OBR Screws Up Yet Again

 

Remember that OBR lot, the so-called "independent" watchdogs of Whitehall's wallet? 

Well, they've gone and done it again – tripped over their own spreadsheets and missed the December borrowing figures by a whopping six billion quid.

While the OBR were busy pencilling in a hefty £14bn December deficit, the actual figure came in at a measly £7.8bn. That's, as the Americans might say, a "yuge" £6bn miss – the kind that makes you question if these fiscal soothsayers even bother to look at the books before predicting the future.

So, what went wrong? 

Well, the usual suspects. VAT receipts were higher than the OBR's estimate, income tax took a surprise bite out of paychecks, and even government spending was a tad more restrained than expected. Turns out, sometimes reality doesn't always follow the OBR's economic origami models.

Now, the interesting bit. This unexpected borrowing bonanza has Chancellor Jeremy Hunt singing a different tune. Gone are the doom-and-gloom pronouncements about austerity and belt-tightening. Now, it's all sunshine and rainbows, with whispers of tax cuts dancing on the breeze. Apparently, when the coffers are unexpectedly full, even the tightest-fisted Tory starts feeling a bit generous. Suddenly, that £20 billion giveaway he's been whispering about doesn't seem so pie in the sky.

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EAC Worried That Bank of England is Over Egging The Pudding

 

The Bank of England is facing growing pressure from its own Treasury advisers to slow down its campaign to raise interest rates.

A majority of the seven-member Economic Advisory Council to Chancellor of the Exchequer Jeremy Hunt believes that the bank is risking pushing the UK into an unnecessary recession by raising rates too quickly.

The council's concerns are based on the view that inflation is already starting to fall, and that further rate hikes would do more harm than good.

The Bank of England has raised rates five times since December, taking them to their highest level in 13 years.

The central bank has said that it is committed to bringing inflation back to its 2% target, but the council's members believe that the bank is now overshooting its mark.

"We are worried that the Bank of England is raising rates too fast," said one council member. "We believe that inflation is already starting to fall, and that further rate hikes would risk pushing the economy into a recession."

The council's concerns are echoed by some economists, who believe that the Bank of England is now behind the curve in its fight against inflation.

"The Bank of England has been slow to react to the rise in inflation, and now it is overcompensating," said one economist. "This could lead to a sharp slowdown in economic growth."

The Bank of England is due to announce its next interest rate decision on August 4.

It is unclear whether the bank will heed the advice of its Treasury advisers and slow down its campaign to raise rates.

However, the council's concerns suggest that the bank is facing mounting pressure to change course.

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Hunt's Mansion House Speech

 

In his first Mansion House speech as Chancellor, Jeremy Hunt set out plans to make the UK capital markets more attractive to investors.

Hunt said that the government would be "removing the barriers" that prevent pension funds from investing in start-ups and other fast-growing companies. He also announced plans to create a new "innovation exchange" to help businesses raise capital.

Hunt said that the reforms would help the UK to "become the world's next Silicon Valley" and a "science superpower". He said that the government wanted to "make sure our financial services sector has the right architecture to provide the best possible security for investors as well as capital for businesses".

Hunt's speech comes at a time when the UK economy is facing a number of challenges, including inflation and the war in Ukraine. The Chancellor said that the government was committed to "tackling inflation" and "boosting growth".

Here are some of the key points from Hunt's speech:

• The government will be "removing the barriers" that prevent pension funds from investing in start-ups and other fast-growing companies.
• The government will create a new "innovation exchange" to help businesses raise capital.
• The UK wants to "become the world's next Silicon Valley" and a "science superpower".
• The government is committed to "tackling inflation" and "boosting growth".

Hunt's speech was well-received by business leaders. The Confederation of British Industry (CBI) said that the reforms would "make the UK a more attractive place for investment". The Financial Times said that the speech was "a clear signal that the government is serious about supporting the UK's financial services sector".

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The Fiscal Black Hole

 

Despite Hunt's doom and gloom, I suspect that before the next election the fiscal black hole will have magically disappeared!

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Hunt Nixes Kwarteng's Budget

 

Hunt has announced a.o. the following:

-No longer cut dividend tax 

-Abandon IR35 changes 

-Won't cut basic rate of income tax, it remains at 20% indefinitely

-The UK will shorten universal energy supply until April 2023 

-Scraps planned freeze on alcohol duty etc etc

The measures will raise £32 billion. 

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