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The FTSE 100 fell today amid concerns over Britain’s inflation rate.
Barclays economists issued a research note saying that they no longer expected a June interest rate cut.
The bank said: “The tone from [Bank of England] policymakers since May’s decision [to cut rates] has been decidedly cautious.”
It predicted a quarterly pace to cuts, with changes in August and November this year.
Traders are currently fully pricing in one quarter of a percentage point cut to rates by the end of the year.
Ben Seager-Scott, chief investment officer at Forvis Mazars, said: “The passage of the US tax cutting bill brings into sharp contrast the fact that the UK has no room to deploy fiscal stimulus whilst yesterday’s worse-than-expected jump in inflation points to more potential pain for UK consumers and makes interest rate cuts less likely.
“Added to that, the purchasing managers indices for the UK are still pointing to a contraction in activity. So plenty to worry about for UK equity investors.”
Rory McPherson, chief investment officer at Wren Sterling, said the FTSE 100 was being weighed down the market as traders priced in “a less aggressive pace of UK interest rate cuts following yesterday’s higher than expected inflation”.
It came as oil stocks were subdued by expectations that the oil cartel Opec+ will boost production.
Brent Crude, the global benchmark price for oil, fell 1pc to just over $64 (£48) a barrel.
Helima Croft, of RBC Capital Markets, told Bloomberg: “We think the most likely outcome is another headline increase of 411,000 barrels a day from July, which will be primarily Saudi barrels.”
The FTSE 100 closed down 0.5pc, having lost as much as 1.1pc.
The biggest faller was fuel distributor DCC, which lost 4.9pc. BP dropped 1.5pc and Shell 1.4pc.
Read the latest updates below.
06:24 PM BST
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06:23 PM BST
Trainer brands start to raise US prices as Trump’s trade war bites
Adidas and Puma are likely to follow Nike in hiking prices for running shoes in the United States, analysts said on Thursday, as US tariffs on imports drive costs up for retailers.
Nike on Wednesday said it would raise prices next week, charging up to $10 more for shoes currently costing more than $150, while keeping prices stable for products under $100. It is the biggest sportswear company by sales.
“That was the moment Adidas and Puma were waiting for,” said Robert Krankowski, sporting goods analyst at UBS.
Both German sportswear brands recently said they would not be the first movers in raising prices, instead waiting to see what rivals do.
“We should probably expect a similar decision from both Adidas and Puma because ... this is not Nike-specific, it is an industry issue. Everyone will be impacted by the tariffs,” Mr Krankowski added.
Donald Trump has imposed a blanket 10pc tariff on all imports, and hit China with a higher tariff of 30pc. More worrying for sportswear brands, the key footwear and clothing manufacturing hub of Vietnam faces the threat of a steep 46pc tariff returning in July.
Nike described the announced price increases as part of its normal seasonal planning, without mentioning tariffs.
A Puma spokesman said: “We are in talks with our partners in the US to discuss the best way to approach the current situation, but we have not made a decision if and how we will make price adjustments. We have already taken decisive actions and accelerated deliveries to the US, and optimised our sourcing, including a further reduction of the imports from China to the US.”
The Telegraph has approached Adidas for comment.
05:58 PM BST
Stock market ‘resilient’ as US government bond yields jump
Thirty-year US Treasury yields reached their highest level in 19 months today, before easing, with worries lingering over America’s public finances and demand for government debt.
Bond yields (the effective interest rate) rise as prices fall.
Moody’s late last week became the last of the major credit rating agencies to strip the US of its coveted triple-A status.
Thirty-year US yields are currently 5.072pc, down from a high of 5.150pc earlier today. Soft demand for a $16bn (£11.9bn) sale of 20-year bonds on Wednesday increased concerns about reduced interest in US debt.
None the less, US stocks are slightly higher this evening after falling sharply yesterday. The S&P 500 and Dow Jones are both up by nearly 0.1pc, whil the tech-heavy Nasdaq is up 0.5pc.
Jake Dollarhide, chief executive of Longbow Asset Management, said: “It’s amazing how resilient this [stock] market can be... given all of the uncertainty and potential bad news out there.
