Economy

House of cards: why are so many property sales collapsing?

Moving house is said to be one of the most stressful life experiences, right up there with bereavement and divorce. But what about the stress of not moving? Amid the upheavals of the past few months increasing numbers have seen their property ladder dreams collapse around their ears. According to market analyst TwentyCi there has been a ‘sharp increase’ in the number of deals falling through. More than 90,000 agreed sales disintegrated between July and September, an 18 per cent increase on the same period in 2019. Wendy and William Waterton know exactly what it feels like to be on the sharp end of a collapsing sale. In the past

How to spot a looming house price crash

From the man down the pub/on Twitter to major lenders and think-tanks, homebuyers and sellers can barely move for so-called experts dishing out advice on the property market. Rising interest rates and increased mortgage costs have prompted fears of a house price slump, with Capital Economics predicting a 5 per cent drop over the next two years. Credit Suisse is forecasting that prices could fall by as much as 15 per cent if interest rates hit 6 per cent – making it more of crash than slowdown. Buyers don’t want to make a major purchase at the top of the market, and sellers may be hesitant to list if they

Divided they fall: can the Tories save themselves?

Seldom has support for a government fallen so far, so fast. Polls show that 24 per cent of the public would vote for the Conservatives if there was an election now, vs 52 per cent for Labour: figures that make 1997 look like a good result for the Tories. This is not just a one-off rogue poll, but the sustained average of six. It reflects what Tory MPs hear from voters appalled at the disgraceful shambles of the past few weeks. It won’t be forgotten in a hurry. This magazine gave its verdict on the Liz Truss agenda in August: ‘To attempt reform without a proper plan is to guarantee

What makes a ‘crisis’?

In his picture from 1932, ‘Derrière la gare Saint-Lazare’, Henri Cartier-Bresson caught the moment when a man in a hat launched himself forward from a ladder lying in some water, his leading heel not yet breaking the mirror-like surface, which reflected too a circus poster of a girl leaping. In 1952, when the photographer published his collection Images à la Sauvette, the title chosen for the English edition was The Decisive Moment, a phrase that Cartier-Bresson took from a sentence from Cardinal de Retz (1613-79), a statesman from a banking family: ‘Il n’y a rien dans ce monde qui n’ait un moment décisif’ (‘There is nothing in this world that

Martin Vander Weyer

The truth about corporate taxes

I’ve chosen to write about corporate tax rates this week not because they’re the sexiest subject available but because – unlike the government’s frontbench, the value of the pound and the scale of winter fuel bills – they’re unlikely to change dramatically during the shelf-life of this column. An increase in corporation tax from 19 per cent to 25 per cent, originally announced by Rishi Sunak, will go ahead in April, despite new Chancellor Jeremy Hunt’s own leadership campaign pledge to cut the rate to 15 per cent, which would have placed the UK between Ireland and Singapore in competitive tax tables. The uplift will, we’re told, tip £19 billion

Kate Andrews

What will the Halloween Budget bring?

Liz Truss did not think that spending cuts would be a major part of her agenda. She and her first chancellor, Kwasi Kwarteng, were confident that markets, having lent Britain billions of pounds to cover the cost of the lockdowns, would be more than happy to do the same to transform the economy. Their argument was, as it turned out, calamitously wrong. The miscalculation cost Kwarteng his job and the Prime Minister her power. Truss’s new Chancellor, Jeremy Hunt, has dismantled almost all of her plans. ‘Trussonomics’ has been snuffed out. This temporarily calmed the markets. But abandoning tax cuts – as painful as it was – will soon prove

Will the free-market cause ever recover from Liz Truss?

In theory, I should be delighted about the Liz Truss project. She is saying the things I’ve been arguing for years: talking not just about lower taxes but about basic liberty and how it relates to everyday life. She’s passionate about these ideas – and sincere. I remember watching her deliver a rallying cry, a salute to the ‘Airbnb-ing, Deliveroo-eating, Uber-riding freedom fighters’. This was just over three years ago when she was a Treasury minister. Her speeches were getting punchier and her one-liners becoming newsworthy and memorable. She was turning into one of the most recognisable faces of classical liberalism in Britain – a development which clearly delighted her.

