Bank of England expects UK to fall into more recession

[no1novice]

Bank of England expects UK to fall into longest ever recession



Mini-budget "damaged" the UK's reputation, says Bank of England boss
By Dearbail Jordan & Daniel Thomas
Business reporter, BBC News

The Bank of England has warned the UK is facing its longest recession since records began, as it raised interest rates by the most in 33 years.

It warned the UK would face a "very challenging" two-year slump with unemployment nearly doubling by 2025.

Bank boss Andrew Bailey warned of a "tough road ahead" for UK households, but said it had to act forcefully now or things "will be worse later on".

It lifted interest rates to 3% from 2.25%, the biggest jump since 1989.

By raising rates, the Bank is trying to bring down soaring prices as the cost of living rises at its fastest rate in 40 years.

Food and energy prices have jumped, in part because of the Ukraine war, which has left many households facing hardship and started to drag on the economy.

A recession is defined as when a country's economy shrinks for two three-month periods - or quarters - in a row.

Typically, companies make less money, pay falls and unemployment rises. This means the government receives less money in tax to use on public services such as health and education.

The Bank had previously expected the UK to fall into recession at the end of this year and said it would last for all next year.



But it now believes the economy already entered a "challenging" downturn this summer, which will continue next year and into the first half of 2024 - a possible general election year.

While it will not be the UK's deepest downturn, it will be the longest since records began in the 1920s, the Bank said.

The unemployment rate is currently at its lowest for 50 years, but it is expected to rise to nearly 6.5%.

The interest rate announcement is the first since former Prime Minister Liz Truss and former Chancellor Kwasi Kwarteng unveiled their controversial mini-Budget in September.

Their plans for £45bn worth of unfunded tax cuts - much of which have been reversed - sent the value of the pound tumbling and sparked market turmoil, forcing the Bank of England to step in to restore calm.

Mr Bailey told the BBC he believed that the mini-budget had "damaged" the UK's standing internationally.

He said that at a recent International Monetary Fund gathering in Washington "it was very apparent to me that the UK's position and the UK's standing had been damaged".

That same week, Mr Kwarteng was sacked as Chancellor.
Bank of England unemployment outlook

Chancellor Jeremy Hunt said: "The most important thing the British government can do right now is to restore stability, sort out our public finances, and get debt falling so that interest rate rises are kept as low as possible."

But shadow chancellor Rachel Reeves said families could not withstand such high rate rises "when we've got rising food prices, rising energy bills and now higher mortgage rates as well".

The latest rate hike - the Bank's eighth since December - takes borrowing costs to their highest since 2008, when the UK banking system faced collapse.

The Bank believes by raising interest rates it will make it more expensive to borrow and encourage people not to spend money, easing the pressure on prices in the process.

But while its latest rate rise will be welcomed by savers, it will have a knock-on effect on those with mortgages, credit card debt and bank loans.


www.bbc.co.uk/news/business-63471725

[sputnik]

i was reading this article about how a majority of brits now regret brexit. no shit. the entire world told you this would happen if you voted for brexit and kept electing tories...

[no1novice]

Nov 4, 2022 20:57:21 GMT sputnik said:

i was reading this article about how a majority of brits now regret brexit. no shit. the entire world told you this would happen if you voted for brexit and kept electing tories...

Illegal move, but why Cameron did it I have no idea. It was *always* a stupid fucking idea.

Might as well as turkeys to vote for Xmas.

It was never the "vote leave & we will leave"

And the thickos voted Brexit to "stick it to the Tories" because obviously they understand tactical voting so well *smh*

[no1novice]

UK Budget.


Hunt’s ‘budget for growth’ gives top 1% a pension bonus but ignores public services

No money for nurses, doctors or teachers note critics as Starmer says UK is on ‘path of managed decline’



Jessica Elgot, Larry Elliott and Pippa Crerar
Wed 15 Mar 2023 20.02 GMT
First published on Wed 15 Mar 2023 19.34 GMT

Jeremy Hunt handed a huge pensions giveaway to the wealthiest 1% to help stem the tide of people leaving the workforce, in a budget designed to reboot Britain’s faltering economy with business investment incentives and childcare support.

