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Chancellor Kwasi Kwarteng has announced the Government’s growth plan and vowed to break a ‘cycle of stagnation.’ The FTSE 100 closed down 2% or 140.92 points at 7,018.60 and the pound fell to $1.09 against the dollar.
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On this week’s podcast, Georgie Frost, Lee Boyce and Simon Lambert discuss what the going for growth mini-Budget means for people, how much they may save in tax, and whether it will work or cause the UK economy even more problems down the line.
> This is Money podcast: What does the tax-cutting mini-Budget mean for you?
Income tax cuts come with ‘a sting in the tail’ for pension savers who will see Government top-ups to their contributions reduced, say finance experts.
The reduction in the basic rate from 20 per cent to 19 per cent, and the abolition of the 45 per cent top rate, will benefit taxpayers in terms of take home pay but have a knock-on effect for pensions.
Just before close, the FTSE 100 was down 1.99% to 7,017.13.
Meanwhile, the FTSE 250 was 1.87% lower at 17,988.80.
Moonpig and Harbour Energy are the top fallers on the FTSE 350 so far today.
Investors have sharpened bets against sterling, which is now at $1.09
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown:
‘Kwasi Kwarteng’s fireworks budget has not been able to stave off a fresh slide in equity prices with the FTSE 100 dropping back below 7,000 earlier for the first time since March, soon after the invasion of Ukraine. By throwing Rishi Sunak’s tax raising plans on a bonfire, the government is taking a big gamble that growth will be ignited, to help the economy grow.
‘But confidence that these unfunded tax cuts are a coherent policy for today’s inflation laden times is going up in smoke, with the pound sliding to fresh 37-year lows against the dollar at $1.10 and government borrowing costs escalating. The yield on 10-year gilts rocketed to hit 3.7%, surging from 3.2% on Tuesday as investors demanded more return for the greater risk they were taking by buying government debt.
‘Investors are betting that the Bank of England will dig in its heels further in its economic tug of war with the government and will go hard and fast with rate rises at the next two meetings. The markets are now expecting that the benchmark UK interest rate could jump to 5% by next summer, up from the higher predictions of 4.75% detailed by the Bank of England yesterday.
‘The FTSE 100 has also been sideswiped by a deteriorating outlook for the global economy as central banks stand ready to raise interest rates even more sharply. Oil prices have tumbled with Brent falling to $86 a barrel, amid expectations of falling demand, as growth slows around the world. This has pushed down Shell and BP by around 4%. This will be welcome news for motorists particularly given that the government did not move on fuel duty. But energy prices are still set to stay volatile given the jitters surrounding developments in Ukraine.’
The pound has broken below the $1.10 barrier to trade at $1.0995 – a new 37-year low.
Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, comments on the stamp duty changes announces by Kwasi Kwarteng today:
The stamp duty cut will ease some of the pressure on buyers right now, and will be a nice bonus for people on the verge of completing, who will have accidentally saved thousands of pounds in tax. However, over the medium term it could do more harm than good.
We can learn something from when stamp duty relief was introduced for first time buyers: it cut the cost of buying by up to 0,5 percentage points, but increased prices by up to 0.7 percentage points – wiping out any cost saving for buyers.
Higher prices coupled with higher mortgage rates would push properties further out of reach for millions of people, which could in itself end up scuppering sales. The property market is a delicate beast, and tinkering with tax incentives always risks producing a result you weren’t fully expecting.
Quentin Fitzsimmons, portfolio manager of the T. Rowe Price Global Aggregate Bond strategy:
‘The government’s strategy is to go for broke – with the gilt market and sterling the easiest casualties to take in order to achieve this goal. The true cost of this massive borrow-to-spend binge is likely be high. Possibly very high.
‘Successive UK governments dragged the gilt market into a modern world of institutional transparency, reinforced by the fashionable orthodoxy of inflation targeting and an independent central bank. These gains, valued by investors, have been rapidly eroded. As the old saying goes, ‘it takes forever to gain credibility, which can also be lost in an instant’.
