What caught my eye this week.
I don’t remember spending reviews being such a media event in previous years. But this week’s got nearly as much attention as a Budget – despite telling us almost nothing we didn’t already know.
I suppose it’s because the free-spending days for Britain are long gone. Everyone is now watching their pennies.
Of course even before the financial crisis, Brexit, Covid, and the war in Ukraine, there was never enough money.
But after all these shocks the country has become like a working class family of yesteryear who has fallen on hard times.
The head of the household budget takes the too-slim pay packet from the breadwinner – and any pocket money scavenged up by the kids – and parcels it out into envelopes and jars to budget for the month ahead.
Food. Rent. Money for the coal man.
A few little treats for the baby.
It’s tough. More money is going out – but not enough is coming in.
It’s not that Rachel Reeves is taking us back to post-financial crisis austerity.
Real terms spending is set to rise.
Rather it’s that not enough money is being generated at the top of the funnel to pay for the British state that we’re used to, let alone the one we aspire to be.
Tax…
This lack of cash persists even as the government taxes us until we squeak.
The average Briton was handing over all their income to HMRC until the Thursday just gone – the so-called Tax Freedom Day for 2025.
To quote the right-wing Adam Smith Institute:
Tax Freedom Day [fell] on the 12th June.
This year, Brits are working 162 days solely to pay taxes, six days longer than last year.
But [we] expect that by 2028 the UK will have its latest Tax Freedom Day ever, 24th June.
This would mean that the tax burden could be higher than it was during WW2 and The Napoleonic Wars.
This is based on current Government taxation and spending plans, and OBR projections.
By as soon as 2030, Tax Freedom Day could fall over half way through the year with taxation exceeding 50% of Net National Income.
The research also shows that the rich are carrying an increasingly large proportion of income tax.
Cost of Government Day, which factors in borrowing as well as taxes, is July 22nd – the latest since the pandemic.
The Adam Smith Institute has its own agenda to promote. But you can’t really argue with the numbers.
…and spend
I didn’t find much to object to in the spending review, in terms of where the money is going.
The tilt towards thinking about the future versus short-term bungs is admirable, in so far as it went.
Support for infrastructure and house building is sensible. Insulating Britain’s draughty homes and money for more nuclear reactors are no-brainers if you believe like I do that humanity is behind in the battle to avert serious climate change.
Higher defence spending is inevitable. Albeit frustrating in that if it works as a deterrent, then we (hopefully) won’t ever use in anger much of the expensive hardware we’ll be paying for.
Personally I’d like to see far more spent on education and training. A better educated and more skilful population could help to address Britain’s lamentably low productivity.
More capable homegrown workers are also necessary to fill the structural vacancies following Brexit, especially if – as I accept is politically required – immigration is to really be brought down.
Not least when it comes to building those 1.5m new homes we’re promised.
Little Britain
Of course we all have our priorities as to how the government should redirect that tax money it takes in.
Have a read of the links below. Applaud or fume to suit your fancy.
What did dismay me though was the nationalistic tone of some of Reeves’ rhetoric.
Britain will make this! British workers will do that!
As if this isn’t obvious.
And as if doing it ourselves is always the best solution versus trade.
Well, it’s not.
Just one example is the hullabaloo over British Steel. Despite various governments intervening and spending to keep this industry on its last legs for decades, the total number of workers employed has fallen from over 330,000 in the 1970s to barely 30,000 today.
We’re producing vastly less steel too.
But is that such a tragedy?
If you are a steel worker and you can’t find work elsewhere, then yes – and Britain for sure did a lamentable job in helping its skilled workers as their industries declined through the 1970s and 1980s.
But from a national perspective?
The world makes far too much steel. That’s why there’s a glut and why these plants are permanently imperilled. And with our high energy costs and general dislike of dirty and polluting industries, Britain is one of the worst places in the world to make it. Not that we even need so much of the stuff these days.
But that’s fine. We can just import it and do other things we’re better at!
It’s called comparative advantage and it was all hashed out hundreds of years ago.
The idea that Britain can – or should – have an independent steel-making industry is for the birds, and for Reform voters.
Britain isn’t even self-sufficient when it comes to food. In any now-unthinkable conventional war where imports were somehow permanently blockaded, we’d half-starve.
Besides even if we have steel plants, we don’t produce our own coking coal or iron ore anymore. So that would need to be imported anyway.
“Well we should be digging that up too!” you might retort.
I fervently disagree, but understand that if we were to go down that path it would mean billions and billions more in government subsidies and interventions that could instead be spent on boosting something we’re actually good at and the world wants more of from us.
As a nation we’d be poorer as a result of your sweatshop fetish.
If we must have a more secure steel supply, then let’s just import five year’s worth of it as a buffer while it’s cheap, stockpile it in a few giant warehouses, and call it a strategic reserve.
I’m sure we’ll never need to draw upon it. But it’d be a cheaper solution than to keep making the stuff with everything against us.
Votes have consequences
Then again, all the jingo-lite stuff wasn’t in the spending review for me.
It was aimed at peeling off Reform voters by reminding them that yes, shock horror, the overwhelming majority of spending done by the British government goes on British interests. Not on bunk beds for asylum seekers or goats for Burkina Faso.
And sadly, these numpties are still calling the shots as the marginal power players in British politics.
It’s a sorry situation. You would think that after the absolute failure of Brexit to deliver anything material except the loss of £40-50bn a year in tax receipts due to lower-than-otherwise economic growth, that Nigel Farage’s flush would be thoroughly busted by now.
But his support has never been about facts, it’s all about feelings. Anyone still backing Farage’s nationalistic agenda for economic reasons can’t use a calculator, let alone a spreadsheet.
