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Weekend reading: I wouldn’t start from here if I were you

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What caught my eye this week.

There is a great discussion going on in the comments to yesterday’s mini budget article. I’d strongly suggest readers with something to say add their thoughts there.

However some seem bemused by what they see as my sudden support for the new administration.

So I’d like to clarify my position this morning. Feel free to skip to the links if (understandably) you couldn’t give two hoots!

Made in Britain

Yesterday’s article was my best shot at fairly considering what was being presented in the mini budget – and why – given where the UK is today.

I felt I’d made clear it was a break with the past, for good or ill, and a gamble.

There are pros and cons and I tried to reflect that.

But it is 2022 and we are where we are.

I didn’t vote for Brexit. I didn’t nail on a 0.25% to 0.5% annual hit to GDP from less favourable trade conditions on leaving the EU. My concerns about Tory populism and mendacity – as well as rising inequality – even had me vote for Corbyn. I’ve lost valued readers to my blog by stating all that over the years.

As I replied in a comment yesterday, my first choice would have been the centrism of Blair or Cameron continuing and the UK sliding into comfortable second-tier nation status. One befitting our demographics and our resources, rather than delusions of grandeur.

Instead of the past six fruitless years of self-harm, we might have been concentrating on building a green energy grid or tackling some other actually important challenge.

I don’t think we should have had a referendum, especially not they way we did.

My second choice would have been a second referendum on the reality of Brexit, not the fantasies.

Even now my third choice would be to re-enter the EU on the less favourable terms we’d get.

Once you get to fourth choices, however, nothing is super appealing.

As I wrote yesterday the UK economy has a huge productivity problem. We also have more than one Brexit problems, including a smaller GDP than otherwise and a consequent hit to funding and borrowing.

And politically we’ve walked a way down the populist path. History shows it can be difficult getting off that without something breaking first.

So now we have the (mega) mini budget – which is a direct result of post-Brexit politics and economics.

Is it the height of prudence? No, as I said yesterday it’s a risky gamble.

The approach could backfire in various ways – which the markets are already worried about with the pound sliding another 3% and gilts spiking, as I mentioned yesterday.

The ‘tails’ of potential outcomes have fattened. The risk of something very bad occurring – like a run on the pound or a confidence crisis in the debt markets – have increased.

However another of those fattened tails is that this is indeed a first step to a faster-growing economy. It’s definitely not a certainty.

The only certainty is this approach will produce some ugly by-products alongside any improvements in growth. But much of that is a political not an economic issue.

There has been a push back against what’s seen as a return to ‘trickle down’ economics. It’s above my pay grade to dissect all that here.

However I would say policies that didn’t work in one era may have more use in another.

Hail the invisible hand

Again, I don’t believe the rich paying too much tax is a big problem for the UK.

But I do understand that trying to make Britain a more entrepreneurial and dynamic economy has a logic to it, especially post-Brexit – if that is indeed the aim.

Much of the criticism I’ve read smacks me more as opposition to capitalism.

Comfortable on its bounty, a certain large swathe of the population seems to believe – to quote a populist – that we can have our cake and eat it. That we can levy indefinitely higher taxes and spout an anti-success rhetoric whilst still enjoying fast economic growth and expanding a state that is already bigger than at almost any time in history.

But I am an unabashed capitalist. All things equal I prefer people to keep more of their own money and save or spend it as they see fit.

Not just for their benefit, but because I still believe it leads to a more prosperous economy overall.

Now all things are not equal – not ability, not education, not family connections, not luck, and not outcomes – which is why I also believe in a pretty strong State to do the things capitalism can’t (e.g. the army) or the things it won’t (e.g. universal affordable healthcare).

But I see that as redressing the inequalities produced by the wonder of free enterprise.

As opposed to people somehow sneaking off and making larcenous profits in some hidden corner of a communist utopia.

Taxing matters

For instance, contrary to much of the commentary yesterday, the highest-earners already pay a huge amount of income tax.

The top 10% pay 60% of income tax receipts.

Yet even ignoring the specifics of the tax system, I have had conversations with intelligent university graduates who are initially thrown when I point out that 40% taxation on £1m is £400,000 whereas 40% on £50,000 is £20,000.

That is, the higher-earner contributes far more in tax.

How did we end up in a situation where reasonable people can be shocked when presented with those facts?

And why is it ‘fairer’ to make the higher-rate band 45% and have the the million earner pay £450,000 instead of £400,000?

Perhaps it is – maybe you want to redistribute more heavily, or you believe high-earners are effectively rent-seekers or similar – but start from the position, again, that the top 10% of earners already fund 60% of income tax receipts. Not the rhetoric that they’re somehow paying less.

I don’t have high hopes for this Truss administration. But I will keep saying it as I see it, which will be waffle-y and full of caveats and maybe more nuanced than some would like.

Perhaps to that end it’s only fitting that I seem to have ruffled a few feathers among our left-of-centre readers.

I’ve included a few more articles about the mini budget below. But ideally comments on this article will be about other money and investing links. That way we can keep the mini budget response to fruitfully expanding the existing discussion.

Have a great weekend everyone!

From Monevator

The cheapest stocks and shares ISA on the market – Monevator

Push me pull you with the 2022 mini budget – Monevator

From the archive-ator: are you wasting money on memories? – Monevator


Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1

Mini Budget bits and pieces

At-a-glance: what’s in the mini budget? – BBC

What does the government’s mini budget mean for your money? – Which

Gilts and sterling hammered as Chancellor spooks investors – ThisIsMoney

Half of Kwarteng’s cuts to personal tax will go to richest 5%, say experts – Guardian

Top earners urged to boost pensions before tax cuts [Search result]FT

Stamp duty calculator: what will you pay to move under new rates? – ThisIsMoney

Will the stamp duty rate cut push up interest rates? – ThisIsMoney

Martin Wolf: Kwasi Kwarteng is risking serious economic instability [Search result]FT

Marina Hyde: if you are poor, have you thought of simply being rich? – Guardian

Other news

UK interest rates raised by 0.5% to 2.25%, highest since 2008 – Sky News

Treasury refuses to publish OBR’s latest economic forecasts – BBC

Rail workers to strike again on 8 October – BBC

Students face a £439 monthly shortfall between income and outgoings, survey finds – Save The Student

