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Here in the UK, politicians are fixated with the level of the national debt.

They fret about the fact that it is now knocking on for 100% of UK gross domestic product (GDP). They incorporate it into their fiscal rules, compelling them to get it falling (even if they rarely succeed in practice).

So you might be surprised to learn that while Britain’s national debt is projected to fall in the coming years, the equivalent figure in the US is projected to balloon to completely unprecedented levels.

In fact, while Britain and America’s state debt levels have moved in near lockstep with each other in recent decades (as a percentage of GDP, both were in the mid-30s pre-financial crisis, in the 1970s and 1980s afterwards, then approaching 100% after COVID), they are about to diverge dramatically.

So, at least, suggest the latest projections from the Congressional Budget Office and Britain’s Office for Budget Responsibility (OBR). They show that while both UK and US net debt are just shy of 100% this year, America’s will rise to 125% by the middle of the next decade, while Britain’s will fall to 91%.

Now of course, these are just projections, based on the assumption that each country follows the current plans laid down by their respective administrations. Those plans could well change. But even so – the gap would amount to the biggest divergence in post-war history.

The reasons for it are many: in part, the US is raising less in taxes, thanks in part to a series of tax cuts and exemptions which began under Donald Trump but continued, for some recipients, under Joe Biden.

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In part it’s because it’s spending more, both on discretionary measures like the Inflation Reduction Act (a series of subsidies for green tech firms) and non-discretionary schemes like Medicare.

Either way, the US is slated to borrow more in the coming years than it has done in any comparable period in recent memory. And the upshot of that is a seemingly perpetual increase in the federal debt, up to that 125% of GDP record level.

Which raises the question: what are the candidates in this election planning to do about it? The short answer is: not much.

Indeed, according to the latest analysis from the non-partisan Committee for a Responsible Federal Budget, based on the promises made by Kamala Harris and Donald Trump, the gap will only widen – whichever party wins the election.

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It found that the Ms Harris campaign’s plans, which involve considerably more spending, imply the federal debt rising to a record 133% of GDP.

Perhaps that’s unsurprising, but the real shock of the analysis is that it found Mr Trump’s plans imply an even steeper upward trajectory, as he slashes taxes for a range of households and businesses, and continues some of the existing spending plans. While the Republicans are traditionally seen as the party of fiscal prudence, a second Trump administration would send the federal debt heading towards 142% of GDP.

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All of these figures would be record numbers. And for some economists that raises an important question: at what point do investors in UK government debt – and the dollar more widely – balk at these spending and borrowing plans?

Since the US dollar remains the world’s reserve currency, Washington is often said to enjoy an “exorbitant privilege”, allowing the government to avoid the constraints of many other nations. But with the federal debt heading towards these unprecedented levels – regardless of which candidate wins – the country’s economic story is heading into unfamiliar territory.

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Bank shares take fright as budget tax hike is floated

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Bank shares take fright as budget tax hike is floated

Shares in UK banks have fallen sharply on the back of a report which urges the chancellor to place their profits in her sights at the coming budget.

As Rachel Reeves stares down a growing deficit – estimated at between £20bn-£40bn heading into the autumn – the Institute for Public Policy Research (IPPR) said there was an opportunity for a windfall by closing a loophole.

It recommended a new levy on the interest UK lenders receive from the Bank of England, amounting to £22bn a year, on reserves held as a result of the Bank’s historic quantitative easing, or bond-buying, programme.

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It was first introduced at the height of the financial crisis, in 2009.

The left-leaning think-tank said the money received by banks amounted to a subsidy and suggested £8bn could be taken from them annually to pay for public services.

It argued that the loss-making scheme – a consequence of rising interest rates since 2021 – had left taxpayers footing the bill unfairly as the Treasury has to cover any loss.

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Why taxes might go up

The Bank recently estimated the total hit would amount to £115bn over the course of its lifetime.

The publication of the report coincided with a story in the Financial Times which spoke of growing fears within the banking sector that it was firmly in the chancellor’s sights.

Her first budget, in late October last year, put businesses on the hook for the bulk of its tax-raising measures.

Ms Reeves is under pressure to find more money from somewhere as she has ruled out breaking her own fiscal rules to help secure the cash she needs through heightened borrowing.

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Is Labour plotting a ‘wealth tax’?

Other measures understood to be under consideration include a wealth tax, new property tax and a shake-up that could lead to a replacement for council tax.