Of course it’s true that many Reform voters don’t believe or care about the consequences of Brexit-y policies on economic growth.
At best they are staunch constitutionalists and are happy to pay the price for that – which is fair enough.
Or maybe they just prefer a Britain that was more like it was and less like, say, London has been getting. Not my view but also mostly fair enough, if it’s expressed nicely and politely.
Many Reform voters have unrelated worries that would be better tackled by any other party than Reform.
And some are just xenophobes and racists.
It’s a broad church and you might think Reform would never be elected to run the country, so who cares?
Well firstly, never say never. Look at the polls.
But more pertinently, the resultant accommodation of Faragian language and even thinking by the mainstream parties expands the Overton Window of what’s acceptable.
This doesn’t just make immigrants feel unwelcome or scared, say, which you might say you can live with.
It will also lead to wrong-headed choices for the country, do yet more damage to the economy, and leave us with even less money to spend in future years.
So if you’re annoyed your taxes are still going up, these are the people to blame.
More to read:
- The spending review 2025 – UK Government
- Key points at a glance – Guardian
- Seven reality checks – Politico
- Which government departments were the winners and losers? – Guardian
- Seven ways the spending review will affect you – BBC
- Progress, but gaps remain for business – CBI
- Understanding the government’s two ‘phases’ – IFS
- Key climate and energy announcements – Carbon Brief
- Why we should all hope Rachel Reeves can deliver growth – This Is Money
- The spending review was a major political shift – Prospect
- Smoke, mirrors, and no strategy [Podcast] – Spectator
Have a great weekend.
From Monevator
Why small value is worth investing in [Members] – Monevator
UK tax brackets and personal allowances for 2025-26 – Monevator
From the archive-ator: How to save money on travel – Monevator
News
Millions more pensioners set to get the Winter Fuel Allowance – Which
Wealth managers issue health warning over inheritance tax vehicles – FT via MSN
UK trade with US falls apart after Trump tariff blitz – CityAM
Treasury gains £500m to pay off UK debt from Barings banker’s 1927 fund [Paywall] – FT
UK and Spain strike ‘historic’ deal over Gibraltar’s future and borders – Guardian
Poundland sold for £1 – This Is Money
FCA warns on ‘freemen on the land’ mortgage conspiracy theories – Guardian
Wealthy UK families ‘seize moment’ to buy exclusive London homes [Paywall] – FT
Yorkshire second region in England to move into drought status – UK Gov
People can’t afford to have children – Sky News
Products and services
Pay by Bank: can you trust this new way to pay? – Which
Get two-for-one cinema tickets for £1 with Meerkat Movies – Be Clever With Your Cash
What to look out for when buying a retirement flat – This Is Money
Get up to £1,500 cashback when you transfer your cash and/or investments to Charles Stanley Direct through this link. Terms apply – Charles Stanley
Chase launches top 5% easy-access savings deal – This Is Money
The skinny on three-year fixed-rate mortgages – Which
Get up to £100 as a welcome bonus when you open a new account with InvestEngine via our link. (Minimum deposit of £100, T&Cs apply. Capital at risk) – InvestEngine
The best bank account switching deals right now – Which
Santander to end all existing 123 Lite accounts – Be Clever With Your Cash
Homes for sale with swimming pools, in pictures – Guardian
Comment and opinion
The trick to enjoying a vacation (and investing successfully) – Oblivious Investor
Winning the won game – Retirement Investing Today
What’s the case for passive funds that exclude certain countries? – Morningstar
“I bought our London home for £390K in 2018. Six years later it sold for the same price” – Independent
The rise of the ‘carent’ – BBC
What can poker teach us about risk management? – Monocle
Enough is a feeling, not a number – Simple Living in Somerset
British pension policy is finally stepping in the right direction [Paywall] – FT
Lost decades mini-special
Sometimes even the US market taps out for a decade… – A.W.O.C.S.
…but the impact on real-life savers isn’t usually too bad… – Of Dollars and Data
…although individual stocks can get permanently creamed [Paywall] – FT
Naughty corner: Active antics
Equal-weighted, aerospace was the best sector of the past century – Fortune Financial
JP Morgan says investors are looking in the wrong place for diversification – Trustnet
Wine investors thirsty for respite as prices continue to sour – This Is Money
Selling Direct Line after a bumpy three-year turnaround – UK Dividend Stocks
Equity analysts are over the Liberation Day tariffs – Bloomberg via F.A.
