Closing post
Time to wrap up…
Here are today’s main stories so far:
OBR chief Richard Hughes is then questioned by the Lords economic affairs comittee about the most recent figures for the public finances.
Hughes explains that the level of spending headroom in the budget - which has improved based on the likelihood of lower inflation and lower interest rates this year - is still a fraction of the risks inherent in five-year forecasts of government debt.
He said the £13bn available to the chancellor based on the November autumn statement forecast amounts to “a quarter to one eighth of the 2% to 4% of gross domestic product” at risk when there is a shock to the economy that forces an expensive rescue package to be deployed.
Richard Hughes, Chair of @OBR_UK: “Over the very near term the UK Government doesn’t have any difficulty raising the finance it needs to cover the gap between monthly and annual tax and spending. So we don’t have any difficulty accessing debt markets.” #Nationaldebt pic.twitter.com/K312m4JivY
— Lords Economic Affairs Committee (@LordsEconCom) January 23, 2024
Updated
OBR chief scathing about government support for forecasts
Richard Hughes, the head of the Office for Budget Responsibility, is in front of peers on the House of Lords economics affairs committee this afternoon, and is scathing about the support he gets from the government to help him forecast the path of public spending.
He said his forecasts were based on “questionable assumptions” that lead people to call his efforts a work of fiction.
Hughes says:
“Some people call [the projections] a work of fiction, but that is probably being generous when someone has bothered to write a work of fiction and the government hasn’t even bothered to write down what its departmental spending plans are, underpinning the plans for public services”.
Updated
Steelworkers from South Wales who travelled 170 miles from Port Talbot to Westminster have been urging politicians to “stand up and support them” after plans to cut thousands of jobs were unveiled last week.
Electrical engineer Jason Wyatt, 41, said workers were being “held in contempt” by Tata, and warned that Port Talbot will fall “further into destitution” should the industry fail.
Mr Wyatt who has been working in the industry for 25 years and lives in nearby Neath continued:
“Our message to politicians is step up, stand up and put your support behind us, behind the steel industry.
“Steel is critical to the UK first and foremost, but to Port Talbot, it is the biggest employer in the area, and in contributing to the economy it’s massive in South Wales.
“It’s imperative that we maintain operations on one blast furnace during the transition, at least until the electric arc furnace is brought online.”
Over in France, Amazon has been fined €32m what the country’s data watchdog called “excessive” surveillance of its warehouse workers.
The CNIL has imposed the fine on Amazon France Logistique, which manages the e-commerce giant’s warehouses, over the data recorded by handheld scanners used by staff.
The watchdog said the implementation of the system measured interruptions in activity so precisely that it led workers to have to justify each break or interruption, and was in fact illegal.
The CNIL called the system “excessive” and also raised concerns over Amazon keeping the data collected on workers for 31 days.
In the property sector, Nationwide Building Society has joined the ranks of lenders cutting rates.
Nationwide are cutting rates on some products by up to 0.81 percentage points, taking its lowest rate down to 3.84% - its lowest level in eight months.
Henry Jordan, Director of Home at Nationwide Building Society, says:
“As one of the largest lenders in the country, we remain as committed as ever to supporting borrowers. These latest changes mean we are now offering sub-four percent rates for the first time in eight months. These reductions will ensure that we have some of the lowest rates on the market for all types of borrowers whether it be first-time buyers, home movers or those looking to remortgage or switch deal.”
