Economy

Are the markets scared of Liz Truss?

Look at the chart for interest rate expectations in isolation, and you might come to the conclusion that Rishi Sunak is right about Liz Truss’s fiscal policies. In June, markets were expecting rates to peak at around 3.5 per cent next year; now they are expecting them to reach close to 4.5 per cent. Moreover, as Truss’s victory came to be seen as inevitable, the FTSE 100 plunged from 7,550 on 19 August to 7,230 this morning – a fall of 4.2 per cent. The pound has fallen from $1.22 on 10 August to $1.15 now. Markets could be forgiven some apprehension But hang on a minute. Markets have been

Trussonomics: a beginner’s guide

When polls started to show Liz Truss miles ahead of Rishi Sunak in the Tory leadership contest, her team adopted a cautious campaign strategy. Why gamble on another interview with Nick Robinson when last time she had struggled to name a single economist who backed her economic plans? Eventually she landed on Professor Patrick Minford, an academic at Cardiff Business School and a bullish Brexiteer. Minford went on the record calling for interest rates to rise to 7 per cent, which Truss then had to defend and deflect. But that moment in the Robinson interview, widely reported as a humiliation, turned out to be one of the most helpful points

It’s time to clear out the Bank of England’s board

Liz Truss says she intends to review the Bank of England’s mandate, which has been fixed as a 2 per cent inflation target since Gordon Brown gave the Bank its independence in 1997. We’re told Governor Andrew Bailey, keen to keep his job, thinks a review is ‘probably the right thing’. But is it? A return to the long-term inflationary average of 2 per cent is highly desirable as soon as global price spikes subside – but if the odds-on next PM thinks the Bank incapable of achieving it, setting more dynamic inflation-and-growth objectives would surely be an overreach. Instead, maybe she should take her axe to the organisation, starting

How to save money: switch to cash and reprogram your boiler

We’ll find out shortly whether official statistics agree with economists surveyed by Bloomberg who say UK GDP probably shrank by 0.2 per cent in the second quarter. But at an uncomfortable moment when we know things can only get worse, looking backwards doesn’t help and nor does holding out hope for a miraculous ‘emergency budget’ in September. As for forecasting beyond that, it’s almost too scary to contemplate. Better to shun economists and politicians and focus instead on facts that tell us what’s happening now – such as data from Barclaycard – and things we can do keep our own budgets in balance. Spending on ‘essential items’ was up by

Douglas Murray

A strange kind of recession

It’s possible that I owe Joe Biden some sort of an apology, however mealy-mouthed it might be. Last week I mentioned here the weird prevarication from the US government and its supporters over whether or not the US is technically in a recession. It arose from the news that the US had two successive quarters of negative GDP growth. Biden’s critics – myself included – leapt to declare the US in recession. According to the Bank of England, the UK is heading for a recession too, so there should be no especial shame in accepting the fact and then trying to deal with it. But then last Friday the US

Why British Gas’s owner is right to restore its dividend

‘What’s worse, they’re paying the profits to shareholders,’ said a grey-haired woman ahead of me in the Co-op queue. ‘Bloody shareholders,’ her friend of similar age and class spat back. I guessed they were talking about Centrica, parent of British Gas, which at a time when domestic energy bills are rising 23 times faster than wages (as Frances O’Grady of the TUC puts it) has announced half-year operating profits of £1.3 billion, up from £262 million last year – and the restoration of a penny-per-share interim dividend after a three-year gap. Both ladies looked likely to be beneficiaries of pensions nourished by dividends from the likes of Centrica, Shell and

The real difference between Sunak and Truss’s tax policies

The Tory leadership race is becoming a test of patience. Today Rishi Sunak has laid out his plan to slash tax: not in a matter of days or weeks, as Liz Truss has pledged to do, but by the end of the next parliament. He’s promised to reduce the base rate of income tax by 20 per cent, by taking 1p off income tax in 2024 (as already pledged) and an additional 3p over the next parliament. As Fraser Nelson notes on Coffee House, the timing of this announcement is working against him: it’s easily characterised as a u-turn on tax cuts, when in truth the former Chancellor is far

Is the US in recession or not?