On our difficulties with spending [podcast] mini-special
Spending your money now with Oliver Burkeman [Podcast] – 50 Fires via Spotify
Spending money in retirement [Podcast] – The Human Side of Retirement via Apple
Kindle book bargains
How to Own the World by Andrew Craig – £0.99 on Kindle
The Algebra of Wealth by Scott Galloway – £0.99 on Kindle
The Big Short by Michael Lewis – £0.99 on Kindle
Skunk Works: A Memoir of My Years at Lockheed by Ben Rich – £0.99 on Kindle
Or pick up one of the all-time great investing classics – Monevator shop
Environmental factors
BYD launches cheapest UK model in bid to overtake Tesla – Guardian
Why wind farm developers are pulling out last minute – The Conversation
Is a smart gate the key to habitat connectivity? – Biographic
Albania is rampantly overbuilding to meet tourist demand – Metro
Decathlon pledges to refund all tents bought this summer – Independent
When a whale dies – Atmos
Is it time to rid the world of mosquitos via gene editing? [Paywall] – Washington Post
Robot overlord roundup
AI native startups pass $15bn in annualised revenues… [Paywall] – The Information
…while Meta just made a $15bn bet / acquirehire with Scale AI – Futurism
Star Wars and the age of AI video – SatPost
Here’s how much water and energy ChatGPT might be using a month – Sherwood
The Illusion of Thinking… [Research paper, PDF] – Apple
…is more evidence LLMs are just a fancy parlour trick, says Gary Marcus – Guardian
Fighting the flood of fake job applications in the tech sector – Fast Company
The AI hype is just like the blockchain frenzy – The Conversation
Not at the dinner table
Everything feels like it doesn’t make sense – Kyla Scanlon
Ten signs the knowledge system is collapsing – The Honest Broker
Jesús polished luxury vehicles at an LA car wash for years. Then ICE showed up – BBC
Off our beat
You are what you won’t do for money – Ryan Holiday
Talking war-onomics [Podcast] – A Long Time In Finance via Apple
We all need to be loved – We Are Gonna Get Those Bastards
Anduril: an amusement park for engineers – Colossus Review
The ‘repugnant conclusion’ that an Oxford philosopher couldn’t escape – Big Think
Marina Hyde: Social media has broken even Elon Musk – Guardian
And finally…
“As someone whose salaries have ranged from $4 per hour working at McDonald’s to much more as an entrepreneur, I believe happiness is more about family, friends, health, and purpose than about wealth. Once you earn enough to take care of your basic living expenses, what keeps you happy is better relationships, good health, and a strong purpose – not more money.”
– Sam Dogen, Millionaire Milestones
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Thanks @TI, hope you had a great holiday. Interesting thoughts, does rather make one fearful of the direction of travel – especially in combo with the ‘Ten signs the knowledge system is collapsing’. Looking forward to the discussion following the lit blue touch paper. Oh, and love the irony of the price tag on the eponymous Poundland!
In the case of steel, aluminium and the like, it isn’t as simple as just making the raw product, there are a multitude of alloys requiring finishing. That’s where the high tech value add is.
I thought of an analogy whilst in the bath last night…
I think most people are appalled at the prospect of Canada being absorbed into the United States, despite there being potential advantages to Canada. Such as: access to a larger integrated market, simplified trade with less exchange rate risk, potential access to U.S. funding for infrastructure and defence, border elimination, policy alignment. Basically many of the advantages which being part of the EU provided.
It is difficult (impossible, actually (at least for the moment)) for me to understand why one (no-one here in particular) should disapprove of Canada joining the USA whilst also disapproving of the UK leaving the EU.
@Gizzard — I’m not appalled by the prospect of Canada being absorbed into the United States, especially with the latter’s devolved state legislation etc. As you say there would be a lot of advantages for Canadians as well as Americans.
I am appalled by the leader of Canada’s longstanding ally and close trading partner bullying and cajoling it with hostile and unprompted rhetoric and threats of a forced integration.
@Mr Optimistic — Do you need to make the raw product here to do the value add, or can you import the raw stuff and then get fancy with it?
@Two more years — I used to bore people for years walking past Poundland and opining about inflation… 😉
Great links as always.
Votes really do consequences, and anyone who voted for Labour at the last GE and its serial untruther of a leader can take a huge responsibility.
He looked incompetent before, leading a lightweight of intelligence, and this has become proven. The foreign secretary and deputy nPM woule be low level employees in any private company.
Take a bow those who didn’t see the obvious last year.
The whole Reform and anti-immigrant rhetoric is always jarring for minorities and immigrants. If you have never been one it is very difficult to see it from their perspective. However justified it might be it can create an unpleasant environment for the vast majority of immigrants/ minorities who just wish to get on in life and contribute, without trying to influence cultural change or sponge off the state, as everyone seems to think immigrants do.
I don’t wish harm on anyone but I think spending a day or two in the shoes of an immigrant/ minority might give people a bit of an insight and perhaps a little more compassion.
A couple of quotes from Captain America for you :
“Because the strong man who has known power all his life, may lose respect for that power, but a weak man knows the value of strength, and knows… compassion.”
“You will stay who you are. Not a perfect soldier, but a good man.”
Who did you vote for Gary?
“Votes really do consequences”
Nods. Latest estimates of the cost to the UK of the utter lie-driven stupidity that was Brexit are 40-50 billion pounds er year.
“serial untruther of a leader can take a huge responsibility.”
Nods. Wait is this about Boris or Farage? Hard to decide between them who would win the award of being the most mendacious MP in British history.
More to the point, the UK was always going to be in a very bad economic condition post Brexit (and Covid really did not help matters). So if you want services like the NHS then there will have to be tax rises one way or the other, whether direct or indirect. But, and I emphasise this so no-one conveniently forgets, the primary cause is the totally avoidable loss of 40-50 billion a year to the UK economy from Brexit.
@Gizzard, the difference is the EU aren’t musing aloud whether they should force us to join them.
If Canadians want the benefits it should be entirely their choice to join.
@Spoonbill #9
And if they chose not to join, should we regard them as idiots?
@Gizzard – I have family in the US and (more) in Canada. The reason Canadians are hostile in general to this idea is because they abhor the US way of life, the gun culture, the wretched health system, etc. Trade deals are fine, and it’s Trump who is currently trying to destroy the integrated supply chains which already exist in the auto industry for example.
I remember the first time I entered the US, late at night at Niagara Falls, about 35 years ago. We stopped at a diner after the hassle of border control and suffice it to say it became immediately obvious that I was in a completely different country to Canada, where I had just spent the summer working.
@full of hope – exactly, everybody should have a go at being an immigrant to develop some basic empathy. I was an immigrant in Canada and also for several years in Germany. This whole anti-immigrant nonsense is the same rhetoric that has been used throughout history and it’s most concerning that public discourse has coarsened in recent years, in fact, since Brexit.