Nationwide finally joining the party with a reduction in selected rates. Better late than never and very welcomed! #mortgages
— Riz Malik (@Riz_1) January 23, 2024
Here are the details, first for new customers moving home:
Five-year fixed rate at 60% LTV with a £1,499 fee is 3.85% (New product)
Three-year fixed rate at 75% LTV with a £999 fee is 4.24% (reduced by 0.75%)
Two-year fixed rate at 85% LTV with a £1,499 fee is 4.49% (New product)
Two-year tracker rate 60% LTV with a £1,499 fee is 5.35% (New product)
For First-time buyers:
Five-year fixed rate at 60% LTV with a £1,499 fee is 3.85% (New product)
Three-year fixed rate at 75% LTV with a £999 fee is 4.34% (reduced by 0.74%)
Two-year fixed rate at 85% LTV with a £1,499 fee is 4.56% (New product)
Two-year tracker rate 60% LTV with a £1,499 fee is 5.50% (New product)
And for those remortgaging:
Five-year fixed rate at 60% LTV with a £999 fee is 3.88% (reduced by 0.80%)
Three-year fixed rate at 75% LTV with a £999 fee is 4.50% (reduced by 0.39%)
Two-year fixed rate at 60% LTV with a £1,499 fee is 4.33% (New product)
Two-year tracker rate 75% LTV with a £1,499 fee is 5.50% (New product)
Hoping to drum up business, Nationwide offers its lowest rates in 8mths deducting 2,3,5 &10yr fixed rate products:
— Emma Fildes (@emmafildes) January 23, 2024
New customers: up to 0.80% off, up to 95% LTV
1st time buyers: up to 0.74% off, up to 95% LTV
Remortgage: up to 0.80% off, up to 90% LTV https://t.co/PqckiesFkm
Other lenders have also been cutting rates in recent weeks, as the financial markets have anticipated Bank of England rate cuts this year….
….but even so, households whose fixed-term deals expire this year could still face a jump in costs.
Updated
.@unitetheunion steelworkers are at Westminster as Parliament debates #PortTalbot job cuts. With the right investment, linked to job guarantees, the UK can become the green capital of steel, creating jobs not losing them. Unite will protect workers by all and every means.#UKSteel pic.twitter.com/MDtErx6QaC
— Sharon Graham (@UniteSharon) January 23, 2024
Shadow secretary for international development Lisa Nandy has joined workers from Tata’s Port Talbot steelworks at Westminster today:
Updated
Hundreds of millions of pounds extra investment needed in Tata steel, says Welsh minister
The Welsh Government economy minister, Vaughan Gething, has said that it does not have the finances to step in to save the 2,800 jobs being cut by Tata, the owner of the Port Talbot steelworks.
The UK government is contributing £500m to a £1.25bn programme to switch to more environmentally-friendly methods at the south Wales plant.
But Gething, a Labour MS (member of the Senedd), said that the Welsh Government could not afford to invest the sums of money needed to prevent the job losses announced last Friday, most of which will fall at Port Talbot.
He said:
“It would require hundreds of millions of pounds of additional investment. I am really clear about this”
“It’s not a marginal investment of one or two million - it’s hundreds of millions.
“I think this comes down to whether the UK Government is prepared to contribute to a future of the UK steel sector.”
Debate over the future of the steelworks reached Westminster today.
As part of an “opposition day”, Labour plans to force a vote on the job cuts.
Shadow business and trade secretary Jonathan Reynolds said.
“This is a bad deal, leaving thousands of workers out of a job, handing over millions of taxpayer’s money and risking the UK’s national security.”
As covered earlier, steelworkers gathered outside Parliament in blustery conditions to protest Tata’s decision and accused Rishi Sunak’s government of “stringing us along”. “We need real investment with job guarantees.” they said.
Steelworkers are outside Parliament ahead of the vote in Parliament.
— Unite For A Workers' Economy (@UniteEconomy) January 23, 2024
We won’t let Tata UK plead poverty while its owner paid out dividends of £1.4bn to shareholders from 2019-2023.@RishiSunak’s government is stringing us along - we need real investment with job guarantees. pic.twitter.com/40b8IBpjj6
Updated
Steel workers gather at parliament ahead of Port Talbot debate
Over at parliament, workers from Tata’s Steel’s Port Talbot steelworks have gathered at College Green, in Westminster, London, to urge MPs to save jobs at the site.
They are displaying a large banner, reading “Support UK Steel”, days after Tata announced up to 2,800 job cuts as it closes two blast furnaces and installs a new, lower-emissions electric arc furnace.
The Labour Party are holding an opposition day motion on the Port Talbot job cuts later today….
