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Rachel Reeves is paving the way for tax rises in October’s Budget after large public sector pay rises fuelled a £3bn surge in government borrowing.
The Treasury borrowed £3.1bn in July, according to the Office for National Statistics, well above the £0.1bn anticipated by the Office for Budget Responsibility.
So far this financial year the Government has borrowed £51.4bn, which is £4.7bn more than the OBR predicted.
The spending watchdog said higher pay deals for public sector workers were a key factor.
“The difference with our forecast profile is driven primarily by higher-than-forecast consumption spending by government departments (£5.8bn), which appears related to strong growth in public sector pay,” the OBR said.
Darren Jones, chief secretary to the Treasury, said the borrowing figures underlined “ the tough decisions that are needed to fix the foundations of our economy”.
It follows a report in the Guardian that Ms Reeves is considering increasing inheritance tax and capital gains tax in the upcoming Autumn budget.
The Labour Party promised it would not increase the headline rates of income tax, national insurance and VAT in its election manifesto, but earlier this month Ms Reeves declined to rule out an increase to capital gains tax.
Alex Kerr at Capital Economics said spiralling spending meant the Chancellor was likely to launch a multi-billion pound tax raid in October’s Budget.
“We think that she will look to raise an additional £10bn a year via higher taxes in the Budget and increase borrowing by around £7bn a year,” he said.
The borrowing figures cover a period before Ms Reeves agreed a 22pc increase for junior doctors and 14pc package for train drivers. Despite the agreement, drivers on the East Coast mainline are set to start another three months of weekend strikes.
Government income hit £91bn in July, £1.7bn higher than the same month last year, after the economy grew strongly in the first six months of the year.
Rising income tax, corporation tax and VAT revenues outweighed the drop in national insurance caused by the cut to the headline rate of NI under the previous Conservative Government.
Jessica Barnaby from the ONS said: “Revenue was up on last year, with income tax receipts in particular growing strongly. However, this was more than offset by a rise in central government spending.”
Most benefits were uprated in line with inflation in April, while frozen income tax bands mean workers are gradually being taxed more through stealth.
Read the latest updates below.
The Competition & Markets Authority has closed a review into Google and Apple’s app stores as it prepares for new powers to clamp down on tech firms.
The UK’s Digital Markets, Competition and Consumers Bill is set to come into force in the coming months, allowing the regulator to investigate specific activities of individual companies designated as having “strategic market status”.
It will be able to slap companied with heavy fines if they are found to be acting uncompetitively.
We’ve closed our investigation into #Google, and #Apple app stores, and will be able to consider concerns under the new digital markets regime once it comes into force.Read more: https://t.co/HQjJ3DfB3K#MobileApps #AppStore #DigitalMarkets pic.twitter.com/LnURZAuJ6X
Hospital blood stocks can be safely transported by drone, an NHS trial has shown, opening up the possibility of avoiding unreliable road services when delivering vital supplies.
As Christopher Jasper reports:
Test flights operated by medical logistics firm Apian in conjunction with NHS Blood and Transplant (NHSBT) showed that blood flown for more than 40 miles across Northumberland maintained its quality and could be used for clinical purposes.In the study, ten units of packed blood cells were flown from Wansbeck Hospital to Alnwick Infirmary and back again on five flights, with ten identical packs transported by road.Analysis showed that both sets remained viable, with no evidence of significant blood cell destruction.NHSBT said: “Results showed that drone delivery did not influence the blood’s quality or longevity and therefore could be used as a safe mode of transport.”The flights marked the first time that blood packs have been delivered in the UK by drones flying out of sight of the person controlling them.The drones flew at 66 mph and shaved seven minutes off the road delivery time, despite taking a circuitous path along the coast on a route agreed with the Civil Aviation Authority.While emergency blood supplies may be moved by volunteers providing “blood bike” services, most packs are transported in vans susceptible to the same delays as other traffic. A similar trial is planned for platelets, which help form blood clots and stop bleeding.
The pound is currently hovering near the one-year high it hit against the dollar yesterday.
Sterling is currently trading at $1.3025. It reached its highest level against the dollar since July 2023 yesterday, rising to $1.3054.
It comes amid growing indications that the Fed will cut interest rates this year, weighing on the dollar. Fed Chair Jerome Powell is due to speak at the Jackson Hole conference in Wyoming on Friday.
The Financial Conduct Authority has warned UK insurers that they must give customers value for money or risk a tougher clampdown.
The City watchdog said insurers were still failing to offer “good outcomes” to customers despite repeated warnings.
Matt Brewis, director of insurance at the FCA, said: “Insurers need to make sure their customers are getting fair value. Progress is being made, but we are still seeing too many examples of insurers and brokers lacking the right information, governance, or oversight to ensure their customers get consistently good outcomes.”
