Former Bank of England governor Sir Mark Carney on Thursday warned the UK government against undermining the country’s economic institutions.
Sir Mark said the new government was “working at cross purposes with the bank", after Chancellor Kwasi Kwarteng’s tax-cutting mini-budget unleashed turmoil in the markets.
“There was an undercutting of some of the institutions that underpin the overall approach — so not having an Office for Budget Responsibility forecast is much-commented upon,” Sir Mark told BBC Radio 4.
“Unfortunately, having a partial budget in these circumstances — a tough global economy, tough financial market position, working at cross purposes with the bank — has led to quite dramatic moves in financial markets.”
The mini-budget, or so-called “fiscal event,” which was announced on Friday, represented the country's largest tax cuts in 50 years. It included the abolishment of the top rate of tax for its biggest earners.
Sir Mark, who served as the central's bank governor 2013 to 2020, said the government made the mistake of leaving out the “real measures” that would drive the acceleration of growth in the economy. He said these were necessary for the numbers to add up.
“And so that leads to one last uncertainty and concern, which is maybe the way the numbers are going to add up is through spending cuts, as yet unspecified,” he said. “What would those be and how are those going to be put in place?”
On Monday, the pound fell to its lowest level against the dollar ― only $1.03.
On Wednesday, the Bank of England was forced to intervene to buy up gilts — UK government debt in sterling ― after it “warned of a material risk to UK financial stability”.
The bank was forced to act after plunging markets for UK debt sent borrowing costs soaring and forced pension funds to dump their assets because they did not have enough short-term cash to honour some contracts.
Sir Mark praised the bank for stepping in to avert a pensions crisis cascading through market.
“If the bank had done nothing, we would have had further moves up in government bond yields and potentially some of these pension funds unable to make short term obligations, and the knock-on effects that were beginning to show up,” he said.
“That would more than ripple, it would cascade through financial markets.
“It is complicated. But the core thing here is the bank acted, the bank was able to act because it has that structure and it rightly stepped in at the point where the system was about to not function.”
The turbulence continued on Thursday, as the pound slid in early deals as low as $1.0763 following the Bank of England intervention.
“The message of financial markets is that there is a limit to unfunded spending and unfunded tax cuts in this environment,” Sir Mark said. “And the price of those is much higher borrowing costs for the government and for mortgage holders and borrowers up and down the country.”
His comments are the latest in a wave of international criticism and warnings about the government’s fiscal plans, including from the International Monetary Fund and ratings firm Moody’s.
The IMF on Tuesday said it was “closely monitoring” developments and urged Mr Kwarteng to “re-evaluate” his tax measures. It said, in an extraordinary statement, that the plans would increase inequality.
Meanwhile, Moody's said Britain's new fiscal policy regime was “credit negative”. It said a sustained confidence shock could permanently weaken the UK's debt affordability.
The government has, however, dismissed criticism about its financial plans.
Chris Philp, Britain's chief secretary to the Treasury, said he disagreed with concerns raised by the IMF.
“I saw the IMF comments. I respectfully disagree,” he told Sky News.
Mr Philp also said the government would stick to its plan to hold a bigger fiscal announcement on November 23.
Meanwhile, World Bank president David Malpass on Wednesday warned that it could take years for global energy production to diversify away from Russia after its invasion of Ukraine. This would prolong the risk of stagflation, or a period of low growth and high inflation, he said.
In a speech at Stanford University in California, Mr Malpass said there was an increased likelihood of recession in Europe. He said China's growth was slowing sharply and US economic output had contracted in the first half of the year.
Those developments would have grave consequences for developing countries, Mr Malpass said, citing what he called “consequential” and “worsening” challenges facing development.
Addressing the current “perfect storm” of rising interest rates, high inflation and slowing growth required new macro and microeconomic approaches, Mr Malpass said. He said these would include better targeted spending and clearly messaged efforts to increase supplies.
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If you go
The Flights
Emirates and Etihad fly direct to Johannesburg from Dubai and Abu Dhabi respectively. Economy return tickets cost from Dh2,650, including taxes.
The trip
Worldwide Motorhoming Holidays (worldwidemotorhomingholidays.co.uk) operates fly-drive motorhome holidays in eight destinations, including South Africa. Its 14-day Kruger and the Battlefields itinerary starts from Dh17,500, including campgrounds, excursions, unit hire and flights. Bobo Campers has a range of RVs for hire, including the 4-berth Discoverer 4 from Dh600 per day.
RESULTS
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The specs
BMW M8 Competition Coupe
Engine 4.4-litre twin-turbo V8
Power 625hp at 6,000rpm
Torque 750Nm from 1,800-5,800rpm
Gearbox Eight-speed paddleshift auto
Acceleration 0-100kph in 3.2 sec
Top speed 305kph
Fuel economy, combined 10.6L / 100km
Price from Dh700,000 (estimate)
On sale Jan/Feb 2020
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COMPANY%20PROFILE%20
%3Cp%3E%3Cstrong%3ECompany%20name%3A%20%3C%2Fstrong%3EAlmouneer%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202017%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Dr%20Noha%20Khater%20and%20Rania%20Kadry%3Cbr%3E%3Cstrong%3EBased%3A%20%3C%2Fstrong%3EEgypt%3Cbr%3E%3Cstrong%3ENumber%20of%20staff%3A%20%3C%2Fstrong%3E120%3Cbr%3E%3Cstrong%3EInvestment%3A%20%3C%2Fstrong%3EBootstrapped%2C%20with%20support%20from%20Insead%20and%20Egyptian%20government%2C%20seed%20round%20of%20%3Cbr%3E%243.6%20million%20led%20by%20Global%20Ventures%3Cbr%3E%3C%2Fp%3E%0A
Ferrari 12Cilindri specs
Engine: naturally aspirated 6.5-liter V12
Power: 819hp
Torque: 678Nm at 7,250rpm
Price: From Dh1,700,000
Available: Now
The specs
Engine: 1.5-litre turbo
Power: 181hp
Torque: 230Nm
Transmission: 6-speed automatic
Starting price: Dh79,000
On sale: Now
Fanney Khan
Producer: T-Series, Anil Kapoor Productions, ROMP, Prerna Arora
Director: Atul Manjrekar
Cast: Anil Kapoor, Aishwarya Rai, Rajkummar Rao, Pihu Sand
Rating: 2/5
Libya's Gold
UN Panel of Experts found regime secretly sold a fifth of the country's gold reserves.
