Feel free to skip one more pundit’s view of the Budget if you’ve had enough. I’m not claiming to be John Maynard Keynes. This is just how I see things.
When asked why he robbed banks, the US heist wiz Willie Sutton said: “Because that’s where the money is.”
Those hit by what passes for wealth taxes in Labour’s October Budget should sigh and say the same.
Yes, capital gains taxes have gone up a little. But entrepreneurs and investors with money to spare outside of tax shelters – or the gumption to start a business – don’t do it for a few percentage points of tax arbitrage versus income tax. We do it because the £760,000 you’re left with after a now-24% levy on every £1m you make in gains is still life-changing, compared to the average UK salary of £36,000 a year.
No, you soon won’t be able to pass along a multi-million pension pot to the next-generation tax-free.
But the state doesn’t provide tax reliefs for pension savings so that your kids need never work again. It does so to encourage you to save for a time when you can’t or won’t yourself. Scrapping the Lifetime Allowance for pensions doomed the IHT ruse, and the trade-off is a sensible one.
Higher stamp duty when you buy a second-home or investment property?
Well I don’t like transaction taxes on principle. But if we’re going to have them, then at least this targets the pointy-end of the property market.
Reversing the 20-year advance that landlords made versus first-time buyers continues. With house price to income ratios still off the charts and buying in the South impoverishing-to-impossible for most young people without a suitcase of cash from mum and dad, I’m at peace with that direction of travel, too.
We tried the rest, now here’s what’s left
Real wage growth in the UK has been flat since the early 2000s. Near-zero interest rates for more than a decade after the financial crisis only inflated the wealth of those with assets – even as the bottom half that relied on lowly wages or state benefits saw their standard of living go nowhere, before the post-Covid inflation shock squeezed them for what was left.
If you’re really upset by Rachel Reeves’ Budget then you’ve probably either done very well – relatively-speaking – for the past 15-20 years or else you’ve been in denial about the state the UK is in. Count your blessings.
I’m fully aware that Monevator has wealthy readers and we’re generally pro-capitalism and getting ahead around here. So this isn’t a sermon that’s likely to have our parishioners throwing their hats into the air.
But a reckoning [1] was overdue and here it is.
We need to manage the UK as the middle-ranking mostly pretty poor country (judged per capita) that it now is. Not pander further to the fantasies of post-2016 populism.
Some friends of mine bemoan a return of ‘the politics of envy’.
But I just see a return to the politics of reality.
A B- Budget
This was not a perfect Budget. Not even judged by my standards, which is akin to judging how well an ambulance crew performs when it arrives to find the patient already blue on the floor and gasping.
The biggest tax-raising measure – the hike in employer’s national insurance – can only hurt growth in itself, even if spending money had to be raised somewhere to stave off worse. At the margin it will make the young and low-skilled less employable.
Hospitality and retail will suffer. And personally I wouldn’t be taxing jobs harder with a potential AI revolution at the door.
But income needed to be found. This country couldn’t take another round of austerity, even if it had voted for it – which it didn’t do in voting for Labour, or for Johnson years beforehand. To get itself past an electorate either unwilling or unable to face facts, Labour had sadly boxed itself in with red lines around the other big revenue raisers. So here we are.
Even with the tax hikes, Reeves’ additional borrowing has slightly rattled the gilt market – although I judge much of the fairly modest rise in bond yields we’ve seen is ongoing recession risk being taken off the table in the US, with knock-ons around the world. I see the Budget as only adding a kicker.
So it’s far from another Disastrous Mini-Budget.
However it is a bit of Show Me The Money concern.
Paying for that protest vote
Everyone sensible knows the UK needs growth. The State needs it, and we need it in our pay packets.
Neither I nor the OBR thinks this Budget will do much for growth over the long-term. The latter forecasts a little boost upfront and then if anything a gentle decline in the long-term.
That’s not good enough.
But again, what’s the alternative?
The UK electorate voted to make itself poorer in 2016, rightly or wrongly. That bill – plus the same for preventing a potential depression during Covid – has come due. Decisions have consequences.
Even if you don’t agree with Goldman Sachs, the OBR, and other mainstream economists that leaving the EU is indeed on its way to costing us the 4-5% hit to GDP [2] that was predicted and is playing out, not even the lunatic fringe can divine any Brexit dividend. Ironically the only reason things aren’t worse economically is because immigration has gone through the roof.
Going it alone could only have boosted the UK’s economic prospects with the deregulated ultra-capitalist ‘Singapore on Thames’ model. Boris Johnson rejected that years before Reeves took charge.
