Treasury

If austerity is off the table, how do we pay for Covid-19 costs?

What is the true cost of Covid-19? No one knows – yet. But it’s not going to be cheap. The Treasury has revised its borrowing plans for May to July up to £180 billion, four times what it planned to raise and over £20 billion more than it planned to borrow all year. So how are we going to pay for all this spending? Policies at the heart of the government’s Covid-19 response, like the furlough scheme, are surpassing all estimations for uptake, and have been granted a limitless price tag by the Chancellor through to the end of June at least. As the economy contracts in a way that

OBR analysis reveals staggering impact of Covid-19 on UK economy

Just days after the Office for Budget Responsibility announced its economic forecasts in March, the reality of Covid-19’s impact on the UK economy sunk in, and its projection was rendered completely obsolete. A month later, with a clearer picture of the toll the virus and lockdown have taken, the OBR today released its new coronavirus analysis, showing a staggering 35 per fall in real GDP in the second quarter, and an unemployment spike of up to 10 per cent – that is, 2 million additional people out of work. A long way off its Budget 2020 forecast for the year:  As the graph above shows, the OBR’s scenario predicts a ‘V-shaped’ recovery –

Rishi Sunak: we will do whatever it takes to support the economy during the crisis

The coronavirus pandemic is a public health emergency. But it is also an economic emergency. We have never, in peacetime, faced an economic fight like this one. I know that people are deeply worried. I know that people’s anxiety about the disease itself is matched only by their anxiety about their livelihoods. Last week, I set out an initial economic response in the Budget. I promised to do whatever it takes to support our economy through this crisis – and that if the situation changed, I would not hesitate to take further action. That is what I want to begin doing today. This struggle will not be overcome by a

The corona stimulus shows we’ve learned the lessons of the crash

The Bank of England hasn’t wasted time getting in front of the coronavirus, and its actions this morning show how far things have moved from the days of Mervyn King. Perhaps more interesting than the interest rate cut is the Bank’s moves to quickly free up the best part of £200bn of lending capacity for UK businesses, particularly small firms who are entirely reliant on banks for funding. The idea is to create a firebreak, to make sure economic malaise doesn’t lead to businesses failing through lack of working cash flow. Fewer restaurants and hotel customers, a fall in those travelling, and more people working from home will all put pressure on

A field guide to Whitehall’s mandarins 

Britain’s civil service is supposed to be the envy of the world, seamlessly executing the will of whichever government happens to occupy the offices of state. But Mr S wonders whether the reality can be rather different. Disgruntled civil servants have toppled more than one over-mighty minister. Others have admitted actively trying to undermine government policy when it comes to Brexit. Much like different nations, Whitehall’s various departments – and the people who inhabit them – have their own eccentricities and foibles. So to help readers out, Mr S has put together a guide for the avid Whitehall twitcher, making it easy to spot the difference between the lesser-crested FCO

The truth about Spreadsheet Phil’s bid to block no deal

Philip Hammond’s former top advisor has confirmed what many in Westminster have known for some time. Writing in the Guardian, ex-special advisor Poppy Trowbridge came out all guns blazing, calling Boris Johnson ‘reckless’ and accusing him of ‘mistaken posturing and trash talk’. In the article, entitled ‘Boris Johnson talks tough but still hasn’t said what he’s doing to get a Brexit deal’, she laments the failures of May’s withdrawal agreement and writes in support of spreadsheet Phil’s bid to stave off no deal. But the Chancellor’s former SpAd also admitted the extent of Hammond-era resistance to Brexit. Responding to comments made by current PM, she writes: ‘At one point during my

Treasury X Factor: Tory MPs belatedly summoned to find the money for NHS pledge

How do you find the money to pay for a £20bn NHS funding pledge? Usually such discussions – and eventual calculations – would be made before the money was announced. However, Theresa May decided to ditch the rulebook this week when she unveiled her government’s funding package to boost health spending by an average of 3.4 per cent over the next five years. Far from a fully costed pledge, May referred to a rarely-sighted Brexit dividend, potential borrowing and future tax rises. The uncertainty has led to criticism from Jeremy Corbyn’s Labour – not usually known for fiscal restraint. But happily it seems the Treasury now has a plan – or