‘For all the excitement of a dash for growth, the UK economy has a lamentable capacity to hang onto such engineered gains. Sterling and the gilt market have very long memories, including a latent form of post-traumatic stress, which may have been triggered.’
Chancellor Kwasi Kwarteng today quietly lifted the effective ban on new onshore wind farms as he set up a potential clash with Tory backbenchers.
In his ’emergency Budget’, which Mr Kwarteng dubbed a ‘Growth Plan’, the Chancellor vowed to ‘unlock the potential of onshore wind’.
Today’s measures mean that the richest tenth of households, who were set to lose around £3,500 a year (3%) on average by 2025-26 under Johnson and Sunak’s plans, will now gain around £700 a year (1%) on average.#minibudget pic.twitter.com/GhhYHO7wOi
Family-run businesses have been ‘thrown to the wolves’ by the Chancellor’s ‘mini-budget’ despite Kwasi Kwarteng unveiling the biggest package of tax cuts in 50 years, it has been claimed.
Mr Kwarteng declared his plans ‘for growth’ as a ‘new era’ for Britain as he unveiled cuts to income tax and stamp duty and a scrapping of a planned rises in business taxes.
The Chancellor handed a boost to drinkers today by announcing the planned duty rises on beer, wine and spirits would be cancelled as part of a budget packed with £45billion worth of tax cuts.
The Treasury claimed the freeze would save £600million and be equivalent to 7p on a pint of beer, 4p on a pint of cider, 38p on a bottle of wine and £1.35 on a bottle of spirits.
London-listed stocks have continued their decline in afternoon trading in what looks to be a bloodbath of a session for UK assets.
The FTSE 100 is down 2.5 per cent crashing below the 7,000 mark, while the FTSE 250 has fallen 2.2 per cent.
Sterling has fallen 1.94 per cent to $1.1044 while gilt yields have sharply risen.
Dr Alla Koblyakova, an expert in mortgage finance at Nottingham Trent University: ‘In the short term, the Government’s cut in stamp duty will undoubtedly support the housing market by ensuring it is more active and, importantly, liquid.
‘The number of transactions will increase, which would be good for the sector and the British economy overall.
‘Even homeowners who are not moving house will benefit, as it will protect the value of their homes.
‘A possible downside, though, which needs consideration by the Government, is that it could cause regional deviations in the housing market and increase the risk of wealthier areas becoming more unaffordable for people on modest incomes.’
UK government bonds are in freefall following Chancellor Kwasi Kwarteng’s mini budget, with sky high spending pledges and sweeping tax cuts spooking investors.
Five-year gilts are on course for a record one-day fall, with yields jumping 50 basis points, while two-year gilts look set to see their worst day of trading since 2009.
The mini-budget, which promised to bring an end to a ‘vicious cycle of stagnations’, also piled further pressure on sterling, with the pound falling to within touching distance of $1.10.
London-listed stocks, which had already started the day badly, fell further and the FTSE 100 and FTSE 250 were trading 1.5 and 1.2 per cent lower by late morning.
To encourage investment into innovative – and higher risk – UK businesses.
Someone earning a £500,000 salary set for £23,592.88 boost, according to figures from wealth management firm Quilter.
There wasn’t a glossy photoshoot, a favourite of former Chancellor Rishi Sunak – but there is a 2 min video.
Economic growth isn't some academic term with no connection to the real world – it means more jobs, higher pay and more money for the public services we all use.
Hear more from Chancellor @KwasiKwarteng as he sets out this government's plan for growth ? pic.twitter.com/ATysy4Qo5g
Dr Phil James, chief executive of the Chartered Institute of Environmental Health, said: ‘The Government missed an opportunity to prioritise energy efficiency measures that could have saved millions from suffering fuel poverty this winter.
‘We have made repeated calls to the Government that a targeted roll out of energy efficiency measures would serve the twin purpose of providing support to the most vulnerable households while also supporting the levelling up agenda.