@Gizzard: Who is saying the Canadians are idiots? If your point is that people who voted for Brexit are not idiots then just say that. Saying that Brexit wasn’t a good idea isn’t saying that people who voted for it are idiots. It’s saying it wasn’t a good idea.
@Larsen and full of hope: +1
Well to be fair I did imply Brexit is/was an idiotic decision if motivated by economics.
But there are other matters of opinion and taste as I acknowledged. 🙂
Oh I don’t listen to anything you say 😉
@TI. First off, hope your headache is better now.
Had in mind places like Advent Research Materials.
Comparative advantage is all well and good but if you need quality assured materials covering full product life history with traceability the QA burden means this can’t be delivered unless you are dealing with countries with sound QA assurance systems (and watch the price escalate !). Also, re rare earths and China’s comparative advantage, this might be a bit worrisome to many.
“Votes have consequences”
Well, yes, they do.
However, I can see that you don’t think that you should change your political perspective, it’s other people who are wrong.
The article which didn’t make it into the opinion-pieces section above was Janan Ganesh’s in the FT, pointing out that the current UK government has now given up on welfare reform, undoing the cut to winter fuel allowance, despite having an enormous and astonishing 410-seat majority, because of some slightly negative feedback.
In other words, there is no chance if this government doing anything really hard now. Majorities don’t get bigger over the lifetime of a parliament. Mr Ganesh is almost quite rude about Sir Keir Starmer’s level of political courage (waiting until Corbyn was dead before revealing that he wasn’t actually a hard leftist, only being able to explain what a woman is once the court had made its ruling and so on).
Welfare reform is now dead. We will have four years of a zombie government. Reform-party and the Conservatives are irrelevant, because of the huge majority, yet the first year, the chance to change things has now been thrown away.
Ganesh’s prediction is grim: No political party will ever grasp the nettle, if one so powerful as this one won’t, so instead of a controlled reform, the UK’s spending will end up being stopped by the lending market, are which point the spectre of being unable to pay the army and police will cause brutal and random cuts.
It turns out that having a National Health Service, as well as taking responsibility for everyone’s social security, might not be such a good idea for a state. Oh, how the Americans will laugh at the snooty, superior Brits getting their comeuppance.
Interesting that there’s lots of political bickering going on above in the comments, about Brexit and Reform and Labour. It’s all irrelevant now. The NHS and the welfare state will grow endlessly, because the electorate demands it now. No party at all can win an election by standing up to the voters.
Eventually the bond market will impose discipline, and political discourse will be irrelevant, politicians will have no say: the state will simply be unable to make the payments for cold pensioners, kidney dialysis patients, cancer treatments, the homeless, supporting the unemployed, saving the lives of stab victims, because any available leisure will have to go to funding the very essentials of being a state (defence and civil order).
It’s a long way off, but it’s coming, because there’s no conceivable alternative.
@jonathan #16
Maybe when it comes people will remember my comments moaning about the motability scheme and free school taxis provided by councils and think I had a point?!
In seriousness
On the 1.5 million new homes the government/defra are consulting about changing the biodiversity net gain system for smaller sites. Apparently sme builders used to account for over 20% new homes around 2010. Down to about 10% now. The whole planning system is becoming farcical. Target dates are always extended decision times for simple applications stupidly long. Consultants and experts needed for reports. You look at a planning app in around 2010 vs one submitted today and see the difference. I though 2010s were austerity?! Anyway I submitted a response. Encourage others to do the same if they like to have choice in their housing not just the standard boxes thrown up by the big boys. There wasn’t even a planning system in force when the best looking period properties were designed and built.
Rant over.
They are right to focus on growth, but squandering the biggest opportunity: re-join the single market. It makes no sense that Labour is so in fear of “Reform” voters. The generally-frustrated will come round if they see things improving, which depends on prosperity. The hardcore nationalists won’t vote Labour anyway.
The hope is that Trump’s chaos teaches people a lesson. It worked in Canada and Australia. Maybe Trump will do us a favour and try to annex the UK next.
“Tax…
This lack of cash persists even as the government taxes us until we squeak.”
Are they though? I’ve seen at first hand that countries like Spain and Germany tax low and medium earning voters far more than in the UK.
See also Dan Neidle’s tweet from today demonstrating that there are literally zero countries that have higher state spending than the UK but the same or less tax on the median earner.
https://x.com/DanNeidle/status/1933882357292867820
Perhaps it’s more that the tax shotgun has been unfairly shot at the higher earners to too great an extent of late?
@all — Cheers for all the largely well-tempered and constructive comments!
@Jonathan — Hi! You write:
Presumably you are basing this on the idea that I still think Brexit was a bad idea?
Why am I supposed to change my political perspective on this when I was largely right?
I said here that Brexit would be benefit-free and cost the country. I lost thousands of readers as a result of voicing this unpopular truth in 2016 and beyond.
And I was right. Nobody ever flags any serious benefits. The list of downsides is a long as your arm, the biggest from the POV of this blog being we’re a poorer nation with a more straightened state that didn’t have the spare capacity to take this economic hit.
If Brexit had delivered any benefits whatsoever I might have moderated my view. But it’s delivered laughably zero benefits. It’s beyond a joke. All it’s done is cost us £40 to £50bn a year in lost tax receipts and the compounding enfeeblement of an economy that’s 4% smaller than it would have been without Brexit. It adds up.
It is people who voted for this clown show and still support it that should be doing some serious thinking.
There is no economic boom. There is no £350m a week for the NHS or 50 new hospitals. There’s no sunlit uplands of low immigration and a resurgent north.
None Of It Came True.
Or perhaps you think I am not changing my mind because I have a different view to you? Based on your response here that seems more likely to be honest.
