Latest news with #RachelReeves
Telegraph
8 minutes ago
- Business
- Telegraph
Inflation risks are taking Britain towards the debt-crisis cliff edge
The UK's consumer price index was 3.6pc higher in June than the same month last year – significantly above the Bank of England's 2pc inflation target. The broader retail price index rose even more, by 4.4pc. Unemployment is also up, hitting 4.7pc during the three months to May, a four-year high. And last week's double dose of downbeat data came against a backdrop of broader economic weakness, with GDP having shrunk in both April and May. It's now screamingly obvious that Labour's crude Keynesianism – 'pump priming' the economy by upping state borrowing and spending – isn't working. Worse than that, this Government's actions are pushing Britain towards a budgetary crisis every bit as serious as that in 1976, when the UK was forced to go 'cap in hand' to the International Monetary Fund for a bail-out. Chancellor Rachel Reeves's higher tax rates have been hammering economic activity, causing tax revenues to fall. Yet Labour's leadership, driven by ideological fervour and fearing the party's increasingly strident far left, keeps pushing spending up regardless. The sharp rise in the rate of employer National Insurance contributions (NIC) has caused hiring to plunge since it was announced in last October's Budget, undermining NIC revenues overall. Labour's higher capital gains tax (CGT) rates mean investors aren't selling assets, causing CGT revenues to plunge. A far more punitive non-domicile tax regime and much higher inheritance tax on businesses has sparked an exodus of wealthy individuals, with countless UK entrepreneurs moving abroad. The top 1pc of earners generate 30pc of all income tax receipts, with the top 5pc paying almost half. But when you push the seriously rich overseas with a student-politics tax regime, they often stop investing and close their UK-based businesses. So the revenue loss goes way beyond income tax, spreading across the gamut of employment and corporate taxes too. As a former asset manager, I talk to many senior people at the global pension funds, insurance companies and other institutional investors that lend governments serious money. They ask me about UK politics and public policy and I ask them what they are doing and why. So when I say financiers are not only deeply unimpressed but seriously alarmed at this Government's actions, that's directly from the horse's mouth. Anyone remotely financially literate can see investors are demanding ever higher returns to bankroll this increasingly spendthrift Government. The interest rates our Government pays to borrow are now at their highest level since the late 1990s, but on a far greater volume of debt. The UK's benchmark 30-year gilt yield last week breached 5.5pc – and has been way above 5pc for the whole of this year. Borrowing costs, then, are consistently much higher than the 4.85pc peak they momentarily touched during Liz Truss's 'mini-budget' crisis in October 2022. Yet the broadcast media's reaction, hysterical back then, is now ridiculously complacent. Draw your own conclusions as to why. Last August, just after Labour took office, the 30-year yield was below 4.5pc. Since then, increasingly sceptical investors have pushed it a full percentage point higher. During this same period, the Bank of England has cut its benchmark borrowing cost from 5.25pc to 4.25pc, a percentage point in the opposite direction. 'Market rates' and 'policy rates' moving against each other are a clear sign of brewing systemic danger. The warning signals are flashing red, yet almost no one in a political and media class addicted to government spending wants to acknowledge what's going on. In April 2024, the Office for Budget Responsibility (OBR) forecast the Government would borrow £87bn over the subsequent 12 months. When that financial year ended in April 2025, the figure was £148bn, an astonishing 70pc more. Endless discussions about whether 'fiscal headroom' in 2029/30 is £5bn or £10bn is utter displacement activity. We can't even get within £60bn of our borrowing estimate within the current financial year. The reality in front of us is that Britain borrowed £148bn last year and £110bn or three quarters of that increase in our national debt went on interest payments on debt previously incurred. Our public finances resemble a Ponzi scheme. Reeves and Keir Starmer cite crowd-pleasing nonsense about 'school breakfast clubs' and 'world-class public services'. As if it's fine to drive the UK into bankruptcy, provoking a full-on bail-out and all the resulting financial and economic chaos because the money is being spent under virtue-signalling headings. 'Borrowing costs are going up around the world', bleat fresh-faced government spin doctors. Yes, but UK gilt yields and total debt service payments are now easily the highest in the G7. Plus, much of the private money invested in UK gilts is 'levered' – or also borrowed. And when the backers of the Government's backers get worried, as they now are, they will eventually 'margin call' creditors, igniting a sudden and self-reinforcing sell-off that sends yields and economy-wide borrowing costs into orbit. On top of all that, Britain is a stark outlier when it comes to the share of 'index-linked' state debt – with regular interest payments rising in line with RPI inflation. Around 30pc of UK gilts are 'linkers', compared to just 12pc in Italy (the G7's next highest) and 5pc in Germany and the US – reflecting long-standing market concerns about vast UK government off-balance-sheet liabilities, not least the trillion-pound-plus bill for still insanely generous pensions for state employees. Britain's sky-high share of index-linked state debt, a long-standing ruse to keep headline yields as low as possible, is coming home to roost. As inflation rises, debt service costs ratchet upward, resulting in ever more borrowing to pay those costs as our tax-strapped economy struggles. That's why, when last week's higher-than-expected inflation number emerged, yields rose sharply. The UK is close to the debt-crisis cliff-edge – and ministers can't say they weren't warned.
