Pound falls sharply and government gilt interest rates up after major budget tax rises
The pound has fallen sharply after the chancellor announced the biggest tax rises in a generation.
Over the last three days, sterling has dropped by 1.2% (in trade weighted terms) – the biggest fall in 18 months.
Between around 1.30pm and 5.30pm today, versus the dollar, it dropped from about 129.9c to the pound to about 128.6c. In the same period, against the euro, it went from 119.3c to the pound to about 118.4c.
In addition, yields for 10-year UK bonds – the cost or interest rate charged for long-term government borrowing – have gone past 4.5% for the first time in a year.
Ed Conway, Sky News’s economics and data editor, said those yields are “pretty much halfway towards the danger zone” – a zone identified by the Office for Budget Responsibility (OBR).
However, he said other European bonds had risen, too. “But the UK does seem to be moving faster than most of the others,” he added.
While cautioning that the budget is still very new, Conway said the “upshot” is that Rachel Reeves’s “room for manoeuvre” is already diminishing “because of market moves”.
Markets are reacting in “quite a violent way”, Conway said.
“It’s really unusual to see this after a budget, and that will have a bearing on how much this government will be able to afford in the future,” he added.
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‘Raising taxes was not an easy decision’
A sudden rise in the yields of 10-year UK bonds followed Liz Truss’s disastrous “mini-budget” of September 2022, which led to a surge in the cost of borrowing for ordinary consumers, while the pound slumped to a 37-year low against the dollar.
It is “certainly not like that at the moment”, Conway said.
Nonetheless, market movements will be “enough to really concern people at the Treasury”, he added, “because it suggests that a lot of traders are looking at how much money this government is borrowing, and they’re saying: ‘Hang on, maybe we’re going to charge you more’.”
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The pound has weakened and gilt yields – the cost of borrowing by the UK government – has increased in response to the budget, which saw Rachel Reeves introduce the biggest tax hike in a generation.
While Conway said it does not feel like a “crisis point”, he said the “calculus for this government” may be changing.
Jack Meaning, UK chief economist at Barclays, said market reaction was “materially different” to what happened in 2022.
Bond yields since Ms Reeves’s budget are up by about 0.3%, while in 2022 the rise was about 1.5%, he said.
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Reeves acting like ‘compulsive liar’
The conversation Barclays is having with its customers is also different to that in 2022, Mr Meaning added.
At that time, people were wondering whether a “big crisis point” had been reached.
This time, he said the focus is on comments from the OBR about a potential rise in inflation, and the potential knock-on effect as the Bank of England makes decisions on interest rates in the next few months.
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The prime minister’s official spokesperson refused to talk about bond prices.
“We don’t comment on market movements,” they said.
“The chancellor has been very clear that first and foremost, this budget has been about restoring fiscal stability, and she’s outlined two new robust fiscal rules, which put public finances on a sustainable path.”
The US Securities and Exchange Commission’s Crypto Task Force has scheduled a roundtable discussion centered on privacy and financial surveillance for December, as a renewed focus on privacy grips the cryptocurrency industry.
The privacy roundtable is slated for Dec. 15. Like other SEC roundtables, crypto industry executives and SEC officials will discuss common pain points and solutions, but no hard policy proposals will be submitted.
Privacy has become a hot-button topic following several developments, including the partial guilty verdict in Tornado Cash developer Roman Storm’s trial in June, the Samourai Wallet developer sentencing in November and the privacy token price rally over the last two months.
“Authoritarians thrive when people have no privacy. When those in charge start being hostile to privacy protections, it is a major red flag,” said Naomi Brockwell, founder of the Ludlow Institute, an organization advocating for liberty through technology.
The renewed interest in privacy hearkens back to crypto’s cypherpunk roots, and one of the core reasons the cryptographic technology that underpins crypto was invented — to ensure secure communication channels between parties in hostile environments.
Related: Crypto investors flee visibility for anonymity as privacy coins surge 80%
Crypto community sounds the alarm about privacy following precedent-setting legal cases
The verdict in the Storm trial and other cases where open-source software developers have been convicted or imprisoned for creating non-custodial, privacy-preserving protocols has set a dangerous precedent for privacy technology in the US, legal experts have said.