Can Britain’s endangered department stores be saved? – Bloomberg

Russia arrests over 1,300 after anti-war protests – CNBC

Higher inflation, higher interest rates, and higher education – Bond Vigilantes

Products and services

Castle Trust launches a best buy one-year fixed savings account paying 3.47%… – ThisIsMoney

…and savers can now earn 4% with a two-year fix from Atom Bank – ThisIsMoney

Only one week left to use paper £20 and £50 notes as legal tender – Which

Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor

Soaring bond yields set to lift UK mortgage rates [Search result]FT

How to earn cashback on your bills – Be Clever With Your Cash

Fund managers pitch ‘alts’ to retail investors as institutions max out [Search result]FT

Thatched cottages for sale, in pictures – Guardian

Comment and opinion

Learning to be a good investor is hard – Behavioural Investment

How our children shape our thoughts around money – The Ramp Report

Why market predictions are best ignored – The Evidence-based Investor

Right you lazy 50-something layabouts, Britain needs YOU – S.L.I.S.

Spending without regrets – Of Dollars and Data

Don’t take financial advice from Kanye West – A Wealth of Common Sense

It’s time to rethink retirement – Darius Foroux

Turns out bosses like four-day workweeks, too – Fortune

Financial bloodletting: don’t let it happen to you – Mantaro Money

Asset-liability matching and your portfolio – Humble Dollar

Inflation is best explained by this theory of money – Advisor Perspectives

Beware the Winner’s Curse at auctions – Humble Dollar

How much should you give to charity? – Flow FP

Crypt o’ crypto

Cryptocurrencies are not currencies. Discuss – Klement on Investing

Naughty corner: Active antics

Valuation measures for the US market are looking more reasonable – Validea

Narcissistic fund managers do about 1% a year worse, study finds – Klement on Investing

Illusion of knowledge [PDF]Howard Marks

Does company culture drive stock performance? – The Onveston Letter

Covid corner

President Biden says Covid 19 pandemic is over in the US – BBC

Kindle book bargains

Winners: And How They Succeed by Alistair Campbell – £0.99 on Kindle

The 5 AM Club: Own Your Morning. Elevate Your Life. by Robin Sharma – £0.99 on Kindle

How To Own The World by Andrew Craig – £0.99 on Kindle

Quit Like A Millionaire: No Gimmicks, Luck, or Trust Fund Required by Kristy Shen – £0.99 on Kindle

(Don’t have a Kindle? Buy one and join the cheap book club!)

Environmental factors

Who will pay to clean up ubiquitous ‘forever chemicals’? – Politico

Off our beat

Diversity – Moontower Weekly

How the Fitbit (and its 10,000 steps) dictates modern outfits – Guardian

Why travel is no cure for the mind – More To That

On the beach at the world’s first wealth festival – L.A. Times

Keeping NYC [and London…] on top – Dror Poleg

Ukraine war: “what’s happening now in Russia is total fear”BBC

And finally…

“In the abstract, life is a mixture of chance and choice. Chance can be thought of as the cards you are dealt in life. Choice is how you play them.”
– Edward O. Thorp, A Man For All Markets

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{ 65 comments… add one }
  • 1 xxd09 September 24, 2022, 11:08 am

    Well done -sums up the current situation very succinctly
    Forwarding to my friends and relations!

  • 2 green_as_grass September 24, 2022, 11:33 am

    My initial response to your piece this morning is to point out that not all university graduates are intelligent. Far from it in fact. Also worth noting that seeming to be intelligent is a very different thing from being intelligent. Otherwise I pretty much agree with your take on the mini-budget.

  • 3 Mr Optimistic September 24, 2022, 11:33 am

    Thanks for the Humble Dollar article. Will read that again, slowly.
    Personally I am a bit disorientated by the market gyrations and whiplash moves. For whatever emotional reason is eating away at me I am really hankering to invest more in bonds ( well I am 69 in 2 weeks). Can you lot set your alarm clocks to ring when the right time arrives and give me a call ? Thanking you all in advance .

  • 4 Robin September 24, 2022, 11:35 am

    Just to say, they aren’t scrapping the IR35 legislation. It’s just the contractor rather than the business decide if they are within it or not. HMRC can still come after you if they think you should be in IR35

    On the budget, it’s is just off the scale nuts. We could see interest rates spike. Forecast is for 5%, I think they could go to 10%. It’s just beyond comprehension. Giving to the rich and taking from the poor. Stealing money from generations to come, just as Rishi did. The debts are becoming unsustainable.

    Think 2020, 2021 and 2022 were bad, you can see 2023 rolling up it’s sleeves and saying “Hold my beer!”

  • 5 Faustus September 24, 2022, 11:36 am

    Excellent, well-reasoned, summary of the mess we are in which matches very closely my own views.

    Both the left and right these days seem to have a great intolerance for any deviation from their rigid tribal creeds; we need rational, independent thinking more than ever.

    Thanks again for all the fantastic work you do every week bringing us these links and analysis!

  • 6 PC September 24, 2022, 11:55 am

    Excellent summary.

  • 7 The Investor September 24, 2022, 11:59 am

    @Robin — Again, let’s please try to keep mini budget responses on the other thread, where it can add to the long discussion (over 70 comments) rather than duplicating the discussion again here:


    @all — Cheers, have a great weekend!

  • 8 Barney September 24, 2022, 12:09 pm

    Yet even ignoring the specifics of the tax system, I have had conversations with intelligent university graduates who are initially thrown when I point out that 40% taxation on £1m is £400,000 whereas 40% on £50,000 is £20,000.

    @ Monevator
    Too much education, no common sense. Ask most under 35 year olds, 3% of anything and watch their eyes glaze over as though you are talking Urdu. If 200k leave school every year unable to read….should we be really surprised.

  • 9 Balanced view September 24, 2022, 2:14 pm

    Most people seem to miss the fact that wages and income are not a reflection of “value” or a meritocracy. Complaining about the fairness of progressive tax overlooks the fairness embedded in salaries.

    So yes, I would argue is fairer that the million pound salary pays a higher tax rate, because the fact they’re a footballer/top doctor/banker/CEO/pop star/whatever doesn’t mean they’re working 50 times harder than a nurse or teacher….and they certainly don’t provide 50 times the social value. They happen to have been lucky to reach the top of their profession…and for whatever’l reason their position has outsized bargaining power compared to the rest of the economy.

