Jeremy Hunt delays Halloween economic statement

Published

2 years ago

October 26, 2022

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Jeremy Hunt has delayed the announcement of the government’s economic plan from Halloween to 17 November, saying it will help ministers make “difficult decisions… that stand the test of time”.

A medium term fiscal statement was due to be delivered by the chancellor in the Commons on 31 October – along with a forecast from the Office for Budget Responsibility – after Liz Truss’s tax slashing mini-budget last month left a blackhole in government finances and the markets in turmoil.

But it will now be put back by more than two weeks and be turned into a full autumn statement – expanding its remit and providing longer term plans.

Mr Hunt, who remains as chancellor in Rishi Sunak’s new cabinet, said he had made the recommendation to the new prime minister to ensure any decisions are based on “accurate economic forecasts”.

And he said he was “willing to make choices that are politically embarrassing if they’re the right thing to do for the country”.

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The chancellor also revealed the autumn statement would include measures to make debt fall “over the medium term”.

“Our number one priority is economic stability and restoring confidence that the United Kingdom is a country that pays its way,” said Mr Hunt.

“But it is also extremely important the statement is based on the most accurate possible economic forecasts and forecasts of public finances.”

The Bank of England is due to make an announcement on interest rates on 3 November, meaning the original government statement would have come ahead of the decision.

Asked if it was wise to change it now, Mr Hunt said Mr Sunak’s entrance to Number 10 meant there was “the prospect of much longer term stability for the economy in the country – and in that context, a short two and a half week delay is the best way we will make sure that it is the right decisions we take”.

The chancellor added: “There has been a lot of market turbulence even in the last 48 hours, and the question is how you deal with that turbulence to make sure that the very, very important, very difficult decisions that I and the prime minister have to make are the right ones – decisions that stand the test of time and do the right thing for people at home who are worried about their mortgages, their jobs, the cost of living, the bills and so on.

“And for that reason, accuracy in the forecasts both around public finances and economic growth is very important, and that’s why this is the right decision and a prudent decision.”

What’s in a name?

Sam Coates

Deputy political editor

@SamCoatesSky

By calling the 17 November announcement an “autumn statement”, the Treasury is signalling that this is a bigger deal than the announcement originally envisaged, unattractively known as the medium term fiscal statement.

However, it is also still significant they are not calling it either a budget, with a full review of tax and spending measures, or a spending review, where every government department’s budgets are set for years to come.

The job of the statement is to identify the size of the black hole the government needs to fill, and how they are going to fill it. It will be accompanied by the Office for Budget Responsibility growth forecast.

Given the job it’s going to have to do, with some curbs to spending, it is likely to feel like a “spending review-lite”. However it could also include some tax measures, like a new system to cap the profits from renewable energy regeneration, as well as a decision about benefit uprating.

Ultimately titles don’t matter in times of crisis – Liz Truss labelled her September statement a “mini budget”, yet this was the biggest set of spending announcements in one day every seen in modern times.

But Liberal Democrat MP Sarah Olney said the delay “risks leaving mortgage borrowers, pensioners and struggling families under a damaging cloud of uncertainty”.

She called on the PM to confirm benefits and pensions will be up-rated in line with inflation, and that there will be no cuts to public services, including the NHS.

“Sunak was installed by Conservative MPs into Number 10 without anyone voting for him, and without telling anyone about his plans for the country,” she said.

“The public deserve to know immediately what lies in store, and that they will not be made to pay for the Conservative Party trashing our economy.”

How did we get here?

Ms Truss came to power in September off the back of a summer of campaigning for lower taxes and higher growth.

A mini-budget by her chancellor Kwasi Kwarteng spooked the markets, leading to the pound plunging, mortgages being withdrawn, and the Bank of England being forced to intervene.

He was replaced by Mr Hunt and within three days had reversed nearly all of the policies.

Ms Truss resigned in the same week, and has now been replaced by Mr Sunak, who promised on the steps of Downing Street that “economic stability and confidence [would be] at the heart of this government’s agenda”.

There were hints the statement could be delayed on Wednesday when Foreign Secretary James Cleverly could not confirm the date to Sky News.

And later that morning, a Treasury source told our political editor Beth Rigby that it was “very possible”.

Business

UK economy grows by 0.1% between July and September – slower than expected

Published

9 hours ago

November 15, 2024

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UK economy grows by 0.1% between July and September - slower than expected

The UK economy grew by 0.1% between July and September, according to the Office for National Statistics (ONS).

However, despite the small positive GDP growth recorded in the third quarter, the economy shrank by 0.1% in September, dragging down overall growth for the quarter.

The growth was also slower than what had been expected by experts and a drop from the 0.5% growth between April and June, the ONS said.

Economists polled by Reuters and the Bank of England had forecast an expansion of 0.2%, slowing from the rapid growth seen over the first half of 2024 when the economy was rebounding from last year’s shallow recession.

And the metric that Labour has said it is most focused on – the GDP per capita, or the economic output divided by the number of people in the country – also fell by 0.1%.

Reacting to the figures, Chancellor of the Exchequer Rachel Reeves said: “Improving economic growth is at the heart of everything I am seeking to achieve, which is why I am not satisfied with these numbers,” she said in response to the figures.

“At my budget, I took the difficult choices to fix the foundations and stabilise our public finances.

“Now we are going to deliver growth through investment and reform to create more jobs and more money in people’s pockets, get the NHS back on its feet, rebuild Britain and secure our borders in a decade of national renewal,” Ms Reeves added.

The sluggish services sector – which makes up the bulk of the British economy – was a particular drag on growth over the past three months. It expanded by 0.1%, cancelling out the 0.8% growth in the construction sector

The UK’s GDP for the the most recent quarter is lower than the 0.7% growth in the US and 0.4% in the Eurozone.

