Tax

Fiscal “black hole” obsession adds to UK problems

16 Nov 2022

Prime Minister Rishi Sunak’s government is set to tighten the public finances by about 50 bln pounds, equivalent to 2% of GDP. Yet the case for such a large package is based on dubious logic. If it’s front-loaded and overly reliant on spending cuts, it will also hurt growth.

Capital Calls: Centrica

10 Nov 2022

Concise views on global finance: The 5 bln pound UK energy group launches a 250 mln pound buyback despite a struggling supply business and windfall tax threats.

BP is case study in global windfall-tax quandary

1 Nov 2022

The $100 bln oil major wants to produce more green energy and less crude. Yet a British windfall tax risks pushing it in the opposite direction. A better levy design would hit outsized profit in both fossil fuels and renewables, while still incentivising investment in the latter.

Italy’s new premier starts with a big faux pas

27 Oct 2022

Giorgia Meloni vowed to hike a 2,000 euro cap on cash payments, reversing attempts to boost electronic transactions. That will make it harder to track 100 bln euros of annual untaxed revenue. With debt at 147% of GDP, Italy cannot afford to be complacent on chronic tax evasion.

Italy’s new boss is missing a trick on tax evasion

24 Oct 2022

Public debt at 147% of GDP and a slowing economy limit Prime Minister Giorgia Meloni’s scope to curb an energy crisis and keep spending promises. Tackling endemic tax evasion would give her more fiscal ammunition. Yet promoting the use of cash and tax amnesties will not help.

Truss’s exit highlights America’s free pass

21 Oct 2022

U.S. fiscal policies, based on tax cuts for the rich and widening budget deficits, have been fairly similar to those of Britain’s ousted prime minister. Only the dollar’s status as the world’s reserve currency keeps the laws of economics from applying in the United States, too.

Britain’s next leader will be on a short leash

20 Oct 2022

Prime Minister Liz Truss is out after just 44 days in office. Whoever replaces her will have to endorse fiscal discipline or risk a similar fate. The ruling Conservatives have little in common except fear of an early election. But only a national vote can restore political order.

Massive fiscal U-turn leaves UK in political funk

17 Oct 2022

New finance minister Jeremy Hunt soothed investors by reversing most of Prime Minister Liz Truss’s “growth plan” and cutting short her generous energy subsidies. But he still needs extra tax hikes or spending cuts. Persuading parliament to support the switch will be a challenge.

UK still two U-turns away from financial stability

14 Oct 2022

Prime Minister Liz Truss sacked her finance minister after less than six weeks because his unfunded tax cuts roiled markets. She will now attempt a more fiscally sound approach. But her party may decide it needs another leader, while voters may prefer a change of government.

UK mess bolsters case for Italian budget prudence

6 Oct 2022

Market turmoil forced British Prime Minister Liz Truss to partly ditch unfunded tax cuts. The humbling saga should help Italian would-be premier Giorgia Meloni resist her allies’ spending requests. Picking a technocrat as finance minister would give investors further comfort.

Tax U-turn leaves UK’s Truss with credibility gap

3 Oct 2022

Prime Minister Liz Truss’ move to scrap a tax cut for high earners lowered government bond yields and boosted the pound. But her policies still rely on unfunded giveaways and rosy growth hopes. Investors’ loss of confidence from the crisis makes her agenda even harder to achieve.

“Help to Refi” could be UK’s next financial wheeze

30 Sep 2022

Prime Minister Liz Truss’s rash tax cuts have rattled the government bond market. She needs to attract investors and bring yields back down. The “Help to Buy” scheme to subsidise mortgages offers a template. Breakingviews imagines a fictional adviser taking up the challenge.

German energy bailout belatedly outclasses Europe

30 Sep 2022

Berlin will borrow 200 bln euros to help consumers cope with rocketing energy prices. It’s not the first state to go for a shock and awe approach, but Germany’s ample fiscal space gives it way more scope to go big. Unlike the UK, it can also do so without spooking investors.

BoE remedy can only be partial cure for UK ills

29 Sep 2022

The UK central bank launched $70 bln of bond-buying after PM Liz Truss’s budget triggered market chaos. That has stemmed a financial crisis among indebted pension funds. Stopping the market exerting economic pain requires a fiscal rethink from politicians, not more BoE action.

Behind Britain’s self-inflicted financial crisis

28 Sep 2022

Sterling fell to a record low and gilt yields soared after finance minister Kwasi Kwarteng unveiled a raft of unfunded tax cuts. In this Viewsroom podcast, Breakingviews columnists explain the long-term damage to the UK’s credibility and what will rebuild investors’ confidence.

BoE’s bond-buying U-turn is worth the risk

28 Sep 2022

The Bank of England will buy UK sovereign debt and delayed sales of its $915 bln bond portfolio due to market “dysfunction”. The danger is Governor Andrew Bailey looks too close to the government whose tax cuts caused the turmoil. Yet calmer markets make it easier to hike rates.

UK swaps one cost-of-living crisis for another

27 Sep 2022

The Bank of England may raise rates past 5% to stem the inflationary effect of Chancellor Kwasi Kwarteng’s tax cuts. Homeowners, saved by the government’s energy price cap, now face a surge in mortgage costs. That will sap growth and add to pressure for banks to help customers.

Capital Calls: Byju’s revenue fail

15 Sep 2022

Concise views on global finance: Byju’s topline shrunk after its auditor advised it to recognise its revenue differently.

Capital Calls: U.S. railways steer clear of crisis

15 Sep 2022

Concise views on global finance: Major U.S. railroads and unions reached a tentative deal, avoiding a shutdown that could have widespread consequences on the U.S. economy.

Chinese audits, Vaccine wars, UK tax cuts

1 Sep 2022

Beijing will let companies submit to U.S. audit requirements. In this Viewsroom podcast, Breakingviews columnists argue only weak firms will comply. Also, Pfizer and Moderna’s legal battle is unlikely to create a winner, and Britain’s prime ministerial hopefuls debate handouts.