‘A long-term national roll out of energy efficiency measures would also have supported the UK’s Net Zero ambitions as well so we are disappointed not to see any additional energy efficiency measures included in this announcement.
‘We would urge the Government to work to introduce such measures as a matter of urgency to support those most in need with their energy bills, meet the UK’s climate objectives, while levelling up the country.’
Following the news that IR35 reforms from 2017 and 2021 are set to be repealed, John Chaplin, employment tax partner at BDO says: ‘The Chancellor’s commitment to simplification is certainly likely to be welcomed by individuals and businesses alike.
‘The current IR35 rules were however implemented to tackle non-compliance with the old rules. If the clock is turned back, will we simply have a return to non-compliance?
‘While compliant businesses and contractors are in a healthy position, today’s announcement could help open the door to those wishing to promote tax avoidance.’
The Government is reversing the 1.25 percentage point increase in dividend tax rates applying UK-wide from 6 April 2023, according to the growth plan document.
Alongside the reversal of the Health and Social Care Levy, the ordinary and upper rates of dividend tax will be reduced to 2021-22 levels of 7.5% and 32.5% respectively.
Of course, he started his own community bank – the Bank of Dave and is the This is Money business doctor.
He told us: ‘I’m incredibly concerned about banker’s bonuses being uncapped, primarily for what happened in 2008, when the banks needed bailing out by the taxpayer to the cost of tens of billions of pounds through pure greed.
‘Also as the DWP cuts the benefit cap that deprives the poor of £65 a week as inflation continues to skyrocket. It feels like we are taking from the poor and giving to the rich.
‘We need more community banks run by the community to benefit the community rather than the bonus culture.
‘We also need to stop casino banking and ensure all savers’ monies are ring-fenced. I do not have a problem with someone working hard and earning a lot of money.
‘However, I have a problem when they come back and need bailing out by the taxpayer. Interest rates for savers are terrible. Banks need to go back to doing what they were built for, which is giving a decent rate of interest to hard-working savers and pensioners, and then lending that money to people and businesses who need it.
‘Then the profit was used to pay the bills, repay shareholders, and increase the service to the customer.
‘We appear to be doing the opposite, as banks close every high street. We need some good old-fashioned honesty, ethics and morals put back into banking.
‘Also, we need the ability to claw back any bonuses from investments like derivatives, credit default swaps, LIBOR rigging, or mortgage scandals that go wrong now or in the future. Banks that are too big to fail are now, in my view, too big to exist.
‘I think the notion of bankers wanting to pay more tax in this country is ludicrous, as they are worldwide professional investors and, in doing so, are fully aware of global tax havens.’
Rob Morgan, chief investment analyst at Charles Stanley says: ‘There is a startling lack of nuance or targeting in this mini-budget; energy, tax, and investment have been solved with simple sweeping measures.
‘A prime example of this is income tax. A planned 1p income tax cut has been brought forward by a year, to 2023, and the additional rate of income tax of 45% is to be scrapped.
‘Whilst the 1p cut might help some consumers meet the rising costs over the coming months, high earners will feel most benefit. Others will likely feel left out in the cold.’
Analysis on Twitter by the IFS
Today’s statement from @KwasiKwarteng represents the biggest tax cut of any budget since 1972.
“It’s half a century since we’ve seen tax cuts announced on this scale.” – @PJTheEconomist #MiniBudget pic.twitter.com/sHYuxGVWzc
The pound fell around 0.6% to hit $1.117, chalking up another unwanted record stretching back to 1985.
Two year government borrowing gilt rates have risen 30 basis points to 3.9% – was around 3.5% this morning and 3.1% on Tuesday and 1.7% in August.
Nicky Owen, Partner at Crowe UK, Professional Practices, says: ‘Reversal of the 1.25% rise in National Insurance Contributions is happening from 6 November; any reduction in people costs will always be welcomed.
‘With the current shortage of talent that firms are currently experiencing, this reduction is unlikely to be noticed.
