What caught my eye this week.
I have always loved the end of things. A closing down sale. A silent office over Christmas when everyone else is away. The last days of school. The siesta of working through your notice period, when however conscientiously you try to keep at it, the pressure has all gone.
Perhaps Rishi Sunak and Jeremy Hunt feel the same way. They certainly seemed to enjoy themselves with Wednesday’s Autumn Statement. The Prime Minister chortling, and Hunt showing unexpected comic timing as he shared his purported 110 supply-side reforms to unlock economic growth.
This is the Brain’s Trust of the Tory party by modern standards [1]. Sunak and Hunt both know the odds of them being in their jobs after the next election are remote.
Hence I was pleased to see what was mostly a technocratic budget.
Without much room to play with and very little chance of enjoying the spoils, Hunt delivered a suite of pinches, tickles, and tweaks that he hopes will add up to an invigorating pick-me-up for Britain PLC.
I wouldn’t say it amounted to a grand Growth Plan. But it does at least look like planning for growth.
A welcome change after nearly a decade of throwing grit into the wheels at every turn.
When 2p goes quite a long way
Under the last two incumbents of Number Ten, this Autumn Statement would surely have been heavy with last-days-in-the-bunker vibes.
Crazy populist policies that heaped more of Britain’s long-term potential on the bonfire, Denethor [2]-style or – presuming she had time to get them typed up – short mad missives addressed to generals and armies long since taken off the table.
There’s still the Spring Budget for that I suppose. Maybe we’ll then see the unnecessary – and at the least ill-timed – scrapping of inheritance tax, or the pantomime horse of a British ISA that doesn’t know its arse from its elbow. Or big income tax cuts that would certainly be welcome but can hardly be afforded.
But Hunt’s more modest moves were impressively sane.
Sure, cutting employee National Insurance by 2% is at bit like giving someone a stool to stand on while the floodwaters of fiscal drag are rising and the tax take inexorably drowns the land.
However it’s better than nothing, rewards work, and helps those towards the average end of the spectrum more than the rich, which is appropriate in a cost-of-living crisis and a world where disparities of outcomes are widening. Ditto the simplification of NI for the self-employed [3].
Unlike a general income tax cut, trimming NI also doesn’t give anything extra to pensioners, which is a good thing. I’ve nothing against old people – I hope to be one someday – but pensioners have had it relatively better for years now. And the too-costly triple-lock remains in place.
Kicking off a consultation to look into Aussie-style pension pots that move with you [4] when you change jobs was welcome, as were the steps towards ISA simplification [5] rather than proliferation.
And common sense seems to have prevailed when it comes to allowing fractional shares [6] in an ISA.
We’ll have to wait for the small print on all of these – and I’d say there’s zero chance of ‘pension pots for life’ before the next election – but it’s sensible stuff.
Paying the price
The bigger picture hardly looks pretty, of course.
After the rush of reporting on the Autumn Statement goodies was over, experts lined up to explain British workers are still very much under the cosh of fiscal drag thanks to frozen tax thresholds.
In fact this Tory government will exit leaving Britain at its most heavily-taxed since the days of Churchill.
Not entirely its fault of course, with a global pandemic in the mix. We can argue about specific Covid policy responses – and I’d cut all governments a lot of slack, fiscally-speaking, given all the uncertainty – but evasive action was costly everywhere.
On the hand, the economically-witless Brexit [7] was mostly the Tories’ fault. Who knows exactly how much it’s hammering us, but the independent Bloomberg’s third annual estimate puts it [8] at £100bn a year.
Slap a 40% tax take on that and that’s £40bn more a year that Hunt could have had to play with.
For a sense of what that’s worth, the OBR estimates this week’s NI cut will cost £10bn a year. So we could have had four of those, say. Or an inflation-adjusted personal allowance. Or more spending on services that instead are being whittled away.
Not so much 40 new hospitals from Brexit as 40 weeks to wait to get into one. Or 40 minutes late on the train to get there.
