Reeves’ Holiday from Economic Reality

Today’s GDP figures provided the smallest imaginable crumb of comfort to Jeremy Hunt, with the UK economy seeing an unexpected uptick in November of 0.1%, mainly thanks to Brits getting smashed during the world cup. We could drink ourselves into prosperity if we each put in the effort…

Naturally Labour honed in on the more negative picture from the quarter as a whole, with a 0.3% shrink in the three months to November. Rachel Reeves put out a statement shortly after the figures were published, slamming “another page in the book of failure that is the Tory record on growth.”

What Reeves didn’t mention is that the 0.3% fall in GDP was, as Reuters write, “driven by a 0.6% fall in output in September when many businesses closed to mark Queen Elizabeth’s funeral.”

Not only can the death of the sovereign and subsequent mourning period hardly be laid at the door of the current government, Rachel Reeves – indeed every sitting Labour MP – stood on a 2019 manifesto promising not one, not two but four extra bank holidays every year. Something Guido notes the cost of which were not included in Labour’s costings document that year…

mdi-timer 13 January 2023 @ 10:32 13 Jan 2023 @ 10:32 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
Bank of England Predicts Two-Year Recession, Unemployment Forecast to Nearly Double

Aside from the breaking news about the massive interest rate rise, the Bank of England’s report today makes for grim reading. The Monetary Policy Committee (MPC) projects a “prolonged period” of recession, with CPI inflation remaining over 10% in the near term. Even taking into account that economic predictions are about as reliable as a long-term weather forecast, the report makes for truly grim reading…

While inflation is expected to fall “sharply” from mid-2023, GDP is expected to decline by around 0.75% during the second half of 2022, and continue to fall throughout 2023 and the first half of 2024. The BBC says this would be the longest recession since records began in the 1920s, albeit not the deepest…

Perhaps most worrying of all for the government, the MPC expects the unemployment rate to rise to just under 6.5% by Q4 of 2025, up from the current 2022 Q4 projection of 3.7%. In real terms this would leave an extra million working brits on the dole. Perfect timing – right around the last possible election date…

mdi-timer 3 November 2022 @ 12:51 3 Nov 2022 @ 12:51 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
UK Narrowly Avoided Recession in Q2

There is a rare sliver of good economic news this morning, as the ONS confirmed we are not currently in recession. The body has announced that a previous estimate that economic growth fell by 0.1% in the three months to June has been revised up to a rise of 0.2%, narrowly avoiding a second month of negative growth which would have defined the UK as in a recession. Small mercies…

The UK’s current account deficit has also improved, according to the revised figures, from the £43.9 billion previously calculated to a mere £33.8 billion.

Liz and Kwasi shouldn’t be too pleased, however. The ONS now also calculates that the UK economy has recovered less from the pandemic than previously believed and is now the only G7 country still languishing below pre-pandemic levels by 0.2% compared to the final quarter of 2019. The Queen’s death and subsequent economic pandemonium are expected to quash any hope of further good GDP news in the final two quarters of 2022…

mdi-timer 30 September 2022 @ 08:20 30 Sep 2022 @ 08:20 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
Freeze Shock: Rishi’s Mega Stealth Tax Will Drag 4 Million Lower Rate Taxpayers Into 40% Band

New research out from the Centre for Economics and Business Research’s Douglas McWilliams, calculates that Chancellor Rishi’s freezing of tax allowances and upper rate thresholds in the March 2021 Budget will, as a result of inflation being much higher than forecast, now mean:

“that by the fiscal year 2025/26 the number of people paying tax, which was 32.2 million in 2021/22, could rise by 5 million and perhaps even more damagingly the number of people paying higher rate tax at 40% will virtually double from 4.1 million to 8.1 million. This is a £40 billion tax rise originally planned to raise £8.2 billion.”

This £40 billion will be in addition to the £20 billion to be raised by NI hikes announced as the Health and Social Care Levy. That hike was voted through Parliament. The impact of unexpectedly high inflation on the freezing of allowances and bands was not voted for, yet it will likely double the impact of the higher NI rate. This is Rishi’s mega-stealth-tax…

The Treasury this afternoon argues that the Osborne-era above-inflation threshold rises mean that even with this freeze, taxpayers will still be ahead:

“We’ve got the most generous basic personal tax allowance in the G20 and maintaining the threshold is progressive and will ensure nobody’s take home pay will be less than it is now in cash terms.”

Take-home pay will of course be less in real terms after inflation, in addition millions of former lower rate taxpayers will now be paying tax at 40%. The threshold freeze will also go a long way to reversing the policy of the coalition government, which took 2 million low-paid taxpayers out of the tax net altogether. How the Treasury reckons bringing the lowest paid into the tax net is progressive is not clear. Guido suspects the Chancellor will eventually use the revenue raised from this stealth tax to cut the NI hike back before the general election. Using a massive stealth tax to finance cutting back taxes the Chancellor raised won’t be clever, it will be bribing us with our own money.

mdi-timer 21 February 2022 @ 15:30 21 Feb 2022 @ 15:30 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
UK Economic Growth Slows in Q3

According to the ONS, the UK economy grew by just 1.3% between July and September which is down on the previous quarter. The level of real quarterly GDP in the UK is still 2.1% below where it was before the coronavirus pandemic at the end of 2019. Though there was strong consumer spending in the third quarter, expansion was weaker than expected. 

mdi-timer 11 November 2021 @ 08:36 11 Nov 2021 @ 08:36 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
UK Already Experiencing High-Wage Growth as Salaries for Drivers, Builders and Nurses Soar

The high-wage, high-growth economy Boris envisioned in his speech yesterday is already upon us according to data released this morning. New figures from the recruitment firm Indeed reveal that some occupations have already seen a huge growth in their wages. Driven arguably more by the post-pandemic recovery than Brexit…

Drivers have seen their wages spike by a whopping 8.5%. Construction workers have seen a similarly impressive 8% growth in their wages. Those working in production and manufacturing have seen their wages boom by 5.1% whilst nurses, loaders and stockers have seen wages increase by over 4%. However most other jobs have seen growth rate of 1.4% since January which is fairly typical. Keep a wary eye on inflation…

mdi-timer 7 October 2021 @ 13:00 7 Oct 2021 @ 13:00 mdi-twitter mdi-facebook mdi-whatsapp mdi-telegram mdi-linkedin mdi-email mdi-comment View Comments
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