Budget: Hostile market response as chancellor suffers Halloween nightmare

Published

2 months ago

October 31, 2024

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First things first: don’t panic.

What you need to know is this. The budget has not gone down well in financial markets. Indeed, it’s gone down about as badly as any budget in recent years, save for Liz Truss’s mini-budget.

The pound is weaker. Government bond yields (essentially, the interest rate the exchequer pays on its debt) have gone up.

That’s precisely the opposite market reaction to the one chancellors like to see after they commend their fiscal statements to the house.

In hindsight, perhaps we shouldn’t be surprised.

After all, the new government just committed itself to considerably more borrowing than its predecessors – about £140bn more borrowing in the coming years. And that money has to be borrowed from someone – namely, financial markets.

But those financial markets are now reassessing how keen they are to lend to the UK.

The upshot is that the pound has fallen quite sharply (the biggest two-day fall in trade-weighted sterling in 18 months) and gilt yields – the interest rate paid by the government – have risen quite sharply.

This was all beginning to crystallise shortly after the budget speech, with yields beginning to rise and the pound beginning to weaken, the moment investors and economists got their hands on the budget documentation.

But the falls in the pound and the rises in the bond yields accelerated today.

This is not, to be absolutely clear, the kind of response any chancellor wants to see after a budget – let alone their first budget in office.

Indeed, I can’t remember another budget which saw as hostile a market response as this one in many years – save for one.

That exception is, of course, the Liz Truss/Kwasi Kwarteng mini-budget of 2022. And here is where you’ll find the silver lining for Keir Starmer and Rachel Reeves.

The rises in gilt yields and falls in sterling in recent hours and days are still far shy of what took place in the run up and aftermath of the mini-budget. This does not yet feel like a crisis moment for UK markets.

But nor is it anything like good news for the government. In fact, it’s pretty awful. Because higher borrowing rates for UK debt mean it (well, us) will end up paying considerably more to service our debt in the coming years.

And that debt is about to balloon dramatically because of the plans laid down by the chancellor this week.

And this is where things get particularly sticky for Ms Reeves.

In that budget documentation, the Office for Budget Responsibility said the chancellor could afford to see those gilt yields rise by about 1.3 percentage points, but then when they exceeded this level, the so-called “headroom” she had against her fiscal rules would evaporate.

In other words, she’d break those rules – which, recall, are considerably less strict than the ones she inherited from Jeremy Hunt.

Which raises the question: where are those gilt yields right now? How close are they to the danger zone where the chancellor ends up breaking her rules?

Short answer: worryingly close. Because, right now, the yield on five-year government debt (which is the maturity the OBR focuses on most) is more than halfway towards that danger zone – only 56 basis points away from hitting the point where debt interest costs eat up any leeway the chancellor has to avoid breaking her rules.

Now, we are not in crisis territory yet. Nor can every move in currencies and bonds be attributed to this budget.

Markets are volatile right now. There’s lots going on: a US election next week and a Bank of England decision on interest rates next week.

The chancellor could get lucky. Gilt yields could settle in the coming days. But, right now, the UK, with its high level of public and private debt, with its new government which has just pledged to borrow many billions more in the coming years, is being closely scrutinised by the “bond vigilantes”.

A Halloween nightmare for any chancellor.

UK

Church ‘needs to be changed’, Archbishop of York to say in Christmas Day sermon after sex scandals

Published

4 hours ago

December 25, 2024

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Church 'needs to be changed', Archbishop of York to say in Christmas Day sermon after sex scandals

The Church of England needs to “kneel in penitence” and “be changed”, the Archbishop of York Stephen Cottrell is expected to say in his Christmas Day sermon.

It comes at a challenging time for the Church which has faced criticism over how it handled a number of abuse scandals.

Mr Cottrell will next month effectively become the Church’s temporary leader in place of the outgoing Archbishop of Canterbury Justin Welby.

Mr Welby announced his resignation in November and will step down on 6 January after a report found prolific serial abuser John Smyth may have been brought to justice had Mr Welby formally reported him to police in 2013.

But Mr Cottrell has himself also faced calls to quit after revelations David Tudor, a priest at the centre of a sexual abuse case, was twice reappointed under him while he was serving as bishop of Chelmsford.

With Mr Welby not giving the 25 December sermon, the focus has moved to what Mr Cottrell will say at York Minster.

He is expected to say the Church must “kneel in penitence and adoration” this Christmas and “be changed”.

He will say about Jesus: “At the centre of the Christmas story is a vulnerable child; a vulnerable child that Herod’s furious wrath will try and destroy, for like every tyrant he cannot abide a rival.

“The Church of England – the Church of England I love and serve – needs to look at this vulnerable child, at this emptying out of power to demonstrate the power of love, for in this vulnerable child we see God.

“If you’re in love, show me. If you have love in your hearts, embody and demonstrate that love by what you do.”

‘Put the needs of others first’

The archbishop will add: “This is what we learn at the manger. Put the needs of others first – those who are cold and hungry and homeless this Christmas.

“Those who are victims of abuse and exploitation. Those who, like the little holy family, have to flee oppression and seek refuge in a foreign land.”

With regards to the Tudor case, Mr Cottrell has acknowledged things “could have been handled differently, and regrets that it wasn’t”.

But Tudor’s victims have branded Mr Cottrell’s response to the case “insulting and upsetting”. They have suggested it’s “inevitable” that he resigns or is forced out of his role.

Bishop of Newcastle Helen-Ann Hartley questioned how Mr Cottrell could have any credibility, and Bishop of Gloucester Rachel Treweek declined to publicly back him.

