Displaying items by tag: Economy

The UK’s largest tax increase since 1993 was announced as Rachel Reeves introduced a budget aimed at revitalising healthcare, education, and infrastructure. Taxes will rise by £40 billion, with employer national insurance contributions, capital gains tax, and VAT on private school fees among the primary targets. These funds, coupled with higher borrowing, aim to close a financial gap left by previous administrations, supporting the NHS, affordable housing, and transport projects. Reeves acknowledged the 'difficult decisions' required, defending these increases as essential to 'rebuild Britain' without directly impacting individual income tax, VAT, or national insurance. Critics argue, however, that these tax hikes may still burden working people indirectly. In response to Tory criticisms, Reeves insisted that Labour’s approach will prevent austerity and 'put more pounds in people’s pockets' while providing relief measures for small businesses and the retail, hospitality, and leisure sectors.

Amid fears of changes to tax-free ISAs in the upcoming Budget, Britons are rushing to maximise their savings in these accounts. Concerns stem from remarks by Rachel Reeves, who previously suggested a cap of £500,000 on tax-free ISAs, sparking fears that she might target ISAs for a tax raid. As a result, investments in stocks and shares ISAs have surged; one provider reported a 156% increase in contributions in September compared to the same period last year. The number of ISA millionaires has tripled in three years, with over three thousand holding more than £1 million in their ISAs, and thousands more nearing that figure. Analysts credit this growth to the power of compounding and investing in stocks and shares rather than just relying on cash ISAs. Proposed changes could reduce the £20,000 annual contribution limit or introduce a cap, worrying investors seeking to save for their future amid an increasingly taxed environment.

In September, UK inflation unexpectedly fell to 1.7%, the lowest rate in 3.5 years, down from 2.2% in August. Lower airfares and petrol prices were the main factors behind this slowdown. The inflation rate now stands below the Bank of England's 2% target, opening the door for potential interest rate cuts. The bank, which has already lowered interest rates once this year, is expected to cut them again in November by 0.25%, with another cut likely in December. While lower inflation is good news for many, economists warn that inflation could rise again due to increased household energy bills. The drop in inflation will also impact the rise of benefits like universal credit, though this will be lower than the expected 4.1% rise in the state pension. Despite the positive signs, the cost of living remains challenging, particularly for low-income families struggling to balance essential expenses like food and heating.

Brexit has had a significant impact on London’s financial sector, with an estimated 40,000 finance jobs lost since the UK’s departure from the EU, according to Michael Mainelli, the Lord Mayor of the City of London. This figure is at odds with previous estimates, including a 2022 assessment which put the job loss at around 7,000. While cities like Dublin, Milan, Paris, and Amsterdam gained positions from the migration of jobs, London’s financial centre has continued to grow, adding roles in insurance and data analysis, bringing the total workforce to 615,000. Mainelli's remarks come as Britain seeks to restore relationships with Europe amid a broader economic slowdown. Although many had hoped Brexit would reduce immigration and deregulate industries, it has proven difficult to disentangle regulations, and the economic slowdown has persisted. Keir Starmer is attempting to rebuild ties with the EU, focusing on improving business relations but ruling out rejoining the single market.

The Guardian reports that the Treasury has asked ministers to prepare for cuts of up to 10% in infrastructure spending, targeting projects such as hospital upgrades, road construction, and defence initiatives. Despite Chancellor Rachel Reeves' recent commitment to increased investment to stimulate growth, the government still faces a £22 billion financial shortfall. Economists warn that cutting capital investments could harm the economy and exacerbate the country's deteriorating public infrastructure. Reeves, set to deliver her first budget on 30 October, is expected to outline tax increases to fund public services, while also addressing departmental spending limits established before inflation and rising asylum costs worsened the deficit. However, some ministers argue that short-term cuts will hinder long-term economic progress.

Energy bills are to rise in England, Wales, and Scotland; households using typical amounts of gas and electricity will now pay about £149 more, bringing the average bill to £1,717 a year. Experts are urging billpayers to submit accurate meter readings to avoid being charged for estimated energy use at the new, higher rate. This price increase comes as winter approaches, but without extra cost-of-living payments or universal winter fuel payments for pensioners, causing concern for many. The price cap, set by energy regulator Ofgem, has been adjusted, raising gas and electricity unit prices and standing charges. Energy debts have also risen, with households collectively owing £3.7 billion to suppliers. Support for vulnerable customers is available through initiatives by energy companies, and pensioners on low incomes may be eligible for pension credit. Forecasters are predicting a slight drop in prices in January, providing some relief, but many fear these increases will exacerbate financial difficulties for households already struggling with high costs.

On 1 October, in a televised speech to mark Nigeria’s 64 years of independence, President Bola Tinubu acknowledged the financial struggles and search for meaningful employment faced by many people. He listed security gains and investments in farm machinery among achievements which would help ease economic pressures, and also announced a national youth conference, known as ‘the 30-day Confab’, whose recommendations would be considered and implemented. The president stressed that the government is mindful of future generations and their potential to contribute to the nation’s progress. However, protests against the current economic hardships have taken place in several states, reflecting discontent among citizens. Some expressed disappointment with the lack of concrete measures to reduce inflation and improve living standards. Tinubu defended his economic reforms, which have pushed the inflation rate to a 28-year high.

The Bank of England is expected to lower its base interest rate to 3.5% in the coming months, a relief for home buyers and businesses as the UK economy shows signs of improvement. Experts predict the economy will grow at double the previously expected rate. One leading firm has highlighted the need for increased public investment to sustain this growth trajectory. While interest rates have surged due to inflation concerns, prompting households to save rather than spend, the easing of rates is expected to boost consumer confidence. The Organisation for Economic Co-operation and Development (OECD) also upgraded the UK’s growth forecast, positioning the UK just behind the US in expected economic performance within the G-7 nations. Despite lingering uncertainties, these optimistic projections suggest a stronger economic outlook for the UK in the near future.

Millions of pensioners will lose winter fuel payments after the Government won a Commons vote to end the universal benefit. Chancellor Rachel Reeves introduced the measure as part of an effort to address a £22 billion deficit in public finances. The payment , which had been given to all pensioners, will now be restricted to those receiving pension credit. The move, which will save around £1.5 billion annually, has drawn criticism for its sudden implementation without public consultation. 53 Labour MPs abstained from voting, and some people have vowed never to vote Labour again. One Labour MP, Jon Trickett, broke ranks and voted against the measure, citing concerns about pensioner poverty and criticising the Government for targeting the vulnerable rather than the wealthy. The winter fuel payment, introduced in 1997, was designed to help pensioners with heating costs, but its removal will affect ten million people, leaving many facing increased hardship this winter.

Scotland's deputy first minister, Shona Robison, has announced £500 million in public spending cuts to address financial pressures. The cuts, which span various sectors, aim to balance Scotland’s budget while facing ongoing economic challenges. Robison emphasised that difficult decisions were necessary to manage increasing demands on public services and rising costs. The cuts will affect education, healthcare, and transport, sparking concerns from public sector workers and unions. Critics argue that the reductions could lead to decreased quality in essential services and further strain on already under-resourced sectors. Robison defended the cuts as crucial to prevent long-term financial instability, noting that the government is committed to protecting vital services as much as possible. However, she acknowledged that the cuts were far from ideal and called for a review of how public funds are distributed and used efficiently.