UK FISCAL: Starmer Refuses To Rule Out Inc. Tax, NI Or VAT Hikes
Oct-29 12:42
PM Sir Keir Starmer has refused to rule out increases in income tax, National Insurance contributions, or VAT. In PMQs, the leader of the main opposition centre-right Conservatives, Kemi Badenoch, asks Prime Minister Sir Keir Starmer if he still stands by the commitment to the tax promises made in the 2024 Labour election manifesto.
- Starmer deflects, claiming that under Labour, retail sales are higher, inflation is lower, growth has been upgraded, and the UK stock market is at an all-time high. Badenoch notes that when she asked the same question of Starmer in July, his answer was a simple "yes".
- Later in PMQs, asked by a Conservative MP to rule out an extension of the freeze on income tax thresholds, Starmer answered only "the freeze was introduced by them". While it is not unusual for a PM to refuse to talk on specific policies ahead of a budget, given the media narrative surrounding the budget (that the gov't is preparing the ground for sizeable tax increases), these comments will do little to dispel that speculation.
- Politically, the Labour gov't finds itself in a difficult position with record-low approval ratings and opinion polling support draining away to Reform UK on the right and the Greens on the left.
- The latest YouGov poll from 27 Oct shows Labour at a record low with the pollster, at just 17% support. This puts them level with the Conservatives and just one per cent ahead of the Greens, which have seen a notable boost following the election of left-wing populist Zack Polanski as leader.
Chart 1. 2024 General Election Results (GB Only) & 27 October YouGov Opinion Poll, %
Source: House of Commons, YouGov, MNI
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BOE: Ramsden doesn't appear to be guiding away from a November cut vote
Sep-29 12:32
- Dave Ramsden has finished his opening comments. Main things are that he says he sees wage settlements in 2026 getting back to inflation target-consistent levels. That risks to inflation are balanced, Bank Rate is still restrictive and that "gradual and careful" cuts remain appropriate.
- He still seems on the dovish side and does not appear to be guiding away from a vote for a November cut so far.
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Sep-29 12:29
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BOE: Ramsden: Balanced risks inflation; "Gradual and careful" still appropriate
Sep-29 12:29
- "If you assume that these various regulated and other price rises are not repeated this year, which I think is a fair assumption, we should see and we should see headlines that services, inflation, starting to come down much more materially and that will be supported by the fact that underlying services, inflation continues when you look at higher frequency measures to be on a disinflationary path."
- "I do remain confident that we're going to get inflation back to target with the current setting of interest rates which are still in restrictive territory, and also given the market expectations that we condition our forecast on."
- "I do see the central case, which is what we've got in our forecast two years out of inflation coming back to target to be the most likely outcome."
- Ramsden talked through the Agent's pay survey being on track this year (3.7%). And noted that "those are also then pointing to settlements being lower, so closer to 3% further out into next year, which will be getting down to target consistent rates."
- "I've been surprised by the how long it's taken for that wage setting behaviour to come back in line. So I don't rule out that there are more structural factors at play in our labour market."
- "For me, the risks to the inflation outlook in the UK are balanced."
- "The UK inflation outlook with those risk to inflation balanced, I think the gradual and careful approach that the MPC has taken to removing policy restraint remains appropriate, and I see scope for further removal of policy restraint looking ahead."
