Key events: 1h ago Introduction: Russia resumes gas supplies to Europe, ECB set to hike rates Filters BETA Key events ( 1 ) OBR ( 2 ) UK ( 2 ) Christine Lagarde ( 1 ) Nadhim Zahawi ( 1 ) Bank of Japan ( 1 ) 17m ago 08. 38 Alison Ring, public sector and taxation director for the Institute of Chartered Accountants in England and Wales, said: . css-knbk2a{height:1em;width:1.
5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} The latest inflation-fuelled numbers will provide little comfort for the new prime minister, as at £55bn for the quarter to June, the deficit is more than double what it was before the pandemic. With inflation at a 40-year high and record energy prices this winter, the question facing the next prime minister and chancellor will not be about whether or not to write another cheque to struggling families, but how big it will be. She said rising supplier cost inflation and public sector pay demands that are unlikely to be satisfied by a proposed 5% increase will put severe pressure on both operating and capital budgets.
. css-knbk2a{height:1em;width:1. 5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} Combined with long-term demographic trends that continue to drive public spending higher, the likelihood is that any tax cuts committed to during the Conservative party leadership campaign will end up being reversed in the years ahead.
Updated at 08. 43 BST 24m ago 08. 31 Danni Hewson, AJ Bell financial analyst, said: .
css-knbk2a{height:1em;width:1. 5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} Families wondering why the government isn’t doing more to help them deal with their strained finances need to understand that the treasury’s fighting its own battle with inflation. The debt interest paid out last month was the highest figure since records began in 1997 and with inflation still running hot things are only going to get more expensive particularly as some of that debt rolls over and refinancing is going be substantially more expensive.
At the moment inflation is playing a dual role because it’s also boosting the government’s tax take. When things cost more people have to pay more in taxes like VAT, but it also means the government is having to pay more and the bill for things like wages is going up. And of course, if people don’t have money to spend, they simply won’t buy stuff and that will bring its own consequences.
At the moment fiscal policy demands an ability to balance on a tight rope, spend too much and debt becomes insurmountable spend too little and the economy will simply grind to a halt. She added that there was also some good news in the figures: . css-knbk2a{height:1em;width:1.
5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} A booming labour market is helping pad out government coffers with tax receipts up by more than £5bn compared to the same time last year and despite the uptick in borrowing in June borrowing since the start of the financial year is almost £6n less than the same period in 2021. But it’s clear there is not a huge amount of wiggle room for the pair hoping to jump into the hot seat at Number 10. And as temperatures drop and energy prices deliver yet another unwelcome shock in the autumn there will be increased pressure to do more to help households.
Giveaways will be popular with voters and party members alike, but they’ll need to be carefully costed. Today’s figures will focus minds and colour debates, promises will need to be more than piecrust. Public sector net borrowing excluding public sector banks was £22.
9 billion in June 2022, the second-highest June borrowing since monthly records began in 1993. This was £4. 1 billion more than in June 2021 https://t.
co/g5mJ9YIvZe pic. twitter. com/9kuMGcac1G — Office for National Statistics (ONS) (@ONS) July 21, 2022 Updated at 08.
39 BST 50m ago 08. 05 More reaction to the worsening UK public finance figures, which make it hard for the new chancellor, and any new prime minister, to cut taxes to ease the cost of living squeeze. Hoa Duong, economist at PwC, said: .
css-knbk2a{height:1em;width:1. 5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} Today’s data shows June adding a further £23bn to the current government deficit, the highest level in 14 months and almost twice the amount recorded in May. This means the UK continues to spend significantly more money than it received in taxes and other income, leading to an estimated borrowing of around 12.
4% of GDP. This is much higher than the 50-year average of 3. 6%, meaning encouraging growth is the key to sustainable public finances strategy.
This increasing deficit highlights the difficult balancing act facing the new chancellor of the exchequer. While tax cuts could ease business cost pressure and encourage growth, this could push up inflation, exacerbating the current pay squeeze. At present this means a choice between focusing on managing the deficit or tackling the cost of living rises, but not both.
UK racked up a record debt interest bill in June at £19. 4 billion pounds, according to @ONS data out today. Reflects soaring inflation which will result in bigger payouts from the government’s index-linked bonds.
pic. twitter. com/jNyRsVhQnD — Andy Bruce (@BruceReuters) July 21, 2022 Updated at 08.
