What caught my eye this week.
A sign of the times: I woke up yesterday to headlines that chancellor Rachel Reeves had U-turned on her income tax plans, and I wasn’t immediately clear whether this was official confirmation that income tax rates were to rise, or whether Reeves was U-turning on the only just rumoured U-turn to hike rates after Labour had pledged to do no such thing.
Is everyone following at the back?
What a palaver. As you probably know by now, it was the latter – a U-turn of the U-turn. Or as boy racers would call it: a doughnut. Which seems appropriate.
Officially, Reeves’ 360 had nothing to do with all the briefings and counter-briefings that gripped Whitehall watchers this week.
Rather, the Office for Budget Responsibility (OBR) has thrown her a lifeline.
According to the BBC:
Newer assessments from the OBR appear to have increased the projected strength of wages and tax receipts in the coming years and offset several billion pounds of that gap, taking it closer to £20bn.
Gilts yields rose as traders panicked at Reeves chickening out over income tax hikes, and they barely calmed down when they heard the OBR had plumbed the depths of the black hole and found it less black than first feared.
Extra taxes will still have to be found from somewhere. Even £20bn is not chump change, especially when you’re also planning to scrap the limits on child benefit and potentially looking to top-up those WASPI pensions after all.
Someone’s money will have to be found to pay for it:
Source: JP Morgan / Chancery Lane
Putting income tax thresholds into an even deeper freeze is leading the runners and riders this week, along with curbs on salary sacrifice. But mucking about with the pension tax-free lump sum is reportedly now off the table.
Still ten days to go though punters! Place your bets.
Where’s the money, Lebowski?
As if the on/off vibes from Budget Bingo weren’t déjà vu enough, we also got the latest account of the economic damage wrought by Brexit to remind us of why we’re partly in this mess.
To quote the abstract to the new working paper from the NBER:
These estimates suggest that by 2025, Brexit had reduced UK GDP by 6% to 8%, with the impact accumulating gradually over time.
We estimate that investment was reduced by between 12% and 18%, employment by 3% to 4% and productivity by 3% to 4%.
These large negative impacts reflect a combination of elevated uncertainty, reduced demand, diverted management time, and increased misallocation of resources from a protracted Brexit process.
Not surprisingly – given there’s no economic benefit to leaving a vast trade bloc that other countries lobby for decades to enter, to replicating its bodies and functions, to becoming a rule taker, to creating friction for business, and to making investment into the UK less attractive – the estimate of the cumulative damage from Brexit has crept up on those made last year by the likes of Goldman Sachs and the OBR.
What’s the relevance to the budget?
Let’s take the NBER’s lower 6% hit-to-GDP estimate. UK GDP in 2024 is estimated at £2.88tn, so the NBER sees the economy as £173bn smaller than it would otherwise have been without the drag from Brexit.
At about a 39% tax take as per the House of Commons library, that implies the state has about £67bn less to spend than in the no-Brexit alternate universe.
Even at a lower 35% take there’s a £60bn shortfall.
Of course you can debate how precisely we can layer on this speculation. But I’m not taking the highest estimates here – and the point is the overall picture.
Which is that the UK government has tens of billions less to spend than it would have had, and that it likely needs to spend more too than in a Remain scenario, given Brexit’s hits to the economy as outlined by the NBER will have increased the various claims on benefits.
A boondogle with a bill that’s come due
Of course the Leave campaign warned us that long-term economic damage was the price we’d pay for the UK regaining our (technical) sovereignty.
A smaller economy than originally projected due to Brexit would present difficult choices about where we directed our spending after leaving the EU. The economic cost was plain – everyone predicted it – but the political argument carried the day with brave Britons.
Ho ho ho.
Of course they literally said we could have our cake and eat it. So now they are surprised when we’re running the economy based on the old inputs and we’re coming up short.
Brexit will carry on bleeding us out for another decade, I’d guess. Perhaps after that some compensatory factors will see things finally stabilise, as the Bank of England governor mused last month.
In 2016 I said Brexit would be a slow puncture that would hinder us for many years. My critics told me to shut up.
On we trundle.
Lies, damned lies, and the 52%
If you don’t discern the dead hand of Brexit – along with Covid, inflation, and Russia’s war of course – when looking at semi-stagnant out-of-puff Britain limping along with only these occasional bunfights over our shrunken tax pie to liven things up then I won’t persuade you.
Sure, the NBER report is the result of exhaustive work by big brains from Stanford, The Bank of England, and the Bundesbank among others.
And yes it tallies with what other studies have shown.
But hey, you’ve got a bloke on social media with three Union Jacks in his profile who can’t write complete sentences saying:
“LOL.. coz they can see the future yeah!! get over it pal! ✊“
Feel free to pick your side.
Just remember later this month when you’re set to pay more tax or the triple-lock pension is unpicked1 that we were told this would happen, 52% voted for it, and we’re living with the result that the decision deserves.
And if you still don’t understand why I belabour this, here’s an article from The Telegraph via Yahoo on how “Britain faces worst decade for growth in a century”.
There’s no mention of Brexit from start to finish. Not even a nod.
It was one thing to be earnestly wrong in 2016. It’s another to stay wrong in 2025.
Have a great weekend!
From Monevator
Why you can’t trust the CAPE ratio [Members] – Monevator
End in sight for renewable trusts? – Monevator
From the archive-ator: What’s your financial origin story? – Monevator
News
Extending the income tax threshold freeze to 2030 raises £8.3bn extra a year – I.F.S.
NS&I Digital revamp is four years late and £1.3bn over budget – This Is Money
FCA doubles down on AI testing versus regulation… – City AM
…and warns CFD firms against failing consumers – Reuters
NHS gets go-ahead to cut thousands of admin jobs – BBC
A technocratic plan for Eurozone growth… – The Constitution of Innovation
…and also note the EU is actually a pretty good investor – Klement on Investing
Products and services
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Hargreaves Lansdown launches a new best buy ISA paying 4.55% – This Is Money
Five major mortgage lenders cut rates – This Is Money
Get up to £1,500 cashback when you transfer your cash and/or investments to Charles Stanley Direct through this affiliate link. Terms apply – Charles Stanley
Santander’s new £200 switch offer – Be Clever With Your Cash
Royal Mint launches yellow gold sovereigns for £1,200 – This Is Money
The cost of car insurance is falling lately – Which
Get up to £200 cashback when you open or switch to an Interactive Investor SIPP. Terms and fees apply, affiliate link. – Interactive Investor
How to get discounted gift cards – Be Clever With Your Cash
The loveliest towns to retire to in Britain – House & Garden
Homes for sale in former warehouses, in pictures – Guardian
Comment and opinion
The joy of giving up on having ‘enough’ – The Root of All
How a former hedge fund titan learned to invest with humility – Excess Returns
Bull market brains – A Wealth of Common Sense
How to earn £250 a day as a film or TV extra – Guardian
We don’t bury our dead – Fortunes & Frictions
‘Total portfolio approach’ could shake up asset allocation – Bloomberg via A.P.
Why everyday investors should stay away from private markets – CFA Institute
A golden year – Musings on Markets
Your time isn’t worth shit – The Falling Knife
Be a nerd – Financial Samurai
Warren Buffett’s Thanksgiving letter [PDF] – Berkshire Hathaway
Naughty corner: Active antics
Beware booming brokers in a bubble – Arcadian
Hedging AI bubble risk via Oracle CDS [My read, anyway] – Mind of Mojo
The case for business stewardship – Flyover Stocks
A poker pro turned quant explains trading [Video] – via YouTube
How to capture Japan’s value unlock – Verdad
Capital allocation [PDF] – Morgan Stanley
Kindle book bargains
Poor Charlie’s Almanack by Charlie Munger – £0.99 on Kindle
The Man Who Solved the Market by Gregory Zuckerman – £0.99 on Kindle
Chip War by Chris Miller – £0.99 on Kindle
Meltdown: The Collapse of Credit Suisse by Duncan Mavin – £0.99 on Kindle
Or pick up one of the all-time great investing classics – Monevator shop
Environmental factors
IEA: supply boom in renewables will end the fossil fuel era – Guardian
Millions of Australians to receive free electricity thanks to solar – TechCrunch
London congestion charge to rise to 20% and apply to EVs for first time – Autocar
Southern Water says sorry after millions of plastic beads pollute beach – BBC
Conservation projects falter as rich countries retreat from climate fight – Observer
Nature reserve uses new bird protection on windows – BBC
Robot overlord roundup
Big Short’s Michael Burry has some concerns about AI accounting – CNBC
The Slop cycle: media revolutions breed rubbish and art – Scientific American
DeepMind cracks a centuries-old physics problem with AI – Business Insider
Yes, it’s a bubble – SpyGlass
AI will transform the entertainment industry in a decade – Institutional Investor
When will we make god? – Uncharted Territories
From AI to ROI: some positive evidence [Paywall] – FT
Not at the dinner table
UK to limit refugees to temporary stays – BBC
Trump is set to sue the BBC – Sky
Fox to BBC: hold my pint – ProPublica
The last of the Old West – Money with Katie
Reform’s pretty quiet since Labour began exploring Danish immigration model – Sky
Musk’s trillion-dollar compensation – The Lefsetz Letter
Off our beat
The monks in the casino – Derek Thompson
Space food made from astronaut pee to be tested on ISS – Independent
Investor’s ‘dumb trans-humanist ideas’ setting back neurotech progress – Guardian
D&D and racism [2021 called and wants its culture war back!] – The Atlantic
Why do people love spicy food, even when it hurts to eat it? – Guardian
Scientists find surprise link between grey hair and cancer – Independent
Humanity is depopulating itself – London Review of Books
Why don’t people return their shopping carts? – Behavioural Scientist
The governance-industrial complex – 3652 Days
And finally…
“You may know that the Chinese word for ‘crisis’ is made up of two symbols, one of which can signify ‘opportunity’.”
– Andrew Craig, How to Own the World
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- Haha, only kidding! [↩]
Before the usual 3-4 suspects rush in to tell me what I’m allowed to write about on my website, here’s a pre-emptive response as to why Brexit again:
1) The NBER report was published just this week, and it meaningfully updates our understanding of the economic cost of Brexit.
2) Many Leavers, politicians, and especially the right-wing press that championed Brexit refuse to acknowledge its economic harm *at all*. Until it is factored into the everyday conversation about Britain’s fiscal plight – or, maybe, another ten years has passed – I’ll continue to suffer the burdensome task of trying to provide some small balance.
3) My taxes will go up this month because of your economically dumb decision. Own it.
4) You don’t have to read it. Feel free to skip to the links, or just take this website off your reading list if reality offends you that much. No hard feelings! 🙂
Looking forward to the comments on this one, should be entertaining. Do you keep a track of the prevalence of the Cassandra index over time on these responses @TI?
JimJim
@TI #1 Dude, logic does not trump emotion 🙁 They socked it to the technocrats, and felt better for it.
@ermine — I know, I know. But I don’t want mainstream readers who are understandably fed up with the subject to let Brexit off the hook. The Telegraph etc is fighting a phoney war. Things would not be great if we’d voted to Remain – still Covid, still Russia/Ukraine, still inflation – but they wouldn’t be quite so immediately desperate. So let’s talk about what’s really happened, especially as I’ve noted many times with Farage actually leading the polls!
@JimJim — Not sure what the Cassandra index is. But among several of my hard-suffering friends, it’s a nickname for me out of acknowledgement of my (dubious) gift of looking forward successfully, persuading few people at the time, then bemoaning it later when nobody cares when things turned out as predicted. (Brexit is far from my only rodeo).
