Latest news with #OBR
Spectator
a day ago
- Business
- Spectator
Mel Stride: ‘what I would do differently'
Last night, Rachel Reeves was the headline act at the Mansion House dinner. In her speech, she made the case that 'Britain is open for business' and that we must 'stay competitive in the global economy'. Critics would say it is hard to claim to be open for business while having also overseen a £25 billion national insurance tax raid that is now known to be costing thousands of jobs. She began by stressing that, despite what recent reporting might suggest, she is 'okay' – the economic indicators, however, suggest that the economy is far from okay. Just this morning, the Office for National Statistics (ONS) reported that inflation hit 3.6 per cent in the year to June – well above the 2 per cent target. On this special edition of Coffee House Shots, James Heale and Michael Simmons are joined by shadow chancellor Mel Stride, who offers his prescription for Britain's ailing economy. He outlines how he would have conducted the speech at Mansion House, how he will spend the recess with business leaders of all descriptions in 'listening mode', and why – when it comes to the big institutions such as the OBR, the Treasury and the Bank of England – he 'isn't ruling anything out'. Produced by Oscar Edmondson.
Telegraph
a day ago
- Business
- Telegraph
Miliband to unleash new gas plants to back up patchy wind and solar
Ed Miliband has opened the way for a fleet of new gas-fired power stations to back up Britain's wind and solar farms. He has told the National Energy System Operator (Neso) – the UK's grid operator – that by the end of the decade it must keep 40 gigawatts (GW) of spare generating capacity on standby for days when wind and solar cannot keep the nation's lights on. The request is part of a system known as the capacity market, where companies are paid to keep generating capacity on standby for days when renewables output plummets or demand surges. The capacity market already costs British consumers about £1.3bn a year – but this will surge to £4bn by 2030 as reliance on renewables increases, the Office for Budget Responsibility (OBR) has said. Mr Miliband's letter to Neso has told it to ensure it has 40GW-worth of back-up generating capacity on the system, roughly equating to the output of 35-40 large gas-fired power stations. About two thirds is expected to come from gas and the rest from batteries, interconnectors and other sources. The riches available to power companies via the capacity market has caused a mini-boom in construction of gas fired power plants. Neso's list of projects seeking grid connections has more than 100 new gas-fired power stations planned around the UK. Most are smaller than the large power plants built in the past but designed to be more flexible, meaning they can ramp their output up and down according to demand and the price of power. They make their profits partly from being paid to be on standby and partly from operating only when power prices surge to unusually high levels – as often happens when low winds reduce windfarm output. Driving up costs Adam Bell of Stonehaven, an energy consultancy, said the system drove up costs for consumers. 'The capacity market is driving a boom in construction of gas fired power stations but these plants push up prices for everyone in the wholesale market. That's why subsidy costs are rising. 'We know that they are able to make excessive returns and they are also given 15 year capacity market agreements which locks in these effects for too long.' John Constable, director of the Renewable Energy Foundation, said that the mix of subsidies supporting renewables were collectively costing the UK £25.8bn a year. 'Renewables are intrinsically unreliable,' he said. 'Under the capacity market consumers are forced to provide an indirect subsidy to wind and solar to pay for a shadow fleet of gas turbines and batteries to guarantee security of supply. This results in two parallel electricity systems and so reduces grid productivity and increases costs.' The move coincides with a separate announcement from Mr Miliband regarding contracts for difference (CfDs) – a different subsidy mechanism. These support construction of renewables such as wind and solar farms by guaranteeing a minimum price for the power they generate. Mr Miliband said that future projects would now be able to apply for CfDs before even getting planning consent – and could then claim subsidies for 20 years instead of the previous 15 years. He said such changes would help deliver more clean power and support thousands of jobs. However, CfDs added £1.8bn to bills last year – equating to about £100 on the average household bill according to parliamentary reports. This too is set to surge, in line with the planned increase in wind and solar farms. Energy UK, trade body for power suppliers, has backed the changes to the CfD scheme. A Department for Energy Security and Net Zero spokesperson confirmed the capacity market system would add £21 to the average household bill this year and said future power plants would be built so that they could eventually be converted to run on green hydrogen or fitted with carbon capture technology. 'The Capacity Market mechanism ensures our electricity supply is secure and meets demand. From this auction onwards, unabated gas plants must have a credible plan to decarbonise to be eligible.' Doug Parr, policy director at Greenpeace UK, said the Capacity Market was a 'rip-off' for consumers and urgently needed reform. He said: 'Our energy market is rigged in favour of gas. It sets the price of electricity 98pc of the time, while only providing around 30pc of our electricity. It's a complete rip off for consumers.'
