Money

The government expects its Autumn Statement to be judged on three tests. First of all, how do the markets react? The decisions announced today by the Chancellor Jeremy Hunt mean that the government will be issuing £31 billion less in gilts – in other words, in borrowing – than expected after the mini-Budget. The initial market reaction to this has been positive. However, the new fiscal rule – to have debt falling as a percentage of GDP by the end of the five-year forecast period – is still relatively loose. Hunt and Sunak are relying on their credibility and their willingness to make difficult choices to reassure the markets.   Perhaps

There had been quiet but growing optimism from some economists that inflation in Britain was nearing its peak as the CPI headline rate had fluctuated slightly – in and out of double digits – over the past few months. But that optimism was put on pause this morning when the Office for National Statistic revealed that inflation rose by a full percentage point from September, taking CPI to 11.1 per cent on the year last month. CPI is at its highest level since 1981, and above the Bank of England’s most recent prediction for where inflation would peak. Meanwhile, real-terms wage increases are failing to keep up with price hikes.

What does Jeremy Hunt want us to know about the Autumn Statement? The Chancellor is in the final hours of writing the economic announcements for Thursday, and today he had his last Treasury questions in the Commons before he gives his long speech. Hunt has been rolling the pitch more assiduously than an MCC groundsman over the past few weeks, with endless briefings about black holes, tax rises and unpopular spending cuts. Today, he was talking again about how ‘difficult’ things were going to be. He said: ‘Despite the difficulty of the package I will be announcing, I will sadly not be drinking any whisky as I do so.’ Hunt

There is a conundrum at the heart of Jeremy Hunt’s comments leading up to the Autumn Statement. Hunt describes inflation as an ‘​​evil’ that ‘erodes the pound in your pocket’: uncontroversial. So Autumn Statement, he says, has been designed by his Treasury to ‘help the Bank of England bring down inflation.’ But controlling inflation is the Bank of England’s remit, so any action will be indirect. By tightening fiscal policy, Hunt is lifting pressure off the Bank to keep pushing raising interest rates. This will be by design on the part of the Treasury. After Liz Truss and Kwasi Kwarteng’s disastrous mini-Budget, markets were predicting rates headed for over 6

Anyone with a mortgage will be in serious trouble. Small businesses will go to the wall. Demand will be hammered. And the cost of government debt will soar. After the Bank of England upped interest rates yesterday to 3 per cent, the highest level in more than a decade, there was one point on which everyone agreed. The Bank might be moving too fast or too slow, but it is imposing steep rises in rates. But hold on: is that right? After all, when you take into consideration rising inflation, the real cost of money has hardly ever been cheaper.  The Bank’s decision to hike rates by 0.75 percentage points

There is no such thing as free money. This was learned the hard way last month, when investors made clear after Liz Truss’s mini-Budget that the era of cheap money was over. Mass borrowing for day-to-day spending was going to have a big premium attached: a bill so large that no government would want to pay. Rishi Sunak understood this delicate dynamic, and said so many times over the summer. His willingness to admit the truth – that the government’s many promises can’t be delivered for free – is what, eventually, landed him in No. 10. But now in power, Sunak and his chancellor Jeremy Hunt risk making another ‘easy

So much for those ‘stranded assets’ which former Bank of England governor Mark Carney and many others tried to warn us about. It wasn’t long ago that climate activists were urging the world to dump shares in oil companies, not just because we should want to punish them for climate change but because, they said, oil companies’ fortunes were on a downward trajectory as the world turned green. ‘The exposure of UK investors, including insurance companies, to these shifts is potentially huge,’ Carney said in 2015. ‘Once climate change becomes a defining issue for financial stability, it may already be too late.’ But that’s not how it looked in BP’s boardroom

