Displaying items by tag: economic policy

Rachel Reeves has described closer trade relations with the EU as 'the biggest prize' for the UK economy, signalling Labour’s desire for further alignment with Europe. She said that while deals with India, the USA, and other nations are welcome, none compare in scale to improving trade with the EU, which accounts for nearly as much UK trade as the rest of the world combined. She favours removing barriers for businesses and rebuilding trust with European partners, citing renewed participation in the Erasmus programme and plans for a Youth Mobility Scheme as signs of progress. Though Labour’s manifesto rules out rejoining the single market or customs union, several senior figures have suggested deeper integration could boost growth. Critics accuse the Government of attempting to dilute Brexit, warning against surrendering tariff control or repeating complications seen in other customs arrangements.

UK inflation surged to 3.5% in April, surprising economists and intensifying concerns over the Bank of England’s strategy on interest rates. The rise follows months of falling inflation and comes amid steep household bill increases, particularly in energy and broadband costs. Huw Pill, the Bank’s chief economist, had warned just a day earlier that rate cuts were being implemented too quickly, describing the return to stability as 'stuttering'. Pill voted against this month’s rate cut, calling for a pause and slower reductions, while the Bank’s monetary policy committee remained split. Some members wanted a deeper cut, while others, including Pill, argued for restraint due to stubborn underlying inflation and continued wage growth. Traders now expect fewer rate cuts in 2025 than previously hoped, disappointing mortgage holders and borrowers. With over 2,000 UK companies going bust in April - the highest since last summer - concerns are growing over financial pressures on households and businesses. The debate now centres on whether the Bank can tame inflation without stalling economic recovery or deepening insolvency risks.

In his Autumn Statement on 22 November, Chancellor Jeremy Hunt announced a significant cut in National Insurance from January, from 12% to 10%. However, due to previous tax changes, many workers might not see substantial benefits. He also raised the state pension by 8.5% and universal credit by 6.7%. Hunt claimed the Government had stabilised the economy, allowing for tax cuts aimed at boosting growth ahead of the next year's general election. Labour criticised the NI cut as insufficient compared to previous tax increases by the Conservative government. Hunt also made a tax break for business investments in new equipment permanent, touted as the 'biggest business tax cut in modern history.' Despite these cuts, the overall tax burden is set to reach a 70-year high. The Office for Budget Responsibility (OBR) revised growth forecasts downwards and projected a delay in the return to pre-pandemic living standards until 2027/28, citing prolonged inflation and higher interest rates. The NI reduction, seen as a significant move, led to speculation about an early general election.