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☆ Why the UK government's tax cuts still leave workers worse off
▼ + stars: | 2023-11-23 | by ( Elliot Smith | ) www.cnbc.com time to read: +5 min

British Finance Minister Jeremy Hunt that the U.K. economy would not enter a technical recession in 2023, while announcing the government's spring Budget. The U.K. National Insurance is a tax on workers' income and employers' profits to pay for state social security benefits, including the state pension. Touted by the Conservative party as the "largest ever tax cut for workers," the move nevertheless does not shield taxpayers from the effect of frozen tax thresholds that tip more of their income into higher tax brackets, as nominal wages rise. In March 2021, then-Finance Minister Rishi Sunak announced that the personal allowance (PA) and higher-rate thresholds (HRT) of income tax would be frozen for four years until April 2026. Alongside extending the freezes, Hunt in November 2022 froze the upper earnings limit for NI contributions and lowered the additional rate hold from £150,000 to £125,140 from April 2023.

Persons: Jeremy Hunt, Dan Kitwood, Rishi Sunak's, Hunt, Rishi Sunak, Torsten Bell, Paul Johnson Organizations: British, Getty, Finance, National Insurance, Labour Party, Rishi Sunak's Conservative, Insurance, Conservative, Treasury, Institute for Fiscal Studies

☆ British tax cut spells trouble in store for next government
▼ + stars: | 2023-11-22 | by ( William Schomberg | ) www.reuters.com time to read: +4 min

UK Parliament/Jessica Taylor/Handout via REUTERS Acquire Licensing RightsLONDON, Nov 22 (Reuters) - British finance minister Jeremy Hunt's big tax cut surprise could help the ruling Conservatives recover some favour among voters, but it threatens to store up budget problems for whichever party wins power after the expected 2024 election. Combined with his decision to make permanent the incentives for business investment announced earlier this year, Hunt's package of tax cuts would be worth about 20 billion pounds ($25 billion)a year by the 2028/29 tax year. "The giveaways announced today are funded by handing whoever wins the next election implausibly large spending cuts," Torsten Bell, chief executive of the Resolution Foundation, said. Hunt is likely to remain under pressure from within his party to go further with more tax cuts in a final pre-election budget statement expected in March. "There's a material risk that those plans prove undeliverable and today's tax cuts will not prove to be sustainable," Johnson said.

Persons: Jeremy Hunt, Jessica Taylor, Handout, Jeremy Hunt's, Hunt, Liz, Rishi Sunak, Labour Party's, Rachel Reeves, Torsten Bell, Investec, David Jones, Paul Johnson, Johnson, William Schomberg, Elizabeth Piper, Alexander Smith Organizations: REUTERS Acquire, Wednesday, Labour, Conservative, Bank of England, Institute for Fiscal Studies, Thomson Locations: London, Britain, British

[1/5] Chancellor of the Exchequer Jeremy Hunt leaves 11 Downing Street for the House of Commons to deliver his autumn statement, in London, Britain, November 22, 2023. "After a global pandemic and energy crisis, we have taken difficult decisions to put our economy back on track," Hunt told parliament on Wednesday in his Autumn Statement fiscal update. Hunt pointed to OBR forecasts showing the government would meet its targets for the public finances, leaving open the possibility of further pre-election giveaways to voters in his full budget statement expected in early 2024. Sunak this week promised "responsible" tax cuts, mindful of last year's "mini-budget" turmoil in financial markets triggered by his predecessor Liz Truss's plans for much bigger tax cuts. This time last year, the newly installed Sunak and Hunt raised taxes sharply to quell the bond market mayhem.

Persons: Jeremy Hunt, Stefan Rousseau, Hunt, Rishi Sunak's, Paul Johnson, we've, giveaways, Johnson, BoE, Philip Shaw, Liz Truss's, Muvija M, Paul Sandle, Sarah Young, William James, Elizabeth Piper, Alistair Smout, Andrew MacAskill, James Davey, Suban Abdulla, Farouq Suleiman, Kate Holton, Sumanta Sen, William Schomberg, Catherine Evans Organizations: REUTERS Acquire, Labour, Labour Party, Institute for Fiscal Studies, Gross, Reuters Graphics, Bank of England, Graphics, Thomson Locations: London, Britain, British

Nominal wage growth is the strongest in two years, economic growth is weak, and these stagflationary pressures are being sustained by persistently low productivity. This lifted the two-year yield some 43 basis points (bps) above the 10-year yield, the most inverted yield curve since 2008. The longer end of the UK yield curve is feeling the squeeze too, with the UK-German 10-year yield spread widening above 200 bps. But traders are now pricing in a peak BoE terminal rate of 5.75% early next year, above the implied Fed peak of around 5.375% later this year. That's another 125 bps of rate hikes on top of the 440 bps of tightening already delivered in the last 18 months.

