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Wednesday's Business and Politics round-up

18 Oct 2017

Commuters reading daily news on their journey to work

Happy midweek!

Hang in there, 2 more days until the weekend. 

So – it’s happened – the UK’s key inflation rate has climbed to 3%. Consumer Price Index (CPI) is at its highest for more than 5 years.

This will, of course, continue to fuel the debate on the likelihood of an increase in interest rates, currently at 0.25%. Another debate it is likely to reignite is that of the young vs. old financial disparity.

In this regard, the figure is significant because state pension payments from April 2018 will rise in line with September's CPI. Under the "triple lock" guarantee, the basic state pension rises by a rate equal to September's CPI rate, earnings growth or 2.5%, whichever is the greatest.

The greatest in this instance being 3%. Wages, of course, are not growing at the same pace.

It is also worth noting that business rates will go up by September's Retail Prices Index (RPI) of 3.9%.

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If at first you don't succeed

Try, try, try again?

Or so says the OECD. The Organisation for Economic Co-operation and Development has said reversing the Brexit process would boost the UK economy. Specifically, it highlighted that a new referendum or change of government leading to the UK staying within the EU would have a “significant” positive impact on growth.

The international economic body also warned "no deal" would see investment seize up, the pound hit new lows and the UK's credit rating cut. It said the outcome of the Brexit negotiations was hard to predict.

The Chancellor, Philip Hammond, said the UK would consider the OECD's report and act where it could.

The organisation’s Secretary General used some interesting language to describe what he thought would be the economic outcome of Brexit, including higher prices would “choke off” consumption.

The report also highlights other challenges for the UK, including productivity and the growth of zero-hours contracts.

An interesting analysis you could say, but unlikely to achieve the outcome they may want. A second referendum would only go back to the British people.

Whether this will be well-received or even noted by them, is another question. For those that opted for Brexit, these economic warnings did not sway there views then. It is, therefore unlikely, that hearing it now from the OECD will help to change their mind.

The Unthinkable

You may be wondering which new Hollywood thriller I am talking referring to in this headline, but you’re not quite right. 

“Unthinkable”, the Home Secretary has said, is the prospect of Brexit happening without any deal being reached between the UK and the EU. Amber Rudd was responding to a question about the impact of security if nothing was agreed before the UK leaves the EU.

Ms Rudd assured the Commons Home Affairs Committee that "we will make sure there is something between them and us to maintain our security".

Asked whether if there was "no deal of any form" Britain would be as safe and secure as it currently is, she replied: "I think it is unthinkable there would be no deal.

"It is so much in their interests as well as ours - in their communities', families', tourists' interests to have something in place."

Ms Rudd also said it was "unthinkable" EU citizens would be asked to leave the UK after Brexit, but was unable to offer guarantees while negotiations continue. The Home Secretary did also say that contingency plans were being made in case of no deal by March 2019.

Speaking earlier that day, however, her cabinet colleague the Brexit Secretary David Davis defended keeping the "no deal" option open in the on-going negotiations.

Credit where credit is due?

Members of Parliament are set to debate the rollout of Universal Credit today, amid continuing calls for adjustments to be made to the way in which the Government’s flagship programme should be delivered.

Universal credit is a new single benefit for working-age people, replacing income support, income-based jobseeker's allowance, income-related employment and support allowance, housing benefit, child tax credit and working tax credit.

The plan is for the six benefits to be merged into one, but Labour is calling for the programme to be paused over concerns about how long claimants wait to get the cash. Senior backbencher Frank Field said people were being "pushed towards destitution" on a growing scale.

Ministers, however, insist it is "safe to proceed" following "rigorous" testing. The Government has also said anyone in financial distress can apply for advance payments.

There is speculation that up to 25 Conservative MPs are thought to be willing to rebel and back Labour in the non-binding vote and Theresa May has held talks with would-be rebels in an effort to stave off an embarrassing revolt.

The Work and Pensions Secretary, David Gauke, has taken to the Sun today to defend the policy, but many will argue that the policy is not the issue, rather its delivery.

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