I’m not prescient or anything like that, but if I have any skill as an investor besides pattern-matching it’s an ability to extrapolate forward and to not let go of the bone. 🙂
So after the Greta Thunberg fanboy post earlier in the week we now have the Remainer post, that seems to have been written whilst wearing a pair of EU rose tinted spectacles.
I get many of the points you raise, but you are raising them in isolation, which is a simplistic approach people have taken on both sides of the Brexit argument.
Approaching it from a true geo-political medium to long term approach using both micro and macro economic approaches, with a heavy dose of Austrian thrown in for good measure, makes these arguments so much more complex than you are making them out to be.
Yes, if you believe the mainstream media (most of whom were Remainer leaning) you will believe the numbers in isolation, but dig deeper … much deeper.
It is the same with when you came up with that old chestnut of ‘97% of climate scientists’ nonsense. Most well read readers will know that there is much more to that figure, but you seem to have just gone with the MSM rhetoric and not dug any deeper.
I LOVE the investment advice on here, but from a geopolitical bigger world perspective, you seem to have very naive views that just parrot whatever the MSM says, and doesn’t seem to comprehend the bigger picture.
You know the BBC lied in a HUGE way about Jan 6th. It doesn’t matter if you are a Trump fan or not (I’m not), but it is undeniable that the BBC lied in a MASSIVE and deliberate way. Well, do you seriously think that everything else they report is true? The MSM has been playing the British public for years, but people are waking up and realising that just because the MSM says it, doesn’t automatically make it true – and that counts for Brexit, Trump, immigration, Europe, Ukraine … everything.
As I say, I absolutely LOVE and appreciate this amazing resource from an investment perspective. It is amazing, but from a geopolitical perspective, and issues such as climate and the EU, I feel you need to broaden your sources, as your points are clearly just an echo of the same talking points the MSM has been promoting ever since 2016, with very little variation.
…UK GDP in 2024 is estimated at £2.88bn… surely you mean Trillion.
“UK GDP in 2024 is estimated at £2.88bn”
I hope you mean £2.88trn, otherwise we are in worse trouble!
@Barn Owl @Jon — Ugh, where were you before I sent the email! *blush* Thanks!
@Fred — You are on non-constructive Troll-watch. Some people will think this is an over-reaction but I have over three decades of experience with this.
e.g. You are going on about the BBC when I quoted the NBER report and data. You are prattling on about January 6 and media conspiracies. You are accusing me of over-simplicity while offering nothing but social media agitator prattle. You are throwing me a bone about admiring the investment stuff on here (thanks) while telling me what to read, when I read more broadly than almost everyone I know and you just have Twitter soundbites.
Constructive points about the efficacy of the NBER report or how we can actually bring Brexit into the debate without it being futile and backwards looking are welcome.
But you are hovering by the auto-delete door. If you/people don’t like it there are other sites to read. This is a benign dicatorship.
Cheers!
David Allen Green (an actual lawyer) had a very informative look at the Trump / BBC spat. Although he does only concentrate on this from the point of view of UK law so if the BBC is really being sued in Florida then things might be different:
https://emptycity.substack.com/p/a-close-look-at-trumps-1-billion
Thanks for the links, as ever, TI.
I would not want to be Rachel. What the OBR giveth, the OBR can taketh away. And it does rather start to look like there isn’t a long term thesis and honestly not putting up taxes is starting to look like stubbornness and justifying it as unnecessary is starting to look like lying. I suppose cutting costs would be too much to hope for.
Trouble with pointing out that your predecessors are intellectual pygmies is that you then have to stand on their shoulders instead of those of giants.
Enjoyed the post from Falling Knife this week. The productive hour does seem more and more like the myth. However I’ve recently looked into a hobby of arm-wrestling AI (and getting paid a bounty when I train/defeat it) and it’s quite refreshing to have an absolute dollar value on an hour spent on an intruiging problem vs some other task.
Think this would be of interest for this weeks round up – Dan Neidle has put together an excellent calculator where you can model the impact of different income tax proposals – and see the impact on marginal rates: https://taxpolicy.org.uk/2025/11/12/the-budget-2025-tax-calculator/
Followed up with a Twitter thread showing the hundreds of thousands of people who have avoided the marginal rates by reducing their hours, forgoing promotions, stuffing pensions and/or employing as many salary sacrifice schemes as possible:
https://x.com/DanNeidle/status/1989312760052674697?s=20
If the treasury are interested in working out where the productivity gap is, surely this is the place to start?
Hi TIm thanks for the article.
On Brexit, I voted remain, somewhat reluctantly and was taken aback by the result. Like a lot of people, including the BBC, I didn’t read the room.
It wasn’t primarily an economic decision ( member sovereignty?). The economic justifications were an enabler which allowed people to overcome their reservations and vote leave.
The economic consequences were never going to be good but there is an argument to be made that our subsequent management of the leave process made matters worse. They were conducted by people who resented the leave vote.
A reasonable argument could be made that the wishes of the people were betrayed.
There is a danger that we continue to misread the room….look at the support for Reform.
The complacency that led up to the leave vote ( a vote that was lost more than it was won) is being repeated.
Rather than tell people they are wrong, do something to address their concerns. It is a problem rooted in the nature of a democracy.
As for RR…why on earth did she make that impromptu speech earlier in the week trailing a rise in income tax??
This is an omnishambles. Add this misstep to her weeping episode and I think it can confidently be said that this will be her last budget.
For my own part I worry the smorgasbord of measures we might now face means next week will see me selling down financial stocks and lobbing yet more cash over the iht wall.
You can chose your own truth, but you can’t chose your own facts.
And as @TI summarises so well above, in economic terms, those facts are clear. Brexit is a disaster.
You’re free to say that the price was indeed very high, but still worth it (for the purpose of your values – e g. sovereignty etc), but you can’t deny the price.
@old_eyes #35, in the thread to the last post of Renewables ITs, puts it best IMHO:
https://monevator.com/end-in-sight-for-renewable-infrastructure-trusts/#comment-1920538
“……you have to do the work to show the flaws in the accepted arguments and show how your explanations of the observed facts are better. “I don’t like the answer” is not a good argument.”
On the budget, bitterly disappointed doesn’t get close to my feelings on Starmer and Reeves. I did vote Labour out of revulsion at what the Conservatives have become, but the PM (and Reeves as well) really do seem like complete amateur politicians.
If there were 10 units of flack to be had for raising IT and 1 unit of flack each for the 50 smaller tax rises needed for the same effect, then RR has now gone and suffered 4 units of flack already just for putting IT increases into the spotlight and then double U turning on it, and then still has to face those same 50 units of flack.
And I thought people at the Treasury could do maths.
I would prefer, rather than having increasingly forensic reviews of the foot and the shotgun damage we inflicted, to have surgeons in charge who could at least mend the foot so that we might begin to hobble, with hope that we may get to a decent walking pace soon. The shot was fired, we can never go back to what we had.
Any changes to the salary sacrifice rules and the Monevator crew will need to rewrite the Pension vs ISA articles (again)!
My firm split the Employer NI with staff, so when I was hammering my DC pension it was the equivalent to a 3.5% pay rise.
Obviously it might just be speculation but it still distracted me from something more important, like looking out of the window to watch squirrels squirrelling away grub for the winter… and now I’m thinking about stashing funds away for my future again.
Rather minded to Douglas Adams’s sperm whale when considering our plunge towards the budget, much as with Brexit. Sadly, as with all positions based on belief over evidence, logic is not an effective counter. 100% agree with every word in your excellent piece @TI, thanks, but having feelings for the bowl of petunias.
@Mr Optimistic: Thanks for the balanced thoughts. On this though:
Boris Johnson, who led the Leave campaign, took us out of the EU. He had previously banished most of the Remainer Tory MPs who had tried to negotiate a softer exit.
We got pretty much the hardest Brexit possible and Brexiteers delivered it. Leavers own the economic results.
On immigration, I’m more in agreement. Of course I was extremely comfortable with free movement within the EU and remain that way (external borders are a much more difficult matter) but I could see a huge number of people had decided we had too much inward migration, and that this largely motivated the Leave vote. To then see nearly one million people enter in 2024 (under, again, Johnson’s arrangements) was ridiculous.
I’ve included links about this in Weekend Reading, including graphs and some links this week about a shift to a harder Danish model. Despite what the likes of ‘Fred’ say, I see the different sides.
With that allowed however, there was lots of wiggle room given you had Brexiteers during and after the campaign saying it was all about immigration and putting up (fake) posters showing huge lines of poor-looking immigrants etc, and others who said it was nothing to do with immigration, it was about economics or sovereignty.
Our own exiled commentator BBlimp and many others used to accuse me of being a devious Remainer for suggesting immigration motivated for Brexit. Seriously, go back and read the comments!
There was no consistency. Live by the double-sided sword and don’t be surprised when it swings back and cuts your own arm off I suppose.
Well brexit was a disaster but the more I think about how things have played out these last 15 or so years it just points to so many poor quality people making really poor decisions. The general standard of staff we have running the country is pathetic no one wants to say no, or make bold changes. So we find ourselves working in effectively a crap company which is full of rubbish at the top wasting money on ridiculous things and focused on minor issues ( id card for example) and ignoring big or hard problems. No wonder people are getting annoyed.
@TI. Wasting your time. The people that voted for Brexit are the same type of people who voted for Trump. The correlation is massive. They are not interested in empirical data. This is all about feelings – fear, anger, hate, envy – not logic.
Brexit was an irrational move. To have access to our biggest market, without having to give up forms of sovereignty that really matter: monetary or fiscal policy. Yoda says “Privileged, we were; stupid to leave that, we would be”. Already 4 years after peak globalisation, what idiot in 2016 would vote to leave our biggest regional market and try to become “global Britain”. Possibly 1990, not 2016.
Yes, the EU is a piece of shit. It whiffs of corruption, it’s bureaucratic, we were paying more than our fair share. All true. Thing is, I could apply that view to Surrey County Council. The net benefit of being part of the EU was clearly positive. I’m less clear on Surrey Council.
So these people don’t do logic. Look at the JPMorgan chart you provide. The ratio of workers to retired goes from 4:1 in 2000 to 2.2:1 in 2050. It means taxation has to at least double. Less workers, far more retired, who cost 5x more to maintain. Yet, many a Brexit voter doesn’t want their pensions slashed, their NHS slashed, income tax doubled. Oddly, what they do want is less young brown people in the country. Possibly the only way out economically, net of a productivity boom from AI. Their position makes no mathematical sense. Yet that is their position. You cannot rationalize with people who are irrational.
@TI, cheers. Immigration per se doesn’t bother me that much. Uncontrolled immigration with people arriving on beaches does. The security implications are immense.
Boris was an unfettered opportunist. But, another warning sign, look at the election result he returned. In retrospect, was Sue Grey to be admired :).
Tbf on Brexit, it along with tariffs are a clear headwind, but I think the issues are far broader. Right now I would characterize the UK as a kettle without a spout – the pressure builds but no steam escapes, and some of it looks avoidable to me.
Right now we have high interest rates and high house prices PLUS tax rises and declining services PLUS tough working peace of mind and plenty of redundancies. Consumer spending is struggling massively and every working person has some level of misery.
But to me the issue at its core is the decisions of the BoE. Interest rate increases have forced the government to tax harder to do less, amplifying the intended squeeze considerably and killing growth. Imo we should have raised rates to 3% AND done temporary tax rises that would unwind with any rate cuts (and return with rate increases) rather than go so hard on rates and create knock on issues.
