Jeremy Hunt is interviewed for Sophie Raworth’s ‘Sunday Morning’ at BBC Broadcasting House in London.
Tejas Sandhu | Lightrocket | Getty Images
LONDON — U.K. Finance Minister Jeremy Hunt used his first Monday on the job to announce that almost all of the controversial tax measures announced by his predecessor would be reversed.
The major U-turn includes scrapping the cut in the lowest rate of income tax from 20% to 19%, as well as cuts to dividend tax rates, the reversal of off-payroll working reforms, VAT claim-backs for tourists and the freeze on alcohol duty rates.
Hunt said the reversed tax cuts totalled £32 billion a year.
Markets cheered the announcement, with sterling trading up over 1% against the dollar by 11:30 a.m. London time. Yields on U.K. government bonds also fell sharply, with the 10-year yield trading down 35 basis points at 3.974%. Yields move inversely to prices.
Hunt also announced that the energy package designed to subsidise consumer and business energy bills would only run until April and then be reviewed in order to “cost the taxpayer significantly less than planned.”
“A central responsibility for any government is to do what is necessary for economic stability,” Hunt said in a statement.
“No government can control markets, but every government can give certainty about the sustainability of public finances. That is one of the many factors that influence how markets behave. For that reason, although the prime minister and I are both committed to cutting corporation tax, on Friday she listened to concerns about the mini budget.”
Hunt said a full statement with questions would come in parliament later Monday, but because the details were market sensitive he wanted to give a brief summary in an effort to instil “confidence and stability.”
On Friday, Prime Minister Liz Truss fired her Finance Minister Kwasi Kwarteng less than six weeks after the pair took office, appearing to blame the chaos sparked in financial markets by the budget he announced on Sept 23.
It included unfunded tax cuts forecast to total £45 billion ($50.78 billion), which were billed by Truss and Kwarteng as a radical plan to turbocharge the U.K.’s sluggish economic growth and were a key part of Truss’s leadership campaign.
However, markets were spooked by a range of factors including the prospect of significantly higher government debt given the impending subsidies of consumer and business energy bills, and the perceived mismatch between the Bank of England’s current monetary tightening to tame inflation and the government’s stimulus package. The lack of economic forecast from the U.K.’s Office for Budget Responsibility also weighed on markets.
The pound’s year-long decline against the dollar accelerated and U.K. government bonds, known as gilts, saw a dramatic sell-off. The Bank of England launched a temporary bond-buying program to support the market, which ended Friday, in large part to protect liability driven investment (LDI) funds — many of which are owned by pension plans — from collapse.
Along with the potential effects of a weaker pound, the public has also been impacted by market volatility as mortgage offers were pulled and mortgage rates spiked as lenders assessed new rate hike expectations.
The ruling Conservative Party will be hoping that the arrival of Hunt, who has held previous roles as health and foreign secretary but was a so-called “backbench” member of parliament until Friday, will give the government a much-needed boost in support.
Political polling shows the party plunging to lows not seen since the 1990s and Brits also a difficult winter of higher prices.
John Gieve, former deputy governor at the Bank of England, told the BBC Monday morning that leaks from the Treasury showed the U.K. deficit was nearing £70 billion.
“Hunt realised even if he squeezes public expenditure hard he won’t be able to square the books doing that,” he told the Today program.”So he can’t afford the sort of tax cuts, even the £25 billion that remain on the table.”
Media reports have emerged of discontent with Truss’s premiership from her own MPs just 40 days since she took the job. However, under current Conservative party rules a fresh leadership election cannot be held for 12 months.
Former Prime Minister Boris Johnson announced that he would step down on July 7 after a wave of resignations by top ministers.
Ford CEO says 65% of U.S. dealers agree to sell EVs
Ford F-150 Lightning trucks manufactured at the Rouge Electric Vehicle Center in Dearborn Michigan.
Courtesy: Ford Motor Co.
DETROIT – About 65% of Ford Motor’s dealers have agreed to sell electric vehicles as the company invests billions to expand production and sales of the battery-powered cars and trucks, CEO Jim Farley said Monday.
About 1,920 of Ford’s nearly 3,000 dealers in the U.S. agreed to sell EVs, according to Farley. He said roughly 80% of those dealers opted for the higher level of investment for EVs.
Ford offered its dealers the option to become “EV-certified” under one of two programs — with expected investments of $500,000 or $1.2 million. Dealers in the higher tier, which carries upfront costs of $900,000, receive “elite” certification and be allocated more EVs.
Ford, unlike crosstown rival General Motors, is allowing dealers to opt out of selling EVs and continue to sell the company’s cars. GM has offered buyouts to Buick and Cadillac dealers that don’t want to invest to sell EVs.
Dealers who decided not to invest in EVs may do so when Ford reopens the certification process in 2027.