“Tech is the market’s security blanket at this point.”
05:43 PM BST
European stocks ‘run out of good news’
European stocks fell today as concerns over America’s public finances affected sentiment. Data showing weak eurozone business activity added to the gloom.
The pan-European Stoxx 600 index closed 0.6pc lower, logging its biggest single-day fall since early April.
Investors have been grappling with lack of progress on trade deals as well as US President Donald Trump’s sweeping tax cut plans, which have raised concerns about ballooning US debt and sent government bond yields surging.
Iain Barnes, chief investment officer at Netwealth, said: “There’s a bit of nervousness around how large the US deficit has been structurally for a given period of time. You’re going to have a very uncertain picture with regards to growth and a certain outlook for deteriorating public finances.”
He added: “Markets had been doing pretty well and are taking a little bit of a sense check on how far they’ve gone... It seems they’ve run out of good news for the time being.”
The benchmark 10-year US Treasury yield was hovering around three-month highs on worries that US government debt would swell by trillions of dollars, as the House of Representatives passed Trump’s tax-cut bill.
Following the US, yields on German long-term bonds hit a two-month high while ones on eurozone bonds edged up modestly, pressuring stocks.
05:37 PM BST
S&P 500 struggles for direction as Trump tax bill progresses
The S&P 500 is up 0.1pc in mixed trading this afternoon in a rocky week because of worries coming about the US government’s debt.
US Treasury yields dipped in the bond market, which has been the epicenter of Wall Street’s action this week. Yields have been on the rise in part because of worries about the scale of Mr Trump’s tax plans.
Craig Johnson, chief market technician at Piper Sandler, told Bloomberg: “Equities are cooling off from short-term overbought conditions.
“Still, a healthy pause/consolidation phase seems more likely than another significant decline.”
05:01 PM BST
Deputy governor says Bank of England shouldn’t influence direction of net zero
The Bank of England must stay in its “swim lane” and avoid trying to influence the direction of the net-zero transition, one of its most senior officials has warned.
Deputy governor for financial stability, Sarah Breeden, said: “It’s really important for us to stay in our swim lane. The pathway to net zero is one for elected politicians to choose.”
Ms Breeden’s remarks come after criticism that climate change responsibilities have distracted the central bank from its fight against inflation.
Former governor Lord King has previously warned it made “absolutely no sense” for net zero to be one of the Bank’s responsibilities.
Ms Breeden said: “It’s clear that climate change has implications for financial institutions. What we need to do is to make sure that banks, insurers, the financial system, are ready to manage the risks, whatever that pathway is.”
04:48 PM BST
FTSE closes down as Wall Street edges upwards
UK and European shares dropped today but New York is edging upwards.
The FTSE 100 dropped 0.5pc, while the domestically focused FTSE 250 lost 0.7pc, much in line with indexes on the Continent.
Wall Street, however, is rising, after the S&P 500 and Dow Jones both opened in negative territory. Stocks have been boosted by optimism around tech stocks.
The S&P 500 is up 0.2pc, the Nasdaq by 0.6pc and the Dow Jones by 0.1pc.
04:43 PM BST
G7 to call for end to ‘excessive imbalances’ in boost to Trump
Finance ministers and central bank governors from the G7 industrialised nations are to pledge to address “excessive imbalances” in the global economy, in a boost to Donald Trump’s plans to restructure world trade.
Bloomberg reported that the comments appear in a draft communique.
The finance leaders, meeting in the Canadian Rocky Mountains, said there was a need for a common understanding of how “non-market policies and practices” undermine international economic security. Bloomberg said the draft statement calls for an analysis of “market concentration and international supply chain resilience”.
German finance minister Lars Klingbeil told reporters that a joint statement from G7 finance ministers and central bank governors was still under negotiation but that he was optimistic there would be agreement.
03:57 PM BST
US housing market slows as interest rates stay high for longer
Donald Trump’s trade war appears to be slowing down the US housing market, according to latest figures.
Sales of existing US homes fell more than expected in April, reflecting the continued drag from high mortgage rates, according to data released Thursday by the National Association of Realtors.