When you combine tax rises and rate rises, the overall impact is pretty biblical. Imo they could cut rates to 2.5% right now and still maintain a squeeze on inflation bigger than their original intention. But as it is it all compounds.
Those JP Morgan charts are pretty depressing. I think even if Labour had done things perfectly, even if they had perfect decision making skills, we would still be in the economic position we’re in. They’ve obviously made misteps but it’s concerning how quickly the population (and the polls) has turned against them.
I suspect if Reform do win the next election, which is looking increasingly likely, they will come up against exactly the same issues and the bond market will keep them in check as it did with Truss. And then 5 years later Labour will be back in charge.
My main concern is that Fascist Farage, who let’s not forget is a majority shareholder in the limited company that is Reform, will take steps to consolidate power once he’s in (much like Trump is trying to do at the moment). Then we’re really screwed.
Brexit has worsened our trade position with the EU, and notwithstanding the fact that we have a largely service based economy who ran a significant trade deficit in goods with the EU, it is our own daft fault for making imports so much harder. Whilst the regulatory barriers of the EU has impacted services, our trade with the EU is greater in this area now than pre Brexit and growing.
The single biggest impact on the economy is COVID, not Brexit. The biggest impact on government debt is the growth in welfare, pensions and healthcare spending.
Revenue growth and GDP growth in nominal terms have been similar at around 4% per annum since 2005. Welfare and pension spending have grown at around 4.5% and health spending at 6.5%. Overall spending outpaced GDP growth 4.5% compared to 4%.
The blip was COVID where debt went from 85% of GDP to 100%.
Brexit hasn’t worked out the way I’d hoped, a reflection of the paucity of talent in the governing classes, but it isn’t the main driver of our fiscal problem. The hangover of COVID is way worse.
Re the “had we remained in the EU” with a larger GDP, I wonder how that bigger economy ALT Britain would look ?
Demographics, mix of nationalities , better paid jobs, more people working , types of business, prices, taxes, political mix … it goes on !
What would I look like…
@zxspectrum48k as an East London native the fear, anger, hate, envy is genuine, rock up to your councillor as a non-Bengali in Tower Hamlets and you are on a hiding to nowhere.
I could move tomorrow to Bath or York and temporarily duck out of this problem but most people cannot afford to do so. Address that and then we have a chance of making progress, don’t address it and the likes of Farage will.
@TI
The article you’ve linked, The Joy of Giving Up on “Having Enough” is a fascinating take on goals, accomplishment, and contentment. As a scientist, amateur artist (composer and musician), and retiree, the quote from Charlie Munger included in the article of “I think that a life properly lived is just learn, learn, learn all the time.” is one that particularly resonates with me.
ps As a complete aside (but related to the linked article), the cover of Gordon Lightfoots’s “Wreck of the Edmund Fitzgerald” by The Longest Johns (available on youtube and one of my favourite Folk bands) is as good a version of that song I’ve heard.
I really appreciate this site for it’s intended purpose, the valuable investment insights and the resulting comments shared here, and steering clear of political discussions. But some comments regarding “Leavers” compel me to offer a different, perhaps less represented, perspective.
While many discussions here revolve around FI, it is easy to forget that not everyone started their journey with the same educational or professional advantages. I grew up in an era and community where opportunities were severely limited and career paths often depended heavily on family or union connections.
When we consider the Brexit vote, It’s crucial to understand that for a large segment of the population, the older generation especially, were often overlooked by the urban elite, so their “Leave” decision was not based on abstract economic models or future investment potential, it was a vote driven by decades of feeling ignored by the establishment.
For those in essential support services, dustmen, shop assistants, care workers, drivers, auto assembly workers, whose jobs were moved to Turkey with the EU blessing and assistance, the opportunities within Europe that city dwellers experienced simply did not materialize for them. They couldn’t see the potential for a better life within the EU framework because , in their lived experience, there wasn’t one.
Comments not necessarily here, suggesting that Brexit voters were simply “uneducated” or “ignorant of the facts” are patronizing and miss the point entirely. Such a view shows a profound lack of appreciation for the daily struggles and genuine felt concerns for those who had very little then and feel they still have nothing now.
Brexit was for many, the only democratic opportunity given to try and force a change to their circumstances and make their voices heard.
Before an entire segment of the population is dismissed, I would add that those of you who have achieved success in your chosen path, consider the vast disparity in life chances. You are in a much better position than the majority of those who voted Leave and frankly, are unable to genuinely appreciate their anger, their mistrust, and the feeling of having their concerns continually marginalised.
Continuing to ignore this deep-seated sentiment has consequences. The persistent dismissal of their position and the perceived failure of the mainstream parties to address their concerns is precisely the reason that many are likely to vote for alternative parties like Reform UK in the next election, despite that party’s worrying lack of governing experience. People are voting for change, even an uncertain one, because the current system has consistently failed them.
I’d rather we focus on investing, but if politics must be discussed, let’s approach it with more empathy and an understanding of the socio-economic realities that shape people’s world views, instead of the opening gambit.
@ TI, Even Chris Eubank allowed his opponents to enter the ring before he KO’d them.
@ZXSpectrum48K #20
Loved the comment “Yes, the EU is a piece of shit. It whiffs of corruption, it’s bureaucratic, we were paying more than our fair share. All true. Thing is, I could apply that view to Surrey County Council. The net benefit of being part of the EU was clearly positive. I’m less clear on Surrey Council.”
When thinking about how those who voted for Brexit voted for having their cake and eating it, and are now angry that the cake is gone (or much reduced), I always remember Hilaire Belloc’s cautionary poem “Jim”:
” …always keep a-hold of Nurse for fear of finding something worse”.
Thanks Barney, your comments resonate and are appreciated.
The experience of the top 15% (IQ, Parents lifestyle/wealth… eg. Middle class ) find it very hard to understand what’s it’s like for the bottom 20-40% of the population – what’s good for the elite isn’t usually as good for the average family in the bottom half of society*.
I generally try to ignore the politics here, but it’s getting harder.
* case in point – you probably need a IQ of 80+ to pass the driving theory test. It’s sounds great to marginally improve standards but excluding ~10% due to intelligence is just cruel. Better having a tougher practical. My grandson took about 5 years, his life is hard enough
@Barney #28
I have spent most of my life in the North-West of England and Wales. Both areas where Thatcherism bit deep. So I have a lot of sympathy for the ‘left-behind’ communities. They have indeed been badly treated by successive governments.
However, those who voted for Brexit chose to blame immigrants, the EU, whoever, for their troubles. In spite of the evidence on the nature and source of their problems, and the well-rehearsed consequences of leaving the EU, they actively chose to embrace a comforting myth of ‘Brittania Unleashed’ (and no more foreigners). That was an active choice. The fact that so many looked at the options and said “I don’t really understand what is going on, but I will opt for a leap into the complete unknown” is a worry. It poisons our politics, because soundbites and slogans become the currency, not policies and evidence.
And that matters for an investing site like this because it affects the performance of the UK economy. Something we all should/do care about. I am still working to help our economy succeed, and it frustrates me that politicians are constantly pandering to those who don’t want to engage with reality, don’t want to pay taxes, want to blame all problems on an assortment of ‘others’, so we never have the important discussions that will affect my life and the lives of my children and grandchildren.
These are not easy problems to solve, but they need to be thought through, not abandoned to ‘feelings’.
“…there is always a well-known solution to every human problem—neat, plausible, and wrong.” – H L Mencken
I too love the investment posts here, but I can’t resist picking up the Brexit bone when someone throws it with such abandon. Some of the “Leave voters were just overlooked” takes are… entertaining. Yes, hardship exists. Yes, opportunity is uneven. Also: someone can struggle in life and still be thick as pigshit — not mutually exclusive.
Holing the boat we’re all in just to “show the establishment” who’s boss? Bold strategy, if your goal is starring in a cautionary tale. Spoiler: the establishment floats better than you.
And the “only democratic opportunity” line? Really? Elections every five years, anyone can run, agency is still a thing. Council votes, pension committees, school boards — all open to you. Moaning about injustice while actively rejecting the levers of change is… ironic. That’s what happens when you cede control, and not to the EU.
Jobs weren’t outsourced to Turkey by Brussels. UK employers chasing cheap labour did that, helped by UK politicians running the laxest immigration policy in the whole of Europe. Quite a feat, given that the UK was never even in the Schengen zone. Exhibit 1: Danish border rules being imported years after the UK left the EU. Denmark, btw, *is* in Schengen zone. Exhibit 2: a million people entering the UK in 2024 — how exactly is the EU responsible for that? I thought we were supposed to have control over our borders.
Empathy is great, but let’s not confuse struggle with a free pass for irrationality. Financial independence is about agency, common sense, personal responsibility, and critical thinking. That shouldn’t be a stretch for the readership here.
@TI — sorry, it’s been a funny Sunday morning. Please don’t ban me from the site.
@ Boltt #30
“I generally try to ignore the politics here, but it’s getting harder.”
Agreed!
@TI If we must have tribal politics would you consider a paid subscription to remove all backward looking historical events (esp Brexit) and focus on the future? Im thinking of the upcoming anti-business Employment Rights Bill. I still enjoy the investment stuff.
@ Old-Eyes, I understand your concern about how the political climate affects the UK economy and investment performance.
The Mencken quote you provided highlights the core of the issue: the solutions presented were too neat and ultimately wrong for a large segment of the population.
The ‘solution’ of remaining in the EU offered by the establishment didn’t account for the socio-economic pain already present in the system.
We look for risk factors in our investments; I view the Brexit vote as a market correction of political risk. It was a clear signal that a significant economic input factor—the well-being and sentiment of hard working people—had been catastrophically undervalued by political analysts.
To have a healthy investing environment, we need stable politics, which requires addressing these fundamental concerns with policy, not just dismissing them as ‘feelings’ or myths. We can’t build a stable economy by ignoring half the players in the market.
Many of those “Brexit” voters were in at the “Start” and cannot help but compare to “before and after”
@ hosimpson 32.
I appreciate your perspective. However, when we discuss outsourcing, it’s worth noting the specifics. The Southampton Ford plant, where many Transits were made, closed in 2013. Its production was shifted to Turkey, a move aided by an £80 million loan from the EU’s own bank, the European Investment Bank. This occurred despite UK contributions to the EIB.
For the workers and communities affected, this strategic decision, facilitated by the EU, felt like a direct contradiction of promised benefits. The Ford case was just one prominent example among many companies (e.g., Philips moving production to the Netherlands, Sony moving its EU HQ, various banking operations shifting to Dublin/Frankfurt) making similar moves over the years for various cost-saving and market reasons.
It’s difficult to separate such clear-cut examples of economic shifts from the sentiment and mistrust that later fueled the Leave vote. The issue is not about “blame,” but about acknowledging that these tangible, negative experiences shaped the worldview of many voters more powerfully than abstract economic models.
@ TI please don’t ban him, been It’s enlightening
Thanks for the comments all. 🙂 Goodness knows I’ve written enough about Brexit myself so I am going to be general and brief.
Firstly, on the less affluent/successful. I am not going to laboriously repeat and source all the data, but IIRC only one study found any hit from EU migration on wages/jobs, and it only afflicted the bottom 5-10% of earners.
Sure that’s bad if you’re in the bottom 5-10% but (a) it was only the bottom 5-10% and (b) it was only one study that actually found this affect
People instinctively struggle with this and start making comments about supply and demand; the simplest way to say it is that immigration creates more demand in itself (so it’s not, like say, importing equipment to replace workers). There’s lots of literature on this, I won’t rehearse it all. (Also before anyone pipes up, this isn’t to say high immigration doesn’t present other challenges/problems. But we are talking about wages / opportunities here.)