Conservatives dump their dirty laundry on the despatch box

Well, this is going well. The leak of the government’s Brexit economic forecasts this week has led to an almighty row within the Conservative party. With Britain predicted to be worse off in all the off-the-shelf alternatives to EU membership, Remainers have claimed it as evidence that Brexit is a bad idea while Brexiteers are quick to brand it as the latest Project Fear effort. Steve Baker – a Brexit Minister – took the unusual step on Tuesday of rubbishing the government report – and, for that matter, the government’s ability to forecast anything; ‘I am not able to name an accurate forecast and I think they are always wrong and wrong

What the BBC won’t tell you about the leaked Brexit forecasts

The leaked government Brexit forecasts have this morning been reported by the BBC just as its leakers intended: as embarrassing proof that Brexit is bad for the economy. If it had any vague interest in being impartial, perhaps the Beeb would have bothered to make the rather obvious point: not only have we seen such forecasts before, but the new figures are more optimistic than HM Treasury’s last effort. The government’s April 2016 analysis said that the economy would be 3.8 percentage points smaller than it otherwise would have in 15 years if we were to stay in the EEA; that has now been revised down to a 2pc hit.

Crunch time

For anyone considering a career in economic forecasting, the Bank of England’s inflation report for August 2007 ought to be required reading. A graph illustrating its Monetary Policy Committee’s ‘best collective judgment’ of annual economic growth two years ahead is fixed around a central prediction of 2.5 per cent, with extreme boundaries of 0.8 per cent and 4.2 per cent. But after two years, economic growth was running at –5.6 per cent, and the economy had just completed its fifth consecutive quarter of negative growth. The finest minds of Threadneedle Street could not see two years ahead. In this case, the Bank of England could not even see a few

The Cabinet’s Brexit position is transitioning

Although this week has seen a divergence of views in the Cabinet over Brexit (not to mention Labour’s continuing Brexit confusion) on everything from chlorinated chicken to freedom of movement, there is one aspect of the negotiations that all ministers can agree on: the need for a transitional agreement. Speaking on the Today programme, the Chancellor confirmed that ‘many things would look similar’ the day after Brexit. The new Cabinet consensus for an implementation period while the UK moves towards a new relationship with the EU is something Philip Hammond has been lobbying for for some time. The expectation in Whitehall is that Theresa May will give a speech in September

What the papers say: The Tories must start acting like a Government again

‘Spare a thought for Philip Hammond,’ says the Times. The Chancellor once looked certain to lose his job – and yet while he might now be safe in his position, his role is only getting tougher. His Cabinet colleagues are queuing up to tell him that now is the time to lift the cap on public sector pay. In response, ‘the Chancellor is expected to fight a rearguard action’, says the Times, which says Hammond is ‘right’ to take this approach. This response also won’t be in ‘in vain’ if he is able to make the point that a pay rise must come with ‘a commensurate increase in productivity’. It’s true, for instance, that

How Philip Hammond’s National Insurance hike affects the ‘gig economy’

You might argue that the self-employed enjoy less security than the employed, so it’s fair they contribute less; you might argue that the ‘sharing economy’ is a nifty pocket-money source for hard-pressed families, and that tax grabs will swiftly kill it. But revenue-starved Chancellor Hammond will retort that all income and commerce, however novel in form, must be taxed unless specifically exempted, otherwise government can’t make ends meet: tax should keep pace with changing patterns of life and technology. Thus Microsoft founder Bill Gates recently proposed that if robots are replacing humans in business, then companies operating robots should pay income tax on their behalf. Back in 1991, Chancellor Norman

Philip Hammond’s small print won’t save him from a Tory backbench revolt

George Osborne was famous in Westminster when Chancellor for laying large ‘elephant traps’ for Labour using Treasury policy. He was also famous for telling everyone all about how the trap worked and where it was, before falling into it himself. When Philip Hammond came into the Treasury, it was largely accepted that the days of silly elephant traps were over. But this week the new Chancellor ended up locating one of the last of the Osborne elephant traps which had been lying dormant in the political jungle – and he located it by falling straight into it. The ‘tax lock’, which the Tories announced in the 2015 election campaign to