Daily Mail
5 hours ago
- Business
- Daily Mail
How Rachel Reeves could clobber the middle classes with a wealth tax sneaked through the back door: Money experts reveal what every family and pensioner must know now
Fears are mounting that middle-class families could face a devastating tax raid on their wealth as Rachel Reeves scrambles to find a way to fill the hole in the nation's finances. The Chancellor last week refused to rule out a new wealth tax, while only promising that protections will remain in place for 'working people'.
Yahoo
7 hours ago
- Business
- Yahoo
Are we willing to drop cash Isas and take more risks with our money?
Savers are missing out on financial rewards because the benefits of investing in stocks and shares are being drowned out by risk warnings, the chancellor says. This week Rachel Reeves said savers would be sent details of investment opportunities if they have money in low-interest accounts. And she won't completely rule out cutting the annual tax-free allowance of cash Individual Savings Accounts (Isas) to push people into stocks and shares Isas instead. But what are her chances of making the UK a nation of investors, rather than risk-averse savers? Experts say women are investing less than men, and have warned the chancellor that some of her ideas could backfire and put off potential new investors. 'Pink websites won't work' Cash savings accounts are steady and safe. The amount of interest varies between account providers, but it is clear how much the returns will be. They are popular when putting money aside for emergencies, or for holidays, a wedding or a car. By contrast, the value of investments in stocks and shares can go up and down, but with risk can come reward. Long-term investments can be lucrative, not only for individuals, but for the economy as a whole. Laura Suter, director of personal finance at investment platform AJ Bell, says Reeves and the finance sector should start by making investing more attractive to women. Having written reports on the Isa gender gap, she argues that, for too long, advertising about investing has been designed by men. Lisa Caplan, director at investment company Charles Stanley, agrees. "It's not about making your website pink. It's about using less jargon, competitive language, and masculine imagery," she says. "When clients who are women feel seen and understood, they will be more willing to trust their money to an adviser or even an investment platform. I think this is beginning to change." Jema Arnold is an investor, and works for UK shareholders' association ShareSoc. She wants investing to be part of general, honest conversation among friends, not private and hidden. "I go to a book club. I want investing to be like that," she says. She is joined in a London cafe by Laura Colucci, who is in her 40s, and Wendy Lanham, who is 71. All three are divorcees, who were forced to think about their relationships with money when their marriages ended. Mrs Arnold was with an investment banker for 17 years. "In many ways I was a traditional housewife," she says. Her now ex-wife had managed that side of the finances. "I'd switched off that part of my brain when raising a daughter. That was a mistake. I felt foolish. I had to switch it back on again fairly quickly." Mrs Colucci was the same. "There were investments in my name," she says. "It was a huge learning curve in one year, when I had to take control." Mrs Lanham put her money into savings accounts. Only later did she consider moving some into investments. But that was a path that all three initially found difficult to join. "People froze up and looked awkward when I talked about investing," says Mrs Arnold. Male domination Mrs Lanham says she joined a group which met to talk about investing. The membership was entirely male. "I bought myself a book called Investing for Idiots, went to a conference, and treated it like adult education," she says. "I did not know anything, but hung in there, and the organisation changed." Now, the trio are members of SIGnet – a network of investor groups that meet in different parts of the UK, or online. It is not-for-profit and covers different areas of interest. It has lots of female members. But they say the chancellor will have little hope of getting more people to invest without initially improving their understanding, especially if they are trying it for the first time. "There's no point telling people to go and run a marathon when they've never run before," says Mrs Colucci. Reeves told financial services and business bosses in her Mansion House speech this week that the "negative" narrative around savers investing money in stocks and shares needed to change. "For too long, we have presented investment in too negative a light, quick to warn people of the risks without giving proper weight to the benefits," she said. She announced new adverts, reminiscent of the "Tell Sid" campaign of the 1980s, which encouraged people to invest in the newly privatised British Gas. Targeted messages will also be sent by banks to people who have money in low-interest accounts. Mrs Suter, from AJ Bell, says this needs to go beyond a "token effort". "If it can get widespread coverage and enthusiasm, then it could make a difference," she says. Isa debate Carol Knight, chief executive of the Investing and Saving Alliance, says Reeves' ambition will be judged a success if more women, more people from ethnic minorities, and more people outside of London become investors. But Anna Bowes, savings expert at the Private Office, says the chancellor risks her plan backfiring by encouraging people to invest now when markets are jittery due to global uncertainty. That could lead to short-term losses. "This needs to be done very carefully or it could put off