Even if we overweight that one study and additionally we say the other studies are a few percent out, you simply will not get to 30-40% of people having lower wages / opportunities because of being in the EU. That’s just wrong. You might get to say 10-15% ( though I don’t think so).
So do I think the 52% voted on behalf of the 5-15%? Not in a million years though I’m sure a few did. They voted for a mix of other reasons, some legitimate and more IMHO misguided.
As has already been noted by others, we have political choices every five years, max. And as I’ve said many many times people could vote for greater redistribution, higher taxes, whatever, instead of Brexit.
But the Leave vote was predominantly more Tory!
I thought Corbyn was a terrible politician and my conception of capitalism in the round is radically different from his, but even I voted for him over Johnson because Johnson was even more unfit for office (at least Corbyn doesn’t continually lie) and Johnson already done vast damage with Brexit.
This struggling underclass could (a) bother to vote (b) vote Labour. The 52% who I am being asked to believe voted on behalf of them could do. They mostly don’t.
Finally, and back on brand (because I am slightly centre-left to independent and I admire Thatcher) people can take some responsibility.
Even if that 5-10% were suffering lower wages, they could look to improve their lot.
They are born here. They have friends here. They speak English natively. They face no anti-immigrant prejudices. At the least it was a fair fight.
I am from what I half-jokingly call the provinces and I was in the first generation in my family to go to university. No need for violins etc, but I am not some scion of the elite.
Anyway Leave vote motivation is all ancient history. I bring up Brexit not to change minds that can’t be changed (to @ZX’s point) but because I am offended to the core by the mendacity of Leavers and their media supporters (e.g. Telegraph) that dare to cast the blame about the UK’s economic issues without factoring Brexit into the picture. And I don’t want floating voters in the middle to be misled or to forget.
It’s not all Brexit, is the complaint. Fine, but let’s consistently say it is a bit Brexit, because it is.
Let’s have the honest discussion. I frequently cite other stuff. I have criticised many times the decision to raise employer NICs last budget, for instance.
Finally, whether I should write about this or whatnot?
Yes, I get it. Remember more investment writers / pundits lean Leave (although definitely not most fund managers, I’d say) so I am very used to being annoyed by political opinions intruding into other discussions.
For instance I’m a long-term fan of Merryn Somerset Webb but she continually winds me up me with her refusal to acknowledge the impact of Brexit, with the result that I’ll occasionally stop listening to her (excellent) podcast for a bit. But overall I bite the bullet and get on with it and go back to it.
More personally, you do not keep publishing to a website for 17 years 2-3 times a week by self-censoring yourself to appease a minority of readers who you believe to be wrong-headed in their thinking about a subject that is both intellectually and emotionally important to you.
So, with some empathy, nothing is going to change around here. I’m sure I’ll occasionally write about Brexit in a decade.
Finally, re: Eubank etc, tell me all about your experience of moderating well over 100,000 posts every day of the year and battling with troublesome trolls who do not engage with the argument, and we can talk.
I have a long history of that, and life is short. So I pattern match and reject an obvious troll.
(Notice the Leave-friendlier posts I have not deleted here, I don’t just delete people I don’t agree with. It’s about the motivation to debate and the constructiveness of the argument. This is the first time I’ve done this with a poster for many months.)
p.s. To be clear the poster I am talking about is ‘Fred’ not anyone else.
Re: Car production, obviously it’s bad if you’re individually affected and I don’t know the specifics of that particular closure. But generally this is the sort of anecdote that gets overweighted in debates such as Brexit.
The bald fact is UK car production hit a peak just before the 2016 decision and immediately afterwards. Since we’ve left the EU it’s collapsed.
See the graph here: https://www.bbc.co.uk/news/articles/c23p028p200o
Again, many factors, Covid, EV transition etc.
But being in the EU didn’t hurt the UK car industry and on the face of the evidence leaving it has.
After the Truss experience and the following bond rout, with Reform possibly heading the next government is it/will it be a dangerous time to hold bonds?
# 38
Really TI …
The bald fact is GERMAN car production hit a peak just before the 2016 decision and immediately afterwards. Since Germany stayed in the EU , it’s collapsed.
https://www.ceicdata.com/en/germany/motor-vehicle-production
about 6 millions in 2015. Declines through 2016, 2017, 2018. Then COVID. Recovers to about 4.1 millions in 2023, 2024.
The elephant in the room is of course Chinese car production and their exports that are affecting everyone, in the EU or out of the EU.
There is a recent article at UK In a Changing Europe (not a rabid Leaver outlet I think) : “https://ukandeu.ac.uk/brexit-and-trade-time-to-face-the-sectoral-facts/” Quote : ” But peer below the surface of individual sectors and a complex picture emerges. Big export ‘losses’ in autos and aerospace are primarily due to global downturns. Comparative failures in energy, chemicals and pharma can be traced to domestic policy choices. Brexit is a convenient scapegoat, but our future prosperity depends on analysts making a correct diagnosis of the UK’s recent trading performance.”
Credit to Monevator for sticking with the Brexit topic through the dark years of denial.
That said, I agree with much of what @Barney said. This is a country of unequal opportunities. The grievances were real, mostly justified, and need to be addressed. Where people were misled is to blame their situation on immigrants and the EU. So they shot themselves in the foot and made funding social support and public services harder.
It needs to be said because only a problem that’s recognised can be addressed. And those responsible should be on the hook for the mess. Farage, above all.
@ TI, If you are moderating 36Mn posts a year, no wonder you come out fighting.
It’s your ball, your game, and those who disagree with you, too bad . That said it’s a great place, and your input along with others is always appreciated But you shouldn’t be surprised if, occasionally, there’s a different point of view⚔️ and opinion, especially so with a subject in which you are so involved.
We certainly agree that life is short ﮩﮩﮩﮩﮩﮩ٨ـ♡ﮩ٨ـﮩﮩ٨ـ⏳ and in my 9th decade I should know by now, that nothing matters really, except, stay healthy, in the end it’s more important than all the other crapola.
@Boltt #30 > you probably need a IQ of 80+ to pass the driving theory test
I am not convinced. FWIW I passed my old style test in the early 1980s. If the theory test is typical as represented by this website then I passed this from a standing start, without preparation getting one question wrong out of 50 (if turning right onto a dual carriageway ensure there is enough gap in the reservation, as opposed to stop, engage low gear) which was daft fail to read the Q properly which was What should you do before emerging?
The pass mark appears to be 43/50, and IMO that’s about right. It’s more common sense than IQ and I’d worry about meeting people coming the other way on the King’s highway who got more than 10% of this wrong.
@ermine
I will do some digging and get back to you.
Needless to say your IQ is around 135-145 so comfortably top 2%, so I’m not sure how easy it is for your translates for the less gifted.
In the case of my grandson it’s reading and comprehension where he struggles.
In the last couple of days there’s been a few articles of people taking 60+ tests to pass, and clearly that excludes people still trying (157 attempts is the highest I saw)
If we accept the Brexit decision was driven by emotions / mythos then Remainers (including me) still need to ask how they failed and continue to fail to tell the better story. The Obama campaign is a great example of it done well: “yes we can”, “there are no red states, there are no blue states, there is only a United States”. Farage is excellent at it but it’s not exclusive to his type of politics. Blair’s campaign also nailed it.
I’ve banged this drum before but I’d hesitate to be so disparaging of mythos. We all understand the world through story. It’s not enough for the there to be a God, there also needs to be a Jesus. Even facts are interpreted through a narrative structure. The world is overwhelming otherwise. “Perception is demonstrably an active rather than passive process; it constructs rather than records reality.”
One typical example of mythos rather than logos helping you to act in the world is the rule that you should always act as if a gun is loaded (even when you know for a fact it is not).
@Boltt #44 I can see that the written part does have some reading comprehension so there’s a level of abstraction. You could have the questions read out to you so reading isn’t needed, there is some case to be made that were are becoming a post-literate society, which that addresses.
The hazard ID is in some ways more honest because it’s more akin to reality. I got 4/5 overall for the few they allowed me before kicking me off for being a freetard.
There was abstraction back in the day because there was a bit after the test, if you passed the examiner would show you some signs and asked what they meant, and all the jazz about prohibition, warning and commanding in the round, triangular and blue signs. And the stopping distances at certain speeds which was pure abstraction in the way it was described.
@platformer #45 > It’s not enough for the there to be a God, there also needs to be a Jesus.
I have learned something new here by the analogy to mythos/logos, thank you!
@platformer #45: you’d perhaps enjoy (former Guardianista) Damien Walters’ Patreon channel – searching for a new mythos for the 21st century (you can join for free).
https://www.patreon.com/DamienWalter
@TI #36, re “17 years”, believe it or not, you’ve been at this gig now for just a smigen over 18 years! The queues had not quite begun to form up outside Northern Rock branches, IIRC.
I appreciate the discussion here which is generally well tempered. I definitely come from the bottom 20% financially, but did ok at school and went to university.
When I came out in 1991 and there were no jobs in my field I went on spec to Germany with about £1000 saved, found a job easily, learned German and stayed for 5 years, having a very enjoyable time. That was the wonder of freedom of movement that was taken away from the young generations. Fair enough I was young and had nothing to lose, but facing a lack of opportunity I did something about it.
So I do definitely empathise with the areas left behind, that’s where I came from and where I have ended up going back to, but the 1950/60s are not coming back. It was these areas that benefited most from EU funding of course.
@ermine #46 Normally the God stuff is what turns people off 🙂 As you probably know, it was the Christian tradition that turned logos into flesh. In terms of linking logos and mythos you can’t get better than the very strange John 1:1: “In the beginning was the Word, and the Word was with God, and the Word was God.” (the KJV Bible translates ‘logos’ to ‘Word’)
@Delta Hedge #47 Thanks, hadn’t seen this before!
To quote @zxspectrum48k: ‘whiffs of corruption, it’s bureaucratic, we were paying more than our fair share.’
Not everyone who voted for Brexit were like Trump supporters. Some had knowledge of EU shenanigans in Brussels and – naively it now turns out – hoped that UK politicians would do a better job, not being fully aware of the economic trade-offs.
I think the tragedy is that we, the public, weren’t remotely qualified to know enough to vote on the subject. And separately it’s absurd there weren’t more guardrails e.g. having to have a 10% tilt majority.
But we are where we are – so 1) we need to learn lessons for the future, but 2) we need to do our best from here. And all our political choices are pretty depressing right now. So maybe more and more talent will leave until things (hopefully finally) improve?
To finish off though, I still believe we have the components of a great country, there are many wonderful things still about London (and the few other cities I know well) and it’s important to remember that and not think it’s all bad!
@tom_grlla “Not everyone who voted for Brexit were like Trump supporters.”
Not everyone but I again refer to the Lord Ashcroft poll (sample 12k) taken a few days after the Brexit vote. Of those who voted for Leave, 80% thought multi-culturalism/immigration a force for ill, 80% social liberalism, 74% feminism, 78% the Green movement, 69% globalisation, 71% the internet. I find it hard not to conclude that are majority were anti-science Luddites, racists, or ethno-nationalists. More than a sprinkling of superstition and conspiracy theories. That’s damn similar to early MAGA.
Going back to the economics of this: a person on the median salary of £37,856 only pays £7,080 in income tax and NI. Just 18.7%. If you pay very little, how can you expect a good service?