Unite steelworkers are at Westminster as Parliament debates Port Talbot job cuts. It's time for @RishiSunak to stand up and be counted and to back UK Steel and UK workers. Unite will be preparing to protect these workers by all and every means. #UKSteel pic.twitter.com/YDAN2J7uRm
— Unite the union: join a union (@unitetheunion) January 23, 2024
Updated
Samer Hasn, market analyst at XS.com, reports that the liquidation of FTX, Sam Bankman-Fried’s failed crypto exchange, is also weighing on the bitcoin market.
Hasn writes:
GBTC [the Grayscale Bitcoin Trust ETF] recorded outflows worth $640m yesterday alone. The reason for this huge amount is that the bankrupt crypto exchange, FTX, continues to liquidate its assets. This ETF, in turn, is also still suffering from the exodus of investors from it, either taking profits after previously buying at a large discount from the net asset value before converting it to an ETF, or moving to other alternatives that are substantially less expensive.
This massive outflow of ETFs came after a week that saw net inflows of about $1.25 billion into all US spot Bitcoin ETFs, in addition to about $11.8 billion in trading volume, according to data provided by CoinShares. But in the end, all crypto investment products globally recorded outflows of about $21 million last week.
Updated
Britain didn’t struggle to find buyers for new long-term government debt today.
An auction of £6bn of a new, 30-year government bond maturing in July 2054 attracted more than £77bn of orders today, one of the bookrunners on the transaction to Reuters, who add:
The new 4.375% 2054 gilt will be priced to have a yield 1.75 basis points above that of the 3.75% October 2053 gilt, representing a price at the top end of initial guidance, as usual at British gilt syndications.
Bitcoin back below $40k - what ETF bounce?
The long-awaited launch of Bitcoin ETF’s this month has not given the crypto currency the boost which some expected.
Bitcoin has fallen back below $40,000 this week, and is down 2% today at $38,955.
⚠️ JUST IN:
— Investing.com (@Investingcom) January 23, 2024
*BITCOIN FALLS BELOW $40,000 TO REACH LOWEST LEVEL SINCE BITCOIN ETF LAUNCH #BTC #BITCOIN pic.twitter.com/0P5oBcT1ta
That means it’s dropped by around 20% from the two-year high of $49,061 set on 11 January, after the US securities regulator approved the first US-listed exchange traded funds (ETF) to track bitcoin.
Some analysts predicted those ETFs would lead to a flood of money into bitcoin, as they made it easier to invest in it.
Simon Peters, crypto analyst at eToro, says some ETF funds are proving popular:
As most in the crypto community predicted, IBIT (iShares Bitcoin Trust from Blackrock) and Fidelity’s FBTC are picking up a lot of the market share, currently accounting for 19% and 20% of the total ETF market share respectively.
GBTC from Grayscale still holds the most bitcoin of any of the spot ETFs with 53% of the market share, however this was all acquired from its days as an investment trust, before it made the conversion to an ETF. GBTC since becoming an ETF has actually seen net outlaws totalling 66,500 BTC (around $2.6billion at current market prices) in all likelihood due to the high fees prompting investors to switch to lower fee alternatives.
Overall, the approval of the bitcoin spot ETFs has proved to be a ‘sell the news’ event, Peters adds.
The WSJ reports that Grayscale, the crypto asset manager that forced U.S. regulators’ hand in approving bitcoin exchange-traded funds, “has lost billions from their launch” as investors cashed out.
And last month, my colleague Nils Pratley did explain that hopes that bitcoin would now surge to the moon might be misplaced, if the necessary demand wasn’t there….
Updated
Ryanair in deal with online travel firm Loveholidays
After a long period of fighting online travel agencies (OTAs), Ryanair has taken the plunge and will start listing its flights with online package-holiday provider Loveholidays.
Ryanair says the real will allow Loveholidays’ customers to buy Ryanair flights, seats, and bags as part of a package deal, at Ryanair’s prices, without being overcharged.
Ryanair’s Dara Brady said:
“We are pleased to announce this first OTA partnership with loveholidays, which will ensure that loveholidays’ customers can now book Ryanair flights, seats, and bags as part of their package with the guarantee that they will not be overcharged for flights, bags, or seats, they will receive flight updates directly from Ryanair and will also have direct access to their booking through their myRyanair account.”
