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The Chancellor took advantage of her first appearance at the International Monetary Fund to achieve global acceptance of next week’s budget.
Rachel Reeves carefully dodged questions about plans to hurt private sector pensions by imposing national insurance on company contributions.
She simply stated that she was determined to free up pension money to invest in infrastructure and new businesses.
It is unclear how it would happen if, like his Labor predecessor Gordon Brown, he taxed retirement savings.
The main objective of the visit so far is to get IMF coverage for radical changes in fiscal rules.
Visit: The Chancellor took advantage of her first appearance at the International Monetary Fund to achieve global acceptance of next week’s budget
His decision to enforce a “stability” rule, under which current spending must be paid for from tax revenues, means large tax increases are at stake that are likely to be concentrated in the future.
The radical solution is the change to the debt rule. Reeves wants to give himself more than £50 billion of extra room for investment by moving the goalposts.
A range of public liabilities will be excluded from debt calculations, including funding the Bank of England’s losses on bond purchases, student loans and National Wealth Fund investments.
A new measure – Net Financial Liabilities of the Public Sector – Reeves believes has the support of the IMF, which advises more public investment.
The Office of Budget Responsibility, which has seen the proposals, must have approved them.
As with any major change in public finances, as Liz Truss learned firsthand, the acid test will come from the gold markets, which are reeling ahead of the budget.
The Chancellor promises that strong “guardrails” will be put in place to ensure all public investment projects are value for money.
Given experience with HS2, the Elizabeth Line and much more, it’s a great question.
There is also a risk that, as money piles into government projects, funding for innovative private sector schemes will be crowded out. Worrying.
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Andrew Bailey’s appearances before the premier bankers’ club, the Institute of International Finance, have become part of Washington mythology.
Two years ago, it was against this backdrop that Bailey revealed he had been involved in an “all-nighter” to organize a bailout for British pension systems endangered as a result of the use of liability-driven investments.
His attitude, a deadline set to resolve the issues and the scale of the crisis, caused by Truss’ tax cut budget, sent the pound tumbling and bond yields soaring while he was still speaking.
Boss: Andrew Bailey’s appearances before the premier bankers’ club, the Institute of International Finance, have become part of Washington mythology.
This year’s appearance was a drier affair. A now slimmed-down governor was confident that the dragon of inflation had been slain peacefully, much more quickly than expected, and that the path to lower interest rates was much clearer.
The question for markets is how much faith should be placed in the reflections of the Governor of the Bank of England. In the spring, Bailey argued that inflation in the United States and Europe (including Britain) was different.
In the United States, a booming economy meant higher prices were sticky. In Britain and the EU, the cost of living shock was driven by supply-side developments, particularly Russia’s war against Ukraine. As energy prices declined, borrowing costs were able to fall freely.
Despite the optimism, the Bank of England rate has only been cut once, from 5.25 percent to 5 percent.
By contrast, the European Central Bank has cut rates by a quarter percentage point three times, and the Federal Reserve by half a point. Those who set bank rates have been behind the curve.
The biggest threat is geopolitical uncertainty and a possible shock to energy prices. But despite the volatility, oil prices remain stable. The excuses for not doing the right thing and giving homeowners, consumers and businesses a break are disappearing.
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Usually, when England plays football against Liechtenstein, the debate is how many goals the pampered stars of the big league will score against the plasterers and lawyers of the small state with a population of just 27,000.
However, it is not too small to join the economic first division with Prime Minister Daniel Risch signing up to be the IMF’s 191st member. Perhaps the truth about late tycoon Robert Maxwell’s hidden millions will finally come to light.
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