not sure about the economy but the u turn us stopping a rebellion and possibly riots....
So what does this give the economy back in terms of improvement?
A stress test?
Not sure I get the u- turn
It's what they think a political masterstroke looks like. Now the door is open to say "the 45% band is maintained, lets have a look at these benefits".
Broadly, the mini budget was popular for everything except the high tax band and bankers bonuses. They drive Mary's popularity to the floor and then take it up slightly and say how she's becoming more popular.
And RNP - dead right Jake Berry is an odious turd who would be pelted with vegetables if he ever showed his fat face in Rawtenstall. Which he wouldn't
More suspicious minds might consider that Kwasi’s Fiscal Event was a good ruse to generate some earning and donations for his ‘friends’, I mean no one would deliberately create instability to earn a few quid would they? 🤣
Even with a U-turn, it’s only cost a few billion to sort out, precipitated interest rate rises, down-graded UK’s credit rating, caused untold stress for millions…
No MPs turning up for the Tory love in in brum might have had something to do with it and Gove is looking for another leaders scalp.
So what does this give the economy back in terms of improvement? I bet in reality it’s not much ?
Didn't judge the mood correctly.
Despite the metrics.
Big picture: everything is a global mess and they don't know what else to do - so regular old Tory style not going to cut it. We knew this of course.
Be interesting what happens next.
Depends on inflation and growth. I don't think Truss is going to get an easy ride with what's coming. And I don't think any Tory is capable of fixing this, especially with supply chain issues and dollar dominance.
Frankly it would take someone with real brains and left wing balls to turn the ship.
People are so bloody thick - talking about the 'taxpayer cost' to the BoE for 65billion. Jesus Christ. It was a swap of reserves for gilts. No net cost.
Using the £/$ as the metric for changing something is totally misguided. It's been dropping for years so you already have the problem. Especially when the dollar's strength is out of your control.
Danger with charts is over analysing small time-frames.
I don't mind the u-turn. Better to get shut of it for the right reasons now.
Wage inflation is a higher paid job though. Or am I missing something.
Not if the wage hasn't risen for a long time.
Even with a U-turn, it’s only cost a few billion to sort out, precipitated interest rate rises, down-graded UK’s credit rating, caused untold stress for millions…
thing is none of those impacts of the mini budget were really due to the 45p rate. The cost of it was small (compared to the package of other tax cuts and, in particular, the energy price cap) so the markets won't be particularly bothered with it. it was just politically awkward
Not if the wage hasn’t risen for a long time.
[American]Why have you sat on your arse waiting for the wage to go up? Go out and get some training so you can get a better job… [/American]
I think this is very clever.
They can say they listened to the people and have cut the smallest part of their Britannia Unchained budget, the rest will now sail through.
NHS for sale before the next GE.
[American]Why have you sat on your arse waiting for the wage to go up? Go out and get some training so you can get a better job… [/American]
Ha ha.
British: what better jobs?
Taxi for KK, if they can drag him out from under the bus.
So U-turn on that tax rate cut? No surprises they clearly didn’t like the polling on that.
Reading a report in the FT that doesn't seem to be the reason at all. Rather than a "change of mind" and the realisation that the policy was politically indefensible and damaging it was in fact that the policy would be impossible to implement in a real and practical way.
Truss concluded after talks with her senior team that the plan stood no chance of getting through the House of Commons.
One cabinet minister close to Truss said: “It’s a very painful decision but we had no choice ultimately. There was no way we were going to get the Budget through.”
https://www.ft.com/content/29ebdd94-8c13-48fa-8718-4c86cce902a8?shareType=nongift
Obviously Truss and Kwarteng will claim that the so-called U-turn was because they listened and the issue had become a distraction from their overall economic strategy, but up until last night they were still maintaining their determination to stick with the policy, despite that by then it had become extremely clear how damaging it was for the Tories.
What appears to have happened is the cold stark realisation that they wouldn't be having the numbers on their side when the division bell was rung.
The next battles they face with Tory rebels in marginals and leafy green constituencies will be over bankers bonuses and the Green Belt.
People are so bloody thick – talking about the ‘taxpayer cost’ to the BoE for 65billion. Jesus Christ. It was a swap of reserves for gilts. No net cost.
The 'cost' is £65bn moved from one account to another, but it can't be moved again - so presumably there is a 'cost'.
