Money

Six days on from the Budget, and things don’t look any better for Rachel Reeves’s claim that her Budget won’t negatively affect working people. Today and tomorrow, it is the turn of the Commons Treasury Select Committee to pick through the wreckage. What have we learned so far? David Miles from the Office for Budget Responsibility (OBR) doubled down on the effect of the rise in employers’ National Insurance (NI). The OBR has already estimated that three-quarters of the effect will be on wages – thereby contradicting Reeves’s claim that working people will not suffer from the rise. Miles went further, saying that many economists would argue that 100 per

Vertrauen ist gut, Kontrolle ist besser – trust is good, control is better – is a popular German saying. It’s also the state’s motto for overseeing Europe’s biggest economy, which is now being run into the ground. Germany’s economy is officially expected to shrink in 2024 for the second year in a row. Berlin’s Social Democratic Chancellor Olaf Scholz and his Greens Vice-Chancellor Robert Habeck, who are fighting for their political lives as their coalition crumbles around them, are to blame. Only one German sector is growing: the state. Government consumption grew by 2.8 per cent from mid-2023 to mid-2024. Dealing with bureaucracy costs German business €67 billion (£55 billion)

Credit to Rachel Reeves: while some chancellors opt to take part in the Sunday shows ahead of a fiscal event, the Chancellor has decided to do the media round the Sunday after her first Budget. Rather than spending the entire interview refusing to say what will be announced in the week ahead (the information is considered to be market-sensitive), she is instead having to answer difficult questions about what she announced on Wednesday. It wasn’t an easy morning, as Labour’s Budget narrative continues to get tested to breaking point. Reeves was played a video on Sky News this morning of her comments back in June, when she said no tax increases would

It was the absence of the Office for Budget Responsibility’s judgment that was blamed for the bond market crisis after Liz Truss’s mini-Budget. Truss and her chancellor Kwasi Kwarteng had rushed to enact their vision for a fast-growing economy without waiting for the wisdom of the government’s official fiscal watchdog. For Truss, the OBR is just another part of the establishment that was out to get her. But then, can the OBR be entirely trusted anyway? It seems that it has created a black hole of its own making – by overstating Public Sector Net Financial Liabilities (PSNFL). PSNFL is the measure that Rachel Reeves has chosen to use for

The more investors dig into Labour’s first Budget, the less they seem to like it. After the Office for Budget Responsibility published its assessment of the Chancellor’s measures yesterday afternoon, some immediate (and expected) volatility set in. But rather than settling down, market jitters seem to have worsened today, as a gilt sell-off saw government borrowing costs hit their highest level in 2024 this afternoon, with the 10-year gilt yield reaching 4.52 per cent and the five-year gilt yield reaching 4.41 per cent. So far the situation is manageable for the government – but is a strong indication that the markets are not quite as on-side with their plans for

It has been a good day for investors in the Alternative Investment Market (Aim), with the index of the top 100 Aim shares up 4.3 per cent. But that merely serves to undermine the damage that Rachel Reeves had done to the market by previously suggesting that she might remove the exemption whereby Aim shares were free of inheritance tax (IHT). In the event, she made Aim shares liable for 50 per cent of the normal rate of IHT – hence the relief rally. Yet Aim shares are still down 2 per cent since election day. By contrast, the Ftse small cap index – smaller shares within the main London

Aside from debates as to what actually constitutes a ‘working person’, the Labour government does ostensibly seem clear as to whom it wants to shield in the forthcoming Budget: the less well-off and those who continue to struggle financially. It is therefore perverse that it should remove a benefit that has been a blessing to precisely that demographic: the £2 cap on bus fares. The government looks set to be making another long-term error This measure, an initiative of the last Tory government, was introduced last January and implemented in England outside areas that already have devolved powers over transport. It’s been an invaluable aid for those who use the

Where did it all go wrong for Volkswagen? The German carmaker is said to be planning to shut several factories and lay off thousands of staff. Workers who do keep their jobs could see their pay cut by as much as ten per cent, according to VW’s top employee representative, Daniela Cavallo. If the revelations are correct, the three factories will be the first to be shuttered in the company’s 87-year history. It is hard to overestimate the scale of the shock that the claims about VW, a company that has always been emblematic of the country’s post-war economic miracle, has delivered to the German economy today. Yet Germany –

Remember Gordon Brown’s ‘golden rule’ – that over the course of the economic cycle the only net borrowing he would allow was to fund investment? As for current spending, he told us, he would pay down debt in the good times so that he could borrow in the bad. It sounded reassuring, until Brown started to fiddle with the figures in every conceivable way. He shunted debt off the public balance sheet via private finance initiatives.  Is anyone confident that Reeves really will invest her extra £20 billion a year in such a way that it will earn the taxpayer a return? He kept stretching out his idea of the