That said I happen to agree with you and the ever-excellent Janesh about the winter fuel payments. But this is the entire point of my article!
The same old-aged pensioners who moaned about the cut to the winter fuel payments and voted for Brexit now support Farage.
Labour is having to make these changes specifically because Farage is promising the world (such as reinstating this benefit) and yet again people are falling for it.
This despite Farage’s last grand project barely delivering a sandcastle.
Or maybe you think I only vote Labour? Au contraire, I’ve voted Tory in the past.
The post-Cameron Tory party was purged of most of its talent in the Brexit wars and two of its leaders (and PMs) top the nation’s worst of all time.
I was supposed to vote for them because… why? Because they made the country poorer with Brexit? Because one of them had a buffoonish wit on Have I Got News For You?
I welcome the Tory party coming to its senses and being serious contenders for my vote. But with Farage in the field on his magical unicorn again — and numpties falling again for his rubbish – I’m afraid it’ll probably get worse before it gets better.
The ten signs the knowledge system is collapsing post. It turns out the story it repeats about Builder.ai is itself fake – see https://blog.pragmaticengineer.com/builder-ai-did-not-fake-ai/ . They system did indeed use LLMs rather than 700 engineers pretending to write code on the fly.
Woe, woe, all is woe.
> I’ve seen at first hand that countries like Spain and Germany tax low and medium earning voters far more than in the UK.
Exactly. I’ve seen the same in France and Germany. Even a six-figure UK salary may have <20% total tax rate (using the generous allowances, which don't exist in other countries). The UK's Tax-to-GDP Ratio is below G7 average.
The "Adam Smith Institute" is a lobby group that hides its donors (among the known are Tory donors, tobacco companies, US hard-right foundations). Their "Tax Freedom Day" is just a propaganda stunt to generate headlines. ASI take the *total* govt tax revenue, pretend all tax comes from "workers", and pretend the "average worker" paid the arithmetic average of all tax.
It makes no sense.
@theInvestor – I always look forward to the Weekend reading, but this one left me confused because I couldn’t tell what it was about, other than how low a regard you have for Reform, Farage and its voters, and Brexit of course. Reading the comments added a measure of depression and helplessness to that confusion.
Can you (or anyone else) add something positive? Give me some hope?
The UK makes up, what, 4% of the global economy? If things are going to get worse before they get better (…if they get better) what’s the takeaway? gut it out, or move somewhere with a more positive outlook? Where is that place?
@The Investor (#20) writes:
“Presumably you are basing this on the idea that I still think Brexit was a bad idea?+
No, I was writing generally. As I wrote above, the political bickering about Brexit is pointless, because it’s not the important story:
“Interesting that there’s lots of political bickering going on above in the comments, about Brexit and Reform and Labour. It’s all irrelevant now. The NHS and the welfare state will grow endlessly, because the electorate demands it now. No party at all can win an election by standing up to the voters.”
One of the reasons why I’ve felt it necessary to adopt the “… the Evil” moniker is because making the right choices (or arguing for them) means standing up to hatred and emotional blackmail about the immediate proximate deaths that those choices will cause.
That’s how we can see that the Starmer government is led by a weak man, who can’t take tough choices: He can’t accept being hated. This is the general problem with politicians who need to signal their virtue (Ganesh calls it “goodness”).
By accepting that I am going to be called evil, I can at least defang that barb in advance.
I was quite surprised that you went on so long about why you’re right on Brexit response to me. No-one cares about that any more. It’s really time to move on, because Brexit is a trivial issue in comparison to the mid-to-long-term trajectory of indebted Western democracies.
Apropos of nothing other than a bid to lift the mood, I just want to commend Ermine’s excellent post on enough. Very thoughtful and wise, I thought.
Without wishing to get into any political ding dong, I would also say that the Janan G FT article that Jonathan mentioned is also very good. Worth a read (and, from recollection, isn’t about Brexit)
Think it’s increasingly clear that the NHS will struggle and become more costly unless the rest of the country’s incentives are aligned. We need an economic system which makes taking the right choice in terms of healthier eating, exercise, other lifestyle changes etc the easiest one (not the only one for the nanny state bleaters, but simply the default one). We need a health system which is more aligned towards prevention, rewards good lifestyle choices etc and somehow tackles problems like 80% of GP visits being by 20% of people (which from talking to friends in the NHS those 20% are mostly those who are the worried well, bored, time on their hands, terminally thick etc).
@Jonathan — I went on so long about Brexit because you said I should change my views and I see you presenting no evidence for that.
I have changed my mind on various things at various points. Just this week in the tax brackets article I noted I was really pretty leftwing in university. That went out the window when I actually experienced the world of work, for instance. Perhaps I was too naive before, but the point is to learn and adapt.
I have called for cuts in spending before (https://monevator.com/my-public-spending-cuts/) though overall I was against austerity (https://monevator.com/why-i-dont-want-gordon-brown-to-cut-my-taxes/). Those are clumsy posts from a younger me, I just present them as evidence of flexible thinking.
The reason I go on about Brexit now and then is we’d basically have a much bigger economy and £30bn-£50bn more in state receipts a year without it. Things would still be creaking and money would still be tight, but all the wiggle room etc that the battles are being waged over would be vastly wider. Reeves’ ‘black hole’ that she pins on the Tories was only £20bn remember.
And yet you will look in vain for any mention of this in the coverage. I’m not saying it should be front page news with every Budget, but it should be flagged up whenever anyone is discussing Britain’s fiscal position.
We should know that ‘we’ voted for this. It was a choice we’re paying for.