Ok I know this has had serious consequences for many folk but by heck its hilarious. I don't think I have ever seen a political farce like this.
Look how he is wearing his watch. And this man is trusted to run the economy
Clearly a wrong-un
Saying it as it is…
https://twitter.com/nicolasturgeon/status/1576829588331560960?s=21
Look how he is wearing his watch.
I'm more worried that he hasn't worked out what the arms on his glasses are for.
The ‘cost’ is £65bn moved from one account to another, but it can’t be moved again – so presumably there is
No. New money creation.
The BoE doesn't need to do cost. No tax-payer money involved.
They can unwind by selling the gilts back. Which they were claiming they were going to do shortly before all this kicked off.
Reading a report in the FT that doesn’t seem to be the reason at all. Rather than a “change of mind” and the realisation that the policy was politically indefensible and damaging it was in fact that the policy would be impossible to implement in a real and practical way.
They wouldn't be ignoring the polling would they?
FT can wrap it up however it wants.
It costs a lot if you wanted to move your pension that week. Real money and it's cost some bloke a champagne lunch.
The BoE doesn’t need to do cost.
Get another record. This one is scratched. There is a real cost to the UK of bailouts like this. A cost to us.
Question is, what else does she have to try and fix things?
It costs a lot if you wanted to move your pension that week. Real money and it’s cost some bloke a champagne lunch
That's because pensions shouldn't be perhaps tied to the market. And we're all at the mercy of the 'market' that is the economy we've got - on a superficial level.
And as I've been saying for ages the £/$ had been on a trajectory downwards for ages - this was a few days blip on that. The news just highlighted it for a day. If you watch assets on a micro level they shoot up and down quite a lot.
You can argue forever and a day about market place but we do have the capacity for the state/BoE to do whatever the government wants it to. Hence they stepped in here, and in the pandemic and the last crash.
Being put in a secure home and ignored.
Is bedlem still open I here a few political professionals have been sent there before
Get another record. This one is scratched. There is a real cost to the UK of bailouts like this. A cost to us
I'm talking funding. You're undermining the way things work with this sort of establishment language.
I've had enough of people talking like this. You don't like what's being said then ignore it.
Just simply not necessary.
(And yes there is a greater cost to society when things screw up but you could spend a bit of time looking at the numbers yourself. It's not my fault the BoE produced 65 billion out of thin air. That's what happened. And everyone thinks the tax payer is paying. I'm going to correct that every time.)
Question is, what else does she have to try and fix things?
That is the question.
Probably not much. Hope that inflation corrects itself and a recession doesn't appear?
@rone I believe the pension fund thing is being looked at or was it's a stack of cards waiting to fall.
Could be worse could be credit Swiss *
Just to emphasise the lack of mandate that the fiscal event has and why not calling a general election should be a stick used by opposition parties to constantly beat the new government with - the Truss/Kwarteng/Philp government today:
Green planning laws will be ripped up by Liz Truss in this week’s fiscal event in a move that could see tens of thousands of new homes built on protected land.
Chris Philp of the mad trio last general election:
https://www.chrisphilp.com/labour-plan-to-build-on-greenbelt/
These measures are completely unnecessary to meet housing demand (which can be met through development on brownfield and sites in Croydon town centre).
The coming General Election is a chance to send a message to Labour that this kind of vandalism of our area is completely unacceptable – by voting against them.
@pk13 - I don't know. Pensions are bit confusing to me but I know enough to know they're linked incorrectly to a market place that works against most people.
FT can wrap it up however it wants.
Why would the FT want to "wrap it up"? They are totally opposed to the economic policies of Kwarteng/Truss
Why would the FT want to “wrap it up”? They are totally opposed to the economic policies of Kwarteng/Truss
Well I can't read the article for obvious reasons but you suggested it was nothing to do with polling.
I feel it is.
Like we've said Tory tax cutting would normally be welcome to the establishment.
And RNP – dead right Jake Berry is an odious turd who would be pelted with vegetables if he ever showed his fat face in Rawtenstall. Which he wouldn’t
Or Darwen.
Thanks - that's just a report of what happened. Not sure what that adds .
put https://12ft.io/ in front of pretty much any paywalled article and you will get it.
Well I can’t read the article for obvious reasons but you suggested it was nothing to do with polling.
I feel it is.
