FirstFT: Sunak to set out fiscal rules to rein in UK borrowing


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UK chancellor Rishi Sunak is planning to use next month’s Budget to set out rules to rein in government borrowing, amid Treasury fears that any rise in interest rates could blow a hole in indebted public finances.

Sunak’s new rules will commit him to stop borrowing to fund day-to-day spending within three years — a move intended to illustrate Tory fiscal discipline ahead of the next election. While the government’s current spending plans fit within the rules, they allow little room for extra giveaways to be unveiled at the Budget.

Sunak’s fiscal rules will also require underlying debt to start falling by 2024-25, according to people briefed on the chancellor’s thinking. It now stands at about 100 per cent of gross domestic product.

Inflation in the UK in August rose to 3.2 per cent, its highest level since 2012, and although the Bank of England thinks the rise is manageable and temporary, Sunak is watching it carefully.

How concerned are you about the prospect of higher inflation, and why? Email me at jennifer.creery@ft.com. Thanks for reading and here’s the rest of today’s news — Jennifer

Five more stories in the news

1. Unpublished ECB inflation estimate raises prospect of earlier rate rise The European Central Bank expects to hit its elusive 2 per cent inflation target by 2025, according to unpublished internal models that suggest it is on course to raise interest rates in just over two years.

Line chart of Eurozone deposit facility rate (%) showing Going down: How the ECB cut rates to a record low

2. US tries to soothe French anger Antony Blinken, US secretary of state, said France remained a “vital partner” in an attempt to calm fury in Paris, whose lucrative submarine contract with Australia was scrapped as a result of America’s naval security pact with Canberra and London.

  • Read on: Beijing condemned the agreement, accusing the three countries of having an “outdated cold war zero-sum mentality”. However, the partnership has been hailed as a boost for the UK’s post-Brexit “Global Britain” agenda.

3. World Bank inquiry finds IMF chief pushed staff to boost China rankings Kristalina Georgieva, managing director of the IMF, has been accused by a World Bank inquiry of directing efforts to artificially boost China’s ranking in the lender’s influential annual Doing Business report.

4. Murdoch’s media empire to launch UK television station News UK said that talkTV, will bring Piers Morgan back to the screens as a presenter, threatening to further disrupt the rapidly shifting broadcasting sector.

5. MassMutual fined over ‘Roaring Kitty’ meme-stock trading The US insurer has been fined $4m for failing to properly supervise Keith Gill, a former employee whose videos under aliases including “Roaring Kitty” encouraged millions of day traders to pump shares of GameStop higher.

Thanks to all those readers that voted in yesterday’s poll. Forty-five per cent of you disagreed with Ark Invest’s Cathie Wood, who predicted that bitcoin’s price would increase tenfold within five years.

Coronavirus digest

  • Analysts predict revenues from Pfizer and Moderna’s Covid-19 vaccines will fall precipitously by 2024.

  • US retail sales bounced back in August as shoppers stocked up on school supplies and home decor in a sign of their willingness to spend.

  • The White House offered rapper Nicki Minaj a chat with a doctor to answer her questions about vaccine safety after she publicly questioned the jabs. (FT, NYT)

The days ahead

Manchester United earnings The team releases its full-year earning results today, including its financial outlook for the year ahead. Investors will look for details of its blockbuster deal for Cristiano Ronaldo, as well as how quickly the club could return to growth after the pandemic.

EU inflation data Earlier this week Eurostat reported that eurozone wages fell for the first time since 2011 in the three months to June from a year ago. This report eased fears ahead of today’s inflation data release.

FDA panel on Pfizer booster jabs An expert panel will meet to give the US drugs regulator an official recommendation as to whether to authorise the company’s booster jab application.

Major Economies Forum on Energy and Climate meeting President Joe Biden will press other countries to join the US, as well as the EU, in pledging to cut methane pollution by 30 per cent over the next decade.

  • More international talks: Mark Rutte, the Dutch prime minister, will meet Boris Johnson, his UK counterpart, in London the same day to discuss how Britain could work more closely with the EU on defence and security.

Lib Dem party conference The gatherings begins virtually and ends on Sunday, when leader Sir Ed Davey will use his in-person conference speech on to position the party as an unambiguously anti-Tory force, vowing that he would never help to put Boris Johnson back into Downing Street.

Russia’s Duma elections The pro-Kremlin United Russia party is expected to retain its majority in the lower house of parliament after Sunday’s polls.

What else we’re reading and watching

Did Occupy Wall Street mean anything? Triggered by predatory home lending and excessive risk-taking, the 2007-2008 financial crisis led to debt crises, mass lay-offs and the repossession of homes. It also birthed protests around the world. Here’s a look at the legacy of the movement, 10 years on.

A trio of Occupy images using the bull as a symbol of corporate greed
Looking at the little-known origins of Occupy, you begin to see the great uncorking of a deep-seated anger that still resonates today © Alexandra Clotfelter; Roger Peet; Adbusters

How Labour lost its grip on the ‘red wall’ Post-industrial England is turning blue. The transformation after the Tory win in 2019 was initially pinned on Brexit and the unpopularity of then-leader Jeremy Corbyn. But Sebastian Payne senses a deeper shift beyond those factors.

East-West divide remains East Germany still exists in people’s minds. Its residents, known as ‘Ossis’, are expected to vote in September 26 elections more radically than westerners. With hindsight, that dissatisfaction emerged almost immediately after the Wall fell, writes Simon Kuper.

Festivals: a high-risk business Music events were already a precarious business, but after a record year in 2019, the pandemic brought outdoor events to a halt. In this film, the FT talks to organisers, bands, and stage hands to find out whether they can bounce back.

FT writers’ biggest financial mistakes From bad interest rates on cards and hire purchase agreements, to living well without checking the costs, our experts explain how they learnt the hard way — as part of our Financial Literacy & Inclusion Campaign.

Fashion

Elizabeth Holmes, the Theranos founder, has adopted a softer, “everymom” persona now that she is on criminal trial in California on charges she misled investors and patients about the accuracy of her company’s finger-prick testing. Has this transformed the power polo into the toxic turtleneck?

Elizabeth Holmes walks into court in a white blouse instead of her signature black polo neck
For court, Holmes has swapped her signature black polo neck for a white blouse © Nick Otto/AFP via Getty Images

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