@SJ — I guess I was a bit elliptic. Basically my point is that Reform is ahead in the polls despite its leadership delivering nothing with its Brexit baloney except more economic hardship (even immigration stayed high) and full technical sovereignty, which is true but I can identify basically no practical benefits from it so far.
Given that Reform’s supporters are wilfully delusion and resistant to evidence, other parties are having to make accommodations that reflect Reform’s various bogus promises and claims. And this will damage the UK long-term.
I feel @Jonathan and me are actually in agreement on this, except he prefers to look at the big macro picture rather than the detail.
But I’d argue this fantasyland politics is part of what’s driving the big picture. Trump is the same in the US, promising cuts with Doge and claiming to shrink the US State while pushing through his big bill that will add trillions to the US national debt.
We can’t make the tough choices being called for when half the electorate can’t be trusted to read the menu.
As for solutions, if I was in my 20s I’d probably consider emigrating, yes, though perhaps not forever and only to a select few countries. As others are discussing here, most countries have similar issues.
@Sparschwein @others — RE: the tax burden here versus elsewhere, remember in this that Britain is a more unequal country than say Spain or Germany. And in the case of the former at least, the informal networks (family, even church) are much stronger. I personally saw extended families supporting each other in Spain during the GFC in a way that was surprising to me.
To some extent the UK tax system taxes the wealthy more because you have to fish where the fish are.
I don’t say this is desirable nor that everyone shouldn’t pay some tax even just to be stakeholders.
But the idea that there’s a low-earning low-no-tax-paying class living rich lives in the UK is just not true, at least in as much as few reading this would want to swap our standards of living with theirs for even a day.
As politics overtakes economics and the barbarians are at the gates in the Middle East and Ukraine-coherent financial discussions are getting more and more fraught
In these seemingly apocalyptic times we still need to protect our own personal finances for the sake of our spouses and kids but keeping rational financial only discussions going is getting harder by the day but we have to keep trying
A real test for the Investor and his blog moderators
I am sure we all appreciate his sterling efforts
xxd09
Poundland was actually sold for less than £1 (€1 so 85p). But that’s misleading as there’s at least £30m debt still owed to the seller by the buyers.
@Platformer, quite right – but it’s a great headline!
@TA had the answer to all this doom a decade ago with his survivalist portfolio:
https://monevator.com/asset-allocation-types/
@31 -re @TA’s 2014 asset allocation – haha.
Yes indeed. That’s a quite revealing piece. 😉
I fear that I’m the Fashion Victim, but like to think I’m closer to Risk Taker, or a Little Bit of What You Fancy.
More seriously, unless it really is going to be near term technopocalypse (perhaps ASI misalignment/bad actors with synth bio wipeout/GE multi pandemic/mirror DNA bacterium); then we’ll be just fine.
We’ve gone through multi (conventional) world wars and collapsing of empires, nationalisms, Fascisms and Communisms – and we’re still here with global equities delivering 5 or 6 percent annually in real terms since the dawn of the previous century.
Can it continue for (yet) another 20, 30 or 40 years?
Probably.
And if not, well what’s left to do?
Peter Lynch well said that far more was lost avoiding crashes than in them.
I think that’s a decent starting point for dealing with all the pessimism.
Might even be a contrarian signal.
Buy on the sound of gunfire and the Death of Equities headline (just before the biggest bull market of the last century) and all that.
If you manage to buy good companies then it overwhelms macro obstacles.
Buy bad companies and your screwed whatever macro does.
@Howard — You write:
While not disagreeing with your conclusions, I’d make two points about this.
Firstly, just because humanity and the institution of the stock market got through the World Wars, that obviously doesn’t mean millions didn’t die. Also there was vast civil and cultural destruction.
I’m not making some bleeding heart point here. Rather that people sometimes look at stock market graphs and shake off the dips, not thinking much about how hard they’d be to live through, and thus underweight the fear and dismay (and consequences) of actually seeing 50% of your portfolio wiped out.
Doing the same for humanity’s ups and downs might be rationale if you’re an endowment or an institution with time horizons of 30-100 years, but I daresay there’ll be some superior ways to invest one’s money if we did go into WW3 versus other ways to invest. (Not saying we will or that those ways can be predicted of course 🙂 )
Secondly, while global markets have indeed delivered great long-term returns, plenty of countries — including notably many of the belligerents of world wars — did a lot worse:
https://monevator.com/european-stock-market-returns/
Set against that, *somewhere* should always be doing well. We must just hope they have much of their economy listed on their stock market, and that we’re able to own those stocks 😉
@TA: There’s always been reason to sell and never come back.
The markets closing in WW1 & influenza killing 20 mn in 1914-20, Smoot Hawley and Creditanstalt collapsing in 1930/31, the death of democracy in Europe from 1917 to 1940, the second leg of the Great Depression in 1937/8, Pearl Harbor in 1941, Singapore in 1942, Hiroshima in 1945, Korea in 1950 and on and on and on.
It never ever ends. There’s always a reason to sell. Different names same pessimism.
But pessimism’s not a winning (and therefore not a useful) strategy.
Example – sure Britain’s screwed (again). But it was screwed in 1976 when the IMF had to bail it out. Back then blue chips were going for low single digit PEs and double digit divi yields. Come 1999 the market was at 30 TTM PE and 2% divis. It wasn’t smart to quit in 76.
Save more, spend less
Invest more
DCA and BTFD
Increase your holding period and horizon
Buy good businesses
Altria / Phillip Morris, whose stock rose 265 million percent from 1925 to 2024, only compounded at 16.3% p.a. across the period. But the ability to keep compounding over the whole period made it the over winner across a century.