The options on the table remain the same: pay more, accept inferior services or accept more slave labour from abroad to execute those services cheaply. Which do the public want? Feelings don’t come into this. It’s just math.
@ ZXSpectrum48k
I really don’t want to continue the Brexit thing, because good or bad, it’s a done deal. But like many within government and positions of trust and accountability, who continue to frustrate and denigrate those who had the temerity to vote against the views of those in power, you continue with the slow drip, of what is not always accurate information. This is how I see it. It gives me no pleasure whatsoever but, you just cannot assume and publicise every vote leaver with your incorrect and unsubstantiated thoughts.”
EU vs. Local Council
I respect your view, but I think the core of your argument rests on some flawed comparisons and assumptions.
⚖️ Accountability: Surrey vs. Brussels
You admit the EU “whiffs of corruption” and compare it to Surrey Council, but this is a false equivalence that ignores accountability.
For Surrey Council, I can attend meetings, inspect documents, and, crucially, vote them out. I have direct democratic redress.
The EU is fundamentally different. While the books are signed, the European Court of Auditors (ECA) has historically given an adverse opinion on the legality and regularity of spending. That means funds were paid despite rules not being followed—a major issue fueling corruption concerns.
You have no direct, comparable route to remove a Member State administrator who mishandles EU funds. Dismissing this lack of accountability as “just like Surrey” misses the point of sovereignty and democratic control.
Implementation vs. Decision
You and others cite the poor economic results since 2016 as proof the decision was “irrational.” But we have to look at the implementation, not just the initial decision.
Following the vote, the implementation of Brexit was met with significant resistance, which continues, from major parts of the UK establishment: senior politicians, the House of Lords, and, crucially, the Civil Service.
It’s unrealistic to expect a smooth or beneficial outcome when the project itself was pushed through a political and administrative structure that was largely opposed to the policy. The current economic data reflects a hostile implementation process, not just the act of leaving.
The Trump Comparison
Finally, claiming Leave voters are “the same type of people who voted for Trump” and only driven by “fear, anger, hate, envy” is a sweeping, lazy generalisation.
This comparison is incorrect and would be offensive to millions of voters.
Concerns over legal sovereignty, the supremacy of the European Court of Justice (ECJ), and the democratic accountability gap are not “feelings”—they are legitimate matters of constitutional principle.
Framing the debate as rational “Remainers” versus emotional “Leavers” is just a way to avoid debating the serious foundational issues of governance that were central to the democratic choice.
I have to say that I always appreciate your ‘investing comments’ and look forward to your further input on the subject, especially as to where we are now, with many industry guru’s predicting a correction.”
A good reasoned political debate but this is/was an financial investment site
Can a site serve two masters ?-to continue the Biblical analogies-possibly -probably not …….
In the hands of the Moderator!
xxd09
@ ZX Spectrum48k
A Quick Look at the Poll Data and the Math
I appreciate you providing the Lord Ashcroft data, as it was definitely insightful. However, interpreting those percentages to label the majority of Leave voters as “racists” or “Luddites” is too simplistic and, frankly, unfair.
The Poll Nuance
The poll showed that two things truly dominated the decision to leave: sovereignty/control and immigration.
A voter can be concerned about the pace or infrastructure strain caused by rapid immigration without being an “ethno-nationalist.”
The attitudes you cite on things like “The Green movement” or “feminism” show a common thread of unease with rapid social or political change. This is less about rejecting science and more about a feeling of being left behind or unheard by the institutions driving these changes—which, again, points back to the need for accountability.
Reducing 17.4 million people to a collection of negative labels skips over the fundamental political and constitutional principles that drove the majority decision.
The Tax Math
Your comment on the median salary earner paying only 18.7% in tax is mathematically too narrow.
You are only factoring in Income Tax and NI. This ignores all indirect taxes that hit median earners hard, such as the 20% standard rate of VAT, Council Tax, and Fuel Duty.
When all these are included, the effective tax rate for a median earner is significantly higher—closer to 25%-30% of their salary, depending on location and spending habits.
Crucially, the UK’s overall tax burden (tax revenue as a share of GDP) is currently at a near-historic high, a level not sustained since the 1940s.
The issue is not that people are paying “very little,” but that the historically high amount of tax currently being collected is often not spent efficiently by the government, often through layers of administration and Quangos. The public wants better services, but the choice is not simply “pay more or accept inferior services.” It is: demand efficiency and proven value for the large amount of tax already being paid.
@ xxdog
Completely agree, but you cannot keep being labelled with incorrect information, no matter which way one voted.
My thanks to TI and his supporting crew, who continually strive to make this an excellent site for anyone interested in investing, even if I have to continually look up the many industry abbreviations used here. But thanks anyway.
Thanks for the comments all, some great stuff including some good pushback on my views. Appreciated.
I think it’s fine that we debate Brexit now and then, because I believe it’s a crucially important issue, even whilst accepting it’s a frustrating subject to many.
My whole contention is that Brexit is the elephant in the room regarding our finances from a fiscal perspective at the moment. Many of us are paying much higher taxes and/or getting a worst service as a result of it. (See my post for the maths). And my grievance is that this isn’t discussed more openly in debates about the UK’s fiscal position/trajectory.
And yes, because it seems I/we have to keep saying it, not only Brexit. But *also* Brexit. Yet Brexit has been taken out of the discussion. Politicians know it’s politically toxic and the media knows the public is mostly bored about it, beyond the tribal whistles on both sides.
I do get frustrated with this line that says “we can’t say Brexit voters were motived by X” because “me or some percentage of them were motivated by Y.”
Politics is always about a mix of things. Traditional party politics includes broad swathes of views, and until we can vote on micro-decisions we have to make our choice and lump what we don’t like in with it. Perhaps a future AI can chat to us for ten minutes and then divine our overall views but we’re not there yet.
Leavers and the media (and me in comments about) traditionally talk about Brexit having been partly a failure because of continued high immigration. Farage is basically running for office on this platform!
And yet (as I said above and now we see it) we have well-articulated pushback here saying “actually it was about sovereignty”. Well no. It was about sovereignty *for you* and some several million who voted Leave. But to get to 52% you need that wider cohort which Lord A. and others (and any number of articles and vox pops etc) have identified were driven by non-sovereignty related motivations.
@Barney — Without wishing to sound patronising, I hope I’m as fluent on relatively new media platforms in my ninth decade as you’re demonstrating here. That is some impressive character based emojiing after your ‘life is short’ comment above! All the best, cheers for continuing to include us in your media diet despite these political differences on Brexit.
@TI
I much prefer the investment side and comments too, always educational, although I don’t always get it.
Provided that it’s never personal or offensive, I don’t mind occasionally ditching the Zimmer to contribute to what is an excellent site, from which I continually learn. Thank you.”
@TI
Now that the political debate is settled (for now!), I’m genuinely keen to hear your thoughts on this predicted market correction, emanating from major institutions like the IMF and central banks.
Unlike the majority, time is not on my side. ⏳ ♂️➡️ …. So, having moved, good or bad, the majority of my funds temporarily into the money market, (not timing but preservation) I look forward to yours and other views on that potential correction.”
Touch surprised that so far nobody has picked up on the BBC story about NHS redundancies. As the article hints, and I was told face-to-face a few weeks back by an A&E nurse, those at risk of being made redundant (including him and several of his colleagues) are not [just or even?] what you and I might think of as “admin” staff.
As I see it, Turkeys never have and never will vote for Xmas so what on earth make anybody think NHS administrators are any different. Somebody needs to have a good look under the surface on this one – but very unlikely from the current lot in charge, who seem more interested in keeping their own pay and rations than what they are supposed to be doing! Just another example of todays broken Britain I guess; where some doctors who got huge pay-rises seem to think it is OK to strike for more. Does not bode well.
“My taxes will go up this month because of your economically dumb decision. Own it.”
I didn’t cite for Brexit, yet I think they you would be psychologically and financially better off if you stopped being so angry about having lost the last war.
@JtE — My taxes are going up. It was an economically dumb decision. Leave voters typically won’t own it, as we’ve even seeing in this relatively incredibly constructive and articulate thread. Everything I’ve written in that quote is correct and unemotional.
@AC – it’s a great point. I wonder whether a potential future MV article covers the effect of private health care on UK FIRE calculations?
My medic friends taking out private health care cover is the canary in the coal mine for sure!
It’s a big part of US planning, and I think it will inevitably creep in over here too..
I can’t see how the NHS can get better given the changes in demographics highlighted by ZX et al.
@ ZX Spectrum48k
“The options on the table remain the same: pay more, accept inferior services or accept more slave labour from abroad to execute those services cheaply. Which do the public want?”
Why are these the only options ..?
I would think that for the planet generally a generation or so having an “aging” population would be a good thing as it would mean the population decreasing… less people on the planet ought to be more sustainable..?
What are we doing with all the technology , AI , automation etc. surely we should be increasing productivity astronomically ( I think some places proabbaly are like China) … which would then support a higher ratio of economically in-active older people..
Or is it that we are just not getting the tax revenue and wealth re-distribtion we should be getting from this technology and the tech companies that control it ? Surely it is a better idea to “tax the robots” to re-distibute the wealth gained from increased productivity …so we need less work from humans..
Just some musings and ramblings …I have never understood why in the 80s it was said we would be retiring at 50 as the techonolgy was advancing so much …. something seems to have gone badly wrong if the choices you offer are all there are in my view..
@Barney. Regarding your view that “demand efficiency and proven value for the large amount of tax already being paid” can somehow solve our fiscal issues.
I don’t think you appreciate the magnitude of the fiscal issue facing nearly all developed countries due to low fertility rates. UK real-terms spending on health and social care has risen 14x since 1950, from 3.6% to 7.8% of GDP. Most of that increase was funded by reducing defence spending from 6%+ of GDP to 2%. Moreover, that increase was during a period of positive demographic trends.
In 2000, we had around 4 workers for every retired person. By 2050 that will be closer to 2.2. That alone increases the relative burden on each worker by around 80%. Except retirees cost far more than workers. An 85-year-old costs the NHS about 8x as much as a 30-year-old.
I accept that the public sector could be more efficient. It has generated no productivity gains since 2008 (the private sector has only generated 0.5%/annum vs. around 2% pre-2008). Yet even if we got back to 2%, that wouldn’t be enough. We need growth more akin to an EM market than a developed one.
In the absence of some productivity miracle (AI, cheap nuclear fusion) this is not an issue that can be solved by tinkering. Efficiency gains, cutting benefit fraud, stopping immigrant boats etc. A few billion here or there is a drop in the ocean. Any politician, such as Farage, who implies that is simply lying or incapable of basic math. Having met Farage several times, I would suspect both.
Maybe China is a model with its world leading use of advanced robotics, high speed rail, cheap and effective small language models and mix of expert model architectures (as I’ve covered on the First they came for the Call Centres thread only today, DeepSeek 1 million tokens $0.14, OpenAI 1 million tokens $30. 214x more).
All coupled with energy efficient algorithm improvements (effective FLOP/FLOP) over expensive GPUs cycles.
A society benefitting from the cheapest electricity in the world, and by far and away the greatest installation rate of new renewables and nuclear power generation.
Admittedly they’ve had the mother of all property crashes, but, even so, it’s impressive to go from one of the worlds’ poorest countries in 1978 to a PPP GDP of $37 Tn, with many costal Chinese cities having per capita PPP GDP figures equivalent to parts of the US.
Average growth near double digit average for almost half a century.
What can be accomplished in a society led by engineers rather than politicians who have to tell comforting lies to get reflected every five years.
