Jeremy Hunt made much of the difficult decisions he faced in his first proper fiscal event as Chancellor of the Exchequer. Tax rises and spending cuts in equal proportion would, he argued, provide fairness. This is, in reality, an arbitrary choice that seeks to politically balance the calls from those that would prefer spending cuts and those that would prefer tax rises. There is no denying the overriding aim the Government today was to consolidates its fiscal position and reassure markets after the fallout from the previous Chancellor’s disastrous “mini-Budget” mere months ago.
Hunt may not have been Rishi Sunak’s personal choice for Chancellor however the tone struck between the two in recent days suggests that they have taken to heart that the Conservative Party needs to ‘unite or die’. That unity has to last across a supremely economically difficult period if it is to reap any political windfalls. Real household disposable income per person is set to fall 4.3% this year, and 2.3% the year after as inflation remains stubbornly above target. Unemployment is due to increase from 3.6% to 4.9% in 2024. Interest rates will likely continue to rise while the Bank of England seeks to reduce the inflation rate. In the meantime, the Conservatives will say that their policies are seeking to strike a balance between maintenance of public services, while not raising taxes to the point that it chokes off economic growth required to pay for them.
The political choice to introduce two new fiscal rules, that within five years debt has to fall as a proportion of GDP and public sector borrowing must be below 3% of GDP, shows a Chancellor that has his eyes both on restoration of national economic credibility in international capital markets but also political credibility in the eyes of an electorate burned by the short and tumultuous Truss premiership. They also represent an attempt to corner the Labour Party, following their economic playbook and challenging them not to make policy pledges that expand the size of state spending. This trap is extended further by government pledges to support capital projects such as the building of Sizewell C nuclear power station, continuation
of HS2, and Northern Powerhouse Rail, as well as with R&D funding increasing while at the same time keeping development spending below the 0.7%. Taken together these could force the opposition into a debate on spending framed in Tory terms.
Tory backbenchers were muted throughout the Statement, and sombre in hearing the figures showing the real hardship that families and businesses up and down the country will face in the months ahead. There were a few exceptions though, throwing their weight behind the extra spending on the Health and Social Care budget, in education, in the maintenance of capital expenditure, and in continuing the pensions triple lock. Hunt and Sunak’s prioritisation of protection for pensioner budgets and projects in the Red Wall should be seen as a clear attempt to stymie the bleed of votes that has happened in recent months and shore up the same coalition that voted for the party in 2019 ahead of the next election.
Ahead of that election the blame game for the pain the country is feeling at present is well and truly under way. Hunt began his statement by blaming unprecedented global headwinds, before labelling the economic downturn a “recession made in Russia,” and citing the Office of Budget Responsibility as confirming that “global factors” are the “primary cause of current inflation.” The Labour Party’s response was that the problem was “made in Downing Street.”
Who voters blame for the decrease in their purchasing power and the diminished opportunities in their lives will ultimately decide the next election. Hunt and Sunak are looking to reap the benefits of prudence now and signs of growth later and hope to do so off the back of rebuilt economic credibility. “Britain is on the right track, don’t turn back” might well be something older political afficionados will recognise. The Labour Party, on the other hand, have already started to repeat the message: don’t forgive, don’t forget.
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With the Financial Services and Markets Bill set to return to Parliament in September, the H/Advisors Cicero Financial Services Practice is delighted to share a detailed overview analysing key provisions contained in this landmark piece of legislation. This analysis also details the likely timeline for reform and how the reforms will be implemented through the new regulatory architecture. This follows an overview note sent in July 2022 upon the Bill’s introduction to Parliament.
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Years in the making, the landmark Financial Services and Markets Bill was finally tabled this afternoon as the last piece of legislation under the Johnson Government.
The Bill repeals the financial services framework inherited from the EU, offering regulators vast new powers to reform EU rules, the ability to devise new regimes on issues including issues including stablecoins and Critical Third Parties, among others, while establishing a new secondary objective for regulators to promote “economic growth and international competitiveness”.
To help your organisation understand this significant Bill and its wide-ranging implications, the H/Advisors Cicero team have written this overview highlighting key proposal across the financial services sector and the likely timeline for the Bill being made law.
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The European Commission today unveiled its Financial Package, comprised of two proposals aimed at improving the consumer protection framework for buyers of financial services at a distance, and bolstering equity financing in the Union to support businesses in their post-COVID recovery.
The Cicero/amo team have produced a short analysis of the key aspects of this Package and the impact they could have on business.
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A new Financial Services Bill, set to be included in this year’s Queen’s Speech on 10th May, will be the most significant legislation in the area since the sector’s post-crisis financial reforms, with the financial regulators – the Bank of England, Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) – all set to take on vast swaths of new policymaking powers.
Unlike the EU system that preceded it, we are currently destined for a regulatory process that leaves significant power in the hands of the regulators, with minimal oversight from a fleetingly interested Parliament.
Against this backdrop, the Cicero/amo team has produced an overview of what to expect from the Financial Services Bill and its impact on the sector.
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Having delivered all of his fiscal statements to date against a backdrop of the COVID-19 pandemic, Chancellor Rishi Sunak was hoping today would be the first opportunity of his still-young chancellorship to make his mark on the British economy. With the cost-of-living at the front of voters’ minds, Sunak had to balance a worsening economic backdrop with MPs from all sides’ demands for a more interventionist approach.
Eye-catching announcements on raising the National Insurance threshold to £12,570 to match the Income Tax band, as well as cuts to fuel duty and Income Tax (that will come into force in April 2024) will boost Sunak’s ambition to be a ‘tax cutting Chancellor’. But overall the statement was a cautious one, showing the Conservatives doubling down on their orthodoxy for fiscal responsibility. As prices continue to rise, however, Sunak may have to revisit his support measures and funding for new energy development, especially once the energy price cap rise kicks in from next month.
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