What do you mean you can't read the article for obvious reasons? No FT, no comment mate.
My quote points out that Truss didn't have the numbers on her side because of the scale of the growing rebellion in the House of Commons, and that's the reason the policy was abandoned.
Obviously opinion polls had an indirect effect as they put pressure on Tory rebels but there is no evidence that polls had a direct effect on Truss or Kwarteng - they were still not backing down last night 10 days after the mini budget even though it was clear how unpopular it was.
What appears to have changed their minds was developments such as Gove's intervention and simple arithmetic suggesting that the numbers weren't there to get the policy through the House of Commons.
You are actually doing them a favour by backing their claim that they "listened". It's not a favour which they deserve imo. If they had felt that the policy would have easily gone through the Commons with a huge Tory majority I'm sure they would have stuck with it.
Agreed Ernie. This policy was nuked by Tory MPs. Of course they have an eye on the optics of tax cuts for the rich, planned to land straight after a hard winter for everyone else. Their constituents aren't all on £150K+.
You are actually doing them a favour by backing their claim that they “listened”. It’s not a favour which they deserve imo. If they had left that the policy would have easily gone through the Commons with a huge Tory majority I’m sure they would have stuck with it.
I'm not doing them a favour. That's silly. A few pages ago you were agreeing that Tories function on tax cuts!
I don't know our opinions are that different - the've performed (to me) an expected U-turn because they know what they were about to do was deeply unpopular. It takes inertia to get to that point - and may I point out that even when the pound tanked they didn't whisper about U-Turns then.
What do you mean you can’t read the article for obvious reasons? No FT, no comment mate.
I don't do FT. Why would I! I've got enough to read.
And yeah they did listen for their survival - 'course they did.
Pensions were traditionally linked to gilts rather than the stock market for low risk and predictable returns. However, the low rate of return on gilts led to a hedging into stocks and shares to maintain returns. This strategy was termed Liability Driven Investment (LDI). It unwound last week because returns on gilts rose so they become less attractive and prices fell, but pension funds needed to cover their positions in shares (using money they had borrowed) and had to liquidate (sell) their gilts into a falling gilt market spiralling the cost down. The BoE said we'll buy those gilts thereby propping up the price (for a couple of weeks anyway).
If you are in a company pension scheme, you will see different management options depending on time to retirement. The above is why. Long time to retire? Shares will offer growth. Retiring in five years? Switch to gilts and cash.
Money from risk-on assets is flying towards the dollar. There is very little that's safe currently.
You seen gold BTW?
I can't see what's going to rescue the macro-picture across the board apart from a serious time-frame of doom and gloom.
I don’t do FT. Why would I!
I've already told you.......No FT. No Comment.
The FT is by far the least biased newspaper. Obviously it isn't totally unbiased but I don't know of any national newspaper less biased.
Okay Lynch.
What's the latest and best way to post an image on here?
Isn't the cost going to be higher mortgage repayments, higher rents and a justification for austerity and flogging the NHS?
So they are announcing massive public services cuts.
Isn’t the cost going to be higher mortgage repayments, higher rents and a justification for austerity and flogging the NHS?
Yep.
High inflation or high interest rates according to 'them'.
One metric is going to get it - one way or another you can't hide the mess that is neolibralism. Whether it's high-inflation / equities / £/$ - something or all of the above is going to tank.
So the plan was deficit spending for tax cuts for the rich or simply just cuts for the rest of us.
It really isn't complex - spend new money on new things for the benefit of greater society. Generate actual growth and get some money pumping around the system.
What’s the latest and best way to post an image on here?
There are two subjects which for me appear to be too complicated for my lazy mind to even attempt to understand, one is economics and the other is posting images on stw.
If you feel that you've cracked economics good luck with posting images.
No cracking either is there?
TBH if you’ve cracked economics you’ll be posting from your super yacht with someone doing the image posting 🙂
I was always in awe of the money people I’d read about in ‘liars poker’ as a kid then got a revised edition years later that showed that they were just insider trading and effectively con artists.
Just because big amounts of money was flying around didn’t mean they weren’t winging it.
Assuming your pics are on Google, use this site to post them on here. Free and no need to sign up.
Or use Postimage web site for any pic on your PC/ mobile on Google or not.
