Labour’s mission for the economy is to end the Tory chaos. ‘Every commitment a Labour government makes will be based on sound money and economic stability,’ it proclaimed in its election manifesto.
The formula was similar to that adopted by Bill Clinton after 12 years of Republican rule in the US.
He sought to measure success by restoring stability to the market for government debt.
Rachel Reeves aimed for a flying start with her July 30 speedy audit of the economy.
She sought to demonstrate determination to get on top of the public finances with the means-testing of the winter fuel allowance for older Britons and some symbolic cuts in road schemes.
Budget jitters: Rachel Reeves aimed for a flying start with her July 30 audit of the economy. She sought to demonstrate determination to get on top of the public finances
The Chancellor was determined not to rush the fences with an early budget and a ‘quick and dirty’ assessment of the public finances.
She opted for a more orderly approach, giving a strengthened Office for Budget Responsibility (OBR) more time.
The first iteration of her budget, including moves to strengthen public investment, should be handed over as early as today ahead of the October 30 statement.
The sought-after stability has gone sour. The combination of a negative interpretation of the Conservative inheritance, turmoil at Number 10 and fears that the Government will shift the fiscal goalposts to accommodate more public investment are unsettling bond markets.
The yield on the 10-year gilt has zipped up from 3.75 per cent in mid-September to 4.22 per cent.
The gap between UK yields and those of Germany (where debt and government borrowing are subdued) has climbed to 1.94 per cent, which is the highest level for 14-months.
Liz Truss’s unfunded ‘mini-budget’ may be old history, but the lessons are unforgotten.
Elevated gilt rates mean worse deals for borrowers and better options for savers with challenger banks offering one-year cash ISAs paying 4.56 per cent.
The Bank of England could nudge gilt yields down if it cuts bank rate from 5 per cent on November 7. But the interest rate-setting Monetary Policy Committee is not known for boldness.
Smoking gun
Imperial Brands is a deeply unfashionable stock excluded by many fund managers.
But since Stefan Bomhard unveiled a new strategy in January 2021, it has become a star performer in the tobacco sector, returning more than £10billion to shareholders in dividends and buybacks.
That exceeds half the group’s £18billion market value.
The latest update saw Imps shares climb another 4.1 per cent and the projected yield stands at 6.92 per cent.
In spite of the health risks, the UK group is still cashing in heavily on an addictive habit and is offsetting lower volumes by hiking prices on key brands such as Winston cigarettes and Backwood cigars.
Tobacco is still the main breadwinner, accounting for more than 90 per cent of revenue.
But the beginnings of a less toxic future are being seen.
Sales of what are known as next generation products (NPGs), such as vapes, e-cigarettes and oral pouches (doing very well in the US), soared by 30 per cent.
These are not without their own health and safety questions. A less hostile future is possible but by no means guaranteed.
Legal minefield
Down the decades, the Serious Fraud Office (SFO) has become renowned for high-profile failures. Fraud has been far harder to prosecute than corporate bribery where the legislation is clearer.
No case has been more destructive than its tangle with the Kazakhstan-based Eurasian Natural Resources Corporation (ENRC).
Irrespective of any alleged wrongdoing by ENRC, the SFO’s handling of a corruption investigation, which began in 2023 and ended last year because of ‘insufficient admissible evidence’, has been humiliating.
In the latest episode, the SFO reached a settlement with ENRC after it charged the agency with leaking sensitive information about its probe to the media.
The SFO could still be liable for heavy damages on the grounds that the missteps in its failed investigation has cost the mining outfit dearly. The agency has set aside £237.7million to cover potential legal costs.
Nick Ephgrave, the former Met assistant commissioner who took over the SFO last year, needs some urgent victories. Of all the farces staining the SFO’s reputation, none has been greater than ENRC.
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