“All insurance firms should take note of our findings and make improvements where appropriate. We’ll continue to take action where we see poor value so consumers can have confidence when buying insurance products.”
A decline in train strikes spells bad news for long-distance bus operator National Express, its parent company Mobico warned.
As Christopher Jasper writes, the reduction in rail-related walkouts in the six months through June cost Britain’s leading coach business £7m in profit compared with a year earlier.
The drop in people switching from train to road or using rail-replacement services also suppressed fares and wiped out the impact of growth elsewhere, pushing the division to a near £10m loss.Rail strikes are set to diminish further in coming months after Labour handed a no-strings 15pc pay hike to drivers, putting the coach business under further pressure. Mobico said National Express plans to trim capacity to match ebbing demand.The group said it’s also preparing for Labour’s plan to hand local authorities control over city bus networks by extending franchising models currently limited to London and Manchester.Mobico’s earnings were rescued by record performance at its Spanish bus arm and contract wins at the US school bus division. The group reiterated guidance for full-year profit.
China has taken aim at Europe’s dairy market as the country retailiates against an electric vehicle crackdown by the EU.
Beijing announced it was launching an anti-dumping investigation into imports of European dairy products, following complaints from Chinese producers.
It said the investigation would cover products including creams and cheeses.
It comes after the European Commission expanded tariffs on Chinese-made electric vehicles, as part of a crackdown on imports from the country.
Teslas made in China are expected to face levies of 19pc, after Brussels argued they received subsidies from Beijing.
Jonathan Leake this morning has been looking into how Britain fell behind in the global race for nuclear power.
According to the World Nuclear Association (WNA), China is set to build more than 90 nuclear reactors by 2035, over which period the UK will complete just one.That chasm is despite Britain boasting a high-quality construction industry, the WNA said, which blamed the drop-off on poor decision-making by successive governments. Its latest report on the global nuclear industry shows that China currently has 56 reactors in operation, 30 under construction, with plans for another 60 by 2035.This accounts for about eight new reactors a year.By contrast, the UK – which previously boasted a nuclear industry far larger than China’s – is only hopeful of opening Somerset’s Hinkley Point C over the next decade.
Read why here.
Overnight, Disney dropped its attempt to block a man from suing it after his wife died following a severe allergic reaction from dining at the theme park.
As The Telegraph reported last week, Jeffrey Piccolo had filed a wrongful death lawsuit against the entertainment giant after his wife’s fatal meal at one of the Walt Disney World Resort’s restaurants in Orlando, Florida, last year.
However, Disney’s lawyers had claimed that Mr Piccolo would have to settle outside of court via arbitration because those are the terms he agreed to when he created an account for the Disney+ streaming service in 2019.
The lawyers argued that he had accepted the terms again when using his general Disney account to buy tickets to the theme park last year.
Disney said it was changing its stance late on Tuesday and had decided to allow the case to now be heard in court.
Disney’s Josh D’Amaro said: “We believe this situation warrants a sensitive approach to expedite a resolution for the family who have experienced such a painful loss.
“As such, we’ve decided to waive our right to arbitration and have the matter proceed in court.”
Central government spending was £4bn higher than the OBR expected for July – meaning spending is now running a huge £9.2bn higher than profile for the year to date. pic.twitter.com/vypCnbTsDQ
Walmart has sold its stake in Chinese ecommerce giant JD.com, in a move which sent shares in the company plunging.
The US retailer revealed it had cut its stake in the company in a filing to the US Securities and Exchange Commission, having previously revealed it owned 289m shares.
JD.com shares fell as much as 12pc in early trading on the report. Seperately, the ecommerce company issued a statement saying it had repurchased shares.
It comes as Walmart looks to focus more on its own business in China. It said the sale “allows us to better focus on the strong development of China, including the operation of Walmart Supercenter and Sam’s Club, and allocate assets to other priorities”.
Walmart added that it would continue to cooperate with JD.com.
People taking weight-loss injection Mounjaro are 94pc less likely to develop diabetes, according to a new trial of Eli Lilly’s treatment.
The three-year study, which is the longest trial to date for the injection, showed that people taking the highest dose of Zepbound lost around 23pc of their body weight. It also showed the potential long-term benefits of the treatment, in that people were significantly less likely to develop diabetes.
Jeff Emmick, senior vice president of product development at Lilly, said: “These data reinforce the potential clinical benefits of long-term therapy for people living with obesity and prediabetes.”
Detailed results from the trial are expected to be presented at an upcoming conference.
Alex Kerr, from Capital Economics, says the figures from the ONS “continued the recent run of bad news on the fiscal position”.