    That said I think wealth is a greater problem than income, but much harder to tax but that’s for a different post

  • 10 Jay September 24, 2022, 4:21 pm

    It’s why I came here to read your honest analysis of major events without the spin (and the links, obvs). I may not always agree with you and that’s fine. Fed up of the polarisation in this country so don’t change how you write and express how you are feeling.

    I think for me it’s the lack of ideas and thinking long term which frustrates me about our current politics. I just don’t think we have any great minds around the table.

  • 11 ekanomikAL September 24, 2022, 7:21 pm

    @Balanced View, how does a doctor get lucky to get to the top of their profession exactly? Happen to fluke numerous niche operations? I’ve met many CEOs, celebrities etc who have taken exceptional risks and worked beyond what the average person is willing to endure to achieve success. Yes every career/business has some element of luck and some benefit from family connections but the high performing docs/CEOs/celebrities on average have had to take extensive risks the average person does not take to put themselves in the position for when chance meetings/contract wins etc occur that ultimately propel them to the top of their profession.

  • 12 chrissy September 24, 2022, 7:57 pm

    @Balanced view
    “Lucky” to reach the top of their profession?????
    No-one get there by luck. It’s hard work, dedication and sacrifices.

  • 13 Jonathan B September 24, 2022, 8:39 pm

    Thanks @Balanced view, that is a useful antidote to the person on the last thread who claimed that everyone on £150,000 plus had extraordinary genes.

    Certainly some are talented, but it isn’t linear, and as you say not related to their importance to the country. Most doctors end up in the top 5% of salaries, and to be fair their job is tough in the absence of government support for healthcare, but it is difficult to say their underlying talent is better than the best teachers on half that salary or less whose job is at least as tough. And I can’t help suspecting that investment bankers owe their position more to family and private school connections than sheer ability, it is just that they are in an industry that is largely closed to most people but pays around twenty times the going rate for the same talent in other occupations.

  • 14 Hariseldon September 24, 2022, 10:45 pm

    Well balanced summary of the present situation.

    I walked away from a high tech engineering business because of the high tax take, excessive red tape and general all round aggro.

    That was fifteen years ago and on a personal note I am far better off now then when I owned and run that business. My annual tax contributions have gone from a six figure sum then to zero now.

    Perhaps if you can keep the high earners more engaged and working then perhaps this approach may have some positives.

  • 15 Tyro September 24, 2022, 11:18 pm

    If hard work, dedication, sacrifices, willingness to take risks, notable talents and aptitudes (which I’m guessing is what’s meant by ‘extraordinary genes’), were necessary for career and/or economic success, I wonder how so many of us encounter people not conspicuous for these attributes but who somehow get near the top of their tree anyway. If hard work and all the rest of it were sufficient for such success, it is hard to see why so few attain it given that these attributes are more widely distributed than top-level posts and salaries. For every hard-working self-sacrificing risk-taking talented or able person who makes it to the top, there will be plenty of other equally (or even more) hard-working self-sacrificing risk-taking talented or able people who don’t. Since hard work (etc etc) are neither necessary nor sufficient for success, there must be at least another ingredient in there too. But it’s seductively easy to construct a personal narrative that ascribes all our successes in life to our own hard work, dedication, etc etc, and other people’s lack of success to their deficiencies in those virtues.

  • 16 Neverland September 25, 2022, 12:16 am

    On the plus side maybe the government will remember that they have this nifty toy called National Savings and issue some more index linked savings certificates now it is no longer going to be so cheap to borrow on the capital markets

    I’m sure they can wrap it up in a flag

  • 17 chrissy September 25, 2022, 1:03 am

    No, it’s not “seductively easy” at all. We talk about financial success which is way way different to happiness and fulfilment. Some of the most financially successful people are, in my opinion, quite monochrome and focussed on wealth to the exclusion of almost everything else. But the point is they have not got there by luck. They’ve sacrificed a lot. There’s no ‘secret ingredient’. To most normal, sensible folk, the sacrifice is too much to be worth it.

  • 18 BBlimp September 25, 2022, 4:10 am

    I’m a bit lost by the above discussion… they earn or generate the income… why does it come to someone else to decide how it’s spent ? Even if it’s dumb luck why should they have the fruits of their labour taken from them ? That’s really no different from saying Euromillions winners can get £1m and the other £125 million should be taken from them and given away ?

    If you say company A shouldn’t be able to pay person B ‘too much’ and if they do then the state should step in and take it from them… I just can’t see how it’s any of your business, it’s between them

  • 19 PostponeEverything September 25, 2022, 8:36 am

    A fixed tax rate for all is only fair when all have fair opportunities to earn.

    When you have one of the poorest social mobility in the developed world (https://www2.deloitte.com/uk/en/pages/about-deloitte-uk/articles/social-mobility.html), a progressive tax system is not just fair, but needed to keep the communities together.

  • 20 Fred Basset's backpack September 25, 2022, 8:38 am

    I entirely agree – and I’m on tax credits .

    I’ve argued this many, many times with people.

    Firstly when the often mooted ‘it’s unfair that higher rate tax payers get more tax relief when contributing to pensions’ story kicks back up, and that ‘we should move to a flat rate for everyone’.

    Erm no. Via salary sacrifice, I can put £1 of gross in my pension as a lower rate tax payer. Why on earth penalise the now non existent 48.25% payer in putting their £1 gross in? It is *exactly* the same thing.

    I’m glad this has not yet happened.

    Equally though, as someone who is on benefits, I can say that the worst aspects of the whole system are

    * taxing me, and then returning the money in tax credits. A massive waste of time.

    * the earnings taper. Effectively, my marginal tax rate is 74.25% between 12-50k and 117.25% between 50-60k thanks to circumstances. Above 60k, it drops back down to 43.25%.

    Well, being a person who reads this sort of blog, who has a gross income that covers that ludicrous marginal rate, I give you one guess what I do given salary sacrifice pension contributions and gift aid payments are 100% allowed and reduce my PAYE figure….