‘People costs are rising as firms hike up salaries in a bid to recruit and retain talent and compensate for loss of talent.
‘HR teams are looking for innovative ways in which to recruit and retain people. Firms need to understand the motivators for their people and provide ever more flexible and bespoke packages.’
Investment analyst at Wealth Club Nicholas Hyett: ‘In what is probably the most pro-business budget this century, the Chancellor has acted to support Britain’s ‘unbounded entrepreneurial drive.
‘Confirmation that the VCT and EIS schemes will continue, a long overdue extension to the SEIS scheme and initiatives to unlock money from the UK’s pension schemes all provide fuel to support an entrepreneurial fire that is already burning bright.
‘Small innovative businesses are key to the government’s 2.5% economic growth target, and creating the high value jobs that will drive wealth creation more broadly.
‘There is still plenty of work to do, with the government planning radical supply side reform as well as dramatic changes to the tax system.
‘Those are no easy tasks, but the government clearly recognises the importance of a thriving private sector and the crucial role entrepreneurs play in building a successful economic future.’
Lee Nuttall, head of tax at the law firm Gowling WLG: ‘This will inject some much needed buoyancy into the property market where the number of transactions has decreased significantly since the Covid-19 stamp duty holiday ended.
‘It should stimulate a significant amount of new transactional activity (both for developers and consumers) which is needed to maintain optimal levels of demand and supply and remove a significant obstacle to mobility.
‘It will be interesting to see how the market responds to future development opportunities in light of this concession.’
A stamp duty cut was announced today by Chancellor Kwasi Kwarteng to remove a major hurdle for some home buyers.
The threshold at which stamp duty kicks in will be immediately and permanently doubled from £125,000 to £250,000.
Views from Paul Johnson, director of the Institute of Fiscal Studies:
£45 billion of tax cuts. This is biggest tax cutting event since 1972. Barber's "dash for growth" then ended in disaster. That Budget is now known as the worst of modern times. Genuinely, I hope this one works very much better.
Will Stevens, head of financial planning, Killik & Co, said: ‘Stamp Duty is one of the UK’s least popular taxes but a significant revenue generator for the Treasury.
‘Today’s announcement will be welcomed by millions who feel they have been trapped in their homes by the additional cost of moving that it represents.
‘The Chancellor will hope that by removing this barrier, it will encourage more property transactions, increase affordability for first-time buyers, help those looking to downsize, and encourage more people to move for work.
‘However, the real acid test will be in the impact on property prices as a whole, with supply still very much constrained.’
The statement was a ‘menu without prices,’ Labour shadow chancellor Rachel Reeves said, asking ‘what has the Chancellor got to hide?’
Ms Reeves said: ‘The Chancellor has confirmed that the costs of the energy price cap will be funded by borrowing, leaving the eye-watering windfall profits of the energy giants untaxed.
‘The oil and gas producers will be toasting the Chancellor in the boardrooms as we speak while working people are left to pick up the bill.
‘Borrowing higher than it needs to be, just as interest rates rise. And yet the Chancellor refuses to allow independent economic forecasts to be published, which would show the impact of this borrowing on our public finances and growth, and on inflation.
‘It is a budget without figures, a menu without prices. What has the Chancellor got to hide?’
Views on Twitter from our editor Simon Lambert.
The 45p tax rate above £150,000 is going, but what about Britain's highest tax rate the 60p tax that lands on those whose personal allowance is removed above £100,000. Hard to gain sympathy for them but it's a huge anomaly in our tax system
Below is a brief overview of the key measures announced in the mini-budget:
Corporation Tax
The 19 per cent corporation tax rate had been due to rise to 25 per cent in 2023 but the government decided to scrap those plans.
Banker bonuses cap
Caps on bankers’ bonuses will be scrapped to boost London’s post-Brexit competitiveness against financial capitals like New York and Hong Kong.