Of course, a multi party system has the advantage of ejecting a disastrous administration, but that only really helps if the alternative is actually better. In 2019 we had the Boris v Corby clown show. In 2024 it was Rich Rishi or Wooden Starmer. And in each of 2016, 2019 and 2022 we got a new PM with no election.
It’s no longer obvious to me thay our system is inherently superior or will ‘win’. Maybe I’m making false equivalences. But China has lifted more people further out of poverty than any other civilisation in history, and by some degree.
If China can overcome its demographics, and we can’t, and if we fall for populist fantasy compounding our shortcomings, then the moral victory of us being able to claim that we’re democrats won’t amount to much.
China’s economic ascent is impressive, but it’s worth remembering that the “secret sauce” is equal parts industrial policy, millions of engineers, some light intellectual-property osmosis, and the kind of resource mobilisation that can only happen when nobody is allowed to say, “hang on, shouldn’t we run a feasibility study on this thing first?”
This produces good things like high-speed rail, cheap LLMs, and enough solar panels to terraform Mars, but it also produces ghost cities, hidden local government debt, and worse demographics than ours.
Western democracies waste time on election-time nonsense, but they also have certain niche advantages, such as long-run innovation, “not accidentally building tens of millions of surplus apartments” and “having laws about property rights.” Swings and roundabouts.
As for the cheap AI models: yes, it’s remarkable what can be achieved through algorithmic efficiency combined with the time-honoured method of studying whatever the Americans just published on arXiv. Imitate, iterate, repeat. Civilisation in three steps.
The question of which system ‘wins’ probably hinges less on GDP and more on whose population burns out first from despair, student debt, and push-notification fatigue. The jury’s still out.
Caveat: if First Contact with the Vulcans is announced next week, I reserve a right to reconsider the virtues of authoritarian catch-up models. They do tend to work reasonably well up until the point you actually reach the frontier. Plus, nobody has ever proved the Federation was a real democracy anyway (those Starfleet uniforms say “bureaucratic technocracy” more than “vibrant pluralism” in my view). So let’s hope the Vulcans turn up soon and offer a five-year plan that actually works. 😉
@ZXSpectrum48k
That’s a formidable analysis, and I agree with your core premise—the demographic challenge is absolutely immense. The 2.2:1 worker-to-retiree ratio is a looming solvency issue.
However, I think the analysis needs to start where a much older, wiser perspective suggests it should: with the engine room of the economy. Our problem, historically, has always revolved around two things: productivity and labour relations. It’s a painful lesson we seem to keep forgetting.
If we agree that efficiency is just “tinkering,” then the immediate fiscal failure is the colossal drag on the current workforce. Before we even consider structural tax changes, we have to address three preventable drains that represent an enormous loss of national production:
A) Over 9.5 million working-age people are economically inactive, many of whom are healthy and refusing to work;
B) Lost production time due to strikes in the last 18 months;
C) The persistence of Working From Home (WFH) in sectors where it reduces managerial oversight contributes further to lost productivity and reduced innovation.
Solving the 2.2:1 ratio isn’t a long-term dream; it’s an immediate necessity to get healthy, working-age people back to work and productive. If we could seriously tackle these three immediate drains, and couple that with the added efficiency that AI is capable of delivering, a significant portion of the fiscal gap could be rapidly reduced.
And the clearest example of the cost of this failure is felt in every wallet: The average UK person is now £10,200 worse off compared to 2010. This catastrophic loss of living standards is the direct and brutal effect of our prolonged failure to solve the long-standing productivity and labour crisis—a problem that significantly predates the EU debate—and it will continue until those core issues are fixed.
Ultimately, this is where the political failures of the last few decades—which led to the volatility of 2016—originate. The country was in a fragile, distrustful state because the governments before 2016 had failed to solve these core, structural economic challenges of productivity and labour participation.
The demands of “Control” were a symptom, a desperate cry for competence, because the state failed to get the engine room of the economy running properly to begin with.
None of this even includes the significant cost of immigration, and the burden imposed on domestic services.
@ hosimpson / Delta Hedge
That’s a necessary perspective. The debate between technocracy and democracy is complex, but the tangible results are hard to ignore. For decades, the developed world stood by, convinced China still lived on a bowl of rice a day.
The reality is that their major cities and services—the high-speed rail, the general infrastructure—are now demonstrably superior to ours in almost every respect.
They didn’t just catch up; they’ve truly outstripped the rest of the modern world. That confirms that until every Western government stops the political tinkering and introduces similarly radical change focused on competence and execution, we will continue to lag further behind.
@Barney – just looking at your 3 main points above-
A- people may be ‘economically inactive’ for many reasons, caring responsibilities, further education etc. You can be economically inactive living off investments and make a greater tax contribution than many working people. Also, one of the main premises of this site is to invest to give ourselves the option of some degree of financial independence. For a lot of people that is because the world of work in 2025, especially employment, is not a good place to be.
B- I can’t believe that strikes are really a significant drag on productivity these days, I’ve never worked in a job where that was even an option. Cybersecurity perhaps , looking at JLR.
C- I spent my last few years of employment WFH, the myth of lower productivity I think is very popular among managers who realise that perhaps they weren’t really essential. For young workers, yes not the most suitable, but for those who know what they’re doing, perhaps with domestic responsibilities requiring flexibility, there is a huge advantage in having some degree of WFH.
And if AI ever gets to the stage of offering gains in productivity, surely the end goal for employers is to reduce employment?
On China I was just reading this
https://www.noahpinion.blog/p/chinas-people-are-on-a-treadmill
@Larsen
That’s a fair and granular breakdown of those points. I agree that for an individual, being economically inactive can be a rational, financially independent choice, and those living off investments pay tax, sometimes significant amounts.
However, we need to focus on the scale of the national fiscal emergency driven by the change in the inactivity numbers. The concern isn’t the retired investor; it’s the over 850,000 extra people who have become long-term sick since 2019, specifically due to mental or physical health issues. This massive, recent spike in ill-health is a direct, unavoidable drag on the NHS and welfare budgets, and that is the core fiscal failure our policy needs to address.
On strikes, I was interested in your comment that they aren’t a significant drag these days. While you may never have personally experienced it, the national cost is staggering. Since mid-2022, the UK has lost over 5 million working days to disputes—the highest total for any period of that length in over 30 years.
As someone who personally witnessed the wide-scale disruption of the 70s and 80s—likely when you were still in education (apologies if I’m wrong)—I can tell you that this level of paralysis, concentrated in public services like rail, health, and education, causes massive, cascading costs that drag down everyone’s productivity. It’s an easily preventable systemic cost we can’t afford.
As for WFH, I agree it offers fantastic flexibility, and yes, it probably makes some traditional managers redundant. But the issue isn’t the WFH itself; it’s the lack of managerial and institutional competence to measure productivity in this new environment. The policy failure is the lack of accountability that allows WFH to become a soft sanctuary for low effort, ultimately contributing to the stagnation that has made the average person £10,200 worse off.
Finally, the AI question is key. The fear that AI boosts productivity but eliminates jobs is the age-old Luddite fallacy. Think back to the eighties, pre-PC days, when shops, offices, and estate agents alike relied on card index systems. The transition from those cards to digital databases eliminated the “card filer” job, but created the entire IT support industry, software development, and modern data analysis.
History shows automation changes jobs and boosts aggregate wealth, creating new sectors. This wealth creation is precisely the explosive growth we need to solve the 2.2:1 worker ratio, and the alternative—avoiding AI to save obsolete jobs—guarantees national decline. That I, alas, will not be around to see.
@Barney (#67, #68)
Economically inactive: According to data at “LFS: Economically Inactive: UK: All: Aged 16-64: Thousands”, the number of economically inactive aged 16-64 has remained fairly constant since 1971 (it was 8.3 million in 1971 and is now, as you correctly said, 9 million). In other words, 50 years of various policies have made little difference to this figure. According to the ONS, “The main economically inactive groups are students, people looking after family and home, long-term sick and disabled, temporarily sick and disabled, retired people and discouraged workers” of whom, I guess only the last of which might in your category of ‘healthy and refusing to work’. Since the pandemic, long-term sickness has accounted for a significant number of those economically inactive (e.g., in Northern Ireland, up from about 45% in 2019 to 55% in 2023). Of course getting the long-term sick into work requires money to be spent on getting them fit to work.
For full disclosure, since I am retired and younger than 64, I currently count as economically inactive (I would probably also count as a ‘discouraged worker’ although I might use a somewhat stronger adjective than ‘discouraged’).
Strike days lost: According to “Labour disputes; working days lost due to strike action; UK (thousands)”, the number of days lost in 2024 was 730k, down from 2600k in 2023. 2014 was the last time this level occurred, but these figures are dwarfed by those in the 1960s, 70s, and 80s where annual values were all greater than 3.3 million. These have an economic impact, but it is relatively small – strikes will diminish when people feel they have a fair days pay for a fair days work.
Working from home: The impact of productivity has been ‘measured’ in various studies to lie between -19% and +13%, with differences between ‘full remote’ and ‘hybrid’ working – in other words, depending how you measure it it can sometime work and sometimes not. Prior to the pandemic, less than 20% worked from home at least some of the time, with estimates of more than 50% now. Full disclosure: As an academic and very self-motivated person, I was lucky enough to have study leave (6 months of working from home) a couple of times in my career – without the distractions of routine office interactions, the 40 minute each way journey to work, etc., my productivity soared.
The other way to ‘solve’ the 2.2:1 ratio is to chip away at the ‘1’ – Johnson allegedly tried this in the pandemic (‘let the bodies pile high’), while reducing NHS provision (which seems to be on the radar across the political spectrum) could also ‘help’ (e.g., moving to a US style healthcare system should reduce life expectancy by about 2 to 3 years). It might also be useful to note that each year that the state pension is pushed back saves about 4-5% of the overall pension budget.
The effect of immigration on the UK finance (e.g., see The Fiscal Impact of Immigration in the UK) appears to be small (less than 1% of GDP) so you were quite right to ignore it.
China GDP per capita ~$13.8k and $56.6k for the UK. China has come a long way but still has a long way to go.
@Alan S
Thank you for bringing in the historical context on both the economically inactive (EI) figures and the strikes—it raises the level of the debate considerably.
On the Economically Inactive (EI) Figure
You are spot on that the total 9 million EI figure has been remarkably constant since 1971. That is a testament to the persistent structural failure of the UK economy over five decades. However, the crisis isn’t the number itself; it’s the compositional shift that has occurred since 2019. The concern isn’t the retired investor; it’s the unprecedented, rapid increase in long-term sickness and disability which has fundamentally altered the fiscal math. This specific group is not only failing to pay tax but is simultaneously becoming the largest drag on the NHS and welfare budgets. This requires not just money, but an absolute policy overhaul to address public health—it is the definition of a national fiscal failure.
On Strike Days Lost
I agree completely that the annual days lost are dwarfed by the trauma of the 1970s. However, the economic impact is relative to the policy context. In a modern, services-dominated, high-tech economy that is already struggling with historically low productivity growth (0.4%), a concentrated loss of 5 million working days in 18 months in vital public infrastructure (rail, health) is disproportionately damaging. It’s not just a small hit to GDP; it is a catastrophic failure of political competence to manage labour relations in a core public sector, a competence that should be the absolute minimum standard for a government claiming “control.”