I was always in awe of the money people I’d read about in ‘liars poker’ as a kid then got a revised edition years later that showed that they were just insider trading and effectively con artists.
Like nearly everything in the economic universe - it's back to front - the state creates the money they manipulate to farm off for themselves - rather than them generating money for our exchequer.
I mean - I say this a lot (sorry Kelvin) - but they didn't bail themselves out did they in 2008?
Assuming your pics are on Google, use this site to post them on here. Free and no need to sign up.
Ah great thanks - google didn't used to work so that's handy.
I had my man do it, now he's finished the pool cleaning.
DXY - Dollar Strength over 10 years.
Yes! it worked - thanks.
I had my man do it, now he’s finished the pool cleaning.
tell your man to plot gold against the dollar for a medium time period!
If only there was a way to compare sterling to other currencies, not just usd.
Just put GBP vs xxx into google and it'll show you
Paul Krugman has a skill which imo is vital to all economists, which is to not simply be able to understand their subject but to be also able to explain it to a non-economist so that they too can understand.
It is surprising how many economists lack this skill which frankly means that they are shite economists - ultimately it is the job of an economist to explain their theories to those who aren't experts and pay for their expertise.
In the article below Krugman explains how trussonomics won't work. The graphics are missing but the fuller article is behind a paywall, and they refer to the Reagan-Clinton era anyway which is less interesting than his comments concerning Liz Truss.
https://politpost.com/2022/09/23/wonking-out-the-tax-cut-zombie-attacks-britain/
From the 'Zombie' article, this is key:
As Martin Wolf of The Financial Times points out, since Margaret Thatcher, Britain has been relatively deregulated and low tax compared with its European neighbors. Its relative economic position hasn’t changed much at all.
I appreciate that it has now been retracted, but the basic premise for eliminating the 45% tax rate, in that it disincentives high earners from working in the UK, was never seriously challenged (or was it and I missed it, duh).
Looking at the EU zone, who was he attempting to undercut, the great financial powerhouses of Estonia?
Finland – 56.95%
Denmark – 55.90%
Austria – 55.00%
Sweden – 52.90%
Belgium – 50.00%
Slovenia – 50.00%
Netherlands – 49.50%
Ireland – 48.00%
Portugal – 48.00%
Spain – 47.00%
Luxembourg – 45.78%
France – 45.00%
Germany – 45.00%
Greece – 44.00%
Italy – 43.00%
Cyprus – 35.00%
Malta – 35.00%
Poland – 32.00%
Latvia – 31.00%
Croatia – 30.00%
Slovakia – 25.00%
Czech Republic – 23.00%
Estonia – 20.00%
Lithuania – 20.00%
Hungary – 15.00%
Romania – 10.00%
Bulgaria – 10.00%
this is an interesting read about the £
https://www.poundsterlinglive.com/gbp-live-today/17607-pound-sterling-record-lows-were-tables-turned-in-market-vs-pboc-punch-up/amp
Previous Governor of the BofE writes:
Oooft...
Can’t see the article, however in my opinion whacking up interest rates is the foolish thing. Inflation is mostly to do with external factors that will not be impacted by rates. People still need to eat, heat, travel and pay existing debt down. There is minimal choice. Whacking rates up is going to push more and more families to the wall.
So… I think I’m with the government on cutting taxes, but not for those who are all ready comfortably insulated. For those at the sharp end, and increasingly those in the middle too.
however in my opinion whacking up interest rates is the foolish thing
While I agree that increasing interest rates doesn't deal with consumer-driven inflationary pressures when people are shutting down discretionary spend already due to cost-of-living, if the £ continues to slide against other currencies, that almost immediately adds to supply-side inflation by making the stuff we have to buy from abroad - energy, food etc more expensive because we buy it in foreign currencies.
If there is too big a gap between our base rate and, say, the US federal reserve rate, then it makes the pound weaker and more vulnerable to the kind of shocks we saw last week, because sterling is already not an attractive option, and vulnerable to shorting.
Which is why our new Chancellor should have taken advice telling him to tread carefully in that environment. Instead of sacking the person who delivered it.
Did you read the article I linked above? It says the reason for the pound sliding is not necessarily directly related to the chancellors mini budget
Well, yes, there is long-term structural weakness in the £ and many other currencies, but no-one can claim that last week's sudden movements were not in direct response to his announcements, and it's hard to say what level the pound would have settled at relative to other currencies without the BofE emergency interventions.