Britain’s economic problems can, of course, be laid at the door of Brexit. We know this because it was asserted on a BBC podcast which went viral over the weekend – and no one would question the BBC’s objectivity. But maybe there ought just to be a scintilla of doubt in the heads of the staunchest remainers given this morning’s news that eurozone inflation has reached 10.7 per cent – even higher than Britain’s latest CPI figure of 10.1 per cent. Markets had been expecting Eurozone inflation to stay a little below the 10 per cent mark. Far from Britain parting off from the rest of Europe and entering a

When Rishi Sunak entered No. 10 on Tuesday, he paid lip service to the aims of his predecessor. Liz Truss ‘was not wrong to want to improve growth in this country’, he said outside Downing Street. But ‘mistakes were made’ which is why he was installed as Prime Minister: to fix the economic fiasco that has overwhelmed Britain over these past few weeks. This morning’s news about looming growth forecasts brings both statements to the fore. Just over a week ago, Chancellor Jeremy Hunt thought he had to find upwards of £30 billion worth of spending cuts and tax hikes to fill the black hole in the public finances. But

Given the swift defenestration of his predecessor after her mini-Budget panicked the markets, it is not surprising that Rishi Sunak has delayed the Treasury’s autumn statement until 17 November. No set of fiscal plans will satisfy everyone, but markets and public opinion do seem to be especially sensitive to changes in fiscal policy at present. And there’s this: left-leaning thinktank the Resolution Foundation this morning said delaying the statement for just two weeks will reduce the apparent black hole in the public finances as the cost of government borrowing comes down. The two-week delay could create the illusion of an extra £15 billion in the government’s coffers (or rather £15

Inflation, asserted Rishi Sunak in his first PMQs, makes us all poorer. That is not entirely true – people relying entirely on the state pension, for example, will be fully compensated for this year’s high inflation, and no doubt some of Sunak’s former colleagues in the hedge fund industry have found a way to profit, too. But generally, he is right. Working people have on the whole suffered a large drop in their real wages. In the year to April, median weekly pay rose by 5 per cent from £610 to £640. In many years that would be a substantial rise, but when adjusted for inflation it comes out as

In the coming weeks we’re going to learn a lot more about what went so badly wrong inside Liz Truss’s government. Indeed, my colleague James Heale is co-writing the book on it. As Rishi Sunak heads into No. 10 in a bid to undo some of the damage (‘mistakes were made…’ he said on the steps of Downing Street this morning, ‘…and I have been elected as leader of my party, and your Prime Minister, in part, to fix them’) we are bound to learn more about the miscalculations, bad advice, and hubris that ultimately led to the undoing of prime minister Truss in just a matter of weeks. It

Given how inflation has taken off and sent real incomes into steep decline it is remarkable that Britain is not already in recession. It seemed that we were heading that way – until the Office for National Statistics revised upwards economic growth in the second quarter of this year from minus 0.1 per cent to plus 0.2 per cent. The economy then shrank by 0.3 per cent in August. But the definition of a recession is two quarters of negative growth – so Britain cannot be classed as being in one until growth figures for the fourth quarter are published in January. But the S&P Global Purchasing Managers’ Index (PMI)

As an erstwhile Brexit-voting academic, I’m used to being at odds with those around me. But in feeling troubled at the news of Liz Truss’s resignation yesterday, it seems I’m now in a minority of one. Truss had to go, of course. Her failings have been so well documented they hardly need repeating. Her lack of political acumen was perhaps most shocking: Truss utterly failed to read the mood of the Conservative party, the nation and the financial markets on every single one of her 44 days in office. But still, I have a pang of regret that she is on her way out. Truss’s stilted performances failed to inspire

Liz Truss is almost exactly the leader the country is desperate for. Britain needs someone to take painful decisions and even alienate voters in order to get growth going. Given that the next election is probably lost anyway, there is a case to be made that Truss should serve as the sin-eater for Conservative policy, implementing necessary but unpopular actions before she’s deposed. Last night rumour had it that she was planning to break the triple lock on pensions, instead bringing in a below-inflation rise. Perhaps this was to be one of those unpopular but necessary policy decisions? Not a bit of it. At PMQs, she told the Commons: ‘I’ve been clear,