“We think that the EV adoption in the U.S. will take time, so we wanted to give dealers a chance to come back,” Farley said during an Automotive News conference.
Ford’s plans to sell EVs have been a point of contention since the company split off its all-electric vehicle business earlier this year into a separate division known as Model e. Farley said the automaker and its dealers needed to lower costs, increase profits and deliver better, more consistent customer sales experiences.
Farley on Monday also reiterated that a direct-sales model is estimated to be thousands of dollars cheaper for the automaker than the auto industry’s traditional franchised system.
Wall Street analysts have largely viewed direct-to-consumer sales as a benefit to optimize profit. However, there have been growing pains for Tesla, which uses the sales model, when it comes to servicing its vehicles.
Ford’s current lineup of all-electric vehicles includes the Ford F-150 Lightning pickup, Mustang Mach-E crossover and e-Transit van. The automaker is expected to release a litany of other EVs globally under a plan to invest tens of billion of dollars in the technologies by 2026.
Tim Draper predicts bitcoin will reach $250,000 despite FTX collapse
Tim Draper, founder of Draper Associates, onstage at the Web Summit 2022 tech conference.
Ben McShane | Sportsfile via Getty Images
Venture capitalist Tim Draper thinks bitcoin will hit $250,000 a coin by the middle of 2023, even after a bruising year for the cryptocurrency marked by industry failures and sinking prices.
Draper previously predicted that bitcoin would top $250,000 by the end of 2022, but in early November, at the Web Summit tech conference in Lisbon, he said it would take until June 2023 for this to materialize.
He reaffirmed this position Saturday when asked how he felt about his price call following the collapse of FTX.
“I have extended my prediction by six months. $250k is still my number,” Draper told CNBC via email.
Bitcoin would need to rally nearly 1,400% from its current price of around $17,000 for Draper’s prediction to come true. The cryptocurrency has plunged over 60% since the start of the year.
Digital currencies are in the doldrums as tighter monetary policy from the Fed and a chain reaction of bankruptcies at major industry firms including Terra, Celsius and FTX have put intense pressure on prices.
FTX’s demise has also worsened an already severe liquidity crisis in the industry. Crypto exchange Gemini and lender Genesis are among the firms said to be impacted by the fallout from FTX’s insolvency.
Last week, veteran investor Mark Mobius told CNBC that bitcoin could crash to $10,000 next year, a more than 40% plunge from current prices. The co-founder of Mobius Capital Partners correctly called the drop to $20,000 this year.
Nevertheless, Draper is convinced that bitcoin, the world’s largest cryptocurrency, is set to rise in the new year.
“I expect a flight to quality and decentralized crypto like bitcoin, and for some of the weaker coins to become relics,” he told CNBC.
In 2014, Draper purchased 29,656 bitcoins confiscated by U.S. Marshals from the Silk Road dark web marketplace for $18.7 million. That year, he predicted the price of bitcoin would go to $10,000 in three years. Bitcoin went on to climb close to $20,000 in 2017.
Some of Draper’s other bets have soured, however. He invested in Theranos, a health startup that falsely claimed it was able to detect diseases with a few drops of blood. Elizabeth Holmes, Theranos’ founder, has been sentenced to 11 years in prison for fraud.
Draper’s rationale for bitcoin’s breakout next year is that there remains a massive untapped demographic for bitcoin: women.
“My assumption is that, since women control 80% of retail spending and only 1 in 7 bitcoin wallets are currently held by women, the dam is about to break,” Draper said.
Crypto has long had a gender disparity problem. According to a survey conducted for CNBC and Acorns by Momentive, twice as many men as women invest in digital assets (16% of men vs. 7% of women).
“Retailers will save roughly 2% on every purchase made in bitcoin vs dollars,” Draper added. “Once retailers realize that that 2% can double their profits, bitcoin will be ubiquitous.”
Payment middlemen such as Visa and Mastercard currently charge fees as high as 2% each time credit cardholders use their card to pay for something. Bitcoin offers a way for people to bypass the middlemen.
However, using the digital coin for everyday spending is tough, since its price is very volatile and the coin is not widely accepted as currency.
“When people can buy their food, clothing and shelter all in bitcoin, they will have no use for centralized banking fiat dollars,” Draper said.
“Management of fiat is centralized and erratic. When a politician decides to spend $10 trillion, your dollars become worth about 82 cents. Then the Fed needs to raise rates to make up for the spend, and those arbitrary centralized decisions create an inconsistent economy,” he added. Fiat currencies derive their worth from their issuing government, unlike cryptocurrencies.
Meanwhile, the next so-called bitcoin halving — which cuts the bitcoin rewards to bitcoin miners — in 2024 will also boost the cryptocurrency, according to Draper, as it chokes the supply over time. The total number of bitcoins that will ever be mined is capped at 21 million.
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