Existing home sales dipped 0.5pc in April to an annual rate of 4m, well below the 4.15m projected by analysts.
“It’s not a good start for the spring buying season,” NAR chief economist Lawrence Yun said, adding that the April figures were the weakest since 2009.
“Affordability conditions are clearly hurting the market, particularly the high mortgage rate,” Mr Yun said.
Mortgage rates were 6.81pc as of May 15, up slightly from a week earlier, but down from the 7.02pc a year ago, according to data cited by NAR.
Jerome Powell, the US Fed chairman, has warned that Donald Trump’s trade war is likely to mean interest rates will remain higher for longer as tariffs cause prices to rise.
The tepid sales figures came in spite of an uptick in houses for sale, which stood 20.8pc higher compared with a year ago and represents the highest count since September 2020, Yun said.
Mortgage applications declined last week, said Mortgage Bankers Association president Bob Broeksmit, who cited “ongoing uncertainty in the financial markets”.
03:46 PM BST
Trump’s trade war triggers worst economic slump since Covid
Donald Trump’s trade war has triggered the worst economic slump since the pandemic among wealthy nations.
Growth across the rich world ground plunged to just 0.1pc in the first three months of the year, down from 0.5pc in the final quarter of 2024, data from the Organisation for Economic Cooperation and Development (OECD) showed.
That is the weakest growth since the second quarter of 2020, when much of the world was in the grip of the first Covid lockdowns.
“The figure represents a departure from the higher and relatively stable growth rates recorded in the OECD area over the past two years,” the OECD said.
America’s economy shrank by 0.1pc in the quarter - its first contraction since the start of 2022. Among the major economies Japan also contracted, with GDP falling by 0.2pc.
President Trump’s tariffs prompted American businesses to import goods before they came into force, a development which offered a temporary boost to exporting nations while subtracting from US GDP, as it represents money being spent outside of the country’s borders. Germany’s GDP rose by 0.2pc, while Britain’s jumped by 0.7pc.
“The rise in US imports of goods, likely influenced by anticipated changes to trade tariffs, was the main drag on growth. Growth also slowed in Canada,” the OECD said.
“By contrast, growth accelerated significantly in the United Kingdom, from 0.1pc to 0.7pc, mainly driven by increases in investment.”
Across the OECD as a whole, the net effect of extra uncertainty and ructions in markets appears to have been a sharp slowdown.
03:25 PM BST
Wall Street’s fears dip as traders eye bigger US debts
Wall Street’s so-called “fear gauge”, known as the Vix, has fallen this afternoon, a day after surging in response to fears around US government borrowing.
The Vix is down 2.9pc after jumping around 15pc yesterday.
Traders were concerned after a US Treasury auction of bonds showed weak global demand for the country’s debt.
Donald Trump’s tax bill is expected to add about $3.8 trillion (£2.8 trillion) to the federal government’s $36.2 trillion debt in the next decade, according to the Congressional Budget Office.
03:04 PM BST
Wall Street shrugs off Trump uncertainty as markets climb
Wall Street stocks climbed on Thursday as investors shrugged off concerns over trillions of dollars worth of tax cuts in Donald Trump’s “big, beautiful” bill.
The Nasdaq, Dow and S&P were up 0.71pc, 0.1pc and 0.25pc at 3:02pm. This came shortly after the US House of Representatives pushed through Mr Trump’s controversial budget plan.
It comes amid worries that Mr Trump’s economic plan will significantly grow America’s already-large debt pile, adding trillions of dollars.
02:04 PM BST
Oil prices continue to fall as Opec members mull production hike
Oil prices declined for their third consecutive day on Thursday as members of the Opec cartel discussed a major production increase in July.
Brent crude was trading at $64 per barrel – it’s lowest point in a week, as traders baulked at the prospect of a significant rise in production over the summer coming at the same time as Donald Trump’s trade war has hammered demand.
Opec members are looking at an increase in production of 411,000 barrels per day. If they agree to push this through at a meeting on June 1, it will be the third consecutive month that they have boosted supply.
