Unsurprisingly, the front-pages this morning are all about Rachel Reeves’ first budget.
Business and the wealthy are to bear the brunt of the biggest budget tax hike in decades, says the FT, which also notes the massive expansion of the state after Reeves announced a sharp increase in borrowing to fund an extra £100bn of capital spending over the parliament.
The decision to hike employers’ national insurance is proving controversial. Writing in The Times, Paul Johnson, director of the Institute for Fiscal Studies, says among the big three taxes, it is “definitely not the best place to go.”
“Ironically, it is likely to impinge more disproportionately on workers and their employers than would an increase in, say, the basic and higher rate of income tax. Most of its effect will be seen in lower wages.”
Hopefully it’s a one-off though, with Reeves seeking to reassure the country that “this is not the sort of Budget we would want to repeat,” in a sit down with the BBC.
After Labour’s cuts on fuel and draught beer duty, drivers and ‘pub-going beer drinkers’ are among the winners, according The Sun. The losers include businesses, other drinkers, and smokers who face a tax rise on tobacco of 2% above inflation, and 10% above inflation for hand-rolling tobacco.
Former chancellor Kwasi Kwarteng says it was inevitable that increases in the tax burden would fall principally on businesses and capital, although he argues the government will now survive or fall on this question of growth (the i).
On growth, there are big question marks after the OBR forecast the steep increases in public spending will create an initial “sugar rush” of growth, but will ultimately leave GDP largely unchanged in five years, the FT reports.
Overnight analysis by the Resolution Foundation think tank found the UK is on course for the lowest increase in living standards under any Labour PM since this data began to be collected in 1955.
Sky News covered the reactions in the market, where the pound initially fell against the dollar before regaining its losses by the end of Reeves’ address.
The FTSE 100 was down by around 0.7% at the end of day, while the more UK-focused FTSE 250 was up 1%.
Pub stocks saw particular gains with Wetherspoon, Marston’s, and Mitchells & Butlers up between 3.7% and 7.2% after the government reduced duty on draught beer.
The UK’s gilt yields, which reflect confidence in the UK’s economic outlook, fell lower during the speech implying investors felt positive about the budget.
But by mid-afternoon, they shot up unexpectedly. Some analysts attributed this to the market taking time to digest the budget before reacting, while others pointed to an almost identical spike in US bond yields on Wednesday afternoon as evidence that the shift was not triggered solely by the budget.
The newspaper leader columns divide as you’d expect. The Telegraph says it will “push up inflation, keep interest rates and mortgages higher”, while The Mirror called it “bold, confident”.
The Economist said Reeves “has taken steps to fix Britain’s crumbling public services, chronic underinvestment and fairy-tale fiscal forecasts. But she has lost her best chance at reform.”
Martin Wolf in the FT said “this looks a decidedly “Old Labour” government. That can be defended as what the public chose in the election. But voters also hoped for faster economic growth and better public services”.
Away from Westminster
Kraft Heinz has tempered its annual forecasts for organic sales and profit as repeated price hikes hurt demand for the packaged food giant’s branded products such as Lunchables meal kits. Shares fell more than 3% in early trading yesterday as it posted a bigger-than-expected drop in revenue for the third quarter (Reuters).
Starbucks is turning to ceramic mugs, the return of cups labelled by Sharpie pen, and a menu price freeze, as its new chief executive attempts to stem a sharp decline in customer traffic (FT).
Subway was hit with a class-action lawsuit on Monday that claims the chain’s advertisements “materially overstate” the amount of meat and cheese in its sandwiches (The Guardian).
The European Chemicals Agency has found almost 300 cosmetic products available on the European market contain chemicals that are hazardous to health or harmful to the environment (Der Spiegel).
No comments yet