    Taxation and, especially a ridiculously over complicated tax system creates all sorts of perverse incentives and disincentives. Already, rather than working 5 days, I work 3. Why on earth would introduce my effective hourly rate (because I’d then have an inescapably awful marginal tax rate) for the other 2 days?

    No thanks. If there was no choice, and I was earning 100-125k, I’d still though be salary sacrificing there to the max, gift aiding monstrously etc, and so on and so forth.

    The TL; DR is, at least in my case is ‘let me keep as much of my gross earnings as possible’. Do that, and maybe I’ll earn more!

    And the more you let me keep, the more time I’ll have to stop f**king around becoming a hobbyist accountant and the more time I’ll have to bring up the kids the right way, to be active in helping my local community and to donate to causes that matter rather than watching my tax receipts either just be returned to me or get pissed up the wall on our national debt interest payments.

  • 21 MonkeysOnARock September 25, 2022, 9:02 am


    If you’re asking for a principled case for taxation (and progressive taxation at that), I think one answer is that Person B has typically benefitted from all sorts of public goods when getting to the point where they are paid their large wodges of cash by Company A. Just to take a few examples:

    – free/subsidised school and higher education
    – free healthcare
    – consumer safety/protection regimes (regulation of what goes in our food, medicine etc.)
    – public order (police, courts etc.)
    – use of public infrastructure (roads, trains etc.)
    – basic welfare state for if things go wrong (e.g. they get ill when they’re starting out in life and can’t work any more)

    Even if Person B hasn’t directly used all of the above personally (private schools, private healthcare etc.) they’ve still benefitted from being in a safe developed country which has private property laws. They also benefit from knowing the safety net is there if things did go badly wrong for them, which arguably allows them to take more chances in their career and in life more generally.

    The tax which Person B pays is, to my mind, the price they pay to contribute to the maintenance and improvement of those public goods. The idea that people for whom things have turned out particularly well should contribute more towards those public goods (i.e. the state ‘stepping in and taking it’, to use your language) doesn’t seem at all outlandish to me.

    More fundamentally, I think our life outcomes are to a significant extent driven by luck (what country we’re born in and when, who are parents are and what values they instil in us, the quality of our education, what our health is like etc.) – that’s not to deny the role of hard work and taking opportunities when they come up, but I think acknowledging that luck is a major driver in our outcomes makes it more intuitive that Person B should be expected to pay a fair share to support the systems which they’ve benefitted from and to help those for whom things haven’t turned out so well.

  • 22 PF September 25, 2022, 9:53 am

    How can these things not be a matter of luck, when the fact that any one of you even EXISTS is a matter of truly INFINITESIMAL improbability?

  • 23 xxd09 September 25, 2022, 10:54 am

    As a child of the sixties with a wife a primary school teacher we were right in the middle of nature and nurture in kids achievements
    (3 kids and 8 grandkids of our own)
    Nature discussion was taboo -ie genes and nurture was the way ahead ie thought to be under the control of the teacher
    No mention of luck
    As I have aged it’s obvious that nature and nurture are both sides of the same coin-if you get dealt a good hand at birth you are off to the races of life
    Luck or bad luck is your only problem ie a car crash caused by some other person ,a brick falling on your head from a tall building etc
    Barring these situations you go fairly smoothly up the ladder of life to the top
    Unfair but better acknowledged as a fact of life and managed ie encourage the better endowed to continue to contribute proportionally more (via tax etc?) to the rest of us less well endowed mortals
    Continually trying square a circle for for understandably righteous reasons is not going to work and in fact will probably do do harm-at the very least waste valuable and finite resources on an impossible quest
    The unfairness of life is a fact -it cannot be changed but it can be managed
    Is this budget an attempt to start to this unpalatable fact?

  • 24 BBlimp September 25, 2022, 1:18 pm

    @Monkeys – I think the first part of your argument (before luck) has merit – and I have no issues paying for high quality public services.

    But during a labour shortage paying benefits to people working 9 hours a week who don’t have to look for more, subsidising houses that have more bedrooms than occupants, etc etc, just doesn’t sit right to me.

    I see youngsters in London, living three or four to a two bed flat in flat shares. Nothing unusual about that historically. Except now they’re not 21-23 they are pushing 30, higher rate tax payers and subsiding non working people to have more bedrooms than they do people in the house… I don’t feel that’s right (I am happy to use ‘fair’ and ‘right’ interchangeably). Yes they’ve benefited from schooling to get a high wage, doesn’t mean they should be living with their parents or in flatshares to subside those less lucky than them.

    That’s my h opinion, fair to say it’s not popular amongst the twiterati and probably not that popular amongst the young urban types I’m describing, but we’ll see.

    I think what is healthy is, for now, we have different ways to vote. You can vote for what you think is right, I can vote for what I think is right, whereas my first vote was for Blair in 2001 and excepting a couple of years in opposition I think If you closed your eyes Blair / Brown could have been the head of any of the govts/ oppositions since then.

  • 25 Tyro September 25, 2022, 1:43 pm

    @ Chrissy – you haven’t addressed my point. Some of the most financially successful people may have sacrificed a lot for that success, but their sacrifice is neither a necessary nor a sufficient condition for it. Even if were true that all financially successful people have sacrificed a lot (which we know it isn’t – lottery winners? Heirs to fortunes?) that would only make it a necessary condition. It still wouldn’t be a sufficient condition.

  • 26 MonkeysOnARock September 25, 2022, 2:38 pm


    It sounds like we agree on a fair bit then, and I suspect that just getting to a point where we have high quality public services on a sustainable financial footing will be more than enough of a challenge for future governments.

    As for your second point, I do see where you’re coming from in the sense that it wouldn’t seem fair/right for a young person in London who is working full time to be worse off than an equivalent person who is on benefits; perhaps where we disagree is how often that’s actually the case in practice.

    The impression I get is that trying to make ends meet based solely/largely on benefits is, in most cases, pretty miserable, with Universal Credit barely able to cover basic living costs (particularly given recent food and energy price increases), and having to jump through incessant DWP hoops to avoid sanctions. I also suspect that the majority of people who receive housing benefit aren’t living in accommodation which is significantly bigger than they need – I’m sure there are some cases where that’s true, but I doubt they’re representative, particularly for younger generations.