Ryanair has previously launched legal action in the US against Booking.com, and last month it won an injunction prohibiting screenscraper Flightbox from scraping Ryanair’s website for flight details to pass onto OTAs.
Today, Ryanair warns that consumers should watch out for “OTA Pirate scams” such as overcharging, hidden mark-ups, and fake customer contact and payment info.
Ryanair will list its flights with online package-holiday provider Loveholidays, in a first for the Irish budget carrier, which has fought online listings in court https://t.co/tUIKHWWBth
— Bloomberg UK (@BloombergUK) January 23, 2024
The drop in UK government borrowing hasn’t brought much cheers to shares in London.
The UK’s FTSE 100 index is down 0.2%, or 15 points, at 7472 points this morning.
Mining stocks are leading the risers, after Chinese policymakers pledged to take more measures to stabilise the market, which has also lifted the iron ore price. Anglo American are up 3%, followed by Fresnillo (+2%) and Rio Tinto (+1.8%).
At the other end of the table, Rolls-Royce are down 2%, with catering firm Compass losing 1.8% a day after announcing the takeover of rival CH&CO.
Updated
Chapel Down toasts rising sales as English fizz grabs market share from champagne
English sparkling wine maker Chapel Down toasted a 14% rise in sales last year to £15m as the company said homegrown fizz makers had grabbed share from champagne.
The Kent-based vineyard, which listed on the Aim junior stock market last month, said it had increased sales of its core sparkling wine by 25% last year helped by a 12% increase in prices.
Sales of all Chapel Down products in pubs and restaurants rose 26% as the brand extended to new outlets, while exports were up 67% as the brand had a successful first year in UK duty free outlets including Heathrow and Gatwick.
The UK’s biggest sparkling wine maker benefited from a shift towards English fizz, with the category increasing retail sales by 16%, while champagne sales were down 9%, according to the market research firm Nielsen.
Budget tax cuts could put Labour’s £28bn green investment plan "at risk"
A fiscal windfall doesn’t have to be used to cut taxes.
Instead, the chancellor could devote any extra headroom in the March budget to lowering borrowing, or to increased investment.
Indeed, it would make more sense to work out how much investment the country needs, and then balance the burden between borrowing and tax (rather than prioritising cutting tax, and restricting investment to what you can safely borrow).
But politics doesn’t seem to work like that. And if Hunt does blow a likely £20bn fiscal headroom on lowering taxes in March, it could make it harder for the Labour party to push its plan to spend £28bn on green capital investment, should it win the next election.
Senior Labour figures have admitted they will look again at the £28bn-a-year spending promise if Hunt spends any fiscal flex that might be available to an incoming Labour government to cut income tax or national insurance.
Hunt’s allies also expect Labour leader Sir Keir Starmer to use the March 6 Budget as an “excuse” to drop the target, which has been repeatedly watered down in recent months.
“We have got our fiscal rules, they come first,” said a Labour official. “This is a Budget we are not writing.”
New - Labour will look again at its £28bn green plan if @Jeremy_Hunt burns through the fiscal headroom for Budget tax cuts. Team Hunt convinced Starmer will use the Budget as an “excuse” to ditch the plan https://t.co/a6FcqAvkVU
— George Parker (@GeorgeWParker) January 23, 2024
thank god we got rid of that terrible political cycle in government spending thanks to the farsighted decision to establish an office of budget responsibility https://t.co/2gLanJT7vo
— Dan Davies (@dsquareddigest) January 23, 2024
But as we reported on Sunday, the public will be put at risk if Keir Starmer drops his plan to spend £28bn a year on green investment, according to the head of the Fire Brigades Union, who warned that his members were already witnessing the effects of the climate crisis.
Updated
Crest Nicholson has become the latest UK housebuild to warn of persistent challenges in the housing market, as it reported a larger drop in profits than expected.
Crest Nicholson blamed a 28% drop in revenues in the year to 31 October 2023 on “the weakness in the housing market”, as home completions fell to 2,020, down from 2,734 in 2022.