01:38 PM BST
Trump’s ‘unnerving’ tax cuts approved despite bond market revolt
Republicans have passed Donald Trump’s package of sweeping tax cuts despite a sharp rise in US debt costs as investors fret about the scale of borrowing within the president’s plans.
The “big, beautiful bill”, as Mr Trump called it, was narrowly approved by the Republican-controlled House of Representatives on Thursday, passing by just one vote.
The legislation extends $4.5 trillion of cuts introduced in the president’s first term of office, as well as new tax breaks including on tips and overtime pay.
The budget also includes an extra $350bn of spending on defence, including a new missile defence system Mr Trump has dubbed “Golden Dome”, as well as border security and deportations.
To pay for the additional tax and spending, the bill will reduce spending on food aid and Medicaid – the programme for healthcare for the poor – and end some of Joe Biden’s tax incentives for spending on low-carbon energy.
However, the cuts are not enough to pay for the tax changes and economists have warned that the president’s plans will add $4 trillion to the $37 trillion US federal deficit over the next decade.
12:45 PM BST
Household bills expected to fall from July
Ofgem, the energy regulator, is expected to deliver a boost to British households tomorrow by lowering its price cap.
The price cap – which dictates the amount suppliers are allowed to charge - is predicted to fall by about 7pc, bringing the average bill down by about £129 to £1,720 per year.
This will come as a relief to households that have faced three consecutive increases in bills.
One major contributing factor is Donald Trump’s trade war, which has hammered gas and oil prices.
Analysts at Cornwall Insight said they expected this to be followed by a “modest drop” in October and another fall in January 2026.
12:15 PM BST
Manufacturing volumes weighed down by soaring costs and tariff uncertainty
Manufacturing output volumes fell at their fastest rate since August 2020 in the three months to May as high costs and rising taxes heaped pressure on firms, new figures show.
A survey of 281 manufacturers by the Confederation of British Industry (CBI) found a growing share reporting that their output had fallen, with the steepest falls in the metal products, food, drink, tobacco and mechanical engineering sectors.
Ben Jones, lead economist at the CBI, said: “Sentiment among UK manufacturers seems poor, reflecting a combination of rising domestic business costs and US tariff uncertainty. Many respondents to the survey reported a reluctance to spend among their customers.
“Although there are some bright spots, notably aerospace and renewable energy, the sector as a whole is reporting that their order books remain weak, and this is expected to weigh on output volumes through the summer.
“While the government has taken steps to boost UK competitiveness on the global stage by striking trade deals with India, the US and a UK-EU reset, more action is needed to shift the dial.
“Businesses are facing pressure from high energy costs, rising labour costs and the threat of extra regulation with the Employment Rights Bill coming down the track.”
It comes after separate data showed private sector output slumped for the second month running in May as employers grappled with higher costs from Rachel Reeves’s tax raid.
11:11 AM BST
Trump’s ‘big, beautiful’ bill casts shadow over US markets
All eyes will be on American markets when they open on Thursday as worries mount over how Donald Trump’s budget plan will add to the US’s spiralling debt burden.
Lenders and investors are growing increasingly jittery about the US’s $37 trillion (£28 trillion) debt mountain. Mr Trump plans to pile on more debt with his so-called “big, beautiful” bill, which includes trillions of dollars worth of tax cuts.
Mr Trump has touted the bill as “the biggest tax cut in the history” of the US.
The S&P 500, Dow and Nasdaq all slid yesterday after it was revealed that demand for US bonds was weaker than expected.
10:58 AM BST
Starmer’s winter fuel capitulation has made Reeves’s life a whole lot worse
Sir Keir Starmer’s about-turn on winter fuel payments defused a backbench rebellion but there is no such thing as a free lunch. What is convenient for the Prime Minister is just the opposite for his Chancellor.
Rachel Reeves nailed her credibility to the policy, citing her first major act in No11 as absolute evidence of her dedication to reducing borrowing.
Cutting winter fuel payments was supposed to prove Labour could be trusted with the public finances and show markets that Sir Keir’s administration could face down both his own Left-wing MPs and Britain’s powerful pensioners, defying the so-called “grey vote”.
