The UK chancellor’s new plan

This is an audio transcript of the FT News Briefing podcast episode: ‘The UK chancellor’s new plan’

Sonja Hutson
Good morning from the Financial Times. Today is Friday, November 18th, and this is your FT News Briefing.

[MUSIC PLAYING]

The UK chancellor announced a plan to boost confidence in Britain’s economy. A big bitcoin fund has been swept up into the FTX crypto turmoil. And the UN climate conference wraps up today with a lot left to do. I’m Sonja Hutson, in for Marc Filippino, and here’s the news you need to start your day.

[MUSIC PLAYING]

UK chancellor Jeremy Hunt yesterday laid out plans to slash public spending and raise taxes. He wants to fill a £55bn fiscal hole. This was his long-awaited Autumn Statement. And the FT’s Chris Giles joins me to talk more about this. Hey, Chris.

Chris Giles
Hey, Sonja.

Sonja Hutson
What is Jeremy Hunt trying to accomplish here?

Chris Giles
The goal of this plan is pretty simple. The goal of the plan is to show to the financial markets that the UK is back as a sensible country and that it cares about what the markets think. And so it wants the public finances to look sustainable. And it’s defined sustainability as to have, in the medium term, public debt falling as a share of national income. And that is why we had to see this very large increase in taxation and cuts in public spending to get there. Because without it, the public finance forecasts were off track. The debt was going to be rising year on year on year, and the borrowing was going to be pretty high.

Sonja Hutson
So, you know, you mentioned wanting to reassure markets. And it seems to me that this plan is just the total opposite of what the previous chancellor proposed, which really spooked markets. Is that right?

Chris Giles
It’s remarkably accurate. You know, this is the same government, and they have done precisely the opposite of what the same party did on September the 23rd, where they gave away £45bn of unfunded tax cuts. It is quite a remarkable U-turn. I don’t think I’ve ever experienced anything like it, and I don’t think the UK’s experience really feeling that it’s been in the eyes of the world has been on the UK in a way that the UK didn’t find at all comfortable. And we really weren’t, in some sense, on the international naughty step and had to show that we could behave ourselves well so that we no longer in the eyes of the financial markets, and they can look elsewhere.

Sonja Hutson
All right. So we’re trying to get the UK government back on the nice list by Christmas.

Chris Giles
Yeah, absolutely. And certainly the market reaction was so muted. There was hardly any market reaction to it, which was about perfect, I think, as far as the government’s concerned.

Sonja Hutson
Let’s dig into the details a little more, starting with the tax rises. Who’s most affected by them?

Chris Giles
They’re all over the board. Really? So a lot of stealthy tax rises. So things in the tax system which have values like when you start to pay income tax or when companies start to pay payroll taxes, what we call national insurance in this country. All these things are frozen at a time of high inflation. And so more income is being taxed. And then there, for richer people, are going to have to spend pay more of their income at the higher rates of income tax. And the same is going to happen on capital gains tax and on taxes on dividends. So again, it’s all really rather focused on richer households paying more and on stealthy ways to raise revenues. But in the end, it’s adding up to really rather a lot of money by the next, by five years’ time.

Sonja Hutson
Could you give a few more details about Hunt’s spending cuts?

Chris Giles
Well, if you listen to him, he was talking all about spending increases through his speech, but that was really masking what was going on underneath and why you always have to look at the documents rather than listen to what the politicians have to say. And in the documents, there is a little bit of a little bit of extra money in the near term, but not nearly enough to cover government departments for the very high inflation rate. The UK’s got 11.1 per cent at the moment. And then in the medium term, what the chancellor has done, essentially, is just to pencil in really rather austere spending plans for the years after 2025. There’ll be very little growth in real terms at a time where the health service is nearly always needs much more than real terms increases its budget just to keep the nation reasonably well-served for healthcare. And in education, it’s very difficult to keep spending at flat in real terms. So in all of these areas, really, there isn’t as much money pencilled in as almost any UK government would like to spend. And so that’s going to cause a big problem for whoever wins the next election.

Sonja Hutson
Chris Giles is the FT’s economics editor. Thanks, Chris.

Chris Giles
Thanks, Sonja.

[MUSIC PLAYING]

Sonja Hutson
At the COP27 UN climate conference in Egypt, negotiators from more than 50 countries are set to wrap up talks today. They’re trying to hammer out an agreement amid tensions over how much wealthy countries should help poorer countries tackle climate change. The FT’s Camilla Hodgson has been in the Egyptian city of Sharm el-Sheikh reporting on developments.

Camilla Hodgson
Something that’s been really prominent this year has been this question of loss and damage, which is a technical term. And what it really relates to is money to help developing countries cope with the consequences of extreme weather events. So things like the flooding in Pakistan, a lot of developing countries here have been saying what we really need is some kind of new finance facility or fund in order that when we have a disaster, when a disaster strikes, there’s a mechanism and the money can be channelled quickly to that country to help cope with the devastation. There’s also been discussion about how we cut emissions faster. I think some negotiators and politicians, particularly some I’ve been speaking to from the EU and the European parliament, have been saying they would like a greater focus on mitigation. They feel that perhaps the focus on loss and damage has somewhat taken conversation away from mitigation, you know, cutting emissions. And that a little concern that there’s not been so much focus on that this year.

Sonja Hutson
So, Camilla, what comes next? As we’re recording this interview with you on Thursday night, there hasn’t been a sign of even a draft agreement yet.

Camilla Hodgson
Yes, we’re at a very tense point. I think there’s a lot of anxiety about when we’ll get that, then what the kind of negotiations will be around that and when something might finally be approved. There are also technical working groups that are trying to thrash out questions around loss and damage, all sorts of other things that need to come to conclusions about make decisions this year, and some of that will spill over into next year. A lot of the decision-making process here is kind of about a process and building each year incrementally on what was decided at the previous year. So there’s a lot of that still to be done. In fact, nothing really has wrapped up at all here, and I think everyone is now really feeling the pressure.

Sonja Hutson
Camilla Hodgson is a climate reporter for the FT.

[MUSIC PLAYING]

Before we go . . . 

[‘BAD BLOOD’ BY TAYLOR SWIFT PLAYING]

There is some seriously bad blood between Taylor Swift fans and Ticketmaster. The world’s largest ticketing site yesterday cancelled the main online sale for Swift’s upcoming tour after selling too many tickets during presale events. Fans are outraged, and some US lawmakers have weighed in too. They see this as an antitrust issue since Ticketmaster is so dominant. The company blamed the problem on high demand. But messing up a Taylor Swift concert, hard to say if fans will be able to Shake It Off.

[MUSIC PLAYING]

You can read more on all these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back next week for the latest business news. The FT News Briefing is produced by Marc Filippino, Fiona Symon and me, Sonja Hutson. Our editor is Jess Smith. We had help this week from David da Silva, Michael Lello and Gavin Kallmann. Our executive producer is Topher Forhecz. Cheryl Brumley is the FT’s global head of audio. And our theme song is by Metaphor Music.