Pre-tax profits tumbled 70%, on an adjusted basis, in 2023 to £41.4m from £137.8m the year before. That’s below analyst forecasts.
CEO Peter Truscott, whose retirement was announced today, says the results in 2023 were disappointing, but adds that recent falls in inflation and mortgage rates will help the housing sector.
Over at Crest Nicholson Preliminary Results for the year ending 31 Oct 2023: show they are reeling from high interest rates, a fire resulting in a legal claim, inc’d build costs at Farnham site & building safety payouts.
— Emma Fildes (@emmafildes) January 23, 2024
Result = Revenue down 28% at £657.5m (FY22: £913.6m) pic.twitter.com/8pdkMJO393
Victoria Scholar, Head of Investment, interactive investor, explains:
The housebuilders have had a tough time amid the backdrop of decreased mortgage affordability, build cost inflation and financial pressures on households.
But with the Bank of England expected to begin the shift towards monetary loosening in either the second or third quarter, investors have been looking back towards the housebuilder sector as a potential source of opportunity.
The dynamics which have punished the sector in recent years look set to shift this year, helping to lift housebuilder shares off the November lows. However, it could still be a bumpy ride ahead.”
Full story: Jeremy Hunt has room for £20bn tax cuts
A halving of UK government borrowing in Deember, year-on-year, has created scope for Jeremy Hunt to make tax cuts worth about £20bn in his March budget, our economics editor Larry Elliott writes.
Data from the Office for National Statistics showed that higher VAT and income tax receipts coupled with lower spending resulted in a deficit of £7.8bn in December 2023 – the lowest for the month since the pre-pandemic year of 2019.
With lower debt interest payments also contributing to the improvement in the government’s financial position, analysts said the prospects for a giveaway package had brightened.
The December deficit was more than £6bn lower than the £14bn pencilled in by the Office for Budget Responsibility – the independent watchdog responsible for the government’s fiscal and economic forecasts.
Updated
China "weighs stock market rescue package backed by $278bn"
In the financial markets, shares have rallied in China today on reports that Beijing is considering taking steps to stabilize the slumping Chinese stock market.
Bloomberg reported that policymakers are seeking to mobilize about 2 trillion yuan ($278 billion), mainly from the offshore accounts of Chinese state-owned enterprises, as part of a stabilization fund to buy shares onshore through the Hong Kong exchange link
They have also earmarked at least 300 billion yuan of local funds to invest in onshore shares through China Securities Finance Corp. or Central Huijin Investment Ltd., people familiar with the situation said.
More here: China Weighs Stock Market Rescue Package Backed by $278 Billion
The Shenzhen SE composite index, which has fallen almost 29% in the last year, has rallied by 1.4% today.
Hong Kong’s Hang Seng index, which has had a torrid time in recent years, has jumped by 2.6%.
Wow. The Hang Seng Index just fell below 15,000. It's at the same level as during the 1997 handover... pic.twitter.com/brYtnniRXJ
— David Ingles (@DavidInglesTV) January 22, 2024
The owner of discount chain Primark has warned that the disruption to shipping through the Suez Canal could push up its costs.
Associated British Foods told shareholders this morning that it does not expect any significant disruption to our supply chain due to events in the Red Sea, adding:
We also feel more confident in the delivery of the Primark adjusted operating margin in this financial year, driven by a further improvement in product gross margin.
This should insulate us well against potential additional costs of supply due to the disruption in the Red Sea should they arise.
ABF also reported that sales slowed at Primark last Christmas. Like-for-like sales grew by 2.1% in the 16 weeks to 6 January 2024, driven by higher average selling prices, slower than the 8% growth recorded in the previous quarter.
Total Primark sales grew 7.9%, after a slow start blamed on unseasonally warm weather.
Richard Hunter, head of markets at interactive investor, says:
“Primark remains the engine of growth for the business, with its value offerings still hitting the spot with an increasingly cost-conscious consumer.
Despite a slow start to the quarter given some unseasonably warm weather, Primark was back with a bang for Christmas. Womenswear and menswear were particularly strong, with the Christmas ranges proving popular.
New data from HM Revenue and Customs this morning shows how the tax burden has risen this year.