On the 2.2:1 Ratio and the ‘Chip Away’ Solution
You raise the difficult moral question of chipping away at the ‘1’ (the dependent population) by reducing services or raising the pension age. While those are mathematically valid levers, I would argue that reducing NHS provision to artificially lower life expectancy is morally reprehensible and a policy of despair. The only sustainable and ethical policy is to maximize the health and productivity of the ‘2.2’ (the workers). This means addressing the long-term sickness crisis and implementing the AI/tech changes needed to boost output—it is the only way to avoid the painful cuts you describe.
On China GDP and the Superiority Argument
You are correct that China’s GDP per capita ($13.8k) is a fraction of the UK’s ($56.6k). But the comparison isn’t about the current static number; it is about the vector and the rate of change. The fact that they have achieved a high-speed rail network and modern infrastructure that is functionally superior to ours in key respects—demonstrating massive, long-term state competence and execution—is why I consider them to have outstripped the West in governance. The problem isn’t their current GDP; it’s their capacity to execute massive, world-leading infrastructure projects while we debate WFH productivity and struggle to deliver HS2. That capability is the true measure of a winning system.
@ Alan S
If your reduced availability of the NHS to the elderly was adopted, then I for one would not be around to respond to your and others’ excellent contributions to this debate.
Perhaps you will think differently if and when you ever reach my age.
@Alan S > Of course getting the long-term sick into work requires money to be spent on getting them fit to work.
Not necessarily. It might involve getting work fit for people. I worked for 30 years and what did it for me was I got sick of the way work was run. I was still a competent engineer, but I couldn’t take the stupid metrics, the ever shifting Successfactors people management crap. And so a quarter was knocked off my working life, it so happened with luck and the wind behind be I was able to FI/RE which stops the load on society accusation and stopping work improved my health so I am not a load on the NHS as of yet.
I look at many of the jobs that people are exhorted to take and ask myself why exactly would you go anywhere near these if you had/wanted to preserve your sanity?
I don’t think you will ever get the increasing proportion of long term sick fit while you are still trying to get them into rubbish work. We are gaslighting no end of people telling them the problem is them where in fact it’s work. How the hell were zero hours contracts ever allowed in the first place?
It has crossed my mind that people aren’t machines and therefore their productivity can’t just be increased indefinitely. I have a suspicion that the drive for increased productivity could be precisely what is making everyone ill? In which case, it’s somewhat counter productive.
I like the inversion of the problem there @ermine. Nice work.
@ermine
A compelling and deeply felt observation, and I think it introduces the most crucial factor into the equation: the quality and psychological safety of modern work.
You are absolutely right that the problem isn’t just about getting people “fit to work” but about getting work fit for people. Your experience, sadly, is a perfect microcosm of the productivity crisis: a competent engineer driven out by toxic corporate culture, metrics, and ‘people management crap.’ I believe this points to a fundamental and long-standing structural flaw in the UK: unlike in places like the US, our management culture was often built on promoting untrained people through the ‘Old boy’ network and filling ‘Retired’ shoes rather than focusing on merit or genuine training.
This legacy of management unfit for purpose is precisely why the ‘stupid metrics’ and bureaucratic nonsense prevail today, actively shedding experienced labour and condemning us to low productivity.
This failure of management is directly responsible for a huge amount of the £10,200 loss per person we discussed:
1. The Systemic Productivity Drain:
When competent workers like yourself are driven out of the workforce prematurely due to a combination of zero-hours contracts and bureaucratic nonsense (as you mention), that is a massive, self-inflicted wound. This phenomenon perfectly explains why the UK’s productivity growth is stuck at 0.4%—we are actively shedding experienced, skilled labour because the work environment is broken.
2. The Gaslighting of the Inactive:
You highlight the moral failure of “gaslighting” people by telling them they are the problem. This is a crucial ethical point. We cannot sustainably address the 850,000 increase in long-term sickness if the available jobs are psychologically or physically damaging. The health crisis is a symptom of a dysfunctional labour market that offers insufficient reward, security, or dignity.
The bottom line is that improving the quality of work is the most direct path to reducing the long-term sickness numbers and increasing the national tax base. It’s an investment in human capital that pays dividends far greater than any minor budget cut.
Finally, the AI question is key. The fear that AI boosts productivity but eliminates jobs is the age-old Luddite fallacy. History shows automation changes jobs and boosts aggregate wealth, creating new sectors. And just as the computer released thousands from a routine drudge, so, hopefully, will AI flourish to provide meaningful and enjoyable work for those who have yet to join the workforce.
@ Rhino
That is the central economic and moral paradox of the 21st century, and I agree completely.
The reason the drive for productivity is making people ill is because we are trying to achieve it through sheer intensity (toxic metrics, endless targets) instead of through intelligence (AI, capital investment, and competent management).
The long-term sickness figures confirm that this reliance on poor management (the legacy of the ‘Old Boy’ network) is utterly counterproductive. We are demanding machine output from people whose lives are being made miserable by the quality of the work itself. That is the fundamental flaw in the UK’s approach to growth.
The bottom line is that improving the quality of work is the most direct path to reducing the long-term sickness numbers and increasing the national tax base. It’s an investment in human capital that pays dividends far greater than any minor budget cut.
Finally, the solution to the systemic failure of “rubbish work” must be technological. Hopefully, AI will flourish to provide meaningful, more skilled, and enjoyable work for those who have yet to join the workforce, achieving these gains without requiring greater personal effort or intensity from the worker.
My feelings in this regard, relate to seeing a factory worker working in a space 10ft wide x 6ft deep doing a repetitive job. When I returned 10 years later, he was doing the same job in the same space, but to a different component.
Lets not segreate ourselves into two warring parties. I think we can all agree that things aren’t perfect, whether its because of the b word or not. Most of those I know who voted leave feel misled, and those who voted remain feel angry. But we can pull together – we’re better than that.
Thanks as always for a weeks worth of great content.
@Alan S, @Barney (#72 & 73): China GDP per capita v Purchasing Power Parity GDP per capita: since the 1980s the PRC/ Peoples Bank of China have successfully artificially devalued the Renmimbi / Yuan, especially against $US.
Market exchange rate GDP comparisons are, consequently, pretty meaningless.
This source pegs PRC GDP at PPP at $43 Tn, about a third higher than the US (at market exchange rates it’s less than two thirds the US level, i.e. ‘only’ $18 or 19 Tn, which is clearly far too low to capture the massive extent of China’s transformation since 1978/79):
https://www.worldeconomics.com/GDP/China.aspx
Per capita PPP Chinese GDP with 1.4 bn people is therefore likely around or nearly $31,000. It’s higher in the southern costal plain cities, on par with poorer areas in the US, and much lower in the (sparsely populated) interior.
@ Delta Hedge
Thank you for bringing this crucial clarification into the discussion. This is exactly the point that needs to be made on China’s true economic weight.
The previous use of Market Exchange Rate GDP was indeed meaningless for capturing the scale of China’s internal transformation. Your correction using Purchasing Power Parity (PPP) is vital.
The fact that China’s GDP at PPP is now pegged at $43 Tn—about one-third higher than the US—and that its per capita PPP is nearly $31,000 (comparable to many southern European economies) is the real story the West has consistently failed to internalize.
This massive extent of China’s transformation is precisely why the comparison remains so relevant to the UK’s structural failures. The superior infrastructure (high-speed rail, modern cities) we observed is the direct, visible result of a $43 Tn PPP economy operating under a system prioritizing state execution over political volatility. We cannot afford to dismiss their success based on artificially low market exchange rate figures when they have demonstrably outstripped the developed world in terms of sheer capability and delivery on the ground.
@ Tom
The core of our conversation is not about Brexit or taking sides, but a friendly discussion regarding a profound economic subject that goes well beyond Brexit.
The underlying issue we’ve been debating is the structural incompetence that existed long before the referendum, which has been severely exposed since.
Whether it’s:
Management Failure: The ‘Old Boy’ network producing leaders who prioritize metrics over human capital.
Political Failure: The inability to complete major infrastructure projects or fix the long-term sickness crisis.
Institutional Failure: The system producing toxic work environments that drive competent engineers to early retirement.
These are fundamental problems of competence and execution, not ideology. If we are to truly pull together, the common ground must be a shared, non-partisan demand for structural reform that ensures the UK can competently execute its goals and resolve the root cause of the £10,200 loss in potential income.
Well since @Barney mentioned the recent increase in long-term sickness, here’s another elephant in the room: Long Covid.
The UK managed the pandemic worse than most peer countries, with several cycles of too-little-too-late laxity followed by longer and harsher lockdowns. Result: more deaths, more debt, more long-term sickness.
@Barney
“… The underlying issue we’ve been debating is the structural incompetence that existed long before the referendum, which has been severely exposed since. …’
At root, the ‘structural incompetence’ to which you refer is called democracy.
Long time lurker but this has been a fascinating debate. One note, I’d suggest Barney tone down the LLM usage. Useful tool but the style needs tweaking to not start to grate quickly
@Barney (#73, #74)
To be clear, I too find the prospect of reducing NHS (and social care) provision morally reprehensible. However, there appears to be an increasing level of support (at least from the centre rightwards) to moving to alternative funding methods or outright privatisation (effectively funding from NI and income tax is progressive, funding from health insurance less so). I am in my early 60s and fully expect to have to pay a significant proportion of any future health costs which means I will ‘run out’ when the money does! Apparently half of all US bankruptcies are caused by health costs (although I cannot find a definitive source for this widely quoted figure).
Economic inactivity: Is the UK situation unique? – looking at Germany, they appear to have 10.5m economically inactive in the age range 15-75 out of 30.9 million (a different age range to the UK, so not directly comparable).
@ermine (#75)
I too was a moderately competent physicist/engineer who took early retirement in my mid-50s because I had repeated bouts of clinical depression largely caused by overload at work – despite working upwards of 50 hours per week, I was unable to actually complete tasks properly (and the horror of meetings, meetings about meetings, pre-meeting meetings, post-meeting meetings, aaaah!). To be fair, my place of work did try very hard to reduce my loading. The final straw came a) when I realised we had enough to retire on and b) on one metric I was below average and was told that no-one was allowed to be below average! It took my mental health about 2 years to recover after retirement.
IMV, one unique problem with the UK is the move to become a service economy in the 1980s. I believe the PM of the time was told by a US visitor that you couldn’t run an economy solely on services.
@Barney (#77, #78)
The ‘old boy’ network in management. To take a personal example, my father was a hands on engineer who rose from a wartime naval aircraft mechanic, through shop floor working to management in heavy industry (having taken night classes throughout his career). Despite this experience and knowledge, he was passed over for the managing director role in favour of someone from public school with no experience of production who then managed to bankrupt the company within, IIRC, 5 years (my dad retired well before that).
I have recently read (but cannot remember where) that we are pretty poor in the UK at going from family sized firms to larger concerns and consequently have not refreshed our world class industry (e.g., see top ten in FTSE100). So your comment about capital investment is an important one. I note that one of the reasons for change in taxation of dividends in the late 1990s was to encourage UK firms to invest to grow rather than paying dividends, with, as it turned out, little success.
While I agree that AI might be useful in some aspects of the service economy (can we at least hope for improvements in online customer service widgets?), can it be applied to SMEs (plumbers, hairdressers, coffee shops, builders, etc.) since these form 99% of all UK businesses and about 50% of business turnover?
@DH (#80)
Interesting information. I’ve only visited China once (on a work trip) with most of my time spent in a city about two hours (by plane) from Shanghai. The contrasts are immense even within a single city (e.g., large multilane modern roads, the junctions of which are swept by little old ladies wielding a besom).