    I do agree that London housing is ridiculously expensive relative to incomes, and I would love to see that change (though hard to make it happen). At least if you’re a young person with a steady job currently in a flatshare you’ve got more options in terms of staying in London and pushing for promotions, moving out of London and working remotely some of the time etc. Personally, I know whose shoes I’d rather be in.

    As you say, everyone can vote for what they think is right based on the facts as they understand them, and I certainly wouldn’t claim to have all the answers.

  • 27 Fred Basset's Backpack September 25, 2022, 4:12 pm

    @BBlimp @MonkeysOnARock

    Neither of you are probably on benefits, so you might be intrigued to see it from the perspective of someone who is. You’re both right in various ways, but there is a bigger picture and plenty of nuance.

    At least in the old Tax Credits system – and largely its true as well in UC – single earner/low joint earner families are making a very rational decision if they decide to limit the amount of hours they work.

    Because, the ugly truth is – they are barely better off if they do increase the hours.

    Consider two single earner families, with 3 kids, renting.

    One earns 50k – working full time. £200 per week childcare costs
    They net £3,129 per month. And are entitled to a bit of housing benefit and tax credits (which might be a surprise) of about £440 per month. So let’s call it £3550 per month.

    The other 19k – the equivalent of full time minimum wage. But they earn this working 24 hours per week, so three days. £100 per week childcare costs
    They net £1,405 p/m from their job. But get £1591 per month in and housing benefit and tax credits combined. Call it £3k per month.

    So, that 31k difference in gross on the surface implied a massive lifestyle difference. Except in practice, that 550 p/m net, because of benefits being tapered at very high rates.

    Now that extra still isn’t anything to sneeze at. But it likely comes at the following cost:

    * those 2 extra days per week are 100 days per year of extra work. So each extra day was ‘worth’ £66 net. On a hourly basis – that’s less that minimum wage.
    * plus additional commuting costs swallow up more. Let’s call that £10 per day.
    * the extra time at home, to do other things, is lost. Instead of cooking from scratch, more convenience food, you’re tired etc etc because your weekends become even more compressed. Zero downtime.

    And so you’re left with not a lot. With budgeting – £3k p/m isn’t *that* big a difference to £3.5k. Why would you bother? You could make £1k a year using your trading allowance for another free grand very easily anyway, closing the gap further. Those extra 2 days are practically priceless in terms of what they mean for your sanity.

    Then we come to another key point – both are renting. The single earner on 50k has about as much chance of becoming a homeowner these days as the one on 19k in most of the south east. So again, why would you bother?

    Those young people in flat shares – they should be apoplectic with what has happened re: housing in the last two decades. Utterly disenfranchised. So who the hell can blame those on benefits who rightly, put in the minimum amount of time for work?

    Hate the game, not the players. Successive governments of both colours set this situation up.

  • 28 Always late September 25, 2022, 4:28 pm

    Life is not fair. Nobody paying for their children’s private education gets a tax refund. Nobody paying for private health gets a tax refund. A person paying enough tax to pay 8 nurses’ salaries has to pay well over twice the rate of tax on their income compared to a person paying for less than one fifth of one nurse’s salary. Large businesses that make large profits from government ineptitude and negligence at securing a nation are expected to have their profits stolen by government yet lottery winners get to take it all. No, life is not fair. But fairness is certainly subjective.

  • 29 Martin T September 25, 2022, 5:36 pm

    A couple of observations:

    1. Whilst we’re discussing the disincentive of 60% marginal tax rates for those earning over £100k, it’s worth pointing out that the Universal Credit taper rate for a single, childless person is 55% on every penny earned – hardly an incentive to take a grotty NMW job with unsociable hours. Whilst the high earner may be able to mitigate through salary sacrifice, pension contributions etc, the UC claimant can choose not to work, or work in the cash economy – vulnerable to exploitation, and living in fear of sanction.

    2. For a significant number of young people, F/T, post-16 education is 2.5 days pw, doing a level 2 course in eg social care, travel and tourism, digital media. No requirement to continue with maths, English, IT, or anything else which might improve their skills for work. Nor is there any attempt to equip them with useful life skills – personal finance, budgetting, cooking cheap, nutritious meals etc, nor any requirement to undertake physical exercise, or do anything socially worthwhile. How we’ll ever improve productivity, or life-chances, like that is beyond me.

  • 30 Boltt September 25, 2022, 6:23 pm

    @martin T

    Absolutely agree with your second item.

    I fear UC is considered an acceptable/logical choice, meaning that taking any job is optional rather than compulsory. America seems to have more robust rules around lifetime claim limits and minimum interim working periods between claims. To have more empathy for the needy we need to be tougher on freeloaders.

    Hopefully this isn’t too offensive

  • 31 Martin T September 25, 2022, 6:35 pm

    @boltt not at all. The taper, and complexity, don’t help – getting started can take more than one go. Life is hard; life in poverty unbearable. I live near a seaside town, where wages are low, and not working generational in some families. For every person in genuine poverty, we see another pleading it, while sporting hair, nails, brows, new phone etc….

  • 32 RC September 25, 2022, 7:05 pm

    @TI (and anybody else for that matter – I would value any contribution!); the lower tax & trickle down ideology seems to me to fit into the idea of increasing labour income and thus allowing people to develop more capital income over time. It is a core capitalist philosophy.

    Trying to reconcile a ‘mini budget’ embracing this philosophy more with one of the main issues today (that increasing inequality is largely a result of capital income considerably outpacing labour income) is very difficult for me.

    Hasn’t the track record so far suggested that this isn’t a therapy for the symptoms we are seeing in the economy and society?

    This question is intended to be separate from debates over contributions from top earners, distribution of wealth through tax etc. I appreciate they are linked but I am discussing the idea of labour vs capital income on a fundamental level.

  • 33 BBlimp September 25, 2022, 7:06 pm

    @fred basset – I don’t hate the players, I applaud Kwasi for making changes to the game

  • 34 Fred Basset's backpack September 25, 2022, 7:33 pm


    If Kwasi really wanted to make proper changes to the game – he could have made it so that benefits are not a trap.

    As @Martin T astutely points out as well, the taper rate is still an enormous disincentive to work more hours. He’s tinkered around the edges on that.