Tom Goodenough

What the papers say: Philip Hammond’s broken promise

Philip Hammond is feeling the heat this morning. This was supposed to be the ‘boring’ budget, with no headline-grabbing announcements or spending splurges. Instead, the Chancellor’s face is splashed across the front pages this morning for all the wrong reasons. And the reception for Hammond doesn’t get any warmer inside the newspapers. The Daily Mail starts its commentary with some praise for the Chancellor. It says that his Budget ‘was a million miles from the panic-stricken emergency Budget’ put forward in the run-up to the referendum by his predecessor. Gone was the ‘anxiety’ about the future of Britain’s economy; and in came the jokes – gags the Chancellor could afford with

As it happened: Philip Hammond’s first – and final – spring Budget

Philip Hammond has finished his Budget announcement. The stand out points? £2bn in funding for social care – although only half will come in the next year; money for new schools; help for businesses – including pubs – that will be hit hardest by the business rates hike. There’s only one policy which will grab the headlines tomorrow, though: the broken manifesto pledge made by the Tories not to hike National Insurance contributions. Instead, Hammond announced that Britain’s five million self-employed workers will see the rates they pay jump by two per cent over the coming years. Follow all the coverage as it happened on our Spectator live blog: 1.35pm: Jeremy

Tom Goodenough

What’s in Philip Hammond’s Budget box?

Philip Hammond doesn’t do box office. Unlike his predecessor George Osborne, he doesn’t do burgers either, with his austere pre-budget picture showing the Chancellor looking characteristically gloomy as, we’re told, he prepares Britain to be ‘match fit’ for the future. So what do we know about Hammond’s first – and last – spring Budget? For those who have accused Hammond of being too downbeat, there’ll be some glimmers of hope. It’s expected that the Chancellor’s ‘upbeat assessment’ of Britain’s economic outlook which he will deliver at the despatch box will mean the country’s growth forecast will be revised upwards – giving the Chancellor an extra £12bn to play with over

A business rates rise benefits nobody

I campaigned hard for a business rates review, and even tried to claim credit for it — or at least for its pro-northern bias — when details emerged last September. The smallest enterprises are exempt and the provinces will gain some benefit; but it’s clear that new rateable values from 1 April will impose undeservedly harsh rises on mid-sized businesses in London and the south-east. I’m even feeling a twinge of sympathy for Victoria Beckham, whose Dover Street boutique reportedly faces a 415 per cent hike. Philip Hammond, meanwhile, is in ‘listening mode’ — not least, we might imagine, when accosted by furious shopkeepers in his Runnymede and Weybridge constituency —

What the papers say: Britain’s soaring EU budget bill shows Brexit can’t happen soon enough

We’ve heard that Brexit could cost Britain billions in the form of a divorce bill from Brussels. But what is the price of staying in? That question is answered by the Daily Mail this morning which reveals Treasury estimates slipped out last week that the UK’s contribution to the EU will jump to £10.2bn in 2019 – up from £7.9bn this year. The numbers also show that if Britain is still in the EU by 2021-22, taxpayers will have to pay out £10.9bn to Brussels. For the Daily Mail this is proof that Brexit is the best course of action. ‘Doesn’t this revelation, slipped out by the Treasury, show precisely

We no longer have a pensions system, just a mess caused by the Treasury

Back in the 1980s, when I was embarking on a lifetime of sweat, toil and tears in order to bring home the bacon, I lived in a pensions desert. I couldn’t see, feel or feed one (a pension, that is) for miles around. During this decade, against a backdrop of privatisations, a rampant Prime Minister (Margaret Thatcher), Michael Jackson’s Thriller and Madonna’s virgins, I was privileged to work for four employers. A major chartered accountancy practice, a big and little publisher and a now defunct building society. Not one offered me the opportunity to save into a company pension. At the time I wasn’t bothered – life was for living, a