In an attempt to keep older skilled workers from retiring early, Hunt announced his only big surprise of the budget – to scrap the £1m cap on tax-free pension savings, saying: “No one should be pushed out of the workforce for tax reasons.”

The chancellor claimed his “budget for growth” 🤣 would address Britain’s two big structural economic weaknesses – a lack of investment and a shortage of workers – but the most eye-catching measure was the pension boost for the top 1% of earners.

Someone with a £2m pension pot will get a tax cut of £275,000 when they take their tax-free lump sum as a result of the change.

The Labour leader, Keir Starmer, attacked the move, questioning how it could “possibly be a priority for this government”, while other critics noted Hunt’s statement said nothing about public sector pay.


Torsten Bell, chief executive of the Resolution Foundation thinktank, said the chancellor had “basically ignored” public services, leaving them facing “implausibly tight spending plans”. Bell added that it means “rich people now have no overall limit on how much can be put into their pension pots tax-free”, and can pass this on to their heirs with “absolutely zero inheritance tax”.

“The more you think about this policy the worse it is,” he said.

Hunt, however, insisted the British economy was “proving the doubters wrong” and would narrowly avoid a technical recession in 2023, as he set out £22bn of higher spending and tax breaks in the next financial year.

His giveaway reversed only part of the £55bn of spending cuts and tax increases previously announced.

Paul Johnson, the director of the Institute for Fiscal Studies thinktank, said the freezing of tax allowances next month would cost the average taxpayer £500 a year and higher rate taxpayers £1,000 a year.


“The declinists are wrong, and the optimists are right,” Hunt said, hailing a stronger-than-expected economic performance since last year’s turmoil. “We stick to the plan because the plan is working.”

However, the economy is still expected to shrink by 0.2% this year and the Office for Budget Responsibility warned that the better growth in the short term would come at the expense of weaker growth in future years.

Hunt delivered his budget against a backdrop of the worst day’s trading on the London stock market since Vladimir Putin launched his full-scale invasion of Ukraine in February 2022.

Fresh fears over the health of the global banking sector triggered a wave of selling in the City, across Europe and on Wall Street. Switzerland’s Credit Suisse plunged to record lows, down 30% at one stage, after its largest shareholder said it would be unable to invest more money in the bank.


Despite the extension of government support for energy bills until July, Britain remains in the grip of a cost of living crisis which the OBR confirmed meant real living standards will fall by a cumulative 5.7% over the next two years – still the largest fall in living standards since records began.

Hunt said inflation – expected to fall from 10.1% to just under 3% by the end of the year – was the root cause of the current wave of strikes, but he offered no new money to help settle the pay disputes.

“That’s a political choice”, said Johnson, who noted the £6bn used to freeze fuel duty could have spent on inflation-matching pay awards for public sector workers. “Money for motorists, but not for nurses, doctors and teachers.”

Labour criticised the short-term nature of some of the measures, with Starmer insisting the budget “leaves us stuck in the waiting room, with only a sticking plaster to hand, a country set on a path of managed decline, falling behind our competitors”.

www.theguardian.com/uk-news/2023/mar/15/hunts-budget-for-growth-gives-top-1-a-pension-bonus-ignores-public-services

[Cartermrc]

Saw today that the pound is worth 82 US cents. I remember way back when it was worth $5! Why has Britain been in what they're calling “the economic crisis” for so long? Seriously asking here in the US. Not that we're any better off. 🙄

[sputnik]

^^^^
the last labour government was defeated in 2010. the UK never recovered from the 2008/2009 financial crisis. i think the two are linked but the UK population seems to be in the throes of some kind of collective psychosis, much like half the US that clings to republicans even though most of them are literally voting against their own best interests.

[no1novice]

Mar 17, 2023 3:58:42 GMT Cartermrc said:

Saw today that the pound is worth 82 US cents. I remember way back when it was worth $5! Why has Britain been in what they've called an “economic crisis” for so long? Seriously asking here in the US. Not that we're any better off. 🙄

Because the British equivalent of the Republicans are in power + have economic policy where the rich get richers, the public services fail + the NHS is starved of money.

Then we have complete fucking idiots that fall for their thinly veiled self-promotion techniques & jingoistic battle cries that appeal to the lowest common denominator at election time.



(The long answer en.m.wikipedia.org/wiki/Fiscal_conservatism )