Analysts at Exane told clients in a note: “In the last couple of years, the chancellor has been protective of the banks and has avoided raising taxes.

“However, public finances may require additional cash and pressures for a bank tax from within the Labour party seem to be rising,” it concluded.

The investor flight saw shares in Lloyds and NatWest plunge by more than 5%. Those for Barclays were more than 4% lower at one stage.

A spokesperson for the Treasury said the best way to strengthen public finances was to speed up economic growth.

“Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms,” they added.

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Controversial P&O Ferries boss Hebblethwaite to quit

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Controversial P&O Ferries boss Hebblethwaite to quit

The man dubbed “Britain’s most hated boss” for his controversial policy of sacking hundreds of seafarers and replacing them with cheaper agency staff is to quit.

Sky News can exclusively reveal that Peter Hebblethwaite, the chief executive of P&O Ferries, is leaving the company.

Sources said he had decided to resign for personal reasons.

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Mr Hebblethwaite joined the ranks of Britain’s most notorious corporate figures in 2022 when P&O Ferries – a subsidiary of the giant Dubai-based ports operator DP World – said it was sacking 800 staff with immediate effect – some of whom learned their fate via a video message.

The policy, which Mr Hebblethwaite defended to MPs during subsequent select committee hearings, erupted into a national scandal, prompting changes in the law to give workers greater protection.

Under the new legislation, the government plans to tighten collective redundancy requirements for operators of foreign vessels.

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In a statement issued in response to a request from Sky News, a P&O Ferries spokesperson said: “Peter Hebblethwaite has communicated his intention to resign from his position as chief executive officer to dedicate more time to family matters.

Peter Hebblethwaite gives evidence to a committee of MPs in 2022. Pic: PA
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Peter Hebblethwaite gives evidence to a committee of MPs in 2022. Pic: PA

“P&O Ferries extends its gratitude to Peter Hebblethwaite for his contributions as CEO over the past four years.

“During his tenure the company navigated the challenges of the COVID-19 pandemic, initiated a path towards financial stability, and introduced the world’s first large double-ended hybrid ferries on the Dover-Calais route, thereby enhancing sustainability.

“We extend our best wishes to him for his future endeavours.”

A source close to the company said it anticipated making an announcement on Mr Hebblethwaite’s successor in the near term.

A former executive at J Sainsbury, Greene King and Alliance Unichem, Mr Hebblethwaite joined P&O Ferries in 2019, before taking over as chief executive in November 2021.

Insiders claimed on Friday that he had “transformed” the business following the bitter blows dealt to its finances by the COVID-19 pandemic and – to some degree – by the impact of Britain’s exit from the European Union.

A union protest is shown at the height of the mass sackings  row in 2022
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A union protest is shown at the height of the mass sackings row in 2022

P&O Ferries carries 4.5 million passengers annually on routes between the UK and continental European ports including Calais and Rotterdam.

It also operates a route between Northern Ireland and Scotland, and is a major freight carrier.

The company’s losses soared during the pandemic, with DP World – its sole shareholder – supporting it through hundreds of millions of pounds in loans.

Its most recent accounts, which were significantly delayed, showed a significant reduction in losses in 2023 to just over £90m.

The reduction from the previous year’s figure of almost £250m was partly attributed to cost reduction exercises.

The accounts also showed that Mr Hebblethwaite received a pay package of £683,000, including a bonus of £183,000.

“I reflected on accepting that payment, but ultimately I did decide to accept it,” he told MPs.

“I do recognise it is not a decision that everybody would have made.”

The row over his pay was especially acute because of his admission that P&O Ferries’ lowest-paid seafarers received hourly pay of just £4.87.

Mr Hebblethwaite had argued since the mass sackings of 2022 that the company would have gone bust without the drastic cost-cutting that it entailed.

The company insisted at the time that those affected by the redundancies had been offered “enhanced” packages to leave.

Last October, the then transport secretary, Louise Haigh, said: “The mass sacking by P&O Ferries was a national scandal which can never be allowed to happen again,” adding that measures to protect seafarers from “rogue employers” would prevent a repetition.

“This issue has been ignored for over 2 years, but this new government is moving fast and bringing forward measures within 100 days,” Ms Haigh added.

“We are closing the legal loophole that P&O Ferries exploited when they sacked almost 800 dedicated seafarers and replaced them with low-paid agency workers and we are requiring operators to pay the equivalent of National Minimum Wage in UK waters.

