Rolling coverage of the latest economic and financial news, as economists predict that Wednesday’s sell-off has strengthened Reeves’s position
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No 10 defends chancellor after day of bitter recriminations over welfare bill fiasco
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Yesterday: UK bond yields rise sharply amid speculation over future of Rachel Reeves
The jump in UK borrowing costs yesterday will have added to Rachel Reeves’s fiscal problems, unless it reverses.
Mohamed El-Erian, chief economic advisor to insurance giant Allianz, has calculated that Wednesday’s rise in bond yields would add £1.8bn to government spending each year, “if it sticks”.
The minute you put a risk premium in the marketplace, it’s very hard to take out. I suspect that we will see some moderation, but we will not go back to where we were 24 hours ago.
So the area left are the two taxes that the Labour government ruled out in the election, income tax and VAT. They are your major sources of tax revenue.
No one likes them, but in a world like this, they will become better than the alternatives.
“She and I work together, we think together. In the past, there have been examples – I won’t give any specific – of chancellors and prime ministers who weren’t in lockstep. We’re in lockstep.”
Continue reading…Rolling coverage of the latest economic and financial news, as economists predict that Wednesday’s sell-off has strengthened Reeves’s positionNo 10 defends chancellor after day of bitter recriminations over welfare bill fiascoYesterday: UK bond yields rise sharply amid speculation over future of Rachel ReevesThe jump in UK borrowing costs yesterday will have added to Rachel Reeves’s fiscal problems, unless it reverses.Mohamed El-Erian, chief economic advisor to insurance giant Allianz, has calculated that Wednesday’s rise in bond yields would add £1.8bn to government spending each year, “if it sticks”.The minute you put a risk premium in the marketplace, it’s very hard to take out. I suspect that we will see some moderation, but we will not go back to where we were 24 hours ago.So the area left are the two taxes that the Labour government ruled out in the election, income tax and VAT. They are your major sources of tax revenue.No one likes them, but in a world like this, they will become better than the alternatives.“She and I work together, we think together. In the past, there have been examples – I won’t give any specific – of chancellors and prime ministers who weren’t in lockstep. We’re in lockstep.” Continue reading…
