ben is here. ever since the rumours started slowly this morning that the government would do a u turn on the plan on the a5p top rate of tax, the pound started to strengthen against the us dollar, it went up at one point to about $1.12. it has dropped back a little bit but it is still at $1.11. why does that matter? if the pound is weak, when we import things it costs more to buy them, and that price gets passed on to us for the things that we buy in the shops. it s worth looking at this change of policy and what it means economically for the government. by not going ahead of the scrapping of the a5p highest rate of tax, it will save them £2 billion in total. 50 save them £2 billion in total. so it s not a massive amounts of money. a big amounts to you and me but in the grand scheme of the mini budget, which totalled £a5 billion of tax cuts in all, this is a relatively
immediately after kwasi kwarteng started speaking one week ago. the pound has rallied, a bit more this morning, trading at $1.12 mark which is where it was before the mini budget. we have also seen gilt yields, the implied cost of borrowing for the government coming down a little bit, but you have to remember that today s u turn is more political than economic at the moment. the 45p abolition of the 45p tax was very sensitive because it is a gift to the highest earners. in terms of what it cost the government, that is about £2 billion. as part of a £115 billion tax package announced in the mini budget. tax package announced in the mini buduet. , , , . , , budget. this saves the public purse about 2 billion budget. this saves the public purse about 2 billion p? budget. this saves the public purse about 2 billion p? it s budget. this saves the public purse about 2 billion p? it s a budget. this saves the public purse about 2 billion p? it s a colossal- about 2 billion p? it s a
reaction continues, the pressure on the bank of does become less. surprisingly, in a way, even how small this is, as i said, it may actually take some of the pressure of the interest rates. but we can still expect interest rates to rise significantly and it will remain the case that for anyone with much of a mortgage at all, those increase in interest rates will much more than wipe out the tax cuts that have been introduced. ., , ., ., ., , ., introduced. really good to get your thou . hts introduced. really good to get your thoughts today. introduced. really good to get your thoughts today, the introduced. really good to get your thoughts today, the director - introduced. really good to get your thoughts today, the director of - introduced. really good to get your thoughts today, the director of the | thoughts today, the director of the institute for fiscal studies. theo leggett, our international business correspondent, joined me earlier let s hear what the reaction was to kwas
bit reassuring and we have seen some rallying on the market in terms of how the pound has done compared to the dollar when asian markets opened this morning, up briefly to around 1.12, similar levels to where it was before the minute budget last friday, which some are seeing partly as a response to the bank of england stepping in and they see it as a reassurance will stop some see it as the fact this meeting is going head and comments from mel stride this morning saying it was a big turning point will have reassured people, but at the same time that reassurance doesn t necessarily match with the sort of things we have heard from liz truss and her camp this morning who seem to be repeatedly saying, as we have seen on the front pages of the papers, that they will not change their minds, they will not change the policy. so the markets are waiting to see. this is a level of reassurance but without having some of the focus, which a lot of the markets will want to see, and without hearing ex
boosting supply to the economy. tension could arise if they are not quite as optimistic as the government, if they don t believe that it will bring as much growth, they are not going to build it into their forecast and it could lead to their forecast and it could lead to the government having to make big decisions elsewhere to make the finance numbers add up. it’s decisions elsewhere to make the finance numbers add up. it s easy to anic finance numbers add up. it s easy to panic when finance numbers add up. it s easy to panic when something finance numbers add up. it s easy to panic when something dramatic i panic when something dramatic happens and what we have seen is dramatic, particularly with the pound pointed at low of $1.03, but it s now back up to where it was before the mini budget, $1.12 stop how much should we read into the markets? we how much should we read into the markets? ~ :, ~ , :, markets? we talk indeed terms about the markets. markets? we talk indeed terms