Persons: BoE, Liz Truss, That's, Sterling, stagflation, Paul Johnson, Jamie McGeever, Jamie Freed Organizations: Bank of England's, Federal Reserve, Deutsche Bank, International Monetary Fund, Institute for Fiscal, HSBC, Reuters, Thomson Locations: ORLANDO, Florida, Britain, U.S, Canada, Japan, United States

"Since mid-October, 10-year gilt rates have fallen, debt servicing costs are down, mortgage rates are lower and inflation has peaked. The International Monetary Fund says our approach means the UK economy is on the right track." [1/6] Britain's Chancellor of the Exchequer Jeremy Hunt holds the budget box on Downing Street in London, Britain March 15, 2023. The OBR forecast economic output would grow by 1.8% in 2024 and by 2.5% in 2025, Hunt said, compared with its previous forecasts for growth of 1.3% and 2.6% respectively. Many economists have said Hunt probably wants to hold back some fiscal firepower for closer to the next national election.

☆ Why the UK spring budget won't fix the economy's problems
▼ + stars: | 2023-03-15 | by ( Hanna Ziady | ) edition.cnn.com time to read: +7 min

London CNN —The last time a British finance minister unveiled a “budget for growth,” UK financial markets crashed and mortgage rates shot up, threatening to tip an already weak economy into a deep recession. But he will deliver his budget against essentially the same gloomy backdrop: the UK economy is stuck in the doldrums. John Springford, deputy director at the Centre for European Reform, estimates that Brexit had cost the UK economy 5.5% of GDP by June 2022. SVB could depress UK bank lendingAnother factor that could weigh on the UK economy in the near term: Silicon Valley Bank. “It is likely that UK financial conditions will remain tighter (or potentially significantly tighter) over coming months than they would have been without the US banking troubles,” Pickering said in a research note Monday.

☆ Trump and DeSantis are the only 'big fish' CPAC attendees expect in the 2024 presidential race. But several say there's nothing wrong with others auditioning for supporting roles.
▼ + stars: | 2023-03-04 | by ( Warren Rojas | ) www.businessinsider.com time to read: +7 min

Donald Trump and Ron DeSantis are top of mind at the 2023 Conservative Political Action Conference. CPAC participants suspect 2024 will come down to those two, while others vie for the VP slot. 'An interesting race'Rory McSchane, a GOP political strategist from Austin, Texas is in the more the merrier camp. "My sincere hope is that she would be the vice president," Yadeta said of having Haley round out the 2024 ticket. Should Scott wind up taking the plunge, Bencosme said she could see herself supporting him in the GOP primary — and possibly beyond.

☆ Paul Johnson’s Historic Times
▼ + stars: | 2023-01-14 | by ( The Editorial Board | ) www.wsj.com time to read: 1 min

There’s an old joke that academics bitterly complain about popular historians for the high sin of publishing books people enjoy reading. Few working journalists have written history with as much elan and narrative force as the British author Paul Johnson , who died this week at age 94. Johnson spent his early career editing the New Statesman, later contributing to the Spectator, Commentary and others, including these pages. His more than 50 books range from “The Birth of the Modern: World Society 1815-1830” to “Art: A New History” to histories of the United States, Christianity and the Jews.

Hunt said he deferred most of the curbs on spending because cutting now would make the current recession worse. "There is nothing Conservative about spending money that you haven't got," he said. The front page of the Financial Times declared "Hunt paves way for years of pain". "All of that borrowing we've done over the last many years is coming home to roost," Johnson told BBC radio. "We're going to be stuck at 100 billion pounds a year being spent on debt interest in the medium term.

He froze until 2028 a threshold at which employers start to pay social security contributions, which will cost companies more. Public spending would grow more slowly than the economy but rise in overall terms, he said. It now expects gross domestic product to contract by 1.4% next year compared with its projection in March for growth of 1.8%. The OBR forecasts GDP growth of 1.3% in 2024 and 2.6% in 2025, compared with previous forecasts of 2.1% and 1.8% respectively. Thursday's forecasts by the OBR showed that target would be met in the 2027/28 financial year.

☆ Some CFOs Are Boosting Their Credit Lines as Insurance Against Recession
▼ + stars: | 2022-11-16 | by ( Kristin Broughton | Nina Trentmann | ) www.wsj.com time to read: +7 min

In addition to recession-planning, some companies are expanding their credit lines in response to higher input and inventory costs, corporate bankers said. Term loans are also funded at the outset, unlike credit lines. Photo: Xcel EnergyThe company increased its revolving credit lines primarily because it is expanding and also confronting higher commodity costs, Mr. Johnson said. Xcel doesn’t typically allow its commercial-paper balances to exceed 40% of its total borrowing capacity under its revolving credit lines, Mr. Johnson said. Bombardier in the third quarter closed on a new $300 million, five-year revolving credit facility.

