Reeves says an extra $9 billion needs to be raised to avoid cuts to UK public services | taxes and spending

Rachel Reeves has been warned that a further $9 billion in tax hikes may be needed to avoid a new austerity drive for key public services, as her record tax hike budget sent tremors through financial markets.

Government borrowing costs rose sharply in the city on Thursday as traders took on Reeves' tax and spending measures, threatening to undermine the prime minister's claims that her budget will restore Britain's economic stability.

The negative reaction came despite the International Monetary Fund (IMF) backing Labor's budget for the first time in 14 years as the government sought to defend its plans on a day of deeper losses in global markets.

In fact, the 10-year Treasury bond yield jumped by more than 0.15 percentage points to 4.5% on Thursday, jumping to the highest level this year, before falling slightly in the evening. The higher the rate of return, the more it costs the government to borrow money.

City traders have warned that the high short-term borrowing levels set out in the budget could hinder the Bank of England's ability to push for interest rate cuts. The pound fell to its lowest level in two months against the US dollar.

spending graphics

Some analysts have sought to draw comparisons to Liz Truss's mini-budget when financial markets were in turmoil, but cautioned that the city's swings are much less significant this time around. Others said it was risky to hold the budget ahead of a hotly contested U.S. election amid a heated backdrop over a historic tax and spending package.

Jonas Goltermann, chief markets economist at consultancy Capital Economics, said the fallout from Reeves' budget is still far from the 2022 mini-budget fiasco, but the similarities could be a wake-up call in Westminster. said.

A collapse of similar proportions is unlikely, he said, but clearly investors are nervous about the financial outlook for the UK (and elsewhere).

On Thursday night, the Bank and Treasury were understood to be on high alert to monitor the situation, and Reeves insisted in an interview with financial media news service Bloomberg that Labor's top promise to investors was economic and financial stability.

We now have our public finances on a stable and strong track, she said.

With the government under pressure to defend its budget as financial markets turn against the prime minister, opposition lawmaker Jeremy Hunt said the market reaction showed Britain was already paying the price for Labour's additional borrowing.

[This will mean] It could result in more expensive mortgages and higher debt interest payments for taxpayers. If you preach stability, you must practice it, he said.

Much of the impact on households and businesses will depend on whether the financial market response is sustained. If borrowing costs continue to rise as the Bank of England keeps interest rates high for an extended period of time, high-end lenders who use short-term interest rates to price loans could see their mortgage costs rise.

The bank is expected to cut its benchmark interest rate from 5% to 4.75% when policymakers meet next Thursday. But City investors said the central bank may fail to cut interest rates below 4% by the end of next year, higher than previously expected, given Reeves' budget.

Leading economists have questioned whether Reeves' $70 billion in additional spending measures, about half of which are backed by the largest tax hikes in a generation, will be enough to reboot growth while also putting government finances back on a stable footing.

Paul Johnson, director of the Institute for Fiscal Studies, said although Reeves had made a significant down payment to stop the Conservatives' unrealistic and reckless policies, more would be needed.

The IFS questioned Labour's claims of a shift in austerity measures and said Reeves could have to top up spending plans with an extra $9 billion after the next financial year. Congress, the judicial system and prisons.

Skip past newsletter promotions

Our morning email breaks down the day's top stories to tell you what's happening and why it matters.

Privacy Policy: Our newsletter may contain information about charities, online advertising and externally funded content. Please see our privacy policy for more details. We use Google reCaptcha to secure our website, which is subject to the Google Privacy Policy and Terms of Service.

After newsletter promotion

Leading experts on Britain's public finances say the prime minister's plan is to pretend the government will raise enough money initially and then curb future spending.

That won't happen. The spending plan will not be maintained following contact with his cabinet colleagues, Johnson said.

Despite plans to increase spending, tax hikes and borrowing, experts have questioned whether the prime minister has done enough to improve public services and raise living standards in a way that will be meaningful to voters before the next election.

prediction graphics

The Resolution Foundation said the budget had yet to make a decisive difference to Britain's national record of recession and that growth prospects for living standards across the rest of the council were weak.

