Weekend reading: deckchair rearranging derailed

Concur with your sentiments TI.

Can’t we have just one significant politician and honestly discuss the state of the UKs finances with no bias and a credible financial plan.

We had the Tories throwing the towel in early after they had sunk the economy. Labour handcuffed by election promises on the economy. Reform rubbing their hands in delight. They recently took over my local council on an anti-woke platform. Unfortunately, they are failing to attend meetings such as Adult Care, Planning etc., thus providing no leadership and now no answers to the budget deficit they inherited.

Who was it again who said “it’s the economy stupid”?.

Just a comment on the ‘Why financial freedom is overrated’ article.

I’ve seen this idea crop up a lot, that people need to work to be happy, because they lose purpose otherwise. The author talks about financially ‘flexing’ when mentioning being financially independent, but this is the biggest flex of all. It basically says that “I do a really important job and the world would be much worse place without me”. Well good for you, but this isn’t true for most people. Most people do crappy jobs that involve making money for corporations. I’ll be damned if I can see where one derives a sense of purpose from that.

I’ll agree partially with the idea of financial freedom and the ability to swap a meaningless job for one that pays worse but offers fulfillment and purpose. But it’s hardly a given that one can simply walk into one of these jobs.

@AW I’ll agree partially with the idea of financial freedom and the ability to swap a meaningless job for one that pays worse but offers fulfillment and purpose. But it’s hardly a given that one can simply walk into one of these jobs.
The wonderful thing about financial independence is that you can take a job that pays nothing but offers fulfillment and purpose, aka volunteering. You don’t need to be FI to volunteer, but it helps considerably as you’ve no ‘day job’ to get in the way.

@Ecomiser (#8)
I think that’s largely the conclusion I come to. Financial independence means you can do whatever you want, even if that means doing it for free. There’s no cost of failure, so no pressure. Financial freedom suggests you still need to work, but that may simply mean you swap a crappy well paid job for a crappy low paid one. Hardly aspirational. Financial independence must surely still be the goal.

Some paid jobs are kinda fun, most are not. Many volunteering jobs are also not terribly fun, because they are often made up of tasks the paid staff don’t want to do, and/or that the organisation cannot afford to pay for – and for sure, no-one wants to risk a volunteer walking off or damaging something mission critical.

This is one of the dilemmas I face. I’m FI, but have carved out a niche where the hours, work, conditions and pay suit me very well so I might as well keep doing it.

I have to concur with @Trufflehunt that the Labour MPs who opposed the bill were not “Corbyn’s kiddos” and hardly left-wing. But they know that their constituents are asking what Labour has achieved during a year in power; Starmer may claim to see the first green shoots of waiting list reductions in the NHS but those aren’t visible to anyone attending A&E. It looks as if the Labour leadership’s headline policies were to make life worse for those least able to cope with that, the elderly and the disabled, and it was hard for rank and file MPs to sign up for that.

The justification seems to be to “save” small amounts of public expenditure. But we know from 15 years of trying that austerity doesn’t turn the economy around, and what it has done is weakened the public services environment which is needed to support growth. The country needs a different approach, and after all the frustration with Conservative governments the electorate put their faith in Labour to deliver that… and they have flunked it.

I see nothing “left-wing” in the opinions expressed. The first government I became aware of as a child was that of Harold Macmillan, an old-fashioned patrician Tory, but Starmer’s government is to the right of that, and I would say to the right of Heath’s and Major’s too. Current Labour policies are more in line with Thatcher or Cameron. Those backbench rebels simply represent mainstream Labour as it was under Blair or Brown, neither of which were particularly left wing.

Collectively we get the politicians we deserve. We don’t want to hear the truth. We recognise something’s not right, there’s no appetite to take difficult decisions so we’ll fight over the share of the pie. A greater amount of our capital will pay for current spending (e.g elderly) through increased taxation which will lower growth further. It’s a doom loop.

Whatever…I barely care any more. The collective electorate is moronic and gets what they deserve. shockingly palliative care, crap state schools, awful court system. I’ve got enough cash now more or less to rise above it. No man’s an island but I’m having a good go. Private schools, health care, lawyers if needed – I can pay my way out of most things now.

Downside is I’m getting totally pumped in PAYE to the tune of hundreds of k each year so will just have to suck it up for a bit longer. After which I’m out of here. There’s still the reasonable possibility of moving to the US workwise where quality of life is clearly much better if you aren’t on the margins but the time to get a green card is a bit problematic. EU passports provide complete optionality too as well.

The bond market will probably intervene eventually.

What is the oldest democracy with universal voting and how has the problem of promising everybody everything been dealt with in the past? Maybe we need to go back to monarchy!?

@MrOptimistic, the issue of two parties each an uneasy coalition of smaller groups seems to be an issue of both the UK and the USA. It is easy to propose that a more proportional electoral system and smaller tighter parliaments might bring improvements – but as with so much else it isn’t easy to see how we might get there from here. There is no political benefit in tackling arcane problems of electoral reform.