The figures have pushed the UK towards the bottom of the G7 growth table for the third quarter of the year.

It was expected to meet the same 0.2% growth figures reported in Germany and Japan – but fell below that after a slow September.

The pound remained stable following the news, hovering around $1.267. The FTSE 100, meanwhile, opened the day down by 0.4%.

The Bank of England last week predicted that Ms Reeves’s first budget as chancellor will increase inflation by up to half a percentage point over the next two years, contributing to a slower decline in interest rates than previously thought.

Announcing a widely anticipated 0.25 percentage point cut in the base rate to 4.75%, the Bank’s Monetary Policy Committee (MPC) forecast that inflation will return “sustainably” to its target of 2% in the first half of 2027, a year later than at its last meeting.

The Bank’s quarterly report found Ms Reeves’s £70bn package of tax and borrowing measures will place upward pressure on prices, as well as delivering a three-quarter point increase to GDP next year.

Business

Chancellor’s Mansion House speech vows to rip up red tape – saying post-financial crash rules went ‘too far’

Published

19 hours ago

November 14, 2024

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Chancellor's Mansion House speech vows to rip up red tape - saying post-financial crash rules went 'too far'

Chancellor Rachel Reeves has criticised post-financial crash regulation, saying it has “gone too far” – setting a course for cutting red tape in her first speech to Britain’s most important gathering of financiers and business leaders.

Increased rules on lenders that followed the 2008 crisis have had “unintended consequences”, Ms Reeves will say in her Mansion House address to industry and the City of London’s lord mayor.

“The UK has been regulating for risk, but not regulating for growth,” she will say.

It cannot be taken for granted that the UK will remain a global financial centre, she is expected to add.

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It’s anticipated Ms Reeves will on Thursday announce “growth-focused remits” for financial regulators and next year publish the first strategy for financial services growth and competitiveness.

Bank governor to point out ‘consequences’ of Brexit

Also at the Mansion House dinner the governor of the Bank of England Andrew Bailey will say the UK economy is bigger than we think because we’re not measuring it properly.

A new measure to be used by the Office for National Statistics (ONS) – which will include the value of data – will probably be “worth a per cent or two on GDP”. GDP is a key way of tracking economic growth and counts the value of everything produced.

Brexit has reduced the level of goods coming into the UK, Mr Bailey will also say, and the government must be alert to and welcome opportunities to rebuild relations.

Mr Bailey will caveat he takes no position on “Brexit per se” but does have to point out its consequences.

In what appears to be a reference to the debate around UK immigration policy, Mr Bailey will also say the UK’s ageing population means there are fewer workers, which should be included in the discussion.

The greying labour force “makes the productivity and investment issue all the more important”.

“I will also say this: when we think about broad policy on labour supply, the economic arguments must feature in the debate,” he’s due to add.

The exact numbers of people at work are unknown in part due to fewer people answering the phone when the ONS call.

Mr Bailey described this as “a substantial problem”.

He will say: “I do struggle to explain when my fellow [central bank] governors ask me why the British are particularly bad at this. The Bank, alongside other users, including the Treasury, continue to engage with the ONS on efforts to tackle these problems and improve the quality of UK labour market data.”

Business

Reeves has welcome support from Bank’s governor as she goes for growth and seeks to woo City

Published

21 hours ago

November 14, 2024

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Reeves has welcome support from Bank's governor as she goes for growth and seeks to woo City

When Gordon Brown delivered his first Mansion House speech as chancellor he caused a stir by doing so in a lounge suit, rather than the white tie and tails demanded by convention.

Some 27 years later Rachel Reeves is the first chancellor who would have not drawn a second glance had they addressed the City establishment in a dress.

As the first woman in the 800-year history of her office, Ms Reeves’s tenure will be littered with reminders of her significance, but few will be as symbolic as a dinner that is a fixture of the financial calendar.

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Her host at Mansion House, asset manager Alastair King, is the 694th man out of 696 Lord Mayors of London. The other guest speaker, Bank of England governor Andrew Bailey, leads an institution that is yet to be entrusted to a woman.

Ms Reeves’s speech indicates she wants to lean away from convention in policy as well as in person.

By committing to tilting financial regulation in favour of growth rather than risk aversion, she is going against the grain of the post-financial crash environment.

“This sector is the crown jewel in our economy,” she will tell her audience – many of whom will have been central players in the 2007-08 collapse.

Sending a message that they will be less tightly bound in future is not natural territory for a Labour chancellor.

Her motivation may be more practical than political. A tax-and-spend budget that hit business harder than forewarned has put her economic program on notice and she badly needs the growth elements to deliver.

Her plans to consolidate local authority pension schemes so they might match the investing power of their Canadian and Australian counterparts is part of the same theme.

Infrastructure investment is central to Reeves’s plan and these steps, universally welcomed, could unlock the private sector funding required to make it happen.

Bank governor frank on Brexit and growth

If the jury is out in a business financial community absorbing £25bn in tax rises, she has welcome support from Mr Bailey.

He is expected to deliver some home truths about the economic inheritance in plainer language than central bankers sometimes manage.

Britain’s growth potential, he says, “is not a good story”. He describes the labour market as “running against us” in the face of an ageing population.

With investment levels “particularly weak by G7 standards”, he will thank the chancellor for the pension reforms intended to unlock capital investment.

He is frank about Brexit too, more so than the chancellor has dared.

While studiously offering no view on the central issue, Mr Bailey says leaving the EU had slowed the UK’s potential for growth, and that the government should “welcome opportunities to rebuild relations”.

There is a more coded warning too about the risks of protectionism, which is perhaps more likely with Donald Trump in the White House.

“Amid threats to economic security, let’s please remember the importance of openness,” the Bank governor will say.