So we’re back to tax and spend – except it’s as much to keep the lights on as to invest in infrastructure.
Still, that’s better than austerity at this moment in time.
Labour’s political opponents have understandably focused on taxes going up after Labour’s election pledges in spirit implied no such thing.
Fine, but firstly their manifesto didn’t add up either. Both sides have seen this country prove for a decade that it will only vote en masse for pretty lies.
Secondly, what would the Budget haters do differently?
Cut services further? Everyone can see they’re falling apart.
Cut taxes to stimulate growth? We couldn’t even afford the last unfunded bung.
Fudge the books by not being frank about spending commitments and promising investment and ‘levelling up’ that was just rhetoric plastered on top of a crumbling national fabric? Oh yeah, we tried that.
I say be careful what you wish for.
You too can be a millionaire
As for our own wallets, well I can still put £80,000 a year into tax shelters – via ISAs and pensions – and I can invest my way to a comfortable retirement without some silly lifetime cap on my gains. The tax-free lump sum was left intact too.
None of the nightmare scenarios came true. Not even flat-rate tax relief.
If you’re a high-earner you can easily make yourself a multi-millionaire helped by those reliefs, without starting so much as a lemonade stand in terms of real risk-taking.
Can any of us – hand on heart – say that isn’t still plenty of room to do well for ourselves?
There was even the rabbit in a hat of the freeze on income tax thresholds being lifted in 2028. A half-boiled bunny for sure, but if I was Reeves I’d have extended them further and not hiked employer’s NI.
As for being clobbered by the supposedly crushing fist of the leftwing unleashed, according to the Budget calculators [3] I’m about £1.36 a year worse off from Reeves’ measures.
So let’s have some perspective.
The actual ultra-left – Jeremy Corbyn and his fellow travellers – have penned an open letter [4] condemning this Budget as ‘austerity by another name’.
First, do no harm
Reeves has not solved anything with her Budget but it shouldn’t make things worse.
Given the rubbish place we’re starting from, that’s no mean achievement.
With luck she’s bought time for a few good years and a fortunate break or two to get the UK economy going again. That might give us a bit more room to be bolder. We’re overdue a bounce.
But I know many of you will disagree, one way or another.
Before we kick things about in the comments, let’s remember Labour hasn’t been in charge for 14 years. Let’s not pretend the UK was humming along before somebody let the long-haired students in to seize the levers of state.
And if Liz Truss is reading, I got some stick for not totally sticking it [5] to your Budget, because you did sort of address the elephant in the room – the lack of economic growth. Unfortunately that message was wrapped in a package as convincing as a man with a billboard crying the end of the world is nigh. Which ultimately only made the markets and the electorate less tolerant of radical action.
No, Britain signed up for gentle decline years ago. The spirt of the 52% is like an old person blustering around a care home talking about the good old days and complaining he can’t understand the nurses’ accents.
Now Barry Blimp [6] is moaning that he has to take his medicine. I’m shocked.
Sorry, but the grown-ups are back in charge. They’re doing what they can, but that’s only so much.
As for the alternative, I’d love to hear a well-argued and costed counter-narrative spelling out a lower tax, higher growth future with a respectable welfare state left intact – as judged by the electorate, not the rich flying by to their private stand-ins. And that’s certainly not coming from the Tory leaders in waiting [7].
So tax, spend, and muddling on it is.
You’ve read one Budget roundup, you’ve read them all:
- How the Budget will affect you and your money – BBC [8]
- The key changes announced – Which [9]
- Same, but with some political response in the mix – Guardian [10]
- A long link list to articles on every Budget measure – Money Saving Expert [11]
- Same, but more politicised [scroll down past the big pictures] – This Is Money [12]
- The Employer National Insurance hike explained – This Is Money [13]
More Budget opinion:
- Paul Johnson: There are big risks lurking in this Budget – IFS [14]
- Response to the Autumn Budget – NIESR [15]
- Faisal Islam: Where is the growth in Reeves’ ‘Budget for Growth’? – BBC [16]
- Aditya Chakrabortty: At last a government willing to spend, but… – Guardian [17]
- Robert Shrimsley: Goodbye to low-tax Britain [Search result] – FT [18]
- ‘Fixing the foundations’ Budget has done nothing of the kind – This Is Money [19]
- Analysing Rachel Reeves’ Budget [Podcast] – The Rest is Politics [20]
- Delivering a Budget for National Renewal – The 99% Percent [21]
- Ian Dunt: Take stock, catch a breath – Striking 13 [22]
- Bart Van Ark: This was not the ‘productivity’ Budget – The Productivity Institute [23]
- Dan Neidle: Agricultural property inheritance relief changes not all that – Via X [24]
- Tim Leunig: There are good reasons for Reeves to raise taxes – Politics Home [25]
Have a great weekend!