09 BST 1h ago 07. 33 The chancellor of the exchequer, Nadhim Zahawi, said: . css-knbk2a{height:1em;width:1.
5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} We recognise that there are risks to the public finances including from inflation, with debt interest costs in June more than double the previous monthly record. That’s why the government has taken action to strengthen the public finances, and in their latest forecast the OBR assessed that we are on track to get debt down. 1h ago 07.
32 Introduction: Russia resumes gas supplies to Europe, ECB set to hike rates Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets. Russia has resumed supplies of gas to Europe today via the Nord Stream 1 pipeline this morning following 10 days of annual maintenance work, the pipeline operator said – but at sharply reduced capacity. The president of Germany’s Federal Network Agency, Klaus Müller, said on Twitter that the pipeline was running at about 30% of capacity.
Die #Gas -Nominierung von #NordStream1 für heute ist bei ca. 530 GWh/d (= ca. 30% Auslastung) geblieben.
Für die jeweils nächsten 2 Stunden ist sie verbindlich, untertägige Veränderungen wären sehr ungewöhnlich. Die initiale Nominierung für den 22. 7.
erfolgt am Nachmittag. @bnetza https://t. co/itMR5TL6bB — Klaus Müller (@Klaus_Mueller) July 21, 2022 Concerns that Russia is weaponising gas deliveries prompted the EU to lay out a plan yesterday to cut gas usage by 15% until March .
The European Commission urged member states to reduce consumption voluntarily, as its president Ursula von der Leyen warned that a complete shutdown in supplies was “likely”. The news came as Russia’s foreign minister told state news agency RIA Novosti that Russia’s military “tasks” in Ukraine now go beyond the eastern Donbas region. The Italian prime minister Mario Draghi is set to resign (again ) today, confirming last week’s resignation which was rejected by the country’s president, after three key parties in his broad coalition did not participate in a confidence vote on the conditions he set for his government continuing.
The former European Central Bank president offered his resignation last week after the Five Star Movement (M5S), a key component of his broad coalition, snubbed a vote on a €26bn cost of living package. This means an early election in the autumn in Italy, and political uncertainty until then. European Central Bank policymakers are considering raising interest rates by a bigger-than-expected 50 basis points at today’s meeting to combat soaring inflation , Reuters reported, citing two sources.
It would be its first rate hike in more than a decade, and most economists have forecast a 25 basis-point rise. To cushion the impact of higher borrowing costs, they are also set to announce a deal to help more indebted countries like Italy on the bond market. Interest rates: three central banks facing one agonising decision | Larry Elliott Read more Meanwhile, the Bank of Japan maintained its ultra-low interest rates today, even though it forecast that inflation will exceed its target this year.
Other central banks such as the US Federal Reserve and the Bank of England have already raised interest rates several times in recent months. Finally, new figures show that the UK government’s fiscal position is worse than the Office for Budget Responsibility predicted in March. The government borrowed £22.
9bn in June, more than expected. Tax receipts, at £70. 5bn, were a bit lower than expected, while spending of £86bn was in line with the OBR’s estimates.
However, this reflects eye-wateringly high debt interest payments of £19. 4bn. Ruth Gregory, senior UK economist at Capital Economics, said: .
css-knbk2a{height:1em;width:1. 5em;margin-right:3px;vertical-align:baseline;fill:#C70000;} Indeed, with RPI [retail price index] inflation at its highest level since 1982 (to which index-linked gilts are pegged), those payments were twice as high as in the previous June and the highest since records began in April 1997. June’s public finances figures provided more evidence that the government’s fiscal position is worse than the OBR predicted back in March.
This may limit the ability of the next Prime Minister to provide more relief for households when a further rise in CPI [consumer price index] inflation from 9. 4% in June to around 12% in October worsens the cost of living crisis. The Agenda 1.
15pm BST: ECB interest rate decision 1. 30pm BST: US Initial jobless claims for the week of 16 July 1. 45pm BST: ECB press conference 3.
15pm BS: ECB president Christine Lagarde speech Topics Business Business live Stock markets Currencies Reuse this content.
From: theguardian
URL: https://www.theguardian.com/business/live/2022/jul/21/russia-gas-supplies-europe-ecb-hike-interest-rates-economy-inflation-business-live
