Hunt: ‘We remain fully committed’ to COP26 climate pact
Hunt guarantees that the federal government will retain climate commitments.
“With the existential vulnerability we face, now can be the incorrect time to step back from our international climate responsibilities, so I also confirm that despite the economic pressures, we remain fully committed to the historic Glasgow climate pact agreed at COP 26, including a 68% reduction in our own emissions by 2030,” he says.
Hunt publicizes ‘difficult decisions on public funds’
Hunt publicizes that public spending will grow below the speed of GDP growth and says government departments “can have to make efficiencies to take care of inflationary pressures in the subsequent two years.”
The Department for Work and Pensions will undertake a “thorough review” of the U.K.’s declining workforce participation rate.
The federal government will ask over 600,000 more people receiving Universal Credit to fulfill with a “work coach” with a view to increase hours and earnings. One other £280 million will likely be invested to “crack down on profit fraud and errors” over the subsequent two years.
Hunt says it’s unattainable to sustain the country’s 0.7% goal for overseas aid spending until the “fiscal situation allows.”
Plans assume that foreign aid spending will remain around 0.5% for the forecast period.
Energy firms to face expanded windfall taxes
Hunt confirmed that from Jan. 1 until March 2028, the energy profits levy will increase from 25% to 35%, while a latest temporary 45% tax will likely be levied on electricity generators, raising £14 billion for the Treasury next 12 months.
Hunt publicizes reduction to top rate income tax threshold
The chancellor announced that the edge at which the best earners will begin paying the 45p top rate of income tax will likely be reduced from £150,000 every year to £125,140.
“Those earning £150,000 or more pays just over £1,200 more in tax every 12 months,” Hunt says.
The measures mean tens of millions of individuals in Britain will likely be paying more in tax.
The income tax personal allowance higher rate threshold, primary national insurance thresholds and inheritance tax thresholds will likely be frozen for an additional two years to April 2028.
Dividend allowance will likely be cut from £2,000 to £1,000 next 12 months after which to £500 from April 2024. The annual exemption amount for capital gains tax will likely be cut from £12,300 to £6,000 next 12 months and £3,000 from April 2024.
Freezing these thresholds signifies that tax bands will remain unchanged at the same time as wages rise, meaning the proportion of earnings that folks pay tax on will rise and more people will fall into higher tax brackets.
OBR forecasts UK inflation rate of 9.1% in 2022 and confirms recession
Hunt says the independent Office for Budget Responsibility projects that U.K. inflation will average 9.1% this 12 months and seven.4% this 12 months, and that the economy is now in recession.
Gross domestic product is forecast to grow by 4.2% in 2022, before falling 1.4% in 2023, then rising by 1.3%, 2.6% and a pair of.7% in the next three years.
Unemployment is predicted to rise from 3.6% today to 4.9% in 2024, before falling to 4.1%.
Hunt says government plan will prioritize ‘stability, growth and public services’
Finance Minister Jeremy Hunt vows that the federal government plan will prioritize “stability, growth and public services.”
UK fiscal plan has large margin for error on OBR forecasts, says Liberal Democrat MP
Sarah Olney, Liberal Democrat MP for Richmond Park, says the U.K.’s fiscal statement, unlike the chaotic mini-budget, will likely be based on the Office for Budget Responsibility’s economic forecasts. But those estimates remain highly uncertain and leave significant margin for error.
Sterling continues to be volatile, it’s totally much a dollar trade, Barclays managing director says
Sterling is more likely to stay volatile, in keeping with Barclays managing director and head of G10 spot FX Ian Tew, who spoke to CNBC’s “Squawk Box Europe” ahead of the Autumn Budget statement from U.K. Finance Minister Jeremy Hunt.
Poorly targeted spending cuts could drag on credit metrics, rankings agency says
Ken Egan, director of European sovereign credit at Kroll Bond Rating Agency, told CNBC last week that given the sensitivity of the bond market, Hunt’s fiscal announcements would require a “deft and cautious approach.”
“This fiscal tightening through spending or higher taxes will likely hamper growth. It’s harking back to what Thatcher said — ‘yes, the drugs is harsh, however the patient requires it’ — and what I’d be concerned about is the form of spending cuts,” Egan told CNBC via videolink.
“If you happen to goal cuts around areas that typically promote stable or long term growth and productivity reminiscent of infrastructure, education, investment spending, this in time potentially drags on various credit metrics.”
While acknowledging that exact forecasts were difficult at present given the speed of policy change within the U.K., Egan suggested that government borrowing will ultimately increase regardless, at a time when “redemptions are rising sharply and the rollover costs are quite expensive.”
– Elliot Smith
Hunt and Sunak ‘risk playing it too secure,’ analyst says
Because the Bank of England has ramped up rates of interest to fight inflation, which got here in at a 41-year high of 11.1% in October, the prices of the U.K.’s debt repayments have soared, with £22 billion ($26.2 billion) more paid in interest this 12 months than last.
“That is why help for the poorest households is predicted to be the centrepiece for this budget, through an increase in advantages and pensions in keeping with double digit inflation, which can mount to a giant bill for the Treasury,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“To try to re-coup that, stealth taxes on higher income earners are rumoured to be brought in through a freezing of tax thresholds.”
