Anna Batchelor

The Government will collect £331bn in income tax this year, and spend £333bn on welfare. In other words, we now spend more on people not working than we raise from those who do. And the cost? Debt per person has risen from £11.5k in 2000 (inflation adjusted) to over £41k today.

Acceptance is growing in Europe for Canada🇨🇦 to join the European Union🇪🇺. Guy Verhofstadt🇧🇪: "There is no reason why EU membership should be off the table [for Canada]." Jean-Noël Barrot🇫🇷: "And maybe Canada at some point." Johann Wadephul🇩🇪: "I am open for Canada."

BLIMEY. After disappointing borrowing numbers and the Bank of England’s hawkish tilt yesterday 10 year gilt yields reached highest levels since 2008 this morning above 4.9%… and possibly heading for 5%. This is rather delicate. The market judges the UK to be energy inflation prone, and somewhat political uncertainty prone too. UK political economy is sending messages right now… eg will the state always step in, in every circumstance now to stop energy bills rising for everyone, even in a generalised energy shock? See the Cornwall Energy projection of a possible £300 annual increase in energy cap typical bills. The IEA is about to advise the world on potential demand management solutions to help (of the sort Germany effected in 2022, which were deemed politically impossible in the UK). Across UK politics can there be reasoned conversations about these things? If the Gulf crisis continues all this will come to ahead in May, when the new energy price cap is set, in the middle of the aftermath of the May local elections, at a time when whispers emerge from leadership rivals of a looser relationship with fiscal prudence. As it happens, my sense is that the Treasury is firmly planning for a far more targeted offering for any support, IF needed, using data that was not available in 2022. The internal view is that many billions of pounds of Liz Truss’ universal £42 billion energy price guarantee scheme were wasted on rich households and on heating the air outside our badly insulated homes too. On top of that the market reaction to the Bank of England’s change of direction was somewhat overdone, as the Governor’s interview by me confirmed, as he told the MPC at the meeting, raising interest rates in the UK is not going to unblock the Strait of Hormuz… that said, some city economists are now saying we could get a rate rise next month, and markets imply three this year. Let’s see. These things could all change with one Truth Social post. There is some time here. We are less than a third of the way through the observation window on energy bills. Whatever the increase on bills summer is responsible for eg 7% of domestic gas consumption… so the immediate impact over summer would be around £10 a month. But there is an issue brewing at the crossover of political and geoeconomic uncertainty for the Autumn, and May is a key staging post. I can see why they keep saying they want a deescalation, both in the Gulf, and in gilts.