a generation of investors." And she stresses that forcing people to consider a stocks and shares Isa by reducing the amount that could be put tax-free into a cash Isa would be a huge mistake. Reeves has stepped back from immediately cutting the tax-free limit on cash Isas, following a backlash from banks and building societies. But she is still keen to shift some of the £300bn in these accounts to being invested in the UK and its companies, despite "differing views on the right approach". Any changes would have an impact on millions of people. Isas are incredibly popular - about 42% of UK adults have at least one. Stocks and shares Isas are less popular but more money is held in them overall - around £431bn, compared to £294bn in cash Isas. People with Isas are more likely to be older, with estimates suggesting about half of pensioners have one. And while more women have Isas overall, more men have the investment option, with women more likely to stick to the safety of cash. Many investment companies that sell stocks and shares Isas back a change, while banks and building societies who dominate the cash Isa market are against it. That debate is likely to pick up again as the chancellor's autumn Budget gets closer. What is an Isa and how might the rules change? Savers to be targeted with offers to invest in shares under new plans One in 10 have no savings, financial regulator says
BBC News
7 hours ago
- Business
- BBC News
Are we willing to drop cash Isas and take more risks with our money?
Savers are missing out on financial rewards because the benefits of investing in stocks and shares are being drowned out by risk warnings, the chancellor week Rachel Reeves said savers would be sent details of investment opportunities if they have money in low-interest accounts. And she won't completely rule out cutting the annual tax-free allowance of cash Individual Savings Accounts (Isas) to push people into stocks and shares Isas instead. But what are her chances of making the UK a nation of investors, rather than risk-averse savers?Experts say women are investing less than men, and have warned the chancellor that some of her ideas could backfire and put off potential new investors. 'Pink websites won't work' Cash savings accounts are steady and safe. The amount of interest varies between account providers, but it is clear how much the returns will be. They are popular when putting money aside for emergencies, or for holidays, a wedding or a contrast, the value of investments in stocks and shares can go up and down, but with risk can come reward. Long-term investments can be lucrative, not only for individuals, but for the economy as a Suter, director of personal finance at investment platform AJ Bell, says Reeves and the finance sector should start by making investing more attractive to written reports on the Isa gender gap, she argues that, for too long, advertising about investing has been designed by men. Lisa Caplan, director at investment company Charles Stanley, agrees. "It's not about making your website pink. It's about using less jargon, competitive language, and masculine imagery," she says."When clients who are women feel seen and understood, they will be more willing to trust their money to an adviser or even an investment platform. I think this is beginning to change." Jema Arnold is an investor, and works for UK shareholders' association ShareSoc. She wants investing to be part of general, honest conversation among friends, not private and hidden. "I go to a book club. I want investing to be like that," she is joined in a London cafe by Laura Colucci, who is in her 40s, and Wendy Lanham, who is 71. All three are divorcees, who were forced to think about their relationships with money when their marriages Arnold was with an investment banker for 17 years. "In many ways I was a traditional housewife," she says. Her now ex-wife had managed that side of the finances."I'd switched off that part of my brain when raising a daughter. That was a mistake. I felt foolish. I had to switch it back on again fairly quickly."Mrs Colucci was the same. "There were investments in my name," she says. "It was a huge learning curve in one year, when I had to take control."Mrs Lanham put her money into savings accounts. Only later did she consider moving some into that was a path that all three initially found difficult to join."People froze up and looked awkward when I talked about investing," says Mrs Arnold. Male domination Mrs Lanham says she joined a group which met to talk about investing. The membership was entirely male. "I bought myself a book called Investing for Idiots, went to a conference, and treated it like adult education," she says. "I did not know anything, but hung in there, and the organisation changed."Now, the trio are members of SIGnet – a network of investor groups that meet in different parts of the UK, or online. It is not-for-profit and covers different areas of interest. It has lots of female they say the chancellor will have little hope of getting more people to invest without initially improving their understanding, especially if they are trying it for the first time."There's no point telling people to go and run a marathon when they've never run before," says Mrs Colucci. Reeves told financial services and business bosses in her Mansion House speech this week that the "negative" narrative around savers investing money in stocks and shares needed to change."For too long, we have presented investment in too negative a light, quick to warn people of the risks without giving proper weight to the benefits," she announced new adverts, reminiscent of the "Tell Sid" campaign of the 1980s, which encouraged people to invest in the newly privatised British messages will also be