The federal government’s scheme to assist the country’s poorest households with energy bill increases is predicted to be continued at a lower and more targeted rate from April, and might be financed through a windfall tax on electricity generating firms, together with North Sea oil and gas producers.
“By taking all these steps the federal government hopes to fill within the fiscal ‘black hole’ which has emerged because successive Conservative ministers have said they need to see net debt falling by 2025-2026,” Streeter said.
“Sunak and Hunt are attempting to bop to a tune they think the bond markets are playing, but by keeping so strictly to their perceived rules, they risk playing it too secure, and pushing the prospects of economic recovery far into the gap.”
– Elliot Smith
GAM: An ‘unwelcome return to the austerity economics of 2010’
The U.K.’s Autumn Statement will mark an “unwelcome return to the austerity economics of 2010,” in keeping with Julian Howard, lead investment director of multi asset solutions at GAM Investments.
“The primary tenet of latest Chancellor Jeremy Hunt appears to be that the books absolutely should be balanced and the £40 billion fiscal gap eliminated, no matter any long-term assessment of the long run cost of borrowing or growth rates,” Howard said in an email Wednesday.
“This can mean a mix of vicious spending cuts, to already heavily degraded public services, and tax rises imposed on consumers and businesses, staring down the barrel of the next inflation and rates-induced recession.”
Howard suggested that pro-growth policies are more likely to be thin on the bottom as Hunt completes the near wholesale rejection of former Prime Minister Liz Truss’ economic agenda. Yet he said there may be a “very persuasive argument” for growth being key to the U.K.’s ability to service its long-term debts.
“Ex-Monetary Policy Committee member Michael Saunders’ recent assessment of the damage done to said growth prospects by Brexit only highlights the wasted opportunity that this Budget represents,” Howard said.
“By way of market outcomes, gilt yields could fall further as any residual risk premium on holding U.K. debt dissipates. This mustn’t be taken as vindication of a return to fiscal rectitude since gilt yields also incorporate a prediction concerning the future trajectory of growth.”
He added that the bond market’s judgment is more likely to remain “deeply unfavorable,” while the country’s growth prospects and currency are set to dwindle over the medium term.
“Based on what we expect to listen to from the Chancellor, nothing within the upcoming Autumn Statement will remotely qualify as having the ability to divert the country from this gloomy path,” Howard said.
– Elliot Smith
Barclays: Government’s commitment to fiscal sustainability unsure if measures ‘backloaded’
Barclays expects an austere budget from Finance Minister Jeremy Hunt, but suggested the federal government could face questions over its commitment to fiscal sustainability if a considerable portion of the brand new measures are “backloaded.”
“To take care of credibility with investors, in our view, the federal government will give attention to the scale of fiscal tightening. Nevertheless, the composition and timing of fiscal tightening will matter too,” said Barclays Chief European Economist Silvia Ardagna.
“Near term, we expect the most important fraction of fiscal adjustment to be achieved via tax increases. We expect spending cuts will likely be mainly budgeted for after the 2024 general election. As such, the delivery of those spending cuts stays uncertain.”
– Elliot Smith
Barclays Private Bank sees £30 billion tax rises and public spending cuts
Barclays Private Bank said Wednesday that it’s taking a “pessimistic view” of the U.K.’s growth prospects, citing “wilting economic data, political turmoil and policy confusion.”
“The federal government’s mini-budget in September sent a shockwave through U.K. assets, as investors questioned the sustainability of the nation’s funds,” said Henk Potts, EMEA market strategist at Barclays Private Bank.
“Additional pressure on the U.K.’s fiscal position has been created by the deteriorating growth profile, rapid rise in rates of interest, and better cost of servicing inflation-linked debt.”
To ensure that the federal government to revive fiscal sustainability and return the deficit to between 1% and a pair of% of GDP, Potts estimated that additional tax increases or public spending cuts totaling around £30 billion ($35.6 billion) will likely be required.
“Given the multitude of pressures on the UK economy, we predict that a deeper and more prolonged recession is inevitable,” Potts added.
“We expect that the economy will register five consecutive quarters of negative growth, starting within the third quarter of 2022.”
– Elliot Smith
‘All the things that might be taxed will likely be taxed,’ fund manager says
Asked concerning the prospect of further windfall taxes on energy firms amid soaring commodity prices, Daniel Avigad, partner and portfolio manager at Lansdowne Partners, told CNBC on Wednesday that “every little thing that might be taxed, will likely be taxed.”
“That applies not simply to oil and gas, but to all elements of the economy, on condition that governments have major deficits to fund by way of primary resources and self-sufficiency, and as a consequence will try to boost capital from whatever sources they’ll find,” Avigad said.
UK inflation hits 41-year high of 11.1% as food and energy prices proceed to soar
U.K. inflation jumped to a 41-year high of 11.1% in October, exceeding expectations as food, transport and energy prices continued to squeeze households and businesses.
“Indicative modelled consumer price inflation estimates suggest that the CPI rate would have last been higher in October 1981, where the estimate for the annual inflation rate was 11.2%,” the Office for National Statistics said.
On a monthly basis, the CPI rose 2% in October, matching the annual CPI inflation rate between July 2020 and 2021.
Read the total story here.
– Elliot Smith