Now that plan has been shredded, and at the worst possible time for the Chancellor.
Despite Reeves’s record-breaking tax raid in last October’s Budget and her insistence that she has put the finances back on an even keel after inheriting a “black hole” from the Conservatives, the numbers are not complying.
10:28 AM BST
‘Blame Reeves, not Trump’ for private sector output slump
Matthew Ryan, head of market strategy at payments firm Ebury, cautioned against blaming the US president’s trade war for declining private sector output. He said:
“While concerns surrounding US tariffs may be partly weighing on business confidence, we think that it would be far too simplistic to merely lump the blame on President Trump’s doorstep.
10:11 AM BST
Growth ‘likely to be bumpy’ this year
Here’s Thomas Pugh of consulting firm RSM on the news that private sector output contracted for the second consecutive month in May:
“The positive news was that business sentiment across the economy seems to have rebounded with the composite future output index recovering all of its April drop.
10:08 AM BST
FTSE 100 falls further as private sector output contracts
The index was down by about 0.74pc at 10:06 on Thursday after separate data showed a surge in public sector borrowing and a contraction in private sector output.
The FTSE 250, meanwhile, was down more than 0.6pc.
09:57 AM BST
Private sector output falls for second consecutive month after Reeves tax raid
Britain’s private sector output slumped for the second month running in May as employers grappled with higher costs from Rachel Reeves’s tax raid.
The S&P Purchasing Managers’ Index (PMI) – a closely watched survey – registered 49.4 in May. This was up from 48.5 in April. Any score below 50 represents a contraction.
Subdued demand and higher payroll costs after employers’ National Insurance (NI) contributions rose were blamed for heaping pressure on businesses and reducing employment in the private sector. Manufacturers suffered a particularly dramatic drop in staff numbers, shedding jobs at the fastest rate in half a decade.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “After an ‘awful April’, businesses reported a milder May. Business confidence has rebounded from April’s recent low, which had seen confidence collapse to a degree not seen since the Truss Budget of 2022, and price pressures have moderated after spiking higher.”
However, he added: “Output still fell slightly when measured across all goods and services for a second successive month, hinting at the possibility of the economy contracting in the second quarter.
“Furthermore, although brighter news on tariffs and trade appears to have helped restore some confidence among businesses, sentiment about prospects in the year ahead is still subdued.
“Job cutting consequentially remains worryingly aggressive, especially in manufacturing, as concerns about weak demand have been exacerbated by the rise in staff costs linked to the National Insurance (NI) and minimum wage changes that came into effect in April.”
09:34 AM BST
‘No hope’ of Reeves sticking to fiscal rules
Here’s Danni Hewson, head of financial analysis at investment firm AJ Bell:
“Going into next month’s spending review Rachel Reeves must feel like a tightrope walker being pushed and pulled in all directions by the demands of different departments and public opinion.
09:27 AM BST
London Stock Exchange needs ‘major reforms’, warns US investor
The London stock market needs “major reforms” to compete on the world stage, a US private equity billionaire has said.
Orlando Bravo, the managing partner of Thoma Bravo, said reforms were “long overdue” amid concerns British companies have struggled to attract the same stock market valuations as US rivals.
Mr Bravo, whose net worth is estimated at more than $13bn (£9.7bn), said strict rules governing how UK companies can be acquired “chills the market”, making British businesses less attractive to US bidders.
He added that stock markets in the UK and the US needed “major and incredibly overdue” reforms around how information is shared.
09:19 AM BST
Euro zone business activity contracts
Business activity in the Euro zone contracted this month amid worries over the impact of Donald Trump’s trade war on the bloc.
Hamburg Commercial Bank’s Euro zone Purchasing Managers’ Index (PMI), which is seen as bellwether for growth, dropped from 50.4 in April to 49.5. The index was particularly weighed down by weakness in the bloc’s services sector.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said: “The euro zone economy just cannot seem to find its footing. Since January, the overall PMI has shown only the slightest hint of growth and in May, the private sector actually slipped into contraction.”
However, a survey by the Ifo institute showed that business morale in Germany, Europe’s largest economy, improved slightly more than expected in May. Its business climate index rose to 87.5 in May from 86.9 in April.