sent by banks to people who have money in low-interest Suter, from AJ Bell, says this needs to go beyond a "token effort"."If it can get widespread coverage and enthusiasm, then it could make a difference," she says. Isa debate Carol Knight, chief executive of the Investing and Saving Alliance, says Reeves' ambition will be judged a success if more women, more people from ethnic minorities, and more people outside of London become investors. But Anna Bowes, savings expert at the Private Office, says the chancellor risks her plan backfiring by encouraging people to invest now when markets are jittery due to global uncertainty. That could lead to short-term losses."This needs to be done very carefully or it could put off a generation of investors."And she stresses that forcing people to consider a stocks and shares Isa by reducing the amount that could be put tax-free into a cash Isa would be a huge mistake. Reeves has stepped back from immediately cutting the tax-free limit on cash Isas, following a backlash from banks and building she is still keen to shift some of the £300bn in these accounts to being invested in the UK and its companies, despite "differing views on the right approach".Any changes would have an impact on millions of people. Isas are incredibly popular - about 42% of UK adults have at least and shares Isas are less popular but more money is held in them overall - around £431bn, compared to £294bn in cash with Isas are more likely to be older, with estimates suggesting about half of pensioners have one. And while more women have Isas overall, more men have the investment option, with women more likely to stick to the safety of investment companies that sell stocks and shares Isas back a change, while banks and building societies who dominate the cash Isa market are against debate is likely to pick up again as the chancellor's autumn Budget gets closer.
Times
7 hours ago
- Business
- Times
Reeves is right, but she is walking a tightrope — with our money
The chancellor, Rachel Reeves, wants us all to take more risks with our money. That much was clear as she delivered her Mansion House speech on Tuesday. The government is on a mission to get more savers investing in the stock market. Reeves is planning an advertising campaign to help explain the benefits of investing — rather than highlighting the risks — and from April the Financial Conduct Authority, the City regulator, will offer 'targeted support' that will allow banks to alert customers to specific investment opportunities. 'For too long, we have presented investment in too negative a light, quick to warn of the risks without giving proper weight to the benefits,' Reeves said. But she didn't stop there. The chancellor also wants to roll back regulatory rules, not just for investment products (risk warnings will be tempered) but also for mortgages (so that it will be easier to borrow more). Encouraging more people to invest; offering bigger loans to hopeful first-time buyers; and forcing pension funds to invest in the UK. It's all part of the government's masterplan for growing the economy. And for much of this she's right. It is true that UK savers are not keen on investing in the same way as our American counterparts. This can be seen clearly in how we use Isas, with two thirds of accounts held in cash rather than stocks and shares. According to a YouGov survey, 55 per cent of the public were unwilling to invest in stocks and shares. Most of us need to invest more and stop our love affair with cash. There is a belief that investing is akin to gambling — not helped by the stringent 'your investment can go down as well as up' warning displayed on every money billboard, piece of paperwork and website. Savers so often forget that leaving your money in cash isn't risk-free, especially in a high-inflation environment. More savers need to become investors. But let's not forget why those regulatory rules were introduced in the first place. Are we now heading back to the hazy days of 2008 when you could get a loan for more than a property was even worth? Light regulations, then a crash, then tighter regulations: it's the same old merry-go-round, with seemingly no lessons learnt from the last ride. • How to get a nation of savers investing And again, as is so often the case, politicians are ignoring that this is our money, not theirs, that they are playing with. The right choices need to be promoted. So much could go wrong if the wrong advice is given or unsuitable products are pushed. Investing in high-risk vehicles such as the long-term asset fund that invests in private markets and infrastructure assets could open the door to a potential mis-selling scandal. Yet the plan is for savers to be able to do this through their Isas. For most beginner investors, the best way to dip a toe into the market is typically by investing in a standard tracker fund. Not only will your assets be diversified (as you invest in often hundreds or even thousands of different companies to spread your risk), you will also keep charges low. Banks, which will offer this new targeted support, typically only have a limited number of investment products on offer and while that often includes a tracker, they tend to be more pricey than the industry average. • The cheap and easy way to invest (without the risk) As for mortgage lending, as I've written before, there's a fine line between responding to the needs of borrowers and putting them in a difficult position if rates were to take another turn or property prices were to fall. It could be a risky business — but then, never being able to get on the property ladder could be the greatest risk of all. Risk can pay off, but we're walking a tightrope. It's all about getting the balance right.@JohannaMNoble
