Published: 10 June 2022
Location: London, UK
By Suzanne Evans, Director, Political Insight
Chancellor Rishi Sunak has been accused of wasting billions of pounds of taxpayers’ money on paying too much in interest to service the Government’s debt. The National Institute of Economic and Social Research (NIESR) said the losses were the result of Sunak’s failure to insure against interest rate rises on £895 billion in reserves created by the Bank of England (BoE) in quantitative easing. Last year, when the BoE base rate was still 0.1%, the NIESR urged the Government to protect the cost of servicing this debt against the risk of higher inflation and rising interest rates by converting it into government bonds with longer maturity. The institute’s director, Professor Jagjit Chadha, told the Financial Times they had now calculated that Sunak’s failure to heed their advice had cost taxpayers £11 billion. This exceeds the losses the Conservatives accused Labour former chancellor Gordon Brown of losing when he sold some of the UK’s gold reserves at rock bottom prices. Shadow treasury minister Tulip Siddiq said the losses were “astronomical” and accused the Government of “playing fast and loose” with public finances. The Treasury said that it had a “clear financing strategy” in place to meet the Government’s funding needs.
Prime Minister Boris Johnson announced a range of plans related to housing and increasing home ownership yesterday, plans which included a pledge to change the welfare rules and turn “benefits to bricks,” by allowing the 1.5 million people who are in work but also on housing benefit to choose whether to use their benefit towards a mortgage, rather than automatically going directly to private landlords and housing associations. Johnson said he wanted to turn renters into homeowners, saying of the 2.5 million households whose homes belong to associations: “They’re trapped, they can’t buy, they don’t have the security of ownership, they can’t treat their home as their own or make the improvements that they want”. Some associations have treated tenants with “scandalous indifference,” he said, “So, it’s time for change. Over the coming months we will work with the sector to bring forward a new right to buy scheme”. He added: “We will finish the right-to-own reforms Margaret Thatcher began in the 1980s”.Other policies announced yesterday include: -
- Launching a "comprehensive" review of the mortgage market to assess how best to access low deposit mortgages to "unbolt the door to home ownership"
- Extending the right to buy council and housing association homes, with a promise of a "one for one replacement" of each one when sold
- “Justice” for private and social housing tenants by "dealing with the scourge of unfair leasehold terms"
- Exploring discounting lifetime and help to buy ISA savings" from Universal Credit eligibility rules
- Earlier access to mortgage support for those who become unemployed
- Looking at how the government can use the £30 billion housing benefits bill to build more social homes with the potential of turning them into "right to buy" options.
The European Central Bank (ECB) has said it will raise interest rates by 0.25% in July - the first time it has done so in more than 11 years - to attempt to control soaring inflation in the eurozone. The latest eurozone inflation estimate was 8.1%, which is well above the ECB's 2% target. The bank also intends to end its bond-buying stimulus programme on 1 July.
Train drivers are set to join thousands of other rail workers on strike, as their union, Aslef, announced strikes at on 26th June at Hull Trains, on 23rd June at Greater Anglia, and on Croydon Tramlink on 28th and 29th June and 13th and 14th July. RMT union workers are striking on 21st, 23rd and 25th June after talks over pay and redundancies fell through. Unite union members will strike on 21st June on London Underground. The strikes are expected to cause severe disruption across the UK.
The Transport Salaried Staffs Association (TSSA) has also served notice of an industrial action ballot at train operator Avanti West Coast in a dispute over pay, conditions and job security. Voting will start on 15 June and close two weeks later. The union says strikes could start in mid-July if there is support from members.
In Scotland, however, strike action that has crippled Scotland’s railways could end after a deal was struck with drivers to resolve a dispute, The Independent said yesterday. Train drivers’ union Aslef said newly-nationalised ScotRailhad offered a 5% pay increase following talks, to try and end a dispute that has seen a temporary timetable put in place and more than 700 services cancelled. The new offer will also offer more money for rest day and Sunday working, driving instructor and maternity pay, as well as a policy of no compulsory redundancies for the next five years. The Aslef negotiating team is recommending acceptance of the offer to members, via a referendum, subject to executive committee approval.
Christina McAnea, general secretary of the public services union Unison, has also said some of her members were likely to strike in the coming months, faced by real-terms pay cuts as the cost of living crisis bites. She highlighted the impact of rising petrol prices, which she said are “are having a big impact on people with jobs that mean they have to travel, such as community health workers, health visitors, care workers, and social workers. “We’re actually hearing of people who would rather phone in sick because they don’t have the money to fill up their cars and do their jobs,” she added, saying that “more and more people are leaving public services, even in local government. There’re huge vacancies across local government.” Of the proposed strike action, she said: “We don’t want to bring low-paid workers out on strike. But if there’s no alternative, what else can people do? I’m not saying there will be strikes tomorrow, but there’s a lot of anger out there, and people become more desperate.”
Boris Johnson said yesterday that the UK economy was “steering into the wind” but cautioned against a “wage-price spiral”, as the cost of a tank of fuel hit a record £100.
UK online electricals retailer AO World is to close its failing German business, which it said had been hit by "an intensifying competitive landscape" and “continuing deterioration in the outlook for the German business, as well as the board's responsibilities to shareholders and other stakeholders". AO’s German division accounts for around 10% of the group's total revenue and will be shuttered at a cash cost of between nil and £15m, Sharecast News says. The company said it would now focus on the UK market and on optimising profit and cash generation.
Asia's richest man has joined forces with US private equity giant Apollo to launch a £5bn bid for chemist chain Boots, The Telegraph reports. Mukesh Ambani's Reliance Industries is part of a consortium that has lodged a binding offer for Boots, which was bought by the international arm of Walgreens, the US retail giant, in a deal worth £9bn in 2014. Walgreens hired bankers from Goldman Sachs to find a buyer at the end of last year. It has put a £7bn price tag on the UK chain after selling its wholesale arm - Alliance Healthcare - in 2021 for $6.5bn (£4.8bn).
Historic British medical equipment manufacturer Smith+Nephew, founded in 1856, is set to build a new £80 million production and R&D facility in Melton, near Hull. "This major investment demonstrates our commitment to the UK," the company said.
Private hospital operator Mediclinic has rejected an unsolicited 463p a share takeover offer from a consortium comprising of existing shareholder Remgroand MSC Mediterranean Shipping Company. Mediclinic said the offer "significantly undervalued" the business and its future prospects and was unanimously rejected by the board. Remgro already owns a 44.6% stake in Mediclinic.
London-listed engineering company Senior has signed a definitive agreement to acquire "substantially all" of Spencer Aerospace Manufacturing in a deal worth £48m. Spencer Aerospace is based in Valencia, California, and “specialises in source-controlled, standard, and proprietary fluid fittings” which are in "high demand" from aerospace and defence customers globally,” Senior said.
Fuller, Smith & Turner reported a “recovery in revenue” yesterday, posting full-year results showing revenue of £253.8m – up from £73.2m - despite being "significantly impacted" during the year by Covid-related closures, restrictions and working from home guidance. The London-listed pub operator said its adjusted profit before tax for the 52 weeks ended 26 March returned to growth at £7.2m, swinging from a loss of £48.7m in the prior year. Net debt also narrowed to £131.9m from £218.1m, and the directors' re-evaluation of the firm's total property portfolio came in at £995.6m.
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