From Monevator
How to work out which platform is cheapest for you – Monevator [26]
Capital gains tax in the UK – Monevator [27]
From the archive-ator: Stress management – Monevator [28]
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
UK house price growth slows, but stamp duty hike could ‘spark buyer’s rush’ – Guardian [29]
Floored by fees: “My £250 child trust fund is now only worth £12” – BBC [30]
The N.Y.S.E. is getting ever close to 24-hour trading – Sherwood [31]
FCA fines Wise co-founder over tax disclosure failure… – Morningstar [32]
…while Russia fines Google $20 DECILLION, more than global GDP – NBC [33]
Rents are up and down in global ‘bubble cities’ [Infographic] – Visual Capitalist [34]
[35]
It’s rare for gold and US stocks to rise in tandem – A Wealth of Common Sense [36]
Products and services
Owning a home in the UK now cheaper than renting – This Is Money [37]
Regulated rail fares in England to rise by inflation-busting 4.6% – Guardian [38]
Open an account with low-cost platform InvestEngine via our link [39] and get up to £50 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine [39]
Three expert tips for paying for care – Which [40]
Divorcing couples battling over who pays VAT hike on private school fees – This Is Money [41]
How to earn up to £55 by sharing banking data with YouGov Connections – Be Clever With Your Cash [42]
Village homes for commuters near a station, in pictures – Guardian [43]
Comment and opinion
Small wins can add up to long-term investing success – Morningstar [44]
Meet ‘Generation Windfall’, coming to an estate agent near you [Search result] – FT [45]
Overweighting perspective and context in your portfolio – A Teachable Moment [46]
When it’s time to rethink your asset allocation – Morningstar [47]
Before you quit work – Humble Dollar [48]
How demographics can distort economic narratives – Financial Times [49]
Retirement – We’re Gonna Get Those Bastards [50]
How the new anti-obesity drugs could boost economic growth – Faster, Please [51]
Naughty corner: Active antics
US credit spreads are looking ominously compressed – Topdown Charts [52]
The hidden risks of social media to investors – Enterprising Investor [53]
Boeing just raised a whopping $21bn to shore up its broken balance sheet – Bloomberg via Yahoo [54]
The history of Meta [Podcast] – Acquired [55]
Kindle book bargains
I Will Teach You To Be Rich by Ramit Sethi – £0.99 on Kindle [56]
Eat That Frog! Get More of the Important Things Done by Brian Tracy – £0.99 on Kindle [57]
Growth: A Reckoning by Daniel Susskind – £0.99 on Kindle [58]
A Confederacy of Dunces by John Kennedy Toole [Not financial, just a fav] – £0.99 on Kindle [59]
Environmental factors
Budget doubles down on support for EVs… – This Is Money [60]
…but 15th fuel duty freeze ‘utterly nonsensical’, say campaigners – Sky [61]
Nationwide offers 0% loans to improve home energy efficiency – This Is Money [62]
Scientists say climate change made the Valencia floods worse – BBC [63]
This yellow powder captures the same amount of CO2 as a tree – Fast Company [64]
The slow-motion destruction of tortoises’ slow-motion migration – Hakai [65]
Robot overlord roundup
Gen AI can reproduce an image when trained on as few as 200 copies – Fast Company [66]
US election mini-special
Why The Economist is endorsing Kamala Harris – Semafor [67]
A vote for Donald Trump is a vote for school shootings and measles – The Verge [68]
Caving to Trump before he’s even elected – Daring Fireball [69]
Off our beat
IYKYK: when a novel speaks a language only part of the Internet gets – The Walrus [70]
How close were the UK’s hospitals to collapse in Covid? – BBC [71]
Why some nations are built for economic success while others flounder – Humble Dollar [72]
How Las Vegas became – for good and ill – the most futuristic city in America – GQ [73]
And finally…
“The essence of risk management lies in maximising the areas where we have some control over the outcome while minimising the areas where we have absolutely no control over the outcome and the linkage between effect and cause is hidden from us.”
– Peter Bernstein, Against the Gods: The Remarkable Story of Risk [74]
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