National insurance
The Government is scrapping a 1.25 percentage point increase in National Insurance that took effect earlier this year will be reversed from 6 November
Dividend tax
An increase to dividend tax rates which had been brought in alongside the NI hike – to raise contributions from those who are paid through different channels – will be scrapped from April 2023.
The Chancellor has abolished the top rate of income tax for the highest earners.
He argues that tax cuts are ‘central to solving the riddle of growth.’ He scrapped the 45% higher rate of income tax and brought forward the planned cut to the basic rate to 19p in the pound a year early to April.
The Chancellor outlined his desire to make the tax system ‘simpler’ and said he would ‘wind down’ the Office of Tax Simplification.
He said he has mandated his tax officials to focus on simplifying the tax code.
He added the Government will ‘automatically sunset’ EU regulations by December 2023, requiring departments to review, replace or repeal retained EU law in a bid to help businesses.
Mr Kwarteng said the Government would also simplify IR35 rules, noting reforms to off-payroll working have added ‘unnecessary complexity and cost’ for many businesses.
He said: ‘As promised by the Prime Minister, we will repeal the 2017 and 2021 reforms. Of course, we will continue to keep compliance closely under review.’
Planned alcohol duty rises are cancelled.
The Chancellor said: ‘Our drive to modernise also extends to alcohol duties. I have listened to industry concerns about the ongoing reforms. I will therefore introduce an 18-month transitional measure for wine duty.
‘I will also extend draught relief to cover smaller kegs of 20 litres and above, to help smaller breweries. And, at this difficult time, we are not going to let alcohol duty rates rise in line with RPI.
‘So I can announce that the planned increases in the duty rates for beer, for cider, for wine, and for spirits will all be cancelled.’
The Chancellor also said that VAT-free shopping would be introduced for overseas visitors.
No stamp duty on property purchases up to £250,000, up from £125,000.
No stamp duty for first-time buyers up to £425,000. Chancellor Kwasi Kwarteng said he is cutting stamp duty, taking 200,000 people out of paying it altogether.
Effective as of today.
The Chancellor said: ‘Home ownership is the most common route for people to own an asset, giving them a stake in the success of our economy and society.
‘So, to support growth, increase confidence and help families aspiring to own their own home, I can announce that we are cutting stamp duty.
He added: ‘We’re going to increase the value of the property on which first-time buyers can claim relief, from £500,000 to £625,000.’
The Government will spend about £60billion on subsidising gas and electricity bills for the next six months for households and businesses, the Chancellor said.
‘The estimated costs of our energy plans are particularly uncertain given volatile energy prices, but based on recent prices, the total cost of the energy package for the six months from October is expected to be around £60billion.’ he told parliament.
‘We expect the cost to come down as we negotiate new, long term energy contracts with suppliers.’
Planned rise to 25% scrapped. The rate will stay at 19%, the lowest in the G20. This will support business investment and help economic growth, the Government says.
The Chancellor: ‘This will plough almost £19bn a year back into the economy. That’s £19bn for businesses to reinvest, create jobs, raise wages, or pay the dividends that support our pensions.’
The Chancellor says he wants to attract more growth in financial services – not have jobs diverted away to Paris, Frankfurt or New York.
He says the Government will legislate to force unions to put all offers to their members to ensure strikes can only be called once talks have ‘genuinely’ broken down.
‘We must reform the supply side of our economy,’ says Kwarteng as he pledges commitment to forthcoming changes to infrastructure planning rules.
‘We will bring forward a new bill in the coming months,’ he says. ‘We are getting out of the way to get Britain building again.’
He says: ‘The cost of our energy package is particularly uncertain because of volatile prices’
He says: ‘We remain closely coordinated, with the Governor [Andrew Bailey] and myself speaking twice a week’
The downturn in British businesses steepened this month as they battled soaring costs and faltering demand, according to a survey on Friday that hammered home the rising risk of recession.
Released as Chancellor Kwasi Kwarteng is due to deliver the new Government’s mini-budget, the S&P Global/CIPS flash Composite Purchasing Managers’ Index (PMI) fell to 48.4 from 49.6 in August.