There’s an almighty debate ongoing in the US about what exactly a ‘recession’ is. Treasury secretary Janet Yellen said the US economy is not shrinking, saying it is in a state of ‘transition’, not recession. But in a clip from 2000 being circulated on Twitter that is comically apt, Bill Clinton said ‘a recession is two quarters in a row of negative growth’. Regardless of who’s right, the US is currently in Bill Clinton’s definition of a recession. Figures show that the economy shrank by 0.2 per cent in the second quarter of this year, following a 1.6 per cent fall in the first quarter. Over the year, the US economy is now 0.9

Kate Andrews

Trussonomics doesn’t add up

I’ve been lucky enough in my working life so far to hold a string of jobs that have allowed me – if not actively encouraged me – to be critical of government. Coming up through Westminster thinktanks in my twenties, I had great fun putting out press releases that tore apart bad public policy. When I had the opportunity to speak to MPs, they’d remind me of the ‘political realities’ that tied their hands and prevented change. In other words, check your policy privilege. Thinktank wonks, commentators and journalists can make all the punchy points they want; they don’t face re-election. But there was one politician who over the years

Charles Moore

‘You can’t have your cake and eat it’: Rishi Sunak talks to Charles Moore

The morning after the first one-on-one Tory leadership debate, Rishi Sunak came to 22 Old Queen Street to speak to Charles Moore for SpectatorTV. This is an edited transcript of their conversation. CHARLES MOORE: Rishi Sunak, welcome to the offices of The Spectator. Just a preliminary – because you mentioned it first in the debate last night [Monday] – David Trimble died and you paid tribute to him. Almost the last thing he intervened on in public life was on the Northern Ireland Protocol. He was worried because he said it threatened the Belfast Agreement. Do you agree? RISHI SUNAK: David Trimble was someone who did an enormous amount to

The future of the Tories is at stake

To govern is to choose. So leadership contests for a party in government tend to come down to a key policy question. In 2019 it was how to break the Brexit deadlock; this time it is what to do about the economy. Should the new prime minister prioritise tackling inflation or delivering immediate tax cuts? The candidates have been divided on this issue. Rishi Sunak, the former chancellor, who I have been friends with for years, argues inflation makes everybody poorer and so getting control of it must be the primary objective. On the other side is Liz Truss. The Foreign Secretary wants, as she tells Isabel Hardman in this

My Tory leadership race fantasy game

‘Black swan’ theory, developed by the writer Nassim Nicholas Taleb, refers to unexpected events that have extreme consequences but are rationalised afterwards by pundits who say ‘That was always going to happen.’ Covid was a big one; Putin’s war on Ukraine another. It’s in the nature of global events that there’s always a dark-feathered disruptor lurking somewhere, waiting to make its presence felt. Right now, it just might be hidden in reports of protestors in Zhengzhou, capital of China’s Henan province, demanding their money back from four local banks that suspended withdrawals in April. Runs on small banks are not unknown in China; nor is embezzlement by corrupt managers. The

The rail strikes could be the end of the line for Boris

Here I go again, in my occasional role as your intrepid transport correspondent. Last week I reported on airport chaos, last month on the opening of the Elizabeth line. Now here I am boldly defying the rail strike on a Grand Central train from York to King’s Cross. To be honest, on a perfect sunny morning, it feels less stressful than my regular journeys on this crowded and often disrupted line. The RMT pickets at the station entrance were less aggressive than the pigeons on the platform trying to steal a bite of my bacon roll. Grand Central – ultimately owned by German taxpayers, though I don’t suppose that explains

Lionel Shriver

The real plan for inflation? To let it rip

Check out these hyperventilating headlines from last week: ‘What the Fed’s largest interest rate hike in decades means for you’ (PBS.org). ‘Federal Reserve interest rate hike opens new era for economy’ (Washington Post). ‘The Fed delivers biggest rate hike in decades to fight inflation’ (National Public Radio). ‘Fed goes for inflation’s jugular with 75bps rate hike’ (Schwab). While it’s true that the US Federal Reserve has not hiked its funds rate by 0.75 percentage points in one go since 1994, the figure prominently missing from those bug-eyed bulletins, and bizarrely unmentioned in all the television news coverage of this ostensibly bold move that I encountered, is what the Fed raised

Who’s to blame for the air travel crisis?