Meanwhile, the Bishop of Dover, Rose Hudson-Wilkin, is giving the sermon at Canterbury Cathedral in place of Mr Welby and will speak of the birth of Jesus as a triumph of “light and hope” over “fear and darkness”.

UK

A&E departments ‘absolutely full to bursting’ with flu blamed for making ‘bad situation even worse’, top medic says

Published

7 hours ago

December 25, 2024

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A&E departments 'absolutely full to bursting' with flu blamed for making 'bad situation even worse', top medic says

Around half of accident and emergency departments, polled by the Royal College of Emergency Medicine (RCEM), have said they are “full to bursting” this Christmas.

The vice-president of the RCEM, Dr Ian Higginson, told Sky News’ Gareth Barlow on Christmas Eve that the situation for the NHS in the UK is “pretty grim” at the moment.

The group, representing emergency doctors, put a call out to senior managers on Friday night. Dr Higginson said half responded and “all but two of them said that the emergency departments were absolutely full to bursting”.

“Normally just before Christmas, we’d expect a bit of a lull. So I’m afraid things are looking pretty difficult out there for our patients and for our staff,” he added.

The NHS has warned that hospitals are under severe pressure because of winter flu cases and a so-called “quad-demic”, combining respiratory infections with norovirus.

Commenting on the challenges facing the NHS, Dr Higginson said: “We simply don’t have enough beds in our hospitals for patients who are admitted as emergencies.

“We don’t have enough staff for those beds and we don’t have any headroom at all. So if something like flu hits as it has done, it makes a bad situation even worse.”

England ‘about 10,000 beds short’

Dr Higginson added he believes the answer is “strategic solutions and strategic investment”.

He said: “In England alone, we reckon we’re about 10,000 beds short in our hospitals to deal with the predictable, urgent and emergency care… the equivalent of approximately two wards in every hospital.”

Recently the RCEM also attacked the “nonsensical” guidance on how to treat patients in corridors – describing it as “out of touch” and “normalising the dangerous”.

Dr Higginson said recent pressures mean “we’ve got patients all the way through our corridors because we can’t admit them to hospital when they need to”.

He added: “It may be that their ambulance is outside in car parks because those patients can’t get into our emergency departments.”

And he argued that social care is “in a really difficult place at the moment” – needing investment to prevent older patients from remaining in hospital longer than they need to.

“When they’re ready to leave hospital, they get stuck in hospital, and that contributes to that shortage of beds even more,” he said.

Since its election victory in July, the Labour government has acknowledged the NHS needs investment with the Prime Minister Sir Keir Starmer saying it is “broken”.

In October, Chancellor Rachel Reeves announced a £22.6bn increase in day-to-day spending on the NHS in her budget.

Commenting on rising pressures within the NHS, Health and Social Care Secretary Wes Streeting said: “We inherited an NHS that is broken but not beaten, and staff are already working hard to tackle an increase in admissions this winter.”

“For too long, an annual winter crisis has become the norm. We will deliver long-term reforms through our 10-year health plan that will create a health service that will be there for all of us all year round,” he added.

UK

‘110 years young’ – UK’s oldest man celebrates birthday with celebrity party

Published

13 hours ago

December 24, 2024

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'110 years young' - UK's oldest man celebrates birthday with celebrity party

The UK’s oldest man has celebrated his 110th birthday with a special performance from opera singer Alfie Boe at his care home in Derbyshire.

A party was laid on for Donald Rose – who’s now ranked as a ‘supercentenarian’.

Mr Boe joined the bash in Ilkeston by video call and sang happy birthday, adding it was “a pleasure” to perform for him.

Mr Rose, who served in the Second World War with the Queen’s Royal Regiment, said: “Today is the best day I’ve ever had.”

Canal Vue Care Home announced his birthday with a post on Facebook: “Today we’re celebrating a remarkable milestone. Our beloved Donald is turning 110 years young!”

Activity coordinator Naomi Allsop also shared a touching tribute on Facebook: “Happy 110th birthday to my amazing best friend, the UK’s oldest man and a remarkable WWII and D-Day veteran!

“We’ve shared so many incredible experiences together, and there’s still so much more to come!”

“Donald is a lovely character – and a true national treasure,” said the Mayor of Erewash, Councillor Kate Fennelly, who also paid him a visit.

Mr Rose, who was born in 1914 in Westcott, Surrey, also received a card from The King and Queen, which he proudly showed off.

Other performances at the care home included Kate from D-Day Darlings, an all-female singing group who reached the finals of ITV’s Britain’s Got Talent.

She sang Dame Vera Lynn’s The White Cliffs of Dover and We’ll Meet Again.

On 5 December, the war hero was among 200 veterans and their guests to attend a Christmas reception at St James’s Palace, hosted by the Duke of Gloucester.

The event was organised by The Not Forgotten veterans’ charity, which aims to combat isolation and loneliness in the armed forces and those who have served through social activities and holidays.

Mr Rose served as a sniper and Desert Rat in North Africa in the Second World War, according to The Gerontology Research Group, and was part of the liberation of Italy and France.

He earned a number of medals during his service including the Legion D’Honneur – France’s highest honour.

After working various jobs as a labourer, lorry driver and bin man he moved to Derbyshire in 2000 following the death of his wife, and at the age of 106 moved into his care home in Ilkeston.

On 25 November, following the death of 112-year-old John Tinniswood, he became the oldest known living man in the UK.

The world’s oldest living person is Japan’s 116-year-old Tomiko Itooka.