@Xeny (#7),
IMO, you could do a lot worse than read @ermines latest post

@G (#14) It depends on the size of the organisation. I’ve been a member of lots of community groups with no paid staff, I’ve also been the only paid staff for one charity.

@Boltt No one owns a car on Motability, you lease it. Blame the scheme for the type of cars available, not those leasing cars essential to their day-to-day lives. And as for deserving to earn more. PIP isn’t an out of work benefit. Most use it so they can actually go to work and not claim benefits. Besides, it’s just a reflection of the extra costs disabled people face for everyday living. There’s nothing unfair about it apart from the very few who abuse the system.

My limited knowledge of Motability – from buying an ex-Motability car, not a prestige make – is that they are provided to disabled people on a three year lease and then sold on secondhand. The fact that Boltt’s friend’s car was 4 years old makes me wonder whether it had been one equipped with modifications that couldn’t be sold until it had been restored for general use. It seems from Wikipedia that dealerships can sign up to be part of the scheme, and there is no reason why they should rule out BMW if they provided a suitable lease deal

#6 & 7 @ZX & Xeny: Reform irrationality syndrome: Politics is about shared stories not facts. Feelings not reason. Fear and resentment play well.

Un/Happiness is just a gap between expectation and reality. If expectations inflate faster than reality improves voters get restless. If reality dips, then they get mad. And in that state of mind they’ll even vote against their own interests if they think it will make life harder for those they hold responsible. This from the DT today on MAGA and Medicaid cuts in ‘the Big Beautiful Budget Aid’: “Of the 200 counties with the highest proportion of voters reliant on public health insurance, a staggering 84% voted for Trump in last year’s election.”

Turning to investing – the Meb Faber link – why can’t Cambrian launch a UCITS LSE listed ETF for this? I’d buy.

Low Volatility anomaly is the second free lunch alongside diversification. Overlay it with shareholder yield and momentum ‘factor’ and why not then lever 1.25x – 1.5x to get to the S&P 500 volatility and max drawdown? I’d take that for a 1965-2023 18% to 19% CAGR and 0.68 Sharpe ratio.

The major problems the country face need solving, and most of the solutions need money, whether that is up front investment or simply a bigger pot to keep the current solutions going. Higher taxation is coming, and probably wealth taxes too. Somewhat vilification of the sick and disabled etc was a terrible strategy and a waste of time and effort. Most sick and disabled people are not living the dream. Sure, look at genuine “waste” and merge disability/health bodies/quangos etc and do all the obvious things, but sorry, taking support from genuine sick and disabled people is not going to fix the UK. That one guy you know with a modified car so he can get his daughters wheel chair in, or the guy who got extra money for adaptions so he can get to his work, is not where the UK budget “waste” is, and even if it is where a large part of the *spend* is, in the majority of cases, ‘waste’ is probably not the right word.

We need adult grown up politicians who are prepared to look beyond their next election period. I am not hopeful.

@Boltt, there is a certain irony in complaining that 20% of adults are economically inactive on a website where one of the main things discussed is how to retire early.

Portfolio-wise, the rejection of a cost cutting measure by backbench Labour MPs confirms my fear, as expressed last week, that Britain is on a probably irreversible road to fiscal failure. The position is pretty desperate; one sign of that is a statistic I saw that we have got to a situation where around 60% of total income tax is paid by the top 10% (morally shameful and financially far too precarious for comfort. Where is the social contract in that? Where are the “normal people” pulling their weight?) And so it becomes a case for me of some more gold and some more inflation-linked bonds (which are difficult for governments to try to inflate away) and less straight gilts.

@Boltt: “self funding economic inactives are acceptable”. While I think most share that point of view, there is still a question of whether the economy would be in a better state if those individuals remained in work.

And there really needs to be a proper national discussion of whether getting sickness treated on a reasonable timescale and having decent access to social care if necessary, is less desirable than having a proportion of the population needing to leave the workforce to look after elderly relatives or disabled children on a waiting list for the treatment they need and unable to access other care.

As I pointed out above, it is an experiment we have been going through. Fifteen years ago Cameron and Osborne decided to systematically reduce the funding they inherited from Blair and Brown, and that approach has continued up until Starmer and Reeves. While it is always impossible to compare an alternative history, I think it is fair to ask whether austerity has benefitted the country’s economy in any way.

The Labour leadership targeted some of the most vulnerable people in society and a lot of MPs refused to go along with it. Good.

I’ve had conversations with people who tell me we can’t ‘afford’ to offer support to people with disabilities. It’s all just too bad.

But those same people are up in arms about private schools paying VAT. Apparently we CAN afford tax breaks for wealthy parents. Says it all really.

I’m increasingly convinced that these comments about ‘the market is telling us X’ are just variations of narrative fallacy that tell us nothing useful other than the preconceptions of the narrator. The idea that we should then use these narratives to allow (fear of) Krugman’s confidence fairy to drive policy is just nuts.

