Retail Sales, Flip-flopping, Inflation and Possible Tax Cuts

The quiz question for you this Friday.  Since the 2010 election there have been seven Chancellors of the Exchequer and nine business secretaries (in that department’s various and ever-changing guises).  How many of them can you name?  And as a hint, two have done both jobs, one of them a firm NTI newsroom favourite.

A new report released this morning (17 November) by the Institute for Public Policy Research (“IPPR”) accuses the government of “flip-flopping” on industrial growth plans resulting in billions of pounds of investment into the UK economy having been lost.

The IPPR (who you won’t be surprised to hear are to the left of the political centre) highlighted how a decade of instability since the 2010 election was to blame.  This, the report said included, the various Chancellors and business secretaries who between them had been responsible for 11 different economic strategies in the last 13 years, from a 2011 “plan for growth” to the “growth plan” announced earlier this year.

The thinktank requested the chancellor to show some consistency in the Autumn Statement next week after all the recent chop and change whilst (presumably irony was off ill when the report was written) asking him to set out a new strategy including a focus on green manufacturing.  A report from the IPPR released in June found business investment in the UK was lower than in any other country in the G7, and 27th out of 30 Organisation for Economic Co-operation and Development (OECD) countries, ahead of only Poland, Luxembourg and Greece.

George Dibb, the head of IPPR’s Centre for Economic Justice, said: “Industrial strategy is having a global resurgence but in the UK it’s still talked about in outdated terms. There’s no such thing as a free market – governments shape markets every day. What’s needed is for this to be done in a strategic way, and for this strategy to last long enough to influence business decisions.”  Put that in your pipe, Mr Chancellor.

Retail sales, which had widely been forecast to grow in October (another economist prediction which turned around to be wrong) fell 0.3%.  The fall sees sales at their lowest figure since February 2021, a month when most of us (apart from, it would appear, those inside No10) were subject to Covid lockdowns.

The fall was due to shoppers buying less fuel and food in October as they were hit by rising living costs and poor weather due to Storm Babet in particular.  Commenting on the latest data, the Office for National Statistics said petrol and diesel sales may have been "affected by increasing fuel prices".  Only may?

"It was another poor month for household goods and clothes stores with these retailers reporting that cost of living pressures, reduced footfall and poor weather hit them hard," said Heather Bovill, deputy director for survey and economic indicators at the ONS.  Supermarkets said shoppers were buying more food, but specialist stores, such as butchers and bakers, recorded a decline.  In good news for the NHS but maybe not the treasury, sales of alcohol and tobacco also dropped, down 4.2% and 10.4%, respectively.

As was announced earlier this week, UK inflation fell sharply to 4.6% in October to its lowest rate in two years, largely due to lower energy prices.  The government was cock-a-hoop in sayings its pledge to halve inflation by end of the year has been met early.

But economists (if you can trust them) have said there is a limit to how much credit the government can take for the fall as energy prices settle by the main reason inflation has fallen from its peak of 11.1% in October 2022 is due to a fall this month in the energy price cap, which limits what suppliers can charge consumers per unit of energy.

The inflation news, as well as higher than expected tax revenues and lower than expected bowing costs, has given Jeremy Hunt headroom to play with in the Autumn Statement.  The Times reported this morning tax cuts might be on the way, with a possible cut in inheritance tax from 40% to 30%, as well as raising the £325,000 threshold before the rate starts.  The Times also reported that a rise in the VAT threshold to £90,000 may also be on the cards.

And to your question answers. 

The Chancellors: George Osborne, Philip Hammond, Sajid Javid, Rishi Sunak, Nadhim Zahawi, Kwasi Kwarteng and Jeremy Hunt.
The Business Secretaries: Vince Cable, Sajid Javid, Greg Clark, Andrea Leadsom, Alok Sharma, Kwasi Kwarteng, Jacob Rees-Mogg, Grant Shapps and Kemi Badenoch