“Make no mistake – this is good for workers and good for business.”

The minister’s description of P&O Ferries as “rogue”, and suggestion that consumers should boycott the company, sparked a row which threatened to overshadow the government’s International Investment Summit last October.

Sky News’s business and economics correspondent, Paul Kelso, revealed that DP World had withdrawn from participating in the event, and paused a £1bn investment announcement.

The company relented after Sir Keir Starmer publicly distanced the government from Ms Haigh’s characterisation of DP World.

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How the US trade war is now targeting you from today

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How the US trade war is now targeting you from today

Donald Trump has cancelled a loophole from today that had allowed consumers and businesses to be spared duties for sending low-value goods to the United States.

The so-called de minimis exemption had applied across the world before Trump 2.0 but the president has taken action – and the UK may soon follow suit – as part of his trade war.

The relief had allowed goods worth less than $800 (£595) to enter the US duty-free since 2016.

But now, low-cost packages face the same tariff rate as other, more expensive, goods.

The reasons for the latest bout of protectionism are numerous and the ramifications are country and purpose specific.

What is changing?

It was no accident that China was the first destination to be slapped with this rule change.

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The duty exemption on low-value Chinese goods was ended in May as US retailers, in fact those across the Western world, complained bitterly that they were being undercut by cheap clothing, accessories and household goods shipped by the likes of Shein and Temu.

From today, Mr Trump is expanding the end of the de minimis rule to the rest of the world.

Why is Trump doing this?

Number of de minimis packages imported in to the US since 2018
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Number of de minimis packages imported in to the US since 2018

The president is not acting purely to protect US businesses.

More duties mean more money for his tariff treasure chest, bolstering the goodies already pouring in from his base and reciprocal tariffs imposed on trading partners globally this year.

The Trump administration has also called out “deceptive shipping practices, illegal material and duty circumvention”.

It also believes many parcels claiming to contain low-value goods have been used to fuel the country’s supplies of fentanyl, with the importation of the illegal drug being used by the president as a reason for his wider trade war against allies including Canada.

How will it apply?

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New tariffs threaten fresh trade chaos

Under the new rules, only letters and personal gifts worth less than $100 (£74) will still be free of import duties.

Charges will depend on the tariff regime facing the country from where the goods are sent.

Fox example, a parcel containing products worth $600 would raise $180 in extra duties when sent from a country facing a 30% tariff rate.

It has sparked chaos in many countries, with postal services in places including Japan, Germany and Australia refusing to accept many items for delivery to the US until the practicalities of the new regime become clearer.

What about the UK?

All goods not meeting the £74 exemption criteria now face a 10% charge because that is the baseline tariff the US has slapped on imports from the UK.

We were spared, if you remember, higher reciprocal tariffs under the so-called “trade deal”.

How will the process work?

All shipping and delivery companies will be wading through the changes, with the big international operators such as DHL, FedEx and the like all promising to navigate the challenge.

Royal Mail said on Thursday that it would be the first international postal service to have a dedicated operation.

It said consumers could use its new postal delivery duties paid (PDDP) services both online and at Post Offices.

But it explained that business customers faced different restrictions to individuals.

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Businesses would be charged a handling fee per parcel to cover additional costs and duties would be calculated based on where items were originally manufactured.

While business account customers could be handed an invoice for the duties, it explained that consumers would have to pay at the point of buying postage.

No customs declaration would be required, it concluded, for personal correspondence.

Is the US alone in doing this?

The answer is no, but it remains a fairly widespread relief globally.

The European Union, for example, removed de minimis breaks back in 2021, making all e-commerce imports to the bloc subject to VAT.

It is also now planning to introduce a fee of €2 on goods worth €150 or less to cover the costs of customs processing.

Should the UK do the same?

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July: The value of ‘de minimis’ imports into Britain

The UK has been under pressure for many years to follow suit and drop its own £135 duty-free threshold as retailers battle the cheap e-commerce competition from China we mentioned earlier.

A review was announced by the chancellor in April.

Sky News revealed in July how the total declared trade value of de minimis imports into the UK in the 2024-25 financial year was £5.9bn – a 53% increase on the previous 12-month period.

Any rise in revenue would be welcomed, not only by UK retailers, but by Rachel Reeves too as she looks to fill a renewed black hole in the public finances.

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