One reason that China is able to complete massive development is the lack of property rights – e.g., the three gorges dam project (which I visited) displaced over 1m people. Imagine trying to displace 0.1% of the UK population with a single project (weirdly, the press that seems most keen on deregulation also seems keenest on NIMBYism). Even 19th century railway building required an act of parliament (and some routes deviated around powerful landed interests).
Many thanks for an altogether interesting discussion with at least some areas of agreement.
China’s property bubble and burst (and now persistent mild deflation) is a massive issue for sure.
Some see it as a cause of imminent collapse.
Certainly property developer bad debt and local government debt are colossal.
But other commercial debt, central government debt, and (excluding property) household debt is not as bad as the ‘West’.
And whilst China *could* collapse tomorrow (or in N years), I can distinctly recall multiple predictions of imminent doom on China (including that it was already underway) since at least the 2015 Chinese growth scare.
Indeed, looking right back, I seem to remember that the broad consensus at the time was that China was finished after Tianaman Square in 1989, and that the CCP would go the way of the CPSU after 1991.
That obviously did not happen.
So, not to say that it isn’t necessary just a house of cards (or a “Paper Tiger”, as the Maoists would have said back in the day); but China’s system, so far, does seem (from what we can tell from the outside) to be remarkably resilient, practically persistent, and, at least in its own terms, perhaps surprisingly successful.
I think it is a mistake to dismiss it as Communist hold over destined for history’s dustbin.
It doesn’t give that appearance, and, on the AI stuff, China really does seem astonishingly adept at getting much more out for far less put in (and with immediate RoI) via algorithmic and system architecture improvements implemented into IRL settings (e.g. factories); rather than the OpenAI approach of ever exponentially more compute only to get ever decreasing sub linear incremental improvements to model output, all with absolutely massive cash burn, huge funding gaps, little (relatively) immediate direct revenue, and seemingly no ‘off ramp’ for either the US model providers or the US hyperscalers to get moving towards better and more sustainable (and achievable) approaches and ideas.
Neil Woodford (yes – I know!) recently published some opinions on the economic effect of Brexit (he doesn’t think there’s been much/any). I have no idea whether he’s right.
https://www.woodfordviews.com/post/brexit-a-convenient-and-popular-scapegoat
@Gary – It’s an interesting enough recap of the post Brexit trade data, and I agree the impact of leaving the EU gets drowned out by the impact of covid and the war in Ukraine (not least, incidentally, because both have hit the EU too, especially powerhouse Germany.)
However it’s not very convincing beyond this because looking at data this way just tells us what did happen not what could have happened if we’d stayed. (The counterfactual.)
There’s a reason all the serious studies have gone this way instead, including independents with no axe to grind like US independent bank Goldman Sachs.
It’s because it’s actually what matters when assessing the choice of two outcomes. Unless you think Brexit meant economic apocalypse, which I never did. (As always my slow puncture analogy).
I appreciate it’s frustrating to deal with “what ifs”, but the fact is the share to the EU was always going to stay high and so would our exports (not least across Irish border.) So looking at them and saying “look they did” isn’t very informative. (The persistence is in fact why it was so good to be in the EU. It’s overwhelmingly our natural trade partner.)
Let’s say you have a lemonade stand. Is nicely profitable. But one day a draconian government mandate says you have to get everyone to sign their name on some paper before they buy. And costs of lemons rises a smidgeon so you have to either charge a bit more or take a profit hit.
You can’t move your stand. Your customers are all the same guys passing every day. So these frictions increase your costs very slightly and reduce your efficiency slightly.
Your data shows you still serving all the same customers etc. But it is a very slightly worse business for you. Over many years the small effect adds up versus what might have been.
That’s Brexit.
A couple of interesting charts from the FT showing how the % of 20-24 year olds in the UK who are not in work, seeking it, in education or raising children is nearly 10% in the UK — up from 4% at the turn of the century.
https://x.com/jburnmurdoch/status/1991487650533110225
This is not just a ‘more old people’ problem, though that’s undoubtedly the existential heart of it.
This is a very insightful thread, blending economic models with clear social data.
I completely agree with the Neil Woodford critique. The “slow puncture” analogy is perfect: the estimate captures the persistent, marginal friction that lowers the UK’s potential GDP—the counterfactual loss.
However, the real danger is that the slow puncture is being experienced while the UK is under a simultaneous Quadruple Squeeze (tax hikes, asylum, Ukraine, and Brexit) that exposes deep structural rot. The UK’s chassis is rusted out due to decades of poor management, preventing us from handling any shock effectively.
The data on youth detachment (nearly 10% of 20-24 year olds inactive) is the clearest proof that the problem is overwhelmingly internal and structural, not solely Brexit. This crisis is driven by domestic factors:
The ‘Rubbish Work’ Thesis confirmed: Youth are opting out because the available jobs lack dignity and security.
The Mental Health Crisis: The primary driver of youth inactivity is a failure in public health provision and workplace psychological safety.
The Skills Mismatch: A long-standing failure of the UK’s education-to-work transition.
Crucially, fixing the youth detachment crisis alone would boost national GDP by an estimated , uncannily similar to the estimated annual cost of Brexit. This confirms the true, profound rot lies in our domestic structures. Not entirely due to Brexit.
There’s a danger of sounding like one or more of the actors in the Four Yorkshiremen sketch here*:
https://youtu.be/ue7wM0QC5LE?si=BWDN2Tyj3Gg5YJ8u
but, even so, are we really to believe that this 2.5x increase (4% v 10%) is really down to a youth mental health crisis, as opposed to a UC / ICB system that now more or less lets anyone get signed onto those benefits because they’re ‘stressed’??
I’m broadly progressive, vote(d) Labour, Remain etc but, come on. Pull the other one.
It beggars belief that the world’s has gotten 2.5x as chronically stressful or that this generation is 2.5x more clinically vulnerable to acute dehabilitating stress than the generation(s) that went before it.
Labour needs to get a grip on this, and fast.
It’s ridiculous and the country can’t afford it, even in good times (and we’re certainly not in those).
I’m not part of the ‘calling out the Wokery snowflake’ brigade’s malarkey, but putting a stop to this is just common sense.
If you’re medically confirmed as physically (orthopedically) unable to work, then that’s one thing.
But taking as gospel truth someone saying that they’re feeling too stressed out or anxious to do so is quite another thing entirely.
(*NB: I live in North Yorkshire mind, my mother grew up in South Yorkshire, and my maternal grandfather lived most of his life there – so I think I can legitimately affect the Four Yorkshiremen attitude for this post!)
That is a fair and common-sense take on the issue, and you’re right to question those figures. It feels impossible that things could get 2.5 times worse purely on a clinical level, and your scepticism about the benefits system’s rigor is completely justified.
But here’s the reality the government has to deal with:
The Administrative Failure
Whether every single claim is medically sound or not, the statistics confirm a huge shift in how people are leaving the labour market. The numbers you are doubting are the claims the government is paying out on: The number of young people claiming benefits like PIP for psychiatric conditions has more than tripled since 2005.
This is not just mild “stress” for some; it’s a massive, quantifiable burden that the state is now locked into paying.
Experts note that the benefit system is increasingly being used as a primary exit ramp from work. Why? Because the poor-quality, low-dignity jobs available (the rubbish work we talked about) make using a lax benefit system seem like an economically rational choice.
The Structural Problem Remains
This leads us back to the structural failure. It’s a failure of the system itself, not necessarily a total clinical collapse:
The issue is not just a clinical one; it’s a failure to manage the transition from education to work. It doesn’t matter if it’s 100% genuine illness or 50% people using a weak system—the government’s job is to create a pathway that stops this from happening.
The fact that the UK labour market and the benefits system are structurally unable to successfully integrate this group confirms the profound rot we’ve been discussing. The only way to stop this leakage is to focus on making work more appealing, including financially, instead of allowing people to be better off on benefits.
With the economy at least £173 bn smaller and the tax take at least £60 bn less each and every single year now compared to what it would (and should) have been just because of Brexit (and with the lingering impacts of Covid and the Russia-Ukraine war to boot); we just can’t afford to be a soft touch anymore.
I’m no fan of Thatcher or Norman Tebbit (quite the reverse), but they resonated with the public because aspects of the central message rang true: incentives do really matter and, at the moment, those incentives are wrong, and getting worse:
https://www.telegraph.co.uk/politics/2025/11/21/work-shy-benefit-claimants-softening-penalties-labour/
The Labour party was set up as the party of the workers, not the shirkers. Get a grip Mr Starmer. You’re generosity of spirit, whilst admirable in it’s own way, is handing the keys to the country to Mr Farage come 2029.
That is a strong articulation of the frustration many feel, and the mention of Thatcher and Tebbit raises a fundamental economic truth that we can all agree on: incentives do really matter.
However, to use that principle effectively, we must apply the same cold economic logic that Thatcher herself applied, rather than framing the issue as simply “shirkers.”
For instance, when Margaret Thatcher took on the miners, the core economic rationale was simple: it was fundamentally cheaper to import coal than it was to produce it domestically. However, the failure wasn’t just the closure; it was the lack of follow-up competence. The economic logic of the closure was not matched by a coherent social plan to regenerate the affected communities, leading to decades of structural failure because the funds were insufficient and poorly targeted.
We see this same structural blindness today. In the name of the Net Zero emissions targets, we now import millions of tonnes of wood from the US and Canada for power generation (like the Drax plant), classifying it as “green” energy. This is another rational calculation that ignores massive external costs: the emissions from shipping it halfway across the globe, the reported destruction of environmentally sensitive forests, and the air pollution suffered by communities near the pellet mills.
We must apply that same cold economic logic to the current benefits/jobs system. The incentives are wrong today because the system fails on both sides of the ledger:
The Incentive to Work is Missing (The Poverty Trap):
As noted in previous posts, it is currently economically rational (and less stressful) for many young people and low-income workers to be better off on benefits than to accept low-wage, insecure work. The government has failed to fix the poverty trap.
The Incentive to Manage Competently is Missing (The Rubbish Work):
The UK is actively destroying human capital because our management culture fails to justify the cost (dignity, security, pay) needed to retain them.
The failure isn’t morality; it’s a structural failure to create a system where the economic incentive to work overwhelmingly outweighs the economic incentive to claim.
The latest voting polls indeed indicate that Reform UK could well become the largest party in a multi-party parliament, but Mr Farage’s Westminster future is far from being a guaranteed certainty.
When my mum was growing up every family wanted desperately to get their sons through the 11+ and into grammar school to avoid a life down the pits. Yet when the pits closed there was nothing left. The thing the community feared and despised was the thing it relied on to keep it together.
Regeneration hasn’t worked. It’s one of left behind places you see looking sad as it goes past the window of the Cross-Country service as you traverse from Yorkshire to the Midlands.
Back in Thatcher’s day, its local politics was summed up by the phrase that they didn’t bother counting the Labour votes, they just weighed them. Other parties just lost their deposits.
Nowadays it’s a Reform heartland. From Socialist Republic of South Yorkshire to hard right (turquoise?) Reform and all those English flags. They scream out “Listen to Us”. We exist. We matter. Care about us.
The way they see it is that it is a crisis of compassion – as the Left say – but the crisis, in their view, concerns what they’d describe as the indigenous and traditional (or ex) Working Class, not what are normally characterised as minority groups. I’m not saying that I agree. I don’t. But I do understand their perspective, and how they’ve arrived politically on the journey which they’ve been on.
Labour’s biggest mistake may have been to listen too much to its student activists. The traditional and ex Working Class are genuinely patriotic. Corbyn went down like a bucket of cold sick. It’s not been forgotten by them.
@Barney I agree with everything you said