The short-term effect of these changes will be improved funding for public services, not only in schools and the NHS but, crucially, in our justice system. But as wage growth slows due to increased employer national insurance, families' living standards will come under further pressure, said Mike Brewer, the think tank's interim chief executive.

On Thursday, Number 10 hinted that it hoped growth forecasts would improve over the parliamentary process once further policies, including the plan, were set out and could be scored by the OBR.

A Starmers spokeswoman said it was not a limit to her ambitions regarding growth. The OBR figures do not take into account the significant range of other reforms being undertaken by the government, including reform plans and skills system reforms. This is not a limit to our agenda for growth. Do you want to see higher growth numbers to generate revenue to fund public services? But yesterday was the beginning.

No 10 has also hit back at some criticism of its future austerity spending plans. Public spending during this parliament has grown much faster than the spending plan inherited by the current government, the spokesman said.

It is precisely because the government inherited a spending plan from the previous government that did not add up that the Prime Minister had to make difficult decisions yesterday to get the foundations right and pump more money into public services. Routine funding through Congress will now increase by an average of 2% per year in real terms. This is obviously much higher than the spending plan this Government inherited.

What Are The Main Benefits Of Comparing Car Insurance Quotes Online

LOS ANGELES, CA / ACCESSWIRE / June 24, 2020, / Compare-autoinsurance.Org has launched a new blog post that presents the main benefits of comparing multiple car insurance quotes. For more info and free online quotes, please visit https://compare-autoinsurance.Org/the-advantages-of-comparing-prices-with-car-insurance-quotes-online/ The modern society has numerous technological advantages. One important advantage is the speed at which information is sent and received. With the help of the internet, the shopping habits of many persons have drastically changed. The car insurance industry hasn't remained untouched by these changes. On the internet, drivers can compare insurance prices and find out which sellers have the best offers. View photos The advantages of comparing online car insurance quotes are the following: Online quotes can be obtained from anywhere and at any time. Unlike physical insurance agencies, websites don't have a specific schedule and they are available at any time. Drivers that have busy working schedules, can compare quotes from anywhere and at any time, even at midnight. Multiple choices. Almost all insurance providers, no matter if they are well-known brands or just local insurers, have an online presence. Online quotes will allow policyholders the chance to discover multiple insurance companies and check their prices. Drivers are no longer required to get quotes from just a few known insurance companies. Also, local and regional insurers can provide lower insurance rates for the same services. Accurate insurance estimates. Online quotes can only be accurate if the customers provide accurate and real info about their car models and driving history. Lying about past driving incidents can make the price estimates to be lower, but when dealing with an insurance company lying to them is useless. Usually, insurance companies will do research about a potential customer before granting him coverage. Online quotes can be sorted easily. Although drivers are recommended to not choose a policy just based on its price, drivers can easily sort quotes by insurance price. Using brokerage websites will allow drivers to get quotes from multiple insurers, thus making the comparison faster and easier. For additional info, money-saving tips, and free car insurance quotes, visit https://compare-autoinsurance.Org/ Compare-autoinsurance.Org is an online provider of life, home, health, and auto insurance quotes. This website is unique because it does not simply stick to one kind of insurance provider, but brings the clients the best deals from many different online insurance carriers. In this way, clients have access to offers from multiple carriers all in one place: this website. On this site, customers have access to quotes for insurance plans from various agencies, such as local or nationwide agencies, brand names insurance companies, etc. "Online quotes can easily help drivers obtain better car insurance deals. All they have to do is to complete an online form with accurate and real info, then compare prices", said Russell Rabichev, Marketing Director of Internet Marketing Company. CONTACT: Company Name: Internet Marketing CompanyPerson for contact Name: Gurgu CPhone Number: (818) 359-3898Email: [email protected]: https://compare-autoinsurance.Org/ SOURCE: Compare-autoinsurance.Org View source version on accesswire.Com:https://www.Accesswire.Com/595055/What-Are-The-Main-Benefits-Of-Comparing-Car-Insurance-Quotes-Online View photos