Martin Vander Weyer

Is Credit Suisse the tornado on the banking horizon?

Headlines about ‘alarm over CreditSuisse’ might be read as a sign of normality in financial news, rather than the reverse. The second-ranked Swiss bank (behind UBS) has slipped on so many banana skins in recent years that, as I wrote in February: ‘I sometimes wonder how and why it survives.’ As a recognised basket-case, its difficulties are not usually seen as harbingers of systemic trouble. But in the Kwarteng-induced febrile mood of London’s markets, the question has to be asked. This is October, the devil’s favourite month for provoking crashes. Could Credit Suisse be the tornado on banking’s horizon? Amid rumours of critical balance-sheet weakness, Credit Suisse’s shares have fallen

Everything’s under control, says Kwasi

You could tell Kwasi Kwarteng was aware of his words and tone as he delivered his Conservative party conference speech to a hall full of Tory members this afternoon. It was a delicate set of circumstances, with him having had to U-turn on his plan to abolish the 45p tax rate only this morning. But perhaps more importantly he learned a lesson after the mini-Budget: his words can move markets. And he’d be loathe to push them into freefall again. Kwarteng worked hard to compensate for the total lack of lip-service he had paid to fiscal discipline in his mini-Budget. He praised the UK’s status of having the ‘second lowest

Why is the right not making the moral case for lower taxes?

There was an article recently in the increasingly woke but still useful New Scientist which attempted to gauge the degree to which luck was responsible for who we are and, hence, an individual’s life circumstances. I think it came in third place after genes and the environment – which are also both down to luck, really, I suppose. The thesis seemed to be we pay too little attention to the role of luck when considering why one man is a millionaire and the other is a lavatory attendant or a book reviewer. I would beg to differ. Ascribing luck to one’s unfortunate position in life is very prevalent indeed and

Martin Vander Weyer

City slickers’ reaction to Kwarteng’s unfunded plan is entirely rational

‘Fury at the City slickers betting against UK plc,’ shouted the Daily Mail on Tuesday, after Monday’s mayhem saw the pound hit an all-time low of $1.03. A more accurate corporate metaphor, though less punchy as headline material, would have been something like this… Activist mavericks seize boardroom control of giant sluggish utility. Novice finance director slashes prices, raises dividends for rich shareholders, shuns in-house forecasters and says he’ll borrow whatever it costs. To which markets reply: ‘Blimey, mate, that’s bonkers. So we’re dumping your shares and the cost of your debt just doubled.’ And that, I’m afraid, is an entirely rational response, not a wickedly speculative one. Moments after

Matthew Parris

Maybe Nanny does know best

Not least among the shivers down my spine as I listen to Liz Truss and Kwasi Kwarteng pump up the rhetoric on their economic revolution is the evocation of myself – myself when young. Like Ms Truss, I too joined the Liberal party as an Oxbridge fresher. I too believed in the power of personal choice. I too had a dream of unhindered competition liberating the animal spirits of enterprise and individual genius. I too told myself that we liberals must grit our teeth and keep the faith when sink-or-swim left some to sink. I too thrilled to the metaphor of ‘tall trees’ being allowed unencumbered access to the light.

Portrait of the week: Chancellor unveils his unBudget, Hilary Mantel dies and corgi prices soar

Home Kwasi Kwarteng, the Chancellor of the Exchequer, presented a far-reaching ‘fiscal event’ (ineligible to be called a Budget), said to have cut more tax than any measure since 1972. The markets’ immediate response was to sell pounds, and sterling fell to $1.07 (though the euro also continued in its own decline against the dollar and the Chinese yuan fell sharply). The Treasury defensively said it would publish proposals for dealing with its debt and the Bank of England said it would buy government bonds to help ‘restore orderly market conditions’. The IMF spoke out, inviting the government to ‘re-evaluate’ its tax changes. The unBudget had reduced the 45 per

The audacity of Kwarteng’s tax cut for the rich

George Osborne dreamed about it and Rishi Sunak told friends that he’d like to do it if everything went well and he was feeling brave. But this morning Kwasi Kwarteng has gone ahead and done it.  The ‘additional rate of tax’ – set up by Gordon Brown as a trap for the Tories in 2009 – has just been abolished. Right now, those earning more than £150,000 per year will pay 48.25 per cent on every pound they earn (45 per cent income tax plus 3.25 per cent National Insurance). From April next year, it will fall to 42 per cent (40 per cent income tax plus 2 per cent NI).

