Treasury warns of tax rises in UK.

The Treasury has warned of inevitable tax rises as Prime Minister Rishi Sunak seeks to fill a “black hole” in public finances. Mr Sunak and Chancellor Jeremy Hunt met on Monday to discuss options for the financial statement on 17 November. They agreed tough decisions were needed on tax rises, as well as on spending.

Few concrete details of the government’s plans have emerged, but a Treasury source told the Daily Telegraph that Mr Hunt is planning to fill the budgetary shortfall through a combination of 50% tax rises and 50% cuts to public spending. While the Treasury said Mr Hunt and Mr Sunak “agreed on the principle that those with the broadest shoulders should be asked to bear the greatest burden,” it warned that “given the enormity of the challenge, it is inevitable that everybody would need to contribute more in tax in the years ahead”.

BP has reported a huge profit for July to September due to high oil and gas prices exacerbated by Russia’s invasion of Ukraine. The oil giant made $8.2bn (£7.1bn) for the period, more than double the profit over the same three months last year. BP said it expected to pay $800m in UK windfall tax this year, a levy introduced by the government in May. BP’s sharp rise in profit is likely to lead to renewed calls for the UK government to increase the windfall tax on energy firms.

Tomorrow evening there is some event risk for the dollar, with the Fed expected to hike by 75bps, for a fourth straight meeting. A lot of interest will be on Chair Powell’s press conference for signals of a shift to smaller sized rate hikes going forward. Market pricing sees US rates peaking at 4.75%-5.00% in 2023.

President Vladimir Putin has said Russia is suspending – but not ending – its participation in a deal that allows safe passage to vessels carrying Ukrainian grain exports. Moscow pulled out of the UN-brokered agreement on Saturday, alleging that Ukraine had used a safety corridor in the Black Sea to attack its fleet. The UN says there were no ships inside the corridor that night. Ukraine has not claimed responsibility for the attack. Ukrainian President Volodymyr Zelensky said the deal would be honoured and accused Russia of “blackmailing the world with hunger” – a claim Russia denies.

Economic Calendar

14:00ISM Manufacturing PMI (Oct)5050.9

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