The Stoxx 600 index was down 0.75pc at 9:19am.
08:44 AM BST
European stocks fall amid Trump tariff wories
The pan-European Stoxx 600 index dropped by more than 0.6pc on Thursday morning ahead of the release of business activity data.
Investors and business chiefs have been waiting to gauge the impact of how Donald Trump’s trade war will impact the European economy.
08:23 AM BST
FTSE 100 falls in early trading
The benchmark index dropped by more than 0.4pc on Thursday as markets opened, capping off five consecutive days of gains.
Investors were expecting a fall this morning following a sell-off across the Atlantic overnight. The mid-cap FTSE 250 has fallen too, dropping by more than 0.3pc.
Easyjet was one of the biggest fallers in early trading, dropping by around 1.3pc as the airline revealed losses before tax of £394m for the six months to April.
Marks & Spencer shares continued on their path upwards after an update on Wednesday, in which the retailer sought to reassure investors and customers following a devastating cyber attack.
While the retailer revealed the attack would cost it approximately £300m, it also revealed its highest profits for nearly 15 years for the last financial year.
08:09 AM BST
‘Growing concerns’ over UK’s fiscal position
Lindsay James, investment strategist at wealth management firm Quilter, said Thursday’s figures “will do little to ease growing concerns around the sustainability of the UK’s fiscal position”.
She said: “Markets are already showing signs of unease. Ten-year gilt yields have edged higher in recent weeks as investors reassess the UK’s fiscal outlook against a backdrop of weak growth, persistent inflation, and rising global debt burdens.
“Public sector net debt now sits at 95.5pc of GDP – up 0.7 percentage points on the year – with net financial liabilities also rising to 83.5pc. These are levels not seen since the early 1960s and underscore the challenge facing policymakers.”
She added: “The decision to hold off on tax rises in the Spring Budget increasingly looks like a temporary reprieve. As borrowing continues to outstrip forecasts and debt interest costs remain elevated, pressure is building on the Chancellor to make tougher choices.
“Without a material pickup in economic growth or productivity, modest tax increases and targeted spending restraint appear the most plausible route to maintain credibility with both markets and voters.”
07:51 AM BST
Persistent over borrowing and underperformance ‘makes tax hikes likely’
Here’s Thomas Pugh, economist at consulting firm RSM UK:
“Looking ahead to the budget in October, the persistent over borrowing and underperformance of the economy means some sort of fiscal consolidation is starting to look inevitable.
07:38 AM BST
Further tax rises ‘feel inevitable’, economists warn
April’s public finance figures indicate a “poor start” to the year for Rachel Reeves that makes further tax rises “feel inevitable”, according to Ruth Gregory, deputy chief UK economist at Capital Economics.
She said: “April’s public finances figures showed that despite the boost from the rise in employers’ National Insurance (NI) contributions, the fiscal year got off to a poor start.
“This raises the chances that if the Chancellor wishes to stick to her fiscal rules, more tax hikes in the Autumn Budget will be required.”
However, she added: “Income tax and VAT receipts remained a source of strength, rising by £1.8bn and £0.5bn on a year earlier. And despite the rush to transact ahead of stamp duty becoming more onerous on April 1, stamp duty receipts were also £0.4bn higher than a year ago.
“In contrast, at £93.9bn, spending came in £4.2bn higher than a year ago, due to inflation linked increases in many benefits and pensions and pay rises and inflation increasing the government’s running costs.”
Ultimately, she said: “Further bad news for the Chancellor is on the way.
“While tax receipts may be currently benefiting from the bumper 0.7pc q/q increase in GDP growth in Q1, business surveys suggest that strength has fizzled out at the start of Q2. This will filter through into weaker tax receipts in the coming months. And the Chancellor’s fiscal predicament will only get worse later this year. The rise in borrowing costs since March has probably reduced the fiscal headroom from £9.9bn to £5.7bn.
“With the PM announcing a partial U-turn on the cut to winter fuel payments, the dilemma faced by the Chancellor over how to deal with increased spending pressures in environment of low economic growth and high interest rates hasn’t gone away.