The painful road to lower inflation

In the end, it could have been worse. The Federal Reserve might have followed Sweden’s lead, with a whole one point rise in interest rates, or it could have even decided to short-circuit the whole process and go straight for a 1.5 per cent increase. Instead, it opted for the safer course, imposing a 0.75 per cent increase in rates much as the market expected. Even so, it made one thing absolutely clear. It is not going to let up in its battle to bring inflation back under control – and the rest of the world will have no option but to follow its lead. The markets were primed for

Truss’s energy bailout is eye-watering

The government will announce tomorrow that it will cover the costs of more than £1 in every £3 of gas consumed by businesses and households over the next six months. There has been no subsidy of a market price on this scale in British history. Estimates of the final bill for taxpayers range from £100 billion to £200 billion, or more than the annual cost of running the NHS – if the scheme for households lasts for two years, as promised, and the separate one for all businesses runs for six months, to be followed by a less ambitious business scheme for another 18 months. This is a subsidy of more

Kate Andrews

How far will Truss’s ‘growth plan’ go?

It was only a few weeks ago that Liz Truss was talking about holding an ‘emergency’ fiscal event towards the end of September, mainly to address rising energy bills and how the government would support people through the winter. This targeted approach helped to justify the speed at which her new government would announce some major policy, and even more importantly was used to justify not commissioning analysis from the Office for Budget Responsibility to go alongside it. Energy bills were too time sensitive for the government to wait for the OBR to run all the numbers and produce forecasts, Team Truss’s argument went. The independent assessment of her plans (which must

Let’s see some energy policy action

At His Majesty’s Treasury, it’s all looking a bit like Year Zero in revolutionary Cambodia. Kwasi Kwarteng’s first act was to sack the respected but ‘orthodox’ permanent secretary Sir Tom Scholar. Now the FT reports the Chancellor ordering underlings to focus ‘entirely on growth’, presumably at the expense of financial discipline. I’m picturing a locked basement of fearful officials labouring under Kwarteng’s lash to translate his forthcoming ‘fiscal event’ – tax cuts on top of massive spending to cap energy bills and unlimited borrowing to pay for it – into the sort of Whitehall language that might make it sound reasonable. Meanwhile, businesses large and small remain completely in the

Buckle up! The Liz Truss era is here

Liz Truss and Kwasi Kwarteng arrive in Downing Street having been on a long political journey together. Both elected in 2010, they have co-written books setting out their shared economic agenda; they have co-founded party groups during their time in parliament; and now they will govern together. The future direction of the country, and the Tories’ electoral prospects, depend on the success of this new Downing Street partnership. Their strategy is one of big economic gambles from day one. Chief among these is the big energy package, potentially costing over £100 billion, designed to ‘freeze’ energy prices for households and businesses. This will involve the state – future taxpayers, in

Martin Vander Weyer

Can anything halt the pound’s fall?

My predecessor Christopher Fildes looked at exchange rates through a cocktail glass: three negronis for the Italian lira equivalent of a tenner, good; a $2 martini for £1, even better. That latter ratio applied briefly 30 years ago when, he wrote, the favoured tipple ‘brushed against my lips like an angel’s kiss’. It recurred during the financial crisis of 2007-08, when no one was really able to enjoy it, and has never been seen since. On Monday, as Liz Truss was crowned, the pound dipped below $1.15, in sight of its 1985 all-time low of $1.05. ‘The prospect of …parity versus the dollar,’ said Bloomberg, ‘is becoming ever less outlandish.’