1 August 2025: There will be tax rises in October. Who will suffer?

The UK’s finances are starting to concern economists, who already see the country’s borrowing as “out of control” despite the Chancellor’s insistence that day-to-day spending will be funded by day-to-day income. The bulk of that income is derived from taxes, so it is becoming a foregone conclusion that there will be tax increases in the budget.

It feels like Rachel Reeves got her priorities wrong when she took office last year. Her priority should have been to ensure that there was an element of control over spending, even if that meant moderate tax increases.

However, the first thing that happened was an inflation-busting pay increase for junior doctors. She was said to have immediately broken a pledge not to make unfunded commitments, and no deal should have been agreed without a commensurate increase in productivity.

Junior doctors may be becoming the 21st-century version of the miners, whose militancy was legendary, but their Leader, Arthur Scargill, proved to be no match for Margaret Thatcher.

Unfortunately, we are seeing a modern-day version of militancy, but there is no sign of a politician prepared to stand their ground. So far, Health Minister Wes Streeting has made “mealy-mouthed” suggestions about “working together” with the BMA to find a solution, when the solution should have been found a year ago. Unfortunately, that ship has sailed.

So, Reeves has already gathered her Treasury team around her to try to find a solution where taxes are increased but do the least to immediate living standards. Last year, it was pensioners and farmers who bore the brunt of the “solution”, although most of the burden on pensioners was subsequently removed.

The Prime Minister is risking the “wrath of Trump” by not only threatening to recognise a Palestinian State, but whipping up support, most notably from Canada and France, for his plans.

A Palestinian State should not be considered a “bargaining chip” to be “ tossed into the equation. If it is to be Government policy in September, why is it not Government policy now? We have reached the beginning of another month, and the suffering continues in Gaza while talks drag on.

The UK is facing the largest millionaire exodus in the world this year, yet the government appears unwilling, or unable, to do anything meaningful to stop it, says the CEO of one of the world’s largest independent financial advisory organisations.

Nigel Green, chief executive of deVere Group, says Britain is sleepwalking into a long-term economic decline by driving away wealth creators and refusing to compete for their return.

“Wealthy individuals and global investors are leaving the UK in record numbers, and there’s no serious attempt to bring them back,” says Green.

“That’s short-sighted and self-destructive.” The Prime Minister pledged to create an environment where investors would arrive to support a growing and forward-looking economy. But so far, the opposite is happening.

The pound is still losing ground, despite the dollar’s rise being slowed by some technical sellers. It fell to a low of 1.3185 and closed at 1.3206, ending a run of five consecutive monthly rises.

Donald Trump is having a “Thomas a’Becket” moment, as no matter what he does to remove him, Jerome Powell continues to be proven right time and again.

The publication of the latest data for Personal Consumption Expenditures showed that inflation, according to the Fed’s favourite measure, grew in line with its expectations, making a continued pause in rate cuts the prudent path to take.

Trump, however, does not do prudent, as can be seen by his performance since January, when he has figuratively blown up U.S. trade policy, while blowing up Iran’s nuclear capability. However, the jury remains out on whether either action has been wholly successful.

The US economy has shown a stronger-than-expected recovery in the June quarter, prompting economists to suggest that recession predictions may be premature.

The preliminary second-quarter GDP figure of 3.0 percent signals a robust economy, a significant turnaround from the 0.5 percent contraction in the March quarter.

Trump has continued to weaponise the threat of tariffs. Yesterday, he added a 40% tariff on imports from Brazil, citing threats to the U.S. economy and security. It seems that he “plucked” these reasons from thin air, even as he said that certain actions taken by the Brazil's government threaten the national security, foreign policy and economy of the United States, adding that these actions interfere with the US' interests while violating human rights, and infringing upon the rights of its citizens and companies.

A 10% duty is already imposed on imports from the South American country.

The dollar paused in its march towards a complete recovery from the uncertainty that surrounded it for the entire second quarter. There were some legacy sales orders from traders who felt that 100 would be the limit of any correction in the Index’s fall from grace.

It reached a high of exactly 100, and although the advance may slow, it is likely to begin again in earnest once the market’s summer lull is over.

It is a little odd to see that the Eurozone continues to see record levels of employment, yet productivity and output remain in the doldrums.

Once the ECB gets an idea, it is hard to shake it free. It was the same about inflation, which was, anyway, falling due to the easing of the energy crisis and the strength of the euro, when Lagarde was full of self-congratulation that inflation had been “driven lower” despite rates being cut by 200 points, which would have provoked a spike in inflation in any other economy.

Now, the ECB the number of jobs that have been created in the region over the past year has led to muted celebrations due to the fact that no other date set is pointing to the level of economic improvement that a record number of workers in unemployment points to.

German inflation remained unchanged in July, preliminary data showed Thursday, as eurozone rate-setters mull their next steps after keeping interest rates on hold last week following a string of cuts.

Annual inflation in Europe's top economy came in at 2.0%, according to preliminary data from the Federal statistics agency Destatis.

That was higher than the 1.8% expected by analysts polled by financial data firm FactSet.

Compared to the previous month, prices rose 0.3%, according to the data. Goods inflation notched up a small rise, while services inflation slowed a little, Destatis said.

The inflation figure will reassure rate-setters at the European Central Bank that overall euro area inflation is on the right track.

Germany is the eurozone's largest economy by some distance, accounting for about a quarter of its GDP.

Philip Lane, member of the executive board of the European Central Bank and the bank's chief economist, will deliver a speech on a broad perspective on the monetary policy agenda at the ECB.

Lane is considered to be one of the more level-headed members of the Board and rate-setting Executive Committee, since he is prepared to be guided by data and not some “set in stone” idea about rate cuts.

The euro remains on the back foot, although recent falls have slowed somewhat. Yesterday, the single currency bounced back a little, rising to a high of 1.1462, but fresh sellers emerged to drive it down to close at 1.1415.

Have a great day!