“With the markets seemingly uneasy about more public borrowing, further tax rises are starting to feel inevitable.”
07:30 AM BST
Inheritance tax receipts rise by almost £100m
Inheritance tax (IHT) receipts hit £800m in April, a rise of £97m (13.8pc) compared with the same period last year.
The rise comes after the Deputy Prime Minister, Angela Rayner, wrote to Chancellor Rachel Reeves calling for IHT relief on AIM shares to be removed altogether.
Ian Dyall, head of estate planning at wealth firm Evelyn Partners, said: “Whether this suggestion carries any weight with the Chancellor is unknown, but with the PM also rowing back on cuts to the Winter Fuel Allowance this week, questions are bound to arise around tax if the fiscal outlook doesn’t improve before the Autumn Budget.
“Some in Government obviously see the passing on of estates as a legitimate target for tightening up the tax net, so whether or not there are any changes to IHT reliefs at the next Budget, it would be surprising if we got to the next election without any.”
07:17 AM BST
Reeves’s April borrowing bill hits £20bn despite tax raid
Rachel Reeves borrowed £20.2bn last month, as spending on public sector pay and benefits outstripped the extra tax revenues from her National Insurance (NI) raid.
Public sector net borrowing, excluding banks, hit £20.2bn in April, the fourth-highest figure for the month since records began in 1993. This was up from £16.4bn in March.
Public sector borrowing hit £148.3bn in the financial year that ended in March, which was £3.7bn lower than previous estimates, but £11bn more than predicted by the Office for Budget Responsibility (OBR).
April was the first month that employers were forced to pay higher NI contributions since the tax rise was unveiled in Labour’s October Budget. Bosses have warned the tax rises will stymie investment and hiring.
Meanwhile, the surge in borrowing in the first month of the new tax year comes after the Prime Minister on Wednesday failed to rule out further tax rises this year, after it emerged Angela Rayner had pushed for a new raid on savers.
The Telegraph revealed Ms Rayner, the Deputy Prime Minister, had sent a secret memo to Rachel Reeves, the Chancellor, in which she proposed eight tax increases.
During Prime Minister’s Questions, Sir Keir dodged a question from Kemi Badenoch, the Tory leader, on whether he would rule out tax rises later this year.
Ms Badenoch also accused Labour of fuelling inflation with their Budget tax raid in the commons, after it emerged the rate of price rises grew to 3.5pc in April.
Darren Jones, chief Treasury secretary, said: “After years of economic instability crippling the public purse, we have taken the decisions to stabilise our public finances, which has helped deliver four interest rate cuts since August, cutting the cost of borrowing for businesses and working people.
“We’re fixing the NHS, with three million more appointments to bring waiting lists down, rebuilding Britain with our landmark planning reforms and strengthening our borders, delivering on the priorities of the country through our Plan for Change.”
Mel Stride, the shadow chancellor, said in a post on X (formerly Twitter): “The latest borrowing figures expose the true cost of Labour’s reckless economic policies. Instead of reining in spending, the Labour Chancellor has piled billions onto the national debt by fiddling the fiscal rules and maxing out the national credit card.
“This follows on from borrowing last financial year coming out billions of pounds higher than the plans Labour inherited, and means wasting billions more pounds of taxpayers’ money on debt interest.”
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What happened overnight
The three major US stock indexes were down more than 1pc each yesterday following an poor performing auction for US government bonds. The dollar also fell broadly.
Treasury yields extended their gains after the US Treasury Department saw soft demand for the $16bn sale of 20-year bonds. The weak bond sale reinforced the view that investors are shying away from US assets.
The yield on benchmark 10-year US Treasury notes rose to 4.605pc from 4.511pc a day earlier.
At the same time, concerns continued about Donald Trump’s efforts to push through a tax-cutting bill that could worsen the debt load by $3 trillion to $5 trillion.
Overall, the Dow Jones Industrial Average fell 1.91pc, to 41,860.01, the S&P 500 fell 1.6pc, to 5,844.55, and the Nasdaq Composite fell 1.4pc, to 18,872.64.