It marked the lowest reading since the Covid lockdown of January last year. Economists had forecast a reading of 49.0. Any reading below 50 marks a contraction in activity.
The NI hike will be reversed from November 6, the Chancellor announced yesterday.
Kwasi Kwarteng said the 1.25 percentage point rise for workers and businesses would be axed.
Since April, workers and employers have been paying an extra 1.25p in the pound to help fund the NHS and social care.
In July then-chancellor Rishi Sunak raised the threshold at which NI is paid to offset the increase for many workers.
Mr Kwarteng said the Government would also cancel the health and social care levy, which was due to come into force in April 2023 to replace the national insurance rise.
Reversing the hike will help nearly 28million workers keep more of what they earn. The move will be worth an extra £330 on average in 2023-24. It will also reduce tax for 920,000 businesses by nearly £10,000 on average next year, according to the Treasury.
MPs are expected to vote on repealing the levy when they return from party conferences.
Below, you will find our usual business live coverage – but this blog is now moving to coverage of the mini budget.
Is new Prime Minister Liz Truss about to gamble on biggest tax cuts for 30 YEARS to end UK’s ‘cycle of stagnation’?
Fracking stocks soared after the ban on drilling for shale gas onshore was lifted.
As war in Ukraine rages on, Business Secretary Jacob Rees-Mogg said strengthening energy security is an ‘absolute priority’.
Sterling has fallen to a fresh 37-year low against the dollar ahead of details of a near-£200billion mini budget, which is set to offer tax cuts and energy subsidies.
The pound is down by around 0.6 per cent to as low as $1.1170, its lowest level since 1985. It was steady against the euro at 87.40p.
The very strong dollar has weighed on all major currencies in recent months, although the pound has been very hard hit as Britain grapples with a sluggish economy and sky high inflation.
Chancellor Kwasi Kwarteng hopes his policies will boost growth and break a ‘cycle of stagnation’, though some fear the scale of the spending could put sterling under further pressure.
He is due to make a statement to parliament at 9.30am.
The Chancellor of the Exchequer will today set out plans for a wave of financial deregulation that has been dubbed ‘Big Bang 2.0’.
Kwasi Kwarteng is to reveal some of the reforms alongside a mini-Budget which is expected to represent the biggest set of tax-cutting measures in more than 30 years.
The deregulation plans will herald a wider package of measures to be set out later in the autumn.
London-listed stocks are treading water ahead of the government’s mini-budget, which is expected at 9am today.
Chancellor Kwasi Kwarteng will present parliament with a programme that includes close to £200billio of tax cuts, energy subsidies and planning reforms.
AstraZeneca and GSK are up by about 2 per cent, supporting the FTSE 100, while oil majors are in the red.
Smiths Group is up 2.6 per cent after the industrial technology group provided upbeat full-year 2023 forecast.
Made.com has plunged 36 per cent after the online furniture retailer said it would cut jobs, conduct a strategic review that included a formal sale process and withdraw its full year forecast due to ‘challenging’ market conditions.
Royal Mail has announced plans to rip up a nine-year deal with trade unions as a battle over the future of the business intensified.
The FTSE 250 post carrier said that the agreement that it signed when it was privatised in 2013 was being used by the Communication Workers Union (CWU) to ‘frustrate’ efforts to overhaul the company.
Sub-prime lender Amigo Holdings’ chief executive officer Gary Jennison is stepping down and will be be replaced by current chief financial officer Danny Malone, the firm has said.
Jennison, who was at helm of Amigo for two years, will step down immediately, but continue to stay in the company until the year-end.
Under his tenure, Jennison had to battle insolvency fears after a deluge of customer complaints early last year of the company misselling loans.
Malone, a chartered accountant by profession, was appointed as the interim CFO of Amigo in January after the abrupt departure of finance chief Mike Corcoran.
Kerry Penfold, who is currently the head of finance operations, would takeover as the new CFO, the company said.