Chancellor presumably was given advice about market conditions, and warned about existing volatility. Then went ahead and pulled the pin anyway.
Raising interest rates will curb inflation, due to reduced spending and more saving. What doesn't work is having the Chancellor do the opposite e.g. tax cuts. This is inflationary and has forced the BofE to print money (due to the effect on pensions) thus undermining the whole 'system' You need government policy and BofE action to be complimentary. Really, Kwasi and Andrew Bailey need to collude on this.
It's not as if the tax cuts are helping our energy or food security / availability, either. Ironically, the 45% tax rate may actually reduce the tax revenue generated (although we will never know). But I get that it was the wrong 'message'.
Like I said, i'm keen to see the supply-side reforms. Something like loosening of labour regulations for temporary workers would help on the food availability front.
'Not necessarily directly' could apply to anything, really.
And the 'income tax rate' is a total red herring, here and elsewhere - always has been.
I remember years ago working with a German and a Dane, the German was complaining that nursery fees had gone up because he'd moved from Dusseldorf to Hamburg - from 10DM per week to 50DM per week (basically £3.50 to £16).
The Dane was horrified that anyone paid nursery fees - and then I told them that we paid nearly £75 per week...
Thing is, the Dane's income tax rate was by far the highest, then the Germans and the mine - But, the overall tax take was lower for both of them. They also got considerable tax reductions for kids, mortgages etc.
And not just income tax, there's VAT, car tax, fuel duty, National Insurance and for the current generation student loans. Chatting with our middle lad the other week and he works with a guy who went to Uni - both earn the same but our lad is far better off as he's no Student Loan been deducted.
All tax IMO.
So it was the Queen dying that was behind this mini budget being quite so shit.
In fairness, if I’d had enough coke to have me giggling at a funeral, I’d probably not be doing my best work either.
The man was distraught. Give him a break FFS.
Quick question if anyone dares to attempt to answer it, during those car crash radio interviews that Truss gave she repeatedly claimed that their plan to cap the energy costs would by itself reduce inflation to 5%, now i'm not knowledgeable enough to know if that's true or not, and I certainly wouldn't take her word at face value, is that at all likely? As far as I can see no one has mentioned it on here and I haven't seen any mention of it in the press either.
Yes rising domestic energy prices is currently the main driver of inflation, so freezing prices will affect inflation.
Edit: Sorry I have just realised that you were specifically asking whether it will reduce inflation by 5%, I don't know, but the effect will be significant.
Thanks @ernielynch I suppose the bit that confused me is that the energy companies themselves aren't reducing the prices, the government is just paying (by borrowing) anything to them over the cap (I think that's right) so presumably that just moves the problem to a different pile.
presumably that just moves the problem to a different pile.
Yes but the definition of inflation which the Bank of England uses refers to the Consumer Price Index.
So it is the cost to the consumer that it is the issue here.
Edit: To be fair the energy price increases aren't really inflation, otherwise the Bank of England increasing interest rates would have an effect on domestic energy prices, they can't because with domestic energy prices inflation isn't the problem. They just add to increases in the CPI.
Does that make sense?
Could've made the energy bill help means-tested, or based on Council Tax band. So give more to poorer households and less to richer ones. Might even cost less!
IMO universal support is always much better than means testing. Firstly it makes it far simpler and cheaper to administrate. Secondly it removes the possibility of deserving people falling through the safety net and undeserving benefitting which always occurs with arbitrary cutoffs. Thirdly it doesn't require everyone to be fully aware of their latest up-to-date entitlement to help and support. Fourthly it removes any perceived social stigma with applying for help and support. And finally any anomalies caused by unequal incomes and needs can easily be resolved through personal taxation.
It is for all those reasons that I believe that in a social democracy all welfare support should always be universal.
Could’ve made the energy bill help means-tested, or based on Council Tax band. So give more to poorer households and less to richer ones. Might even cost less!
Or make it a flat rate per person, say £500 for everyone (so £2k for a family of four, making the anticipated £4.5k bills more like the £2.5k it will be).
It's a far more 'conservative' approach too, less intervention, doesn't affect the market, encourages people to spend their £500 on insulation where it will pay back more, etc.
Yes rising domestic energy prices is currently the main driver of inflation, so freezing prices will affect inflation.