Absolutely this! >>

@Boltt, there is a certain irony in complaining that 20% of adults are economically inactive on a website where one of the main things discussed is how to retire early.

@TI, thanks for that intriguing OBR forecast. It is extraordinarily certain given the range of possibilities over the next 50 years, predicting areas of expenditure to a precision of 0.1%. And assuming there will be no change in government policy (triple lock) over all that time. To be fair though it does discuss in detail the possible impact of climate change which is likely to affect the predictions massively.

It would be fascinating to know if there was any equivalent forecast in 1975 that could be compared to today’s reality. There have been huge changes since then which almost certainly means simple extrapolation will have been massively wrong.

As I recall, the triple lock was introduced after a well-publicised report comparing pensions in the major economies showed that the UK had fallen well behind its peers. The policy was a way of incrementally improving that position without a sudden impact on government finances, but it was a mistake not to define the intended end-point; that might have been in relation to those other economies, or to the minimum wage of those in work. Eventually the ratchet effect needs to be ended and the state pension after that simply to maintain its position relative to other incomes (as suggested in that IFS document).

@ZX, if we had that 1975 forecast I think it would have seen population growth as the problem, not shrinkage. While increasing longevity was evident the falling birth rate wasn’t – what you are talking about hasn’t been predictable for as much as 50 years. The issue is simply how to plan for what we can see coming, and the challenge will be the low-paid jobs where human interaction is part of the requirement and can’t be replaced by a tech interface (like caring professions).

Whilst the future dependency ratio concern #71 will likely prove correct, I’d caution against assuming that it definitely will be.

For most of my life, and for that matter the lives of my parents too, the concern, even here ib the UK, had been one of overpopulation, not demographic deflation.

I’m sure many MV readers in their youths will recall the dire warnings of Ehrlich’s “Population Bomb” (1968).

I myself recall in the eighties reading English nuclear physicist John Fremlin’s 1972 “Be fruitful and multiply: life at the limits of population” in which Fremlin thought that the relentless and accelerating global growth in population seen in the 1960s would ultimately be constrained only by thermodynamics.

Funnily enough, EpochAI seem to make a similar assumption now on the limits to computation (above a petawatt, 100x global energy consumption now, well start to overheat, even using zero carbon emission nuclear power).

It’s only in the last decade or so that the concern has gone from over to under population. and from having too many people in the future for the work available to having too few.

So, whilst the inversion of the population pyramid and the dependency ratio disaster are real concerns now, and whilst demography is destiny, the future is unknowable, and only at best guessable.

Assuming fertility does not turn up (and I agree it’s unlikely that it will) we can’t know for sure that something else won’t intervene.

Tech permabull Tom Lee of Fundstrat was on CNBC the other day explaining his view that AI and robotics will be like finding an inexhaustible alien species to do all the work. 4 day weeks, higher incomes, more tax revenue, deflation and 20% unemployment, but with generous UBI, apparently beckon.

Now that could turn out to be rose tinted BS of course, but, given the pace of developments presently, I wouldn’t necessarily stake much money on that being so.

Keep state pension at the pitiful value that it is at with the current rules. Remove all tax breaks on private pensions. Alternatively, calculate the exact proportion of private pension contribution that was not taxed at individual level, including any NI from salary sacrifice – and on withdrawal, tax it at the exact same rate. Don’t think that is fair? – who do you think is milking the pension system? It is not those on median salaries or those living on state pensions. The only people benefitting from the generous pension system in the UK are those in the upper quartile, and moreso, the right tail of the income distribution, as they get the state pension anyway. This state pension that we are criticising is not even half of the median salary. Further, unless you exceed the lifetime allowance, you need to actually put a lot of effort into how to contribute to your pension and then withdraw it in such a way that you pay tax at a greater rate than the tax rate you paid on the way in.

There is a problem with the generosity of the pension system in the UK, but it is not the state pension. This sort of understanding is also why the current government is in so much trouble – their solutions to everything so far regarding benefits and tax is to focus on the people who have the least options financially, and you don’t get away with that as a labour government.

There are serious problems with the pension system in the UK, but maybe, just maybe, they should be looking for solutions that are in plain site and basically can be described as the areas being gamed by people earning way above the median salary. I say that, as ever, as someone who does the very same (all within the rules), but this is what actually irritates me about all the debate on issues such as pensions – the people abusing the pension benefits in the UK are not the people who need the state pension, it’s us! Up to 60k each year salary sacrificed, 1k extra with a lifetime ISA bonus, 21k (with 1k lisa bonus) in tax free investments/accounts, £500 tax free interest, dividend tax free allowance, capital gains tax allowance, etc etc. All of these parts of the system only really benefit the wealthy, as the guy on median income (and the 50% below him) is certainly not getting even close to putting in the ISA allowance, never mind maximising the other tax free parts of the system.

, its still the best out there.