    But where he should have focused is removing the *real* aspirational cap – and that is anyone who dares to have savings whilst on Universal credit over 6k.

    Provided we assume the person started from 0, and managed to scrimp their way to having some savings, it is *ridiculous* to also taper benefits if you manage to save. Indefensible, imho.

    Let’s say some poor person thinks they can escape the trap – maybe to buy a house if they are absolutely delusional.

    As soon as they hit 6k, bang – the government assumes that they can (and even writing this sounds utterly preposterous) earn an entirely ridiculous 34.8% p/a in interest. I suppose they think every benefits claimant invests into the medallion fund.

    Then there is the 16k hard limit – where you now get precisely *zero* benefits if you get to that level – a hard cap on aspiration. Managed to save? Well done – now spend it all on living costs. F**k you and your dreams.

    Crazy, crazy disincentives everywhere. One big, big mess.

    Personally, I would rather simply see an economic reset. Give me the hard times. I’m prepped. I’m that perplexed and frustrated. At this point I’d rather see the BOE interest rates to 20% for 2 years, and let’s see. Maybe that should be a transfer from the debtors to the prudent, and a chance for the disenfranchised to have a shot at home ownership in a new meritocratic environment.

  • 35 Jonathan B September 25, 2022, 9:24 pm

    While the calculations above are impressive, I am not sure there are many who actively plan to have a low income supplemented by benefits. Those I know in precarious financial positions would much prefer to earn enough to support their themselves and their families without depending on benefits. Arguably those calculations show the inadequacies of the minimum wage rather than problems with the benefit system.

    I am unsure about @Martin T’s second point. Level 2 courses in social care (and also childcare) are very definitely qualifications for particular sorts of employment and a reasonable step up for those who otherwise can only take unskilled employment. (I am afraid I have no personal knowledge of the tourism and digital media qualifications he mentions or the resultant job opportunities). My guess is that those individuals have already identified through hard experience that they don’t have the aptitude for jobs whose primary requirement is mathematical expertise.

    From personal experience, the social care provided to my mother near the end of her life, and the childcare we got quite a few years ago for our own child, were delivered by people who had very definite skills and were much appreciated. The fact they had low pay levels did not reflect their contribution to society – for example in the case of childcare allowing both parents to continue productive work.

  • 36 Fred Basset's backpack September 25, 2022, 10:22 pm

    @Jonathan B

    You’re absolutely right that not many plan to have a low income supplemented by benefits. However, once you are in the system, it is a definitive trap for all the reasons above. There is simply no incentive – maybe if you can suddenly leap from £20k to £80k p/a you have a shot at a tangibly better life. But even 80k gross is f**k all these days, without wishing to sound like that infamous question time man in the face of south east house prices.

    And yes – you could say it looks like inadequacies with the minimum wage – but you could also view it as corporate/shareholder subsidies such that they don’t have to pay actual living wages. Or landlord subsidies in the case of the housing elements. The local authority levels for housing are outrageous. Outrageously high, that is. They are setting a pretty high floor on private rents.

    And yea – I completely concur that poo pooing problem doing vocational qualification on those sort of roles isn’t a good idea. We should be *rewarding* those people with wages that support a decent standard of living without state needing top ups.

    Not everyone can be a stem graduate. And by the standards of employees in my sector, who almost invariably have those degrees – it is absolutely no assurance of quality anyway. Far from it.

    My 9 year old has better problem solving skills then many of my red brick, and in some cases Oxbridge educated colleagues. And certainly far, far more common sense.

  • 37 BBlimp September 25, 2022, 10:24 pm

    @JB – I’m sure I didn’t plan to ride the bus on my vacation to West Coast USA… but lyft prices are prohibitive ! I work on the basis those earning 20k are roughly motivated in a similar vein to those on 200k… the more they get to keep the more they do…

    Ten years ago I wouldn’t have dreamed I’d be earning what I do now… and yet I don’t just stop and say ‘Cool that’s enough, let’s give half of it away’. I ascribe the same rational self interest to all. The leftiest person I know was howling on Facebook when his self employed status ended… I wryly commented… ‘redistribution of other people’s wealth certainly lot easier than one’s own’

  • 38 mr_jetlag September 26, 2022, 1:01 am

    living in Singapore I was fascinated to see all of the comments about “Singapore-on-Thames” in the previous article. I’ve been here a year now – there’s a lot to emulate but also a lot to be wary of in the comparison.

    TI/TA I do want to echo some of the requests for a look into hedged ETFs. I just don’t see the advantages given the higher expense ratios and the possibility that any currency boost is short-lived. has anyone crunched the numbers ie if sterling recovers 20% but the TER is 25% higher?

  • 39 Martin T September 26, 2022, 6:59 am

    @JB @FB’sB I’m not poo pooing vocational courses per se – in fact I think more of them would help provide the labour – carers, plumbers etc – we need. And quite agree about the value attached to some v worthwhile jobs, done extremely well, which most people wouldn’t touch. But if FT education consists of 2.5 days college and 4.5 days YouTube/Minecraft (as I have seen) I question whether we’re really preparing these youngsters for the real world, and haven’t just given up on them? If nothing else, a further 2.5 days learning to cook cheap, healthy meals, and jogging round the block, would save the NHS a fortune in years to come!

  • 40 Martin T September 26, 2022, 7:02 am

    @FB’sB interesting to note that an asset rich homeowner can earn £22070 before paying a penny of direct tax – £12570 personal allowance, £7.5k rent a room, £1k trading allowance, £1k savings allowance!

  • 41 AndyJ September 26, 2022, 8:15 am

    Thanks @TI I really liked that article. I’ve said before the calm objective balance and the healthy discussion has always marked this out as a better corner of the internet. This article epitomises that.
    I’ll go and read the bun fight on the other thread now! 🙂

  • 42 Neverland September 26, 2022, 10:26 am

    “How did you go bankrupt?” Bill asked.

    “Two ways,” Mike said. “Gradually and then suddenly”

    Ernest Hemmingway, The Sun Also Rises, 1926

  • 43 The Investor September 26, 2022, 10:51 am

    I’d prefer we all kept discussing the details of the economic plan / market response then descending into short posts quoting our favourite aphorisms please, as that way ultimately only lies heat and flame.

    Concluding some reasoned discussion with such a quote or incorporating it to make a point is of course fine.


