Income Tax Thresholds
Yesterday, the Treasury announced its plans to freeze income tax thresholds which given the current levels of wage inflation will effectively place an additional 1.2m employees into the “higher” 40p rate of income tax into by 2026 and 1.5m more into the “basic” 20p rate. This announcement did little to please a growing number of backbench MPs increasingly concerned for their constituents rising cost of living. Such concerns were echoed by the director of the IFS, Paul Johnson, who maintains the cost of living “could well be worse than the financial crisis” over the coming months and years. Hence, critics are arguing that these announcements constitute little more than a “stealth tax” with these policy plans estimated to cost households an extra £430 a year on average by 2026. Nevertheless, given the growing national debt and increasing costs of servicing it, these announcements demonstrate how Number 11 are having to explore all methods of increasing tax revenues in a bid to balance the books.

UK Farming
English farming is to get the biggest shake up in more than half a century, as ministers have unveiled new approaches to subsidising the activities of farmers. Currently farmers receive about £1.6bn in subsidies from the EU every year, but that is winding down in a post-Brexit world and the government has come up with a range of different incentives for farmers to continue to get paid. The plans include large re-wilding projects, which aim to have about 300,000 hectares given fully back to nature by 2042, as well as incentives to take on more environmentally friendly farming practices, such as cutting fertiliser use, improving soil standards and reducing pesticide use. The plans have been welcomed and criticised in fairly equal measure, but they’re still a little light in details for the time being which hopefully means they can now be influenced a little more to ensure that environmental impact is the primary outcome. They’ll also need to ensure that farmers can make long term plans to ensure they aren’t left with a gap between the wind down of the EU subsidies and meeting the qualification criteria for the new ones.

The FT has more:

German Inflation
Yesterday, German inflation hit its highest rate in almost three decades. The 5.3% print for Germany’s national consumer price index was primarily driven by record energy prices and VAT cuts. However, considering that nearly half of the largest components in the basket have an inflation rate of or above 4%, the data indicates that inflation is not merely isolated to a few sectors of the economy but is now very much an underlying issue – affecting the cost of living across all aspects. Yesterday’s data will likely raise tensions between an inflation adverse Germany and the wider ECB whose expansionary monetary programme and unprecedented PEPP fiscal stimulus package – along with eight years of negative interest rates – have hit German savers.  Considering that the newly appointed head of the Bundesbank, Joachim Nagel is expected to follow in the footsteps of his predecessor’s (Jens Weidmann) hawkish monetary policy, all eyes will be focused on the extent to which Nagel will be able to pursue German economic interests within the limitations of the ECB.