax?

In order to keep up with demands, councils are allowed to raise council tax usually by up to 5%, broken down into 3% core spending with an additional 2% for social care.

At the moment, a principle exists which prevents more than a 5% increase to council tax without a referendum, mostly to protect taxpayers from excessive increases.

But if a council is already in conversation with government on exceptional financial support, and if the government agrees to allow the council to raise tax above the cap as part of this, the council doesn’t necessarily have to take that to a local public vote.

Deputy prime minister Angela Rayner – who is also the secretary of state for local government – confirmed the move on Monday.

She said the average council tax increase across the country would not surpass last year’s total of 5.1%.

She also said more than £69bn in central funding would be made available to regional administrators, a rise of 6.8% compared to the 2024-25 period. Close to £4bn has also been put aside to help councils with social care.

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The Conservatives accused Labour of “pushing the burden on to taxpayers after they promised to freeze council tax”.

Shadow communities secretary Kevin Hollinrake said: “Their Local Government Finance Settlement will mean that councils will have to raise council tax to accommodate Labour’s jobs tax.

“This means that local people will pay more for less when it comes to local services, especially in rural areas which are losing the Rural Services Delivery Grant that Labour have abolished.

“The Labour Party have made false promises to local people, promising to freeze council tax while many councils will now have to raise it due to Labour’s political choice to raise council tax.”

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The County Councils Network, which represents 37 administrations, said they are facing pressure from the government’s decisions to increase national insurance contributions for employers, and increases to minimum wage.

Barry Lewis, the network’s finance spokesperson said: “More than four in five CCN members say they are in a worse position than before the autumn budget and this finance settlement, and one-third say their service reductions next year will now be severe.

“Considering there is very little fat left to cut from many of these services already, a further reduction will have a material impact on our residents.”

Ms Rayner confirmed allocations worth £502m to assist councils with the impact of increases to employer national insurance contributions.

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