The London-listed firm said in June it plans to resume lending after court approved its new business rescue scheme.
Financial markets swung wildly yesterday as central banks around the world struggled to navigate a path through surging inflation and a rampant dollar.
Interest rates have been hiked from London and Washington to Zurich and Stockholm to keep a lid on spiralling prices – with US aggression sending the dollar soaring.
That yesterday prompted a rare intervention in the currency markets by Japan’s central bank – its first since 1998 – when it stepped in to buy up the battered yen.
The pound is under pressure again this morning and is currently down 0.6 per cent to $1.1188
Head of markets at interactive investor Richard Hunter:
‘A week dominated by further aggressive monetary tightening around the world has left equity markets bruised on a deteriorating outlook.
‘Quite apart from the Federal Reserve’s expected 0.75% hike, there were also notable increases in interest rates in the likes of the UK and Switzerland, as the central bank merry-go-round continues to increase the likelihood of recession on a global scale.
‘For the US, growth stocks were again badly hit, especially big tech where future earnings are being jeopardised by higher rates. In addition, pessimistic outlooks from the likes of Ford and FedEx dampened sentiment further.
‘With the third quarter reporting season due to begin in the next few weeks, analysts are taking red pens to earnings estimates as the worsening monetary backdrop begins to truly bite. Earnings growth for the third quarter is already estimated to fall to 5%, and excluding the energy sector, could even drop into negative territory.
‘The Fed’s own forecast is for economic growth of just 0.2% this year and 1.2% for next, alongside which there is a growing realisation that not only do rates have further to rise, but also that they are likely to stay higher for longer until such time as there is significant progress in taming inflation.
‘In the meantime, the major indices continued their downward spiral. In the year to date, the Dow Jones is now behind by 17%, the S&P500 by 21% and the Nasdaq by 29%.
‘Japan’s intervention in the currency markets, in a move designed to prop up the yen, was one which nonetheless failed to lift the gloom in mixed Asian trading overnight. Quite apart from any number of concerns emanating from China, ranging from consumer confidence to an ailing property sector with restrictive lockdowns also in place, the reverberations of central bank actions continue to rattle investors on a global basis and the Asian region is no exception.
‘After another difficult session yesterday, the FTSE100 opened in cautious fashion. The index remains a relatively strong performer in global terms, although the UK’s premier index is now down by 3% in the year to date. The defensive and energy facing nature of the index has provided some support such as with the oil price, for example, which remains up by 16% in the year to date even after its recent slide.
‘Unfortunately, the same cannot be said of the more domestically-focused FTSE250, seen as a rather more accurate barometer for UK trading and prospects. The index has lost 22% so far this year, with the latest 0.5% rate hike from the Bank of England adding to tightening concerns at a time when growth is flat to non-existent.
‘It is expected that the government will unveil a new “fiscal event” later in a mini-budget which should involve tax cuts and increased spending in an attempt to stimulate growth. It remains to be seen how effective such moves might be, given the wider pressures affecting economies globally.’
The Government’s economic plans are not a gamble, levelling-up minister Simon Clarke said ahead of the mini budget which is set out tax cuts designed to spur economic growth that outstrips rising national debt.
‘The evidence of the 1980s and the 1990s is that a dynamic low tax economy is what delivers the best growth rates – this isn’t a gamble, the weight of history and evidence is with us,’ he told the BBC.
Britain’s new Chancellor of the Exchequer, Kwasi Kwarteng, is set to deliver an emergency mini-budget on Friday to give more details about support to help ease the cost-of-living crisis.
Prime Minister Liz Truss took office on 6 September and promised to immediately cut taxes and redouble efforts to promote economic growth.
Kwarteng is expected to deliver a tax-cutting statement, with the National Insurance hike reversed, a corporation tax rise stalled and even rumours of a 1p cut to the basic rate of income tax being pulled foward and now talk of a stamp duty cut on home purchases.
Many will be keen to hear details about the vast cost of the plans, with estimates ranging between £100billion and £200billion.
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