Total HMRC receipts for April 2023 to December 2023 have risen to £580.8bn, which is £26bn higher than a year ago.
Income Tax, Capital Gains Tax and National Insurance Contributions (NICs) rose by £12.8bn, while VAT brought in £8bn more and business taxes raked in an extra £9.2bn.
Inheritance Tax receipts for April 2023 to December 2023 were £5.7bn, £0.4bn higher than the same period last year.
Nicholas Hyett, Investment Manager at Wealth Club says:
“The government’s income from death duties is going up. That makes changes to IHT policy a careful balancing act.
Cutting rates might win votes, since many see IHT as an unjust grab for money that’s already been taxed once. But the revenue earned is playing an important part in the government’s spending programme, and a shortfall would need to be made up somewhere else.
Contrary to popular belief, inheritance tax doesn’t just affect the super-rich. Frozen tax brackets mean many who would not consider themselves wealthy will find themselves falling into the IHT bracket in future. Their standard of living hasn’t changed, indeed inflation means it might have gone backwards, but the government now considers them to be wealthy enough to face inheritance tax.
But receipts from stamp taxes fell by £4bn, while tobacco reeipts were £1.3bn lower.
Elsewhere in the economy, Lidl is increasing minimum pay for its shop staff from £11.40 to £12.00 an hour from 1 March, in the cut-price grocer’s third pay rise in a year.
The increase brings Lidl in line with rival Aldi which will increase minimum pay to £12 an hour next month.
Both will be in line with the independently verified living wage as competition for workers continues to be high in a tight labour market.
The drop in government support for energy bills also pushed down borrowing in December, says Michal Stelmach, senior economist at KPMG UK.
Stelmach explains:
“Public sector net borrowing came in at £7.8 billion in December 2023, down significantly from £16.2 billion a year earlier. This was mainly due to a large drop in debt interest payments which reflected a fall in monthly RPI inflation in October, while the energy price schemes, which contributed to spending last winter, are no longer in place.
Indeed, government spending on subsidies and other current grants, which included the cost of the Energy Price Guarantee and other support schemes, was down by £5.9 billion on a year ago.
Stelmach cautions, though that the UK’s fiscal outlook is “riddled with uncertainty”. That means that some of Jeremy Hunt’s wiggle room could “easily be squashed” if some of the downside risks materialise.
Stelmach explains:
The government’s implicit commitment to freeze fuel duty rates lowers revenue by £6 billion a year relative to current plans, while the assumption that real spending on unprotected departments would have to fall by over 2% a year is largely unrealistic in the absence of significant productivity improvements.
That’s before considering the longer-term pressures from an ageing population, energy transition, and slowing workforce growth.”
Capital Economics: more wiggle room for a big pre-election splash
Jeremy Hunt has “more wiggle room for a big pre-election splash”, following this morning’s drop in government borrowing, say City consultancy Capital Economics.
Ruth Gregory, their Deputy Chief UK Economist, estimates that Hunt could have £20bn of headroom for tax cuts in March.
She says:
After nine months of the 2023/24 fiscal year, borrowing is on track to undershoot the OBR’s full-year borrowing forecast of £123.9bn by £5.0bn.
What’s more, with market interest rate expectations and long-dated gilt yields having fallen since November, we suspect the OBR will revise down its borrowing forecast significantly from 2025/26. That may provide the Chancellor with “headroom” against his fiscal mandate of about £20bn in the Budget.
That will probably allow him to unveil a freeze in fuel duty in April 2024 (costing about £6.0bn a year) but perhaps also to announce more crowd-pleasing measures, such as a 1p cut to income tax (costing £6.9bn a year), while still maintaining fiscally prudent appearances.
Divya Sridhar, economist at PwC, is hopeful that the bill for the UK’s inflation-linked bonds will continue to fall – easing the pressure on the public finances:
“The relatively lower debt interest payments in December 2023 were a key driver of the lower monthly borrowing figure compared to recent months.
Last month recorded the lowest December interest payment figure since 2020, and was less than a fourth of the interest payments paid in December 2022.