  • 44 Jonathan B September 26, 2022, 10:56 am

    @Fred, thought-provoking comment there about benefits to people in work, and housing benefits, being round-about subsidies to companies and landlords.

    There seems to be something structurally wrong. On the benefits side, people in work should be able to earn enough not to need extra support, on the housing side there ought to be enough social housing with affordable rents to set the market sensibly. (I don’t think you can blame local authorities, who are just following the rules sent down by central government).

  • 45 ermine September 26, 2022, 11:59 am

    @mr_jetlag #38

    > has anyone crunched the numbers ie if sterling recovers 20% but the TER is 25% higher?

    Take CSPX – the unhedged ishares SP500, TER .07%, versus the hedged GSPX TER 0.1%

    Buy £1000 of each, and assume the SPX stays the same for a year. Ignoring the spread and the transaction costs of the turn, with the unhedged you are left with £999.3. If the pound stays the same, you end up with £999, ie 30p less

    Let’s say Crazy Kwasi was dead right, and the authors of Britannia Unchained put a Bold Brexity spring in Blighty’s step and the pound is now worth $1.26 in a year, ie the level on the 1st of June 2022 (it’s 1.06 at the time of writing, so 20 cents is near enough to 20%) and GSPX is 1198.80

    Not only that, but you are holding a slug of American exceptionalism in the index of 500 companies, which may do its own stuff for you.

    It’s easy enough to capture the straight forex difference, and you can usually do it on margin, if you are that bold. But the attraction of the hedged approach is that you can put the capital to work in the stock market as well. I don’t find the 30p/£1k per annum differential that terrible a price to pay for the shockingly higher TER difference of 42% 😉 It’s 42% of not a lot.

  • 46 Fred Basset's backpack September 26, 2022, 12:36 pm

    @Martin T

    Indeed! But it’s better than that – there’s also the 2k dividend allowance and ~12k CGT allowance for the really asset rich

    Of course, for most people you should probably be paying zero of either because it’s all in ISAs, but let’s say you have stuffed those to the gills already

    The Uk is a tax haven.

  • 47 mr_jetlag September 26, 2022, 2:18 pm

    Thanks ermine. I was looking at a similar comparison between IGWD and IWDA, and whether higher expense ratios would matter over a 20 year time horizon, and you’re correct that they don’t (or at least, not for identical pairs of hedged/unhedged funds).

    Obviously either choice is a bet on the future of the £ and in the short term one can still see £/$ parity as a realistic prospect, even with the slight bounce today. The third (and worst) choice IMO is to sit in cash waiting to time the bottom. Still doesn’t feel great investing in the throes of a bear market + currency crisis.

  • 48 ermine September 26, 2022, 3:46 pm

    > Still doesn’t feel great investing in the throes of a bear market + currency crisis.

    Actually until Kwasi did his thang I was feeling OK about it. Apparently over the Pond they are feeling despondent about the SPX, because it’s fallen 20%. For various reasons I had a bit too much cash holdings, and have been buying VWRL over time, though I hated the price of £80-ish. I feel less bad about that because the fall in the £ masked the drop in the SPX as they fell about the same rate. And while American exceptionalism looks dear in £ the fall in valuation makes the expected future return stream look better. It also makes my holdings of gold look pretty good.

    I have invested in (gbp-denominated) falling markets and it really feels horrible, and then you got to get up and doing again into the slide. And again… Somehow the fall in the £ makes that less hard in falling global assets, even though it’s all illusion and bonkers.

    Of course, in an ideal world I would just have bought USD back in June and done something else for a few months, but hey, you can’t win ’em all.

  • 49 Neverland September 26, 2022, 4:53 pm

    An emergency statement from the bank of england and a previously unplanned “medium term fiscal plan” statement from the treasury on 23 November backed by an OBR forecast

    Quite the humiliation for the new government – sent back and told to do your homework properly and have it marked by the office of budget responsibility

  • 50 Marked September 26, 2022, 5:31 pm

    #49 Neverland

    Never a good idea to be less than transparent with markets when you are already in hoc for £2.4 Trn. OBR would have helped even if there was disagreement between the Govt and OBR. 2nd schoolboy mistake of Kwasi who I did have some respect for previously.

    Meanwhile interest rates going up will pound my hobby of property development. Could even lose my shirt as have a 9 months of before my latest development is complete.

    At least my pension is in world ETFs thankfully.

    Good luck all!

  • 51 mr_jetlag September 27, 2022, 1:37 am

    >> For various reasons I had a bit too much cash holdings, and have been buying VWRL over time, though I hated the price of £80-ish.

    Samesies. I mentioned iweb tradeplans as a way to limit trade in my ISA, and scalped sub-80 VWRL a couple of times earlier in the year. I’ve got one open now for XDPG at 60… we shall see.

    nb., I enjoy your long form musings on your own site. Saw your latest post and I hope your retirement plans have only been mildly inconvenienced, trips to Jobcentres notwithstanding.

  • 52 MoneysGoneMad September 27, 2022, 2:08 am

    The reason the top 10% pay 60% of the tax is because they have 30 percent of all income. It seems almost disingenuous to suggest a lack of “fairness” when one’s paltry wage is a rounding error on some people’s yearly wealth.

    It’s also common for those people of excess wealth to be given share options, discounts, and company-paid services. In contrast, as anyone who has had to suffer low finances knows, it’s terribly expensive to be poor.

    If I got paid more in a year than some do in ten, I’d expect to be taxed six ways from Sunday. Stops me from hoarding all the wealth, you see. Lest i turn into something utterly reprehensible, like a landlord or something. Excess capital is just used as leverage over other people to maintain or increase inequality.

    On that same report it explains that the top 10% paid 50% of the tax in ’99. Might have something to do with rampant rising inequality in the country perhaps. Take a walk in your nearest ex-mining village or dilapidated town, to see where this trending distribution of wealth will end up.

  • 53 The Investor September 27, 2022, 8:29 am

    @MoneysGoneMad — I wasn’t particularly commenting on the fairness. As I said in my article in fact, my argument isn’t with people saying it’s right and proper for the highest earners to pay the bulk of tax for redistribution reasons or any others. What I was pointing out is that the highest-earners already do pay by far the largest share of income tax receipts.

