Displaying items by tag: finance
At the time of writing, 19th January America is about to hit their debt limit, meaning the government is not allowed to borrow any more money - unless Congress agrees to suspend or change the cap, currently almost $31.4tn (£25.4tn). Since 1960, politicians have moved to raise, extend or revise the definition of the debt limit 78 times - including three just in the last six months. But Republicans recently took control of the House of Representatives and are calling for spending cuts, raising concerns that politicians will delay acting this time - leading America to intentionally default for the first time in its history. Treasury Secretary Janet Yellen has estimated that special measures can buy time for the US until at least June, at which point the government will no longer be able to pay its bills. A true economic catastrophe - unpaid defence contractor payments, Social Security cheques, received by retirees and salaries of government employees, including the military, will all be affected.
After a wild few months in the UK economy, the Government wants to raise more money to cover a big black hole in its accounts. Jeremy Hunt, the Chancellor, has said everyone must pay more tax. Meanwhile, a group of economists have questioned whether the ‘black hole’ in public finances must be filled with austerity and tax rises. They said that the £50bn hole entirely disappears if debts are calculated differently. When Rishi Sunak was chancellor two years ago, he used a different accountancy rule to arrive at a government debt figure. Changing it back to what it was before the 2021 Autumn Statement completely removes the black hole, according to the economists' analysis, and will put government debt back on a sustainable footing. Pray for Jeremy Hunt and all members of the treasury to be wise regardless of the accountancy rules they choose to follow.
The Chancellor announced targeted payments to help with the cost of living. The national wage will jump from £9.50 to £10.42 an hour from April; help for energy bills will be extended, but less generous. There will be cost of living support for pensioners, the disabled, and those on low incomes. Means-tested benefits, including Universal Credit, and pensions will rise in line with inflation. Social sector rent rises will be capped at 7% in the next financial year. However, the cap on social care costs due next October will be delayed by two years. A ‘temporary’ 45% tax on companies generating electricity will be applied from January, and windfall taxes on oil and gas company’s profits will increase from 25% to 35% and extend until 2028. The NHS budget will increase in each of the next two years by an extra £3.3bn, and schools will receive £2.3bn extra in 2023 and 2024.
The latest interest rate rise by the Bank of England means its benchmark interest rates have hit 3% for the first time since 2008. The interest rate affects mortgages, repayments on credit card debt and the interest paid on savings accounts. They have been rising since December in an effort to curb the rate at which the cost of everyday goods and services are rising. This latest rise follows economic turmoil under Liz Truss, though things have calmed slightly since Rishi Sunak took over and promised to issue a plan to repair the nation's finances later this month, but tax rises and spending cuts are expected. The Bank of England’s outlook for the UK economy is a downturn lasting for two years and the unemployment rate will nearly double.
UK businesses, hospitals, schools and charities will have their energy bills cut by half their predicted level under a support package that fixes wholesale gas and electricity prices for six months from 1 October, shielding businesses from crippling costs. The scheme will be reviewed after three months and possibly extended for vulnerable businesses. Government officials have not said how much the package will cost taxpayers: Cornwall Insight estimates £25bn. Energy-intensive industries, like steel manufacturing, could close because of energy costs surging after Russia's invasion. Household bills would be limited to £2,500 annually until 2024 under a separate scheme. Business analyst Simon Jack said few businesses plan with only a six-month time horizon. There will be some whose plans to cut production, close premises and let staff go will not change in spite of this intervention. Retail and hospitality organisations see this as giving them a fighting chance over the commercially crucial Christmas trading period.
The Bank of England has raised interest rates to 2.25%, the highest level for 14 years. This will make it more expensive to borrow, which should - theoretically - encourage people to borrow less and spend less. It should also spur people to save more. However, there is also a risk that it can drag on growth, harming the economy. The bank's monetary policy committee, which sets rates, believes that the economy is already shrinking, which would officially push the UK into recession. The Bank of England has also warned that the government’s energy price freeze will push up inflation in the medium term. With energy bills rising less sharply, households will have more money to spend on other goods and services (although some people are already having to skip meals due to rising bills).
Ofgem says a typical household gas and electricity bill will rise to £3,549 a year from October. Save the Children warned the rise could put young people's health at risk, with families unable to afford to heat their homes. Money expert Martin Lewis predicted grave consequences without more state help. Liz Truss has ‘ruled out’ further direct support for everybody to help cover the costs of surging energy bills, and was not considering further support like the £400 payment that all households will receive this winter. Rishi Sunak says the government must provide some direct support to everyone. Ovo Energy has proposed a ten-point plan for the Government to subsidise soaring gas and electricity bills so that the poorest households get the most support. A key proposal is for energy firms to borrow from a government-backed fund to subsidise bills.
The UK chancellor Nadhim Zahawi visited the USA for cost-of-living talks during what could be his final week in the job. The two candidates for PM have signalled they will offer more help when elected, though neither has given details. Mr Zahawi insists he has been working tirelessly to come up with proposals for either leadership candidate to bring in more support. The chancellor met banking chiefs in New York to discuss co-operating on financial services, before heading to Washington DC to discuss support for Ukraine, the global economic outlook, and energy security. He said that global pressures must be overcome through global efforts.
Companies were forced to give bribes to cajole employees to return to the office last year: free breakfast, ice cream and even popcorn to workers who came in. Now bribes are replaced with stern summons issued to workers still wanting to stay at home. Apple’s chief executive ordered every employee to return to the office three days a week from September. That is the latest in similar demands issued by other companies, who all feel that office life improves productivity. But efforts to lure staff back may not be necessary when the country plunges into recession. Experts and City professionals are now saying workers are keen to get back in front of managers to save their jobs as a crisis looms. However, as the harsh reality of the cost-of-living crisis hits, they will still have to escort some of their colleagues to the door anyway.
Public finances are under pressure from a predicted recession. Both PM candidates agree that people will need help with the cost of living this autumn, but tax cuts will only bring relief to taxpayers. Cutting health and social care levies gives no money to pensioners or anyone earning less than £12,570. The new prime minister will not start the job for another four weeks. The candidates are coming under increasing pressure to spell out their plans. Gordon Brown recently said an emergency budget was urgently needed and that Boris Johnson, Ms Truss and Mr Sunak must agree on one now. A financial time bomb will explode with the October energy price cap. Loughborough University’s Prof Hirsch said, ‘It is urgent for the next prime minister to ensure families have enough to live through this crisis and beyond.’ Some will be £1,600 worse off per year. On 11 August government ministers met with energy giants, focusing on how energy companies can alleviate pressure on consumers: see