Crypto industry executives and advocates argue that the prosecutions are meant to dissuade developers from building privacy-preserving tools.
The verdict in the Samourai Wallet case is analogous to the US government accusing car manufacturer Toyota of a conspiracy because terrorists and criminals also use their cars, according to journalist and crypto advocate Lola Leetz.
“People should not be held accountable for what other people do with the tools they build,” Leetz said.
In August, Matthew Galeotti, the acting assistant attorney general for the Department of Justice’s criminal division, signaled the agency would no longer prosecute open-source software developers for writing code.
“Our view is that merely writing code, without ill intent, is not a crime,” Galeotti said. “The department will not use indictments as a law-making tool. The department should not leave innovators guessing as to what could lead to criminal prosecution.”
Magazine: 2026 is the year of pragmatic privacy in crypto: Canton, Zcash, and more
Politics
All four UK governments ‘failed to appreciate’ scale of COVID pandemic threat – inquiry finds
All four UK governments failed to appreciate the scale of the threat posed by COVID-19 or the urgency of the response the pandemic required, a damning report published on Thursday has claimed.
Baroness Heather Hallett, the chair of the inquiry, described the response to the pandemic as “too little, too late”.
Tens of thousands of lives could have been saved during the first wave of COVID-19 had a mandatory lockdown been introduced a week earlier, the inquiry also found.
Noting how a “lack of urgency” made a mandatory lockdown “inevitable”, the report references modelling data to claim there could have been 23,000 fewer deaths during the first wave in England had it been introduced a week earlier.
The UK government first introduced advisory restrictions on 16 March 2020, including self-isolation, household quarantine and social distancing.
Had these measures been introduced sooner, the report states, the mandatory lockdown which followed from 23 March might not have been necessary at all.
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All four UK govts ‘failed to appreciate’ scale of pandemic
COVID-19 first emerged in the Chinese city of Wuhan at the end of 2019, and as it developed into a worldwide pandemic, the UK went in and out of unprecedented lockdown measures for two years starting from March 2020.
Lady Hallett admitted in her summary that politicians in the government and devolved administrations were forced to make decisions where “there was often no right answer or good outcome”.
“Nonetheless,” she said, “I can summarise my findings of the response as ‘too little, too late'”.
‘Toxic culture’ at the heart of UK government
The report said there was “a toxic and chaotic culture” at the heart of the UK government during the pandemic.
The inquiry heard evidence about the “destabilising behaviour of a number of individuals” – including former No 10 adviser Dominic Cummings.
It said that by failing to tackle this chaotic culture – “and, at times, actively encouraging it” – former PM Boris Johnson “reinforced a culture in which the loudest voices prevailed and the views of other colleagues, particularly women, often went ignored, to the detriment of good decision-making”.
‘Misleading assurances’
The inquiry found all four governments in England, Scotland, Wales and Northern Ireland failed to understand the urgency of response the pandemic demanded in the early part of 2020.
The report reads: “This was compounded, in part, by misleading assurances from the Department of Health and Social Care and the widely held view that the UK was well prepared for a pandemic.”
The report notes how the UK government took a “high risk” when it significantly eased restrictions in England in July 2020 – “despite scientific advisers’ concerns about the public health risks of doing so”.
Lady Hallett has made 19 key recommendations which, if followed, she believes will better protect the UK in any future pandemic and improve decision-making in a crisis.
Repeated failings ‘inexcusable’
In a statement following the publication of Thursday’s report, Lady Hallett said there was a “serious failure” by all four governments to appreciate the level of “risk and calamity” facing the UK.
She said: “The tempo of the response should have been increased. It was not. February 2020 was a lost month.”
Read more:
A timeline of the UK’s response to the pandemic
Lady Hallett said the inquiry does not advocate for national lockdowns, which she said should have been avoided if at all possible.
She said: “But to avoid them, governments must take timely and decisive action to control a spreading virus. The four governments of the UK did not.”
Lady Hallett said none of the governments were adequately prepared for the challenges and risks that a lockdown presented, and that many of the same failings were repeated later in 2020, which she said was “inexcusable”.
She added: “Each government had ample warning that the prevalence of the virus was increasing and would continue to do so into the winter months. Yet again, there was a failure to take timely and effective action.”
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