☆ VIEW Rishi Sunak to become Britain's new PM, UK markets rally
▼ + stars: | 2022-10-24 | by ( ) www.reuters.com time to read: +8 min

LONDON, Oct 24 (Reuters) - Former British finance minister Rishi Sunak will be Britain's next prime minister after his rivals quit the race, which analysts said had relieved some of the nervousness around the outlook for the UK economy, boosting domestic markets. The new Prime Minister needs to confirm their leadership team as soon as possible and provide clarity on their strategy for stabilising the economy and their policy priorities. ART HOGAN, CHIEF MARKET STRATEGIST, B. RILEY WEALTH, NEW YORK:"Coming to a very rapid decision on who the prime minister is going be certainly breathes a sigh of relief into the markets. RUTH GREGORY, SENIOR UK ECONOMIST, CAPITAL ECONOMICS, LONDON:"The fall in gilt yields on the news today that Rishi Sunak will become the UK’s next Prime Minister has reduced the chances of a significant fiscal consolidation. With the pound, just because we have a new Prime Minister in place, all of the issues don't just go away and we still have remarkable strength being enjoyed by the dollar."

☆ Britain's failed tax experiment will leave economic scars and credibility issues, analysts say
▼ + stars: | 2022-10-18 | by ( Jenni Reid | ) www.cnbc.com time to read: +6 min

U.K. Prime Minister Liz Truss faces increasing pressure to resign. The yield on these bonds, which reflect the cost of borrowing for the government and influence interest rates on many products such as mortgages, eased lower after the statement Monday. The yield on 10-year bonds, the closely-watched benchmark seen as the indicator of long-term interest rates, remains significantly elevated at 4.045%, up from 3.49% before the budget. Bonds tend to become less attractive when interest rates rise, decreasing their price and sending up the yield. watch nowWider effectsWith the ideologically-driven policy platform Truss ran on now dead in the water, there is uncertainty in many other areas.

☆ Analysis: Despite tax U-turn, UK's Hunt still faces tough budget choices
▼ + stars: | 2022-10-17 | by ( William Schomberg | ) www.reuters.com time to read: +5 min

LONDON, Oct 17 (Reuters) - The screeching about-turn on tax cuts by finance minister Jeremy Hunt on Monday will not spare Britain from painful spending cuts and new tax hikes to fix the country's public finances. Paul Johnson, director of the Institute for Fiscal Studies, a think-tank, said Monday's tax cuts U-turn was relatively simple compared with the balance Hunt must strike between more tax increases and spending cuts over the next two weeks. Hunt said the tax U-turns announced so far would raise about 32 billion pounds a year in extra revenues. That was 40 billion pounds above the level needed to cut debt as a share of the economy which currently is about 97%. "With tens of billions of spending cuts still to come, and a new energy support package needing to be devised, many of Jeremy Hunt's tough choices still lie ahead," Torsten Bell, chief executive of the Resolution Foundation, said.

☆ Long-term damage for the UK due to failed tax cuts, leading thinktank says
▼ + stars: | 2022-10-17 | by ( ) www.cnbc.com time to read: 1 min

Share Share Article via Facebook Share Article via Twitter Share Article via LinkedIn Share Article via EmailLong-term damage for the UK due to failed tax cuts, leading thinktank saysPaul Johnson, director of the Institute for Fiscal Studies, speaks to CNBC's Arabile Gumede after the latest U.K. economic policy annoucements.

☆ New UK finance minister rips up Truss’ economic plan in stunning policy reversal
▼ + stars: | 2022-10-17 | by ( Julia Horowitz | ) edition.cnn.com time to read: +5 min

The stunning reversal would raise £32 billion ($36 billion), he said. “No government can control markets, but every government can give certainty about the sustainability of public finances,” Hunt said. “The United Kingdom will always pay its way.”The moves represent a gutting of Prime Minister Liz Truss’ flagship policies and leave her in a perilous political position. On Friday, Truss fired Kwasi Kwarteng, her previous finance minister, and reinstated a big tax hike on corporations. “A central responsibility for any government is to do what’s necessary for economic stability,” Hunt said.

☆ Bank of England warns risks to UK financial stability haven't gone away
▼ + stars: | 2022-10-11 | by ( Mark Thompson | ) edition.cnn.com time to read: +4 min

A slump in UK government bonds that promise to protect investors from inflation — known as index-linked gilts — was the latest source of risk, it said. “Dysfunction in this market, and the prospect of self-reinforcing ‘fire sale’ dynamics pose a material risk to UK financial stability,” it said in a statement. Starting Tuesday, the Bank of England will include index-linked gilts in its emergency £65 billion ($71.7 billion) bond-buying program announced on Sept. 28. The market meltdown began after Prime Minister Liz Truss’ government unveiled £45 billion in unfunded tax cuts on Sept. 23. And with monetary and fiscal policy now working in opposite directions, we think the broader risks around UK monetary [and] financial stability are growing,” he added.