The economic drag from our innumerate Brexit has been going on for years now. Soon enough we’ll be half a trillion quid in the hole. This was always going to be a costly whimper, not a big bang. And this is not even to count the waste of time of five years arguing about how best to shoot ourselves in the foot, versus a counter-factual where we had decent leaders who focused on things that actually mattered.
Never forget when Britain properly gets growing again that we generally tend to grow. Brexit won’t have given us that growth. It has just slowed us down in the meantime.
Oh, and I’m not much impressed by retorts that we’re growing slightly faster than Germany or doing a little better than Italy or whatnot.
For one thing, I expect that the same statistical revisions – which we’ve applied first – will boost rear-view Eurozone growth in time, too.
More pertinently, it just means we’d be growing even faster than those countries if we hadn’t the burden of Brexit.
We did fine for decades in the EU – and we were growing faster than them then, too.
Now though, we’re trundling along with a slightly flat tire – and that’s with immigration at a record high [9].
Immigration boosts economic growth. So we’d be growing even slower if Brexiteers had actually been able to cut numbers to the level most of them voted for.
Incompetence saved us on that score.
Poor show
The pandemic, Brexit, inflation, and Britain’s endemic productivity problem – it has all helped to squash real income growth.
According to [10] the Resolution Foundation, by the end of this Parliament (which started with a bluster in 2019) average household income will have fallen by 3.1%. That’s £1,900 less in spending money.
It’s unprecedented in modern times:
[11]
Source: Financial Times [12]
Still, you might imagine that with the government taking in the greatest share of economic output since World War 2 the squeeze on public services might be over, at least?
Alas not. The Institute of Fiscal Studies estimates [10] that Government departments will need to find another £20bn of spending cuts next year.
I suppose they might yet try a pre-election borrowing binge to fund their way out of that hole. But given how the soaring cost of paying our current debt is another reason why the public finances are so strained, this would hardly be something to cheer.
The morning after the night before
I said on Twitter [13] this sensible Autumn Statement suggested the Tory party had turned a corner – at least for now.
I hope so. Britain desperately needs better leadership. We can debate the right policy levers to pull, but we can ill-afford any more grand delusions.
The numbers make that plain.
Have a great weekend!
Autumn Statement roundups
What the Autumn Statement means for your money – Which [14]
Another spin on the same – Be Clever With Your Cash [15]
FT has a solid take on The Autumn Statement [Search result] – FT [16]
Here’s a perspective from the lefties… – Guardian [17] and its calculator [18]
…and the same with a calculator more from the right – This Is Money [19]
And commentary
What is national insurance, and who will benefit from its cut? – Guardian [20]
Britain’s tax burden to be highest since WW2 despite NI trim – This Is Money [21]
Will fiscal drag wipe out your national insurance gains? – This Is Money [22]
How to fix Britain’s flashy economic announcements [Search result] – FT [23]
Hunt delivers a budget designed to destroy a future chancellor – Guardian [24]
It alleviates the worst pain, but it won’t fix Britain’s underlying problems – Prospect [25]
The collated #autumnstatement tweets of Martin Lewis – Independent [26]
From Monevator
Accumulation units: tax on reinvested dividends – Monevator [27]
The rich person’s guide to pension contributions – Monevator [28]
From the archive-ator: Fat cats of the land – Monevator [29]
News
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Chancellor to close £29,000 ISA loophole – Yahoo Finance [30]
Famed short-seller Jim Chanos is throwing in the towel – CNBC [31]
Millennials say they need $525,000 a year to be happy – Business Insider [32]
Cognitive ability mattered in vote for Brexit, study shows – University of Bath [33]