The panel’s 2017 report followed a trail to West Africa where large sums of cash and gold were hidden by Abdullah Al Senussi, Qaddafi’s former intelligence chief, in 2011.
Cases filled with cash that was said to amount to $560m in 100 dollar notes, that was kept by a group of Libyans in Ouagadougou, Burkina Faso.
A second stash was said to have been held in Accra, Ghana, inside boxes at the local offices of an international human rights organisation based in France.
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Get inspired
Here are a couple of Valentine’s Day food products that may or may not go the distance (but have got the internet talking anyway).
Sourdough sentiments: Marks & Spencer in the United Kingdom has introduced a slow-baked sourdough loaf dusted with flour to spell out I (heart) you, at £2 (Dh9.5). While it’s not available in the UAE, there’s nothing to stop you taking the idea and creating your own message of love, stencilled on breakfast-inbed toast.
Crisps playing cupid: Crisp company Tyrells has added a spicy addition to its range for Valentine’s Day. The brand describes the new honey and chilli flavour on Twitter as: “A tenderly bracing duo of the tantalising tingle of chilli with sweet and sticky honey. A helping hand to get your heart racing.” Again, not on sale here, but if you’re tempted you could certainly fashion your own flavour mix (spicy Cheetos and caramel popcorn, anyone?).
The biog
Full name: Aisha Abdulqader Saeed
Age: 34
Emirate: Dubai
Favourite quote: "No one has ever become poor by giving"
Walls
Louis Tomlinson
3 out of 5 stars
(Syco Music/Arista Records)
Abu Dhabi traffic facts
Drivers in Abu Dhabi spend 10 per cent longer in congested conditions than they would on a free-flowing road
The highest volume of traffic on the roads is found between 7am and 8am on a Sunday.
Travelling before 7am on a Sunday could save up to four hours per year on a 30-minute commute.
The day was the least congestion in Abu Dhabi in 2019 was Tuesday, August 13.
The highest levels of traffic were found on Sunday, November 10.
Drivers in Abu Dhabi lost 41 hours spent in traffic jams in rush hour during 2019
Classification of skills
A worker is categorised as skilled by the MOHRE based on nine levels given in the International Standard Classification of Occupations (ISCO) issued by the International Labour Organisation.
A skilled worker would be someone at a professional level (levels 1 – 5) which includes managers, professionals, technicians and associate professionals, clerical support workers, and service and sales workers.
The worker must also have an attested educational certificate higher than secondary or an equivalent certification, and earn a monthly salary of at least Dh4,000.
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Our family matters legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
Uefa Nations League
League A:
Germany, Portugal, Belgium, Spain, France, England, Switzerland, Italy, Poland, Iceland, Croatia, Netherlands
League B:
Austria, Wales, Russia, Slovakia, Sweden, Ukraine, Republic of Ireland, Bosnia-Herzegovina, Northern Ireland, Denmark, Czech Republic, Turkey
League C:
Hungary, Romania, Scotland, Slovenia, Greece, Serbia, Albania, Norway, Montenegro, Israel, Bulgaria, Finland, Cyprus, Estonia, Lithuania
League D:
Azerbaijan, Macedonia, Belarus, Georgia, Armenia, Latvia, Faroe Islands, Luxembourg, Kazakhstan, Moldova, Liechtenstein, Malta, Andorra, Kosovo, San Marino, Gibraltar
The specs: Audi e-tron
Price, base: From Dh325,000 (estimate)
Engine: Twin electric motors and 95kWh battery pack
Transmission: Single-speed auto
Power: 408hp
Torque: 664Nm
Range: 400 kilometres
ENGLAND SQUAD
Goalkeepers Pickford (Everton), Pope (Burnley), Henderson (Manchester United)
Defenders Alexander-Arnold (Liverpool), Chilwell (Chelsea), Coady (Wolves), Dier (Tottenham), Gomez (Liverpool), James (Chelsea), Keane (Everton), Maguire (Manchester United), Maitland-Niles (Arsenal), Mings (Aston Villa), Saka (Arsenal), Trippier (Atletico Madrid), Walker (Manchester City)
Midfielders: Foden (Manchester City), Henderson (Liverpool), Grealish (Aston Villa), Mount (Chelsea), Rice (West Ham), Ward-Prowse (Southampton), Winks (Tottenham)
Forwards: Abraham (Chelsea), Calvert-Lewin (Everton), Kane (Tottenham), Rashford (Manchester United), Sancho (Borussia Dortmund), Sterling (Manchester City)
Avatar: Fire and Ash
Director: James Cameron
Starring: Sam Worthington, Sigourney Weaver, Zoe Saldana
Rating: 4.5/5
ELIO
Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett
Directors: Madeline Sharafian, Domee Shi, Adrian Molina
Rating: 4/5