    I presume you have always made this clear in your discussions about the ‘fairness’ or otherwise of the tax system, and will continue to do so going forward. But many don’t. 🙂

  • 54 Rob September 27, 2022, 10:42 am

    There is another point that doesn’t seem to be in the public consciousness, that is population collapse. I don’t know if you accept outside links TI, but this little interview alarmed me!


  • 55 Boltt September 27, 2022, 10:45 am


    The 8o/20 principle is everywhere – 20% of people have 80% of the sex etc. in a free market there will always be high and exceptionally high earners. As per other comments we need incentivise these “generators” to do more. A 10% increase from these (20) will potentially be more significant than focussing on the lower end.

    As a non- expert it seems we need to grow the economy and the tax £’s we can generate to support people and infrastructure. I’m not aware we are sure 45% tax is the optimal, we tried 50% now we are trying 40% again. It’s not fixed for ever and the “experiment” may yield important insights.

    As for fairness- it’s not fair: I’m fat, I’m short, I have a low IQ, my genes are subpar etc etc. We need to find a home (job) for as many people as possible and give the means to be as self supporting as possible (with state support WHERE activity and effort are being demonstrated). Free lunches should be kept at school dinner times.

    My concern for grandkids/future generations is their mindset -how much they expect to be paid and that all work should be enjoyable/rewarding. This is unrealistic when we are already living lifestyles can’t afford and other countries earn a fraction of those in the Uk…I’ll stop now it’s getting depressing

    I’m hoping Liz’s experiment shows we can be more like America..

  • 56 Faustus September 27, 2022, 11:22 am

    O/T but what is it with all these Tory shills calling Truss ‘Liz’ as if she was some mate down the pub? She isn’t and will never be – it just makes you look like a toad. Funnily enough these are often the same people who used to tell us how nauseating it was when Blair’s acolytes salivated over him as ‘Tony’. Of course the worst example surrounded that revolting charlatan Johnson, but at least he had a forename that couldn’t be confused with a thousand others, and now he has finally gone we are overdue a pushback against bootlicking.

  • 57 Adam September 27, 2022, 11:48 am

    Well, it has been a wee while since I read the comments section……what has happened?
    I read one important question on Bonds, is now, the time to buy?
    Most of the rest is just opinion/rants.
    Oh for the old days of fascinating investment talk.
    Brilliant article as normal, thanks to all you do Monevator.

  • 58 Jonathan B September 27, 2022, 1:41 pm

    @Boltt, while an 80/20 theory might work for sex, I am not sure it works for growing the economy through fiscal stimulus. The top 20% almost certainly still have disposable income despite inflation, and are still able to buy the goods and services they want. The 80% are those that are having to buy less to stay within their income and are worried about further increases in energy prices etc, and a bit more money in their hands is more likely to boost expenditure and grow the economy.

    But the bizarre thing is the way the government and Bank of England are pulling in different ways. Bank of England is trying to use interest rates to reduce demand (spending) while the government is using taxation to tray and increase it.

  • 59 Boltt September 27, 2022, 2:26 pm

    @Jonathan B

    I don’t see the tax cut as being simply a means to stimulate their spending – but it probably will. It is more of an appeal to greed/desire for “more” – psychologically, keeping 60p in the pound v 55p (or 80 v 60p if HRT band moves) incentives more effort, more innovation and more risk. The pie analogy is awful but I find the logic quite appealing.

    Interest rates are another matter – it’s going to be painful, if I was 20-30 years younger I’d be looking for as much O/T (overtime) as possible

    There’s a lot of behaviour and psychology around avoiding the child benefit cut off and phasing out of the TAx free allowance – I expect these will change next, not sure why they didn’t come first, probably because the 45% demise was so unexpected and screams we are serious about growth.

  • 60 Timbo September 28, 2022, 11:24 am

    I see your point about the fairness of higher earners paying more tax, but how does making taxation fair for the very rich make things better? The country needs some income since the events of the last 6 years. I’m in the 40% band and I will vote for paying more tax as it buys a fairer society and is more efficient than the private alternative is (healthcare, libraries, schools).

    Nice to read your viewpoint as it’s far more reasoned than the media!

  • 61 Jon September 28, 2022, 12:33 pm

    I wish they’d kept the ‘45% rate at 150k+’, and instead eradicated the ‘60% marginal rate between 100k-120k’. Perhaps the least talked about of the bizarre income tax peculiarities.

  • 62 Boltt September 28, 2022, 3:13 pm

    I read somewhere 1.2m earn over £100k – so removal would cost circa £6b, the 45% removal estimated cost was £2b

    So perhaps 3x the kickback from the press

    Ps my maths may be wrong

  • 63 Fred Basset's backpack September 28, 2022, 6:50 pm

    @Jon – the 60% marginal rate gets little ores because

    1) it applies to 100k+ earners – for whom the general populace’s collective heart bleeds little, and therefore it’s not something that the mainstream would highlight. Even if 100k isn’t what it used to be.

    2) It’s very easily avoidable with salary sacrifice pensions, bikes and, these days, EVs

    3) The only people it *really* applies to therefore earn much more gross than 125k *after* sacrifices. And on that, I refer you again to point (1)

    Fwiw it doesn’t apply to me and I agree with you.

  • 64 BBlimp September 28, 2022, 10:02 pm

    If 1.2m people earn over 100k, hard to believe the ‘higher’ cuts in at 50k. Maybe it should be renamed ‘second half of basic rate’ instead

  • 65 Unwilling Codemonkey September 29, 2022, 8:41 pm

    > to do the things capitalism can’t (e.g. the army)

    It can provide armies, but we’ve decided we don’t want it to. The East India Company was a good example of capitalism doing this. Not for national defense which was probably your target, but for maurading and attacking others there’s a long history of private enterprise being, well, enterprising.

    > and expanding a state that is already bigger than at almost any time in history.

    I’m curious about this one. Is the state bigger because we have a bigger population, or bigger because we’ve become more generous/inefficient (delete as appropriate)?

    Coming back to money (@Adam, #57 I hear you): why haven’t savings account rates caught up with the base rate? And do we expect them to? I remember when rates were above the base rate, and now at or slightly below base rate is the best I find for easy access.

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