☆ UK needs 62 billion pounds of cuts or tax rises to tame debt - IFS
▼ + stars: | 2022-10-10 | by ( David Milliken | ) www.reuters.com time to read: +4 min

Interest rates for new long-term government borrowing leapt to a 20-year high last month, after Kwarteng announced 45 billion pounds of unfunded tax cuts, on top of even greater short-term support for households' and businesses' energy bills. "The Chancellor should not rely on over-optimistic growth forecasts or promises of unspecified spending cuts. British government borrowing looks on course to hit 194 billion pounds this financial year and to still be 103 billion pounds in 2026/27 - 71 billion more than government forecasters predicted in March, the IFS said. COSTLY DEBTDebt interest would cost 106 billion pounds this year and 103 billion pounds in 2023/24, the IFS predicted, due to the large amount of finance raised in years gone by through issuing bonds that pay interest that rises as inflation goes up. "Such spending cuts could be done, but would be far from easy," the IFS said.

☆ UK needs 62 billion pounds of cuts or tax rises to tame debt -IFS
▼ + stars: | 2022-10-10 | by ( David Milliken | ) www.reuters.com time to read: +4 min

A source at the Treasury said Kwarteng had no plans to resign or reverse any policies. DO THINGS DIFFERENTLYBritain's first Black Chancellor, Kwarteng is the son of Ghanaian immigrants. In Kwarteng, Truss picked a key ideological ally with whom she co-wrote a book that spells out a low tax, small state, deregulated vision of Britain. One other aspect that raised investor ire was Kwarteng's decision to release a fiscal plan without the accompanying scrutiny of the independent Office for Budget Responsibility. Kwarteng will set out a medium term fiscal plan alongside OBR forecasts on the scale of government borrowing on Nov. 23.

☆ British pound plunges below $1.11 after new government announces tax cuts
▼ + stars: | 2022-09-23 | by ( Jenni Reid | ) www.cnbc.com time to read: +2 min

The Bank of England said Thursday that the U.K. economy was likely already in a recession as it raised interest rates by 50 basis points. The pound has been on a precipitous fall against the greenback this year, hitting levels this month not seen since 1985. The embattled British pound fell 1.95% Friday against the dollar, after the new U.K. government announced a radical economic plan in a bid to boost growth. "The obvious implication is that BOE rates are likely to be higher for longer than they would have been otherwise. While textbooks suggest that higher short-term interest rates should be currency supportive, GBP has been demonstrating since the spring that this is not always thecase," she said in a note.

☆ UK's mini budget slashes taxes and borrows heavily as recession hits
▼ + stars: | 2022-09-23 | by ( Anna Cooban | ) edition.cnn.com time to read: +4 min

London CNN Business —A huge gamble by the UK government aimed at rescuing the economy from recession and boosting long-term growth sent the pound plunging on Friday. Paul Johnson, director of the Institute for Fiscal Studies, an independent think tank, called the government’s plans “extraordinary.”“It’s half a century since we’ve seen tax cuts announced on this scale,” he said in a tweet. The pound sank almost 2% to $1.10 on Friday after Kwarteng’s announcement to its lowest level since 1985. The measures come a day after the Bank of England warned that the country was already likely in a recession. ‘Unfunded giveaways’News of the heavy additional government borrowing rattled investors already concerned that the country is spending beyond its means.

☆ New UK finance minister Kwarteng seeks end to 'cycle of stagnation'
▼ + stars: | 2022-09-23 | by ( David Milliken | ) www.reuters.com time to read: +4 min

Paul Johnson, director of the Institute for Fiscal Studies (IFS) think tank, said Truss and Kwarteng's tax cuts could be the largest since 1988, and risked putting Britain's public debt on an unsustainable path. The IFS, together with U.S. bank Citi, estimate household energy subsidies will cost about 120 billion pounds over two years, while six months of business energy subsidies will cost 40 billion pounds. read moreThese are a one-off, and the bigger concern for the IFS is around 30 billion pounds of permanent tax cuts - starting with 14 billion pounds in reduced payroll taxes, confirmed on Thursday, and 15 billion pounds of cuts to corporation tax. For Kwarteng, tax cuts and deregulation are a way to end what he calls "a cycle of stagnation" that led to tax rates being on course for their highest level since the 1940s. "We will liberalise planning rules in specified agreed sites, releasing land and accelerating development," Kwarteng is expected to say.

☆ New UK finance minister Kwarteng seeks end to "cycle of stagnation"
▼ + stars: | 2022-09-22 | by ( David Milliken | ) www.reuters.com time to read: +4 min

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