Daily Mail
a day ago
- Business
- Daily Mail
Britain has 'reasons to worry' as debt surges, spending watchdog says... after Rachel Reeves tries to talk up Government's growth mission
Britain has 'reasons to worry' about surging debt, the head of the UK's spending watchdog warned yesterday – but cautioned against 'higher and higher taxes'. Richard Hughes, chairman of the Office for Budget Responsibility (OBR), told MPs that chancellors had been willing to see the debt pile 'ratcheted up and up over time'. With Britain still reeling from global crises over recent years, and amid weak economic growth and near- record taxes, tackling it will be even harder, cautioned Mr Hughes. He said that while there was no 'hard and fast level of debt at which governments should start to worry, if you look at the recent past you've seen governments get themselves into trouble at lower levels of debt than the UK has at the moment'. That includes the Republic of Ireland, he added, which suffered a financial crisis in the 2010s at a lower level of debt than the UK currently has. Mr Hughes said the risk of being brought down by debt depended on how exposed a country is to shocks, how quickly it can instigate reforms to deal with the problems and how easily a country can access the borrowing it needs. 'In all three of those areas, when you look at the UK there are reasons to worry,' he told the Treasury select committee. Mr Hughes pointed to the 'hard hit' Britain had taken from the Covid pandemic, as well as the financial crisis and the energy crisis. He also referenced the high level of taxes – making it harder to raise more – and the growing concerns about whether investors are willing to keep financing the UK's borrowing. Luring in more investors will have to mean paying higher rates on bonds, adding to the cost of that borrowing, he added. 'So I think there are reasons to be concerned about the level of UK government debt and for it to feature in decisions that are being taken,' said Mr Hughes. The comments undercut Chancellor Rachel Reeves's attempt to talk up the Government's growth mission at her annual Mansion House speech to the City on Tuesday night. They also added to the bleak report published by the OBR last week forecasting that debt is on course to surge from its current level of around 100 per cent of gross domestic product (GDP) to 270 per cent over coming decades. The watchdog warned that Britain is effectively living beyond its means and simply 'cannot afford the array of promises that it has made to the public'. Meanwhile, the new head of the Institute of Fiscal Studies, a respected economic think-tank, said the Chancellor was 'limping' from one fiscal event to another. It comes after recent economic figures showed GDP shrank in May for the second month in a row. Mr Hughes added: 'There hasn't been a determined effort to reduce the level of debt over time. 'There has been, in practice, a de facto willingness to allow its level to get ratcheted up and up over time and then commit to getting it to fall on a future date.' Asked about efforts to boost economic growth, Mr Hughes conceded that funding investment in areas such as research and development could help – but that using public money to do so could backfire. 'Higher and higher levels of tax are also not good for growth,' he said. Without stronger growth, the level of debt as a percentage of GDP will inevitably continue to surge, the OBR pointed out. David Miles, another member of the watchdog appearing before MPs, said: 'If nothing changed, it wouldn't be right to assume that debt just stayed at 100 per cent of GDP, it would indeed be rising over time... ultimately probably in a way that would be unsustainable.'
Telegraph
2 days ago
- Business
- Telegraph
Tax raid not enough to fix debt crisis, OBR chief warns
The chairman of the Office for Budget Responsibility (OBR) has warned that further tax rises will hit growth and fail to tackle the country's growing debt burden. Speaking to the Commons Treasury Select Committee, Richard Hughes said there were 'reasons to be concerned about the level of UK government debt' and suggested taxes alone would not be enough to address the issue. 'Higher and higher levels of taxes are also not good for growth,' he said, suggesting a fresh raid in the autumn could prove self-defeating. 'We have also already raised taxes quite a bit in this country. The tax burden is getting close to an all-time high,' Mr Hughes told the committee. The difference between the interest rate on government debt and economic growth makes it 'harder to stabilise the debt to GDP ratio', the OBR chairman added. 'Increasingly vulnerable' His testimony followed the publication of the OBR's Fiscal Risks and Sustainability Report last week which warned that Britain's economy was 'increasingly vulnerable'. The report from the fiscal watchdog painted a grim picture for the UK's finances and warned that without action, debt as a share of GDP would rocket from almost 100pc today to over 270pc over the next 50 years. Mr Hughes raised concerns that the British economy was particularly vulnerable to future shocks. 'We are a country which is very exposed to shocks [and] has been particularly hard hit by the last three shocks which the world has faced – the financial crisis, Covid and the energy crisis. In each case we took quite a hard hit economically and fiscally from those shocks,' Mr Hughes told the Commons committee. 'There are reasons to be concerned about the level of UK government debt.' The UK's government debt is the fourth-highest amongst advanced European economies and the country faces the third-highest borrowing costs of any advanced economy after New Zealand and Iceland. Concerns about the sustainability of the UK's debt comes after the OBR's Fiscal Risks report warned that the 'scale and array of risks to the UK fiscal outlook remains daunting.' The fiscal watchdog said successive Tory and Labour governments had failed to make any progress on tackling public debt. UK government debt currently stands at around £2.7 trillion, with the Government's interest bill this year expected to be around £100bn. David Miles, a member of the OBR's budget responsibility committee, warned that the decline in full-salary pensions schemes, which were traditionally big buyers of UK government debt, could push up long-term borrowing costs by as much as £20bn. Costly U-turns The warning comes as the country braces for a fresh tax raid in the autumn. It is almost certain that the Chancellor will have to push taxes higher in order to make up a shortfall in the Government's finances and ensure she doesn't break her 'iron-clad' fiscal rules. A series of costly U-turns by the Government on disability benefits and winter fuel payments have left the Chancellor scrambling to find billions of pounds. Economists have warned that the Chancellor is facing a black hole of between £10bn to £20bn in the autumn Budget. No 10 has refused to rule out a wealth tax after Lord Kinnock, the former Labour leader, said the party was 'willing to explore' the idea. He added that the Government could raise an extra £10bn a year by imposing a 2pc tax on assets worth more than £10m.
Times
2 days ago
- Business
- Times
Falling demand for bonds ‘may add £20bn' to UK borrowing costs
Declining demand from pension funds for government bonds risks adding tens of billions of pounds to the UK's borrowing costs, the Office for Budget Responsibility has warned. The government's fiscal watchdog has said there will be at least a £20 billion hit to long-term borrowing costs over the coming decades from the falling ownership of gilts among defined benefit pension schemes. David Miles, a member of the OBR's budget responsibility committee, told MPs the UK was facing a 'worrisome' future where 'one of the strong buyers of UK government debt over decades is declining'. 'You've got to find people and induce them to hold bonds,' he said. 'That means you've got to offer them a better deal.'