I sincerely hope you’re not reading this on a holiday flight that’s sitting on the tarmac with no indication as to when it might take off – or a sad train home after your flight was suddenly cancelled. Brace for three-hour delays at security, we’re told; don’t even try checking bags in, and at worst, as happened to Tui passengers at Manchester who thought they were going to Kos, watch out for a text after you’ve boarded telling you you’re going nowhere at all. How and why? When the pandemic set in, airlines and airports – thinking, not unreasonably, that their industry was doomed – made mass redundancies rather than

Is the Elizabeth line worth the cost?

It’s 8.16 on Tuesday morning and I’m actually writing this on a moving Elizabeth line train. Moving in the sense that we’ve just zipped from Paddington to Liverpool Street in 13 minutes – which if nothing else will be a boon for City commuters from west of London. Moving also in the sense that I’ve been writing about the project formerly known as Crossrail, first in optimism but later in frustration and rage, since its then chairman Terry Morgan gave me a personal tour of the Bond Street diggings back in June 2013. Now that the central section is open at last – even with its Bond Street station still

Tinkering with the energy price cap won’t fix it

In principle, the UK’s energy price cap is supposed to provide a buffer for consumers who might otherwise see their energy bills go through the roof. But governments can’t control international energy prices: a lesson that has been learned the hard way over the past six months, as dozens of energy companies have gone bust, unable to raise prices for customers to reflect increasing wholesale costs. Meanwhile the cap has not stopped bills from skyrocketing: Ofgem’s last price cap went up by 54 per cent, taking the total cost for an average household to just under £2,000 per year. Still, if there were any silver lining to this distortive policy

The one thing Netflix could do to keep me subscribing

Anecdotes and statistics should never be confused, but let’s do just that to build a composite picture of today’s UK economy. As the ‘cost of living crisis’ – barely out of its starting blocks – began to eat spending power and erode confidence, high street sales fell 1.4 per cent in March while non-store retail (largely online) dropped 7.9 per cent. Office occupancy, blighted by working from home, is stuck below 30 per cent of capacity. The City of London is a ghost town on Mondays and Fridays, while West End footfall remains a fifth below 2019 levels. But in case you’re planning a resumed commute or an in-town shopping

Will economic pressures weaken the West’s alliance?

This morning’s retail sales update isn’t pretty. Sales volumes fell by 1.4 per cent last month, following a 0.5 per cent drop in February (revised, and worse, than the original estimate of 0.3 per cent). The biggest fall came in non-store retail shopping: almost an 8 per cent month-on-month fall. However, the Office for National Statistics points out that overall sales volumes are still roughly 20 per cent higher now than they were pre-pandemic. But the recent drop indicates that the cost-of-living crisis is already worsening, as inflation – now at 7 per cent – is taking its toll on real incomes and is already prompting changes in consumer behaviour.

How much did Emily Maitlis cost licence fee payers?

Off duty How many non-doms are there in the UK? – In the year ending 2020, 75,700 people filled in a tax return in which they declared themselves to be non-domiciled – down from 78,600 the previous year and 137,000 in 2008. – Of the 75,700 in 2019/20, however, only 62,200 were actually resident in Britain. – In spite of their non-domiciled status, which does not oblige them to pay tax on foreign earnings, the 75,700 people still paid £7.85bn in income tax, capital gains tax and national insurance. – The highest number of non-doms in 2019 were resident in London (45,200), followed by the South East (10,400). The fewest