WHO asks China for more information about rise in illnesses and pneumonia clusters – NPR [34]
WTF! Extremely high-energy particles detected falling to earth – Guardian [35]
[36]
The unprecedentedly top-heavy S&P 500 is a challenge for index fund investors – Cullen Roche [37]
Products and services
Nationwide brings back sub-4.5% mortgage fixes for first time since June – This Is Money [38]
Energy price cap to rise 5% to £1,928 from January – Which [39]
Metro Bank tops easy access and one-year savings tables. Is it safe? – This Is Money [40]
Get £50 free trading credit when you open an account with Interactive Investor [41]. Terms apply – Interactive Investor [41]
New mortgage lender Perenna offers up to 40-year fixes at six-times income – This Is Money [42]
Open an account with low-cost platform InvestEngine via our link [43] and get up to £50 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine [43]
Why is it so expensive to insure an electric car? – Which [44]
Review of the Cheddar cashback app – Be Clever With Your Cash [45]
Homes for sale near beauty spots, in pictures – Guardian [46]
Comment and opinion
The downsides of diversification – Of Dollars and Data [47]
“I want to get out”: two landlords on the ‘broken’ rental market – Guardian [48]
Cash’s big blind spot – eToro [49]
The network scam – Seth Godin [50]
What traits make for a super-saver? – CNBC [51]
The downsizer’s dilemma [Search result] – FT [52]
Don’t retire. Ever! – The Walrus [53]
The best time to diversify – Creative Planning [54]
Saving-for-retirement ratios [US but interesting] – Humble Dollar [55]
More ‘supernerds’ rail against Dave Ramsey’s ‘8% rule’… – Think Advisor [56]
…and even try to find a way to make his reckless rate [57] work – Morningstar [58]
Late bloomers – Humble Dollar [59]
The debt reaper – Bond Vigilantes [60]
New data suggests stock returns are lower over the very long run [Nerdy] – F.A.J. [61]
Longevity risk mini-special
Longevity risk [PDF, US and nerdy but relevant] – Centre for Retirement Research [62]
Seven reasons why people avoid annuities [Slideshow] – Think Advisor [63]
Naughty corner: Active antics
What makes a multibagger? [PDF] – Stockopedia [64]
Hard work pays off. Maybe. – Klement on Investing [65]
Hedge fund herding is worse than ever [Search result] – FT [66]
Moats and capital allocation – Investment Talk [67]
Is HSBC a good choice for dividend investors? – UK Dividend Stocks [68]
Private equity resorts to buying back companies after IPO flops [Search result] – FT [69]
Kindle book bargains
Rogue Trader by Nick Leeson – £0.99 on Kindle [70]
I Will Teach You To Be Rich by Ramit Sethi – £0.99 on Kindle [71]
The New, New Thing by Michael Lewis – £0.99 on Kindle [72]
The Epic Rise and Fall of WeWork by Reeves Wiedeman – £0.99 on Kindle [73]
Environmental factors
How Norway brought heat pumps in from the cold – Guardian [74]
All the fish we cannot see – Hakai [75]
Blue whales return to ‘safe’ tropical haven – BBC [76]
Regenerative cattle ranching [Fancy visuals] – AP News [77]
30 new species seen in Bath due to climate change – Guardian [78]
Robot overlord midwives in crisis roundup
Sam Altman to return to run OpenAI – BBC [79]
Board warned of AI breakthrough before Altman’s ouster – Reuters [80]
OpenAI’s misalignment and Microsoft’s gain – Stratechery [81]
Will AI render programming obsolete? – MIT Press [82]
A reminder why this all matters [Video] – Twitch founder Emmett Sheer, via X [83]
Off our beat
Middle-class shoplifting at the self-service till – Guardian [84]
The gun industry chose mass murder – Rolling Stone [85]
Would you want to be comforted by a ‘ghostbot’? – Vox [86]
The full reset – Morgan Housel [87]
Naomi Klein on wellness culture’s embrace of far-right tropes – Guardian [88]
How fossils are shaped by people – Undark [89] [h/t Abnormal Returns [90]]
Can Disney rediscover the magic? [Search result] – FT [91]
Six ways to make your life easier and more peaceful with Stoic principles – Guardian [92]
And finally…
“On balance, the financial system subtracts value from society.”
– John Bogle, Enough [93]
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