And there’s plenty cheap quality out there. U.S. stocks trade at 21.7x forward earnings. That’s the 93rd percentile since 1979. But European stocks trade at 13–15x. A 30–40% discount. The valuation gap is wider than it’s been since 1979. China is at multi year lows. Quality names in Africa are on 3x to 5x PEs. The entire gold mining sector is just $500 bn cap even as above ground gold hit $23 tn valuation -an almost unprecedented gap. For silver and platinum miners (both of which metals are at low relative valuations to gold) it’s similar. There’s opportunities galore. There always are.
Dan Neidle posted on LinkedIn this week about Govt spending vs tax. Tax on the average (median) tax payer is comparitvly low based on the spending. The issue in the UK is we need politicians honest and brave enough to have this debate. The aim should be a simpler tax code with fewer gimmicks but a tax rate that can maintain the spending. As others have said we also need more joined up thought on spending especially healthcare. And some very tough choices – e.g looking at the amount spent on extending lives by a few months.
https://www.linkedin.com/posts/danneidle_just-on-times-radio-talking-about-the-green-activity-7339648125361446914-6jKA
@Gizzard, the EU is not the United States of Europe, it has a much more decentralised political structure than the USA, even if you’re a Euro member state. When the UK was part of the EU we still had our own currency, our own army, our own tax and spend, our own laws (on most things) and more besides. What we also had was alignment on product laws which meant less paperwork at the borders so easier trade (which due to comparative advantage was a huge benefit), freedom of movement which meant people could work, live, and retire anywhere in the EU (I know personally a couple who voted Brexit and are now pissed off they can’t retire in Spain like they were planning), and yes there was a small cost for membership (I think it was less than 1% of our govt spending but more than made up for by the financial benefits of free trade).
To suggest an analogy between the advantageous relationship the UK had in the EU and some kind of subservient relationship Canada might have as part of the USA is misinformed (at best).
@Wephway #36
Thanks for your kind remarks.
Not sure there is a “British” disease. It’s a “developed world” disease. Yes, Brexit was idiotic and made it all worse than it had to be. Even the exceptionalism of the US is just their tech sector. Remove that from the equation and their numbers start looking as bad (if not worse) than Europe.
I’m a broken record on this but I come back to demographics. It’s the iceberg that threatens to sink the developed world. It’s a major element behind the drop in productivity. The UK replacement rate is 1.44 vs. breakeven at 2.1. That isn’t even bad vs. some countries (South Korea at 0.72). It’s just not economically sustainable to have a public sector system with services like the NHS if you are facing demographic inversion. The public sector is now functionally a wealth tax on young people to pay for the old. Nobody can argue this problem could not have been seen coming. It’s been obvious for – literally – a few generations.
Every attempt to increase the birthrate for natives (white natives of course!) fails. Hungary has spent 5% of GDP on it for a minor upward blip that then fell back. Many people just don’t want kids. They have more interesting things to do. Fair enough. And it’s not as though the planet needs more of the human virus.
So, in the absence of AI robots, we need immigration. Lots of it. Yet it’s deeply unpopular everywhere in the developed world. It’s providing a golden opportunity for populists and authoritarians to offer their simple solutions to a complex problem. So in the absence of an economic growth miracle (and I’m not certain AI is it), this will only get worse.
I’d argue if you want to emigrate, look for a place that still has replacement rate above 2, or that likes immigration. Moving to another developed country with the same basic problem won’t achieve anything.
@Bazza #35 > Tax on the average (median) tax payer is comparatively low based on the spending.
And against UK history. I started my first real job a little over 40 years ago. I was taxed on 2/3 of my total income, and at 30% plus 8.75% NI. It was about half the median current earnings for that age, we were all much poorer then.
These days I would be taxed on 1/3 of that salary at 28% combined tax/NI over roughly the personal allowance. The moaning minnies don’t know that they are born. The name of the prime minister reigning over this historical high tax regime? That high tax harridan Margaret Thatcher 😉
Interest rates and inflation were higher then, though VAT was lower, at 15%.
I’m sure NI went down further. I worked in the summer holidays as a kitchen porter for in real terms less than the current minimum wage, and paid NI, which was singularly useless as you can only use NI in full tax years, I think if you miss even one week it doesn’t count to your SP.
And yes, riffing off the earlier observation about income inequality, that was lower in those days so perhaps ordinary grunts had to do more of the lifting on income tax
So top three are Chad, Somalia, DR Congo.
Which one do you have in mind ZX?
I’m glad the government has eventually U-turned on the Winter Fuel Payments and that millions more low income pensioners should again receive the payments. It was a poor decision to remove the payments from those pensioners; made worse by the report that Rachael Reeves herself claimed over £4000 for energy payments in expenses from the taxpayer. The Winter Fuel Payments outcome is said to save £450m from the universal scheme. However when including the cost of the additional ongoing administrative effort and the extra pension credit amounts for the pensioners that signed up when the Winter Fuel Payments were removed, the resulting saving is likely to be considerably less.
Of course now with the Iran Israel war oil prices are rising again.
(BTW I’m not a pensioner.)
@ermine #39
“…you can only use NI in full tax years, I think if you miss even one week it doesn’t count to your SP.”
I don’t think that’s the case these days: if you earn at least the Lower Earnings Limit (the annual amount) then you get a full years NI credit. That’s what happened to me when I ceased working a few months into the 23/24 tax year.
Similar to you, though, I had quite a few holiday jobs in the 80s that failed to pay sufficient to get NI credit for those years. The joy of low pay, eh? 🙂
@Rhino #40: If I had to, then I’d choose the DRC from that short list. $24 trillion of natural resources (gas, platinum, cobalt, iron, uranium, diamonds) & 106k square km of arable land. But GDP just 64 billion ($800 per capita, with 63% under poverty line). When physical resources are 375x annual output (the highest ratio globally) then surely the only way is up.