Despite the small uptick in CPI inflation last month from 3.9% to 4.0%, we expect inflation pressures to continue easing over the coming months, further lowering government spending on interest payments.”
Trott: economy is beginning to turn a corner
Chief Secretary to the Treasury, Laura Trott, has commented on this morning’s UK borrowing figures, saying:
“Protecting millions of lives and livelihoods during Putin’s energy shock and a once in a century pandemic has created economic challenges. However, it is right that we pay back these debts so future generations are not left to pick up the tab.
“Because of this Government’s decisive action, the economy is now beginning to turn a corner: Inflation has more than halved. Debt is on track to fall as a share of the economy. And we have been able to afford tax cuts for 27 million working people, and an £11 billion tax cut to drive business investment. “
The broader picture is that the UK national dent was clocked at £2.685 trillion at the end of December 2023, which is around 97.7% of UK GDP.
That’s 1.9 percentage points higher than in December 2022 and the highest level since the early 1960s.
Public sector net debt was £2,685.6 billion at the end of December 2023, and was provisionally estimated at around 97.7% of the UK’s annual gross domestic product.
— Office for National Statistics (ONS) (@ONS) January 23, 2024
➡️ https://t.co/KEl5HlNE51 pic.twitter.com/BI75ubxuoE
Introduction: UK borrowing falls
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Britain’s monthly government borrowing fell last month, potentially giving chancellor Jeremy Hunt more room for tax cuts in the March budget.
Figures just released by the Office for National Statistics show that the UK’s public sector net borrowing (excluding public sector banks) fell to £7.8bn in December.
That’s the lowest deficit for any December since 2019, just before the Covid-19 pandemic, and half as much as the UK borrowed to balance the books in December 2022.
It’s also a lot lower than forecast; economists polled by Reuters had expected public sector net borrowing, excluding state-owned banks, to hit £14bn.
Public sector net borrowing excluding public sector banks was £7.8 billion in December 2023.
— Office for National Statistics (ONS) (@ONS) January 23, 2024
This was £8.4 billion less than in December 2022, and the lowest December figure since 2019.
➡️ https://t.co/KEl5HlNE51 pic.twitter.com/z00WhjRpRC
Falling inflation helped to push down borrowing, by lowering the interest bill on index-linked government debt.
Central government debt interest payable was £4bn in December, £14.1bn less than in December 2022, the ONS says, due to the fall in the Retail Price Index measure of inflation.
So far this financial year (since April), the UK has borrowed £119.1bn, which is £5bn lower borrowing than the £124.1bn forecast by the Office for Budget Responsibility.
That indicates there is wiggle-room for some fiscal loosening, while keeping within the government’s fiscal rules.
This is the fourth-highest borrowing bill at this stage of the financial year since monthly records began in 1993, behind the Covid-19 years of 2020, 2021, and 2009 following the global financial crisis.
Last week in Davos, Hunt dangled the prospect of big tax cuts in his March budget, telling reporters that he wanted to move in the direction of a low-tax economy.
Speaking at the World Economic Forum, the chancellor said:
“In terms of the direction of travel we look around the world and we note that the economies growing faster than us in North America and Asia tend to have lower taxes, and I believe fundamentally that low-tax economies are more dynamic, more competitive and generate more money for public services like the NHS.
That’s the direction of travel we would like to go in but it is too early to say what we are going to do.”
Also coming up today
Workers from Tata’s steelworks in Port Talbot are heading to Parliament today, ahead of a House of Commons debate on the future of the plant.
The debate was called by the Labour Party, following the announcement last week that Tata is planning to close its blast furnaces at Port Talbot and is intending to cut 2,800 jobs. Labour will use an opposition day debate to force a vote on the issue….
Investors in the City will be digesting the latest policy decision from the Bank of Japan overnight – it left interest rates at -0.1%, and stuck to its yield curve control policy that keeps the upper limit for 10-year Japanese government bond yield at 1%.
BOJ board members also lowered their forecast for core consumer inflation.
The agenda
7am GMT: UK public finances for December
10.15am GMT: Treasury Committee inquiry into SME access to finance
3pm GMT: Eurozone consumer confidence index
Updated
