24 July 2025: Reeves and Rayner are battling over tourist tax

The apparent antipathy between Deputy Prime Minister Angela Rayner and Chancellor of the Exchequer Rachel Reeves has resurfaced as the two senior Cabinet members disagree over the imposition of a tourist tax on visitors to the UK.

Rayner pushed for councils to be given powers to tax tourists as part of the government’s devolution agenda, but was rebuffed by the Treasury.

The Deputy Prime Minister believes that as part of the Government’s devolution programme, directly elected Mayors should be given the power to raise taxes on hotel stays by foreign visitors, but Reeves disagreed saying that the measure would harm local businesses that are already struggling to pay the increased employers National Insurance cost as well as the rise in the minimum wage.

A tourist tax is a common charge levied in several European cities, including Amsterdam, Paris, Lisbon, and Venice. Rayner had wanted the tax to be available across the entire UK, something that is not done in other European states.

Cities in Scotland have their tax-raising powers. Visitors to Edinburgh and Glasgow will pay 5% on hotel stays from July next year and January 2027, respectively.

Manchester Mayor, Andy Burnham, is thought to be in favour of providing devolved authorities revenue-raising opportunities, while London Mayor Sadiq Khan would welcome the opportunity. Both signed a letter along with several of their colleagues in devolved authorities in favour of the plan.

Data published yesterday showed that vehicle production in the first half of this year fell to its lowest level since 1953, other than during the shutdowns due to the Pandemic.

Vehicle output fell 7.3% in the six months to June, while the closure of Vauxhall's Luton van plant helped drive van production down 45%, data from the Society of Motor Manufacturers and Traders.

Uncertainty over tariffs in the US, the UK industry's second-biggest market after the European Union, meant some firms slowed or stopped production in the first half of this year.

Eclectic vehicle production rose by 1.8% as manufacturers welcomed the subsidy reintroduced by the Government last week, although there is confusion about which vehicles would qualify.

Composite data for output is due for release later today. It is expected to show a marginal increase, driven by an improvement in service output. Manufacturing is expected to slow a little, remaining below the 50 level, which denotes expansion.

The pound appears to have officially entered the summer lull, with activity and liquidity falling to their lowest level in two months. Sterling did attempt to break above its short-term level of resistance, but did not have the support to continue higher. It reached a high of 1.3588 and closed at 1.3583.

Donald Trump appears to have given up for now in his efforts to both force the Federal Reserve to cut interest rates and also remove its Chairman, Jerome Powell, from Office.

However, the pressure has only decreased marginally as several of Trump’s supporters are continuing to attack Powell, no doubt galvanised by Trump’s recent rhetoric, if not actively encouraged by the President.

Newspaper reports confirm that in May, Attorney General Pam Bondi informed the President that his name appears several times in the documents regarding the case of Jeffrey Epstein, but mere mention of his name does not imply any association with Epstein or his business or personal life.

It would be surprising, and lead to speculation of a cover-up, should Trump’s name not be mentioned since they moved in similar circles, given the similarity of their business interests.

Meanwhile, a judge in Florida has denied a Department of Justice request to release grand jury transcripts from the investigation into the late sex offender Jeffrey Epstein, undermining an effort by Trump and Bondi to quell criticism from the MAGA base over the administration’s handling of the files relating to Epstein and his death in custody.

The trust between Europe and the United States is "no longer there", forcing the European Union to diversify its trade relationships as the world shifts away from a predictable, rules-based system, a senior European business leader warned last week.

The comments came during a virtual discussion hosted by the Peterson Institute for International Economics. The panel featured Penelope Naas, Head of Allied Strategic Competitiveness at the Marshall Fund of the United States, and Luisa Santos, deputy director general at Business Europe.

Naas said that US President Donald Trump's affinity for tariffs is a long-held conviction, now being deployed as a "Swiss army knife" to solve a range of issues.

She outlined a four-part strategy behind the administration's actions: achieving reciprocal trade, restoring key industries to the US using national security justifications, generating significant government revenue and using tariffs as leverage on unrelated geopolitical matters.

It is believed that Trump-owned businesses were prominent in the promotion of “exporting” U.S. manufacturing output to countries with lower cost bases, but he changed his mind when it became a politically sensitive subject.

The dollar index is still in the doldrums, with just commercial interests the only substantial buyers as investors shy away from the uncertainty that has developed during the current quarter.

The Greenback fell to a low of 97.19 in thin trading yesterday and closed at 97.22. Its major support point is set at 96.65, but it is unlikely to challenge that without a significant global event.

The ECB’s Governing Council meets later today to agree on monetary policy for the next six weeks. It is expected to be a close call whether the cycle of interest rates that has been in place for more than a year and has led to the official rate of interest falling by 200 basis points will continue, or if the widely expected pause will begin this month.

Some “heavy-hitting” members of the Council have lent their weight to the need for a pause to gauge the effect of such a long run of cuts, while any move for a continuation has been purely anecdotal since no “dove” has seen fit to “show their head above the parapet”.

The European Central Bank looks set to keep interest rates unchanged on Thursday, while the introduction of higher US tariffs threatened by US President Donald Trump hangs in the balance.

A pause would bring an end to a string of cuts that dates back to September last year, as the ECB progressively lowered borrowing costs in response to sinking inflation.

The pace of consumer price rises has settled around the central bank's 2% target, having soared to double-digit highs in the wake of the coronavirus pandemic and Russia's full-scale invasion of Ukraine.

But the relatively more favourable monetary policy conditions look fragile, with an August 1 deadline for the possible imposition of punitive tariffs on European exports into the United States set by Trump. With Washington and Brussels still in talks over a possible tariff deal, ECB rate-setters would want "more clarity... before considering any further adjustment to monetary policy", UniCredit analysts said.

A pause would give policymakers the summer to see whether Trump follows through with his threat to slap EU exports with a flat 30% tariff, in addition to existing levies on cars, steel and aluminium.

Higher barriers to trade risk delivering a fresh blow to the eurozone economy, and encourage the ECB to contemplate further rate cuts.

ECB Chief Economist Philip Lane believes that the Central Bank and the European Commission must look beyond simply controlling inflation to the wider economy as the “inflation ship has clearly now sailed”, and inflation was a one-off which was due to a series of singular events and not ingrained into the fabric of the region.

PMI data will also be published today, with the composite index remaining just above the fifty level while manufacturing output hovers just below.

The predilection with inflation has meant the ECB has taken its “eye off the growth ball”, almost waiting for Germany to come to the region’s rescue. The recent creation of two funds, both Government-backed, is likely to see German industrial output rise, although there are moves within the country to try to move to a more service-based economy.

Critics believe that this would simply allow China to gain a far larger slice of the “global manufacturing pie”.

The euro gained marginally in quiet trading yesterday. It climbed to a high of 1.1775 and closed at 1.1772.

Have a great day!