“Even if this overshoot does not persist, we expect the Chancellor to raise taxes and increase borrowing at the Budget on 30th October.”
Capital Economis is expecting Rachel Reeves to raise an additional £10bn a year via higher taxes in the Budget and increase borrowing by around £7bn a year.
Mr Kerr added: “Today’s release highlights the tight fiscal backdrop that the Chancellor faces ahead of her first Budget.”
Isabel Stockton, senior research economist at the Institute for Fiscal Studies said:
“Today’s figures suggest that day-to-day spending by central government on goods and services between April and July was £140bn, up by 5pc on the same months in 2023. “It is also some £6bn above that forecast for those months in the March Budget. In just four months – or one-third – of this financial year the Government appears to have spent 34.1pc of what was budgeted for the whole year, whereas since comparable data began in 1997 it has never spent more than 32.9pc of the eventual total in the first third of the financial year. “This is indicative of the scale of the pressures on departmental budgets – in some cases well and above what was budgeted for.”
Waitrose has this morning unveiled plans to open up to 100 new convenience stores in the next five years, as it steps up efforts to win customers away from Marks & Spencer.
James Bailey, executive director for Waitrose, said: “Waitrose will always offer fantastic food, but the groundwork we have undertaken behind the scenes in recent years means we can now focus on growth through new shops and ensuring our existing ones are providing great shopping experiences that match the quality of our products.
He said the supermarket had “taken time to understand how our customers like to shop” and would be using this to introduce new concepts into its stores.
It is planning to invest £1bn in new and existing shops over the next three years.
Asian stocks have broken a three-day winning streak as investors became more cautious ahead of an update from the Federal Reserve later this week.
The Hong Kong Hang Seng index was leading losses on Wednesday morning, with tech stocks taking a particular beating. Giant JD.com fell by as much as 12pc after it emerged that Walmart was planning to sell a stake.
Shares were also down in Japan and South Korea, amid a cooling appetite for risk among investors ahead of Jerome Powell’s Jackson Hole speech on Friday.
Alvin Tan, head of Asian currency strategy at Royal Bank of Canada in Singapore, said: “It’s probably time for a breather after the furious risk rally of the past fortnight. The turbulence at the beginning of the month is fading further in the rear view mirror. “The US dollar has been under significant pressure since Monday. Part of this has to do with the global risk rally.”
Borrowing in the financial year so far to July 2024 came in at £51.4 billion, the ONS said. This was £500m less than in the same four-month period a year earlier, but marked the fourth highest year-to-July borrowing since monthly records began in January 1993.
It is expected to ramp up pressure on Rachel Reeves ahead of the autumn statement later this year. Labour has announced a spate of public spending commitments following the election win.
Since July 5, it has pledged £8.3bn on the new public energy company, GB Energy, £7.3bn on a National Wealth Fund and around £10bn on public sector pay settlements.
According to the ONS this morning, borrowing was up because of rising social benefits, uprated due to inflation, and higher wages in the government.
Commenting on today’s public sector finances figures for July 2024, ONS Deputy Director for Public Sector Finances Jessica Barnaby said 💬Read more ➡️ https://t.co/EtVdgIf4Gq pic.twitter.com/PXS6ZbNJvN
New figures from the Office for National Statistics today have revealed that government borrowing hit £3.1bn in July, making it the highest borrowing for the month since 2021.
This is £3bn higher than the Office for Budget Responsibility (OBR) had been forecasting.
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On Wall Street, the S&P 500 finished down 0.2pc, closing at 5,597.12, the Nasdaq Composite lost 0.3pc, reaching 17,816.94, and the Dow Jones Industrial Average eased 0.2pc, closing at 40,834.97.
The yield on benchmark 10-year US Treasury bonds eased ahead of a speech on Friday by Federal Reserve Chair Jerome Powell, which will likely be the week’s highlight for financial markets. The yield was 3.81pc last night, down from 3.88pc the day before.
Asian shares mostly declined Wednesday following a slip on Wall Street that snapped an eight-day winning streak, the longest of the year.
Japan’s benchmark Nikkei 225 lost 0.8pc in morning trading to 37,741.53. Australia’s S&P/ASX 200 dropped 0.5pc to 7,958.40. South Korea’s Kospi shed 0.1pc to 2,692.81. Hong Kong’s Hang Seng slipped 0.9pc to 17,348.77, while the Shanghai Composite shed 0.3pc to 2,858.98.
In Tokyo, Japan’s Finance Ministry reported a 621 billion yen ($4.3 billion) trade deficit in July, as surging global prices pushed imports higher, growing nearly 17pc from a year.
Japan’s exports also grew, rising 10pc, to destinations like the US and China.
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