Agreed I’m not sure Ermine is right there. I’ve got some early years when I did qualify for a state pension year and others where I didn’t, but I certainly never worked every week.. so DR Congo it is then. No doubt I’ll see ZX there? As Yazz once so presciently said, the only way is up…
@Curlew #42 and @Rhino #44
You’re right, my bad. If you clear the lower earnings limit in a year it does count, presumably even if you make that in one day. While those summer jobs never did, I retired in June 2012 and it appears despite taking as much salary sacrifice as I could it appears I paid enough NI from April, they tell me
2012 to 2013
Full year
You have contributions from
Paid employment: £534.41
Oddly enough in 1982 when I was unemployed for a few months (for which you get a credit) it appears I paid 2 weeks class III and that is also a full year
Paid employment: £46.55 (about £166 these days)
Voluntary: 2 weeks
National Insurance credits: 32 weeks
I don’t really know why that counts, presumably I followed the instructions on the form and two weeks voluntary seemed an easy win. Maybe that covered the start up hit where you get paid in arrears at the end fo the month. Perhaps my younger self unconsciously knew I was going to want to retire early.
These days the Lower Earnings Limit is £125 p.w which implies to me that if you declare earnings of > £6500 you are good for that NI year, don’t know what the score is if there’s a tax year which has 53 weeks if they count Sunday to Sunday so I’d declare £6625 to be sure 😉
@ZXSpectrum48k (#38)
Completely agree that it is about demographics – in 2022 about 20% of the UK population was aged 65 or over, whereas back in 1972 it was about 13% of the population (e.g., see https://commonslibrary.parliament.uk/the-uks-changing-population/). Of current government spending, 18% is spent on health (roughly half of that on over 65s, see a somewhat out of date article at https://www.theguardian.com/society/2016/feb/01/ageing-britain-two-fifths-nhs-budget-spent-over-65s), and 12% on social security (e.g., state pension) for pensioners (e.g., see https://ifs.org.uk/taxlab/taxlab-key-questions/what-does-government-spend-money). With 1972 levels of over-65s, health spending would be reduced to about 15% and social security to about 8% (i.e., a saving of 7% of expenditure).
Japan can form a useful predictor of where the UK might be in the future – in Japan currently 30% of its population are over 65 and, even after recent changes in government policy, only 2.7% of the population are foreign nationals with residency (compared to about 16% in the UK). Having been invited to visit Japan a few years back on one of their government schemes, it was interesting to note that much of the research I saw was devoted to automated/robotic solutions for dealing with their aging population (including some that would raise serious privacy concerns in the UK).
The political problem for any government is that the elderly vote in greater proportions than the young and their views generally (but not universally) align with right wing media – as exemplified by the completely out of proportion reaction over the, as it turned out, temporary, removal of the winter fuel allowance. Since touching the state pension (e.g., removing any part of the triple lock) would be political suicide (for a generation that harps on about sacrifice, we don’t seem to be particularly keen on trying it for ourselves), the only politically acceptable route to reducing expenditure is to ration health expenditure either by long queues (as practiced by the last government), by cost (through privatisation), or by age (which is already partially done) and to remove future benefits for the young (e.g., by increasing the state pension age) since the life expectancy will only be slowly reduced.
@wireless (#41)
According to government figures (e.g., see https://www.theguardian.com/society/2024/nov/19/winter-fuel-payment-cuts-may-force-100000-pensioners-below-poverty-line) the removal of the WFA would have immediately pushed about 50000 pensioners into relative poverty (to join the 2 million or so already there). Not great, but a tiny effect in the grand scheme of things.
@ermine, @curlew, @rhino:
Key phrase is [and AFAICT always has been] “qualifying year”; see: https://www.litrg.org.uk/pensions/state-pension/national-insurance-and-state-pension
And, not surprisingly only QY’s count for the state pension. Worth noting there are several ways to get a QY and more than one way can be used per year too.
Just to let some facts in on the argument. According to the House of Commons Library UK GDP growth since Q4 2019 is 4.1%, France 4.8%, Germany 0.3% and EU 5.3%. Depressingly low figures for sure but they don’t support idea that the UK economy is 4% smaller because of Brexit. Any post Brexit difference is a rounding error compared with the gamut of other economic policy choices. Of course if you make a load of assumptions and plug them into your favourite economic model then you can get a different figure. The point is that there is a reasonable discussion to be had about the economic effects of Brexit which is not the line you take. I will just add that the main reason for leaving the EU wasn’t economic but was around the arguments for the best system of government. Democracy based on nation states or a supra-national system with minimal democratic accountability.
@Passive Investor — It’s fair enough to look at figures from Q4 2019 (pre-formal implementation) but one also has to consider the four years of tumult before, the impact on inward investment, the preparatory steps that businesses took ahead of Brexit itself. Not doing so is equally ‘unreasonable’. 🙂
Secondly, as I’ve written many times before, Britain grew *more quickly* than other EU countries during its time in the EU. So the bar to beat isn’t parity. Being in the EU helped the UK economy. Being out of it hurts it.
Thirdly, I’m very happy trusting independent sources like Goldman Sachs, the OBR, and others, when they derive their 4% long-run impact figure. Remember this is compounding over time, too. So even if you think it’s a bit smaller, after eight years of post-Referendum impact we’re a meaningfully smaller economy than we would have otherwise been.
Finally, while we can debate around your other points, I’m sorry but this is not tenable:
I’m quite prepared to believe that that’s true for you, and for a significant minority of Leave voters.
But it wasn’t the main driver of a majority of Leave votes (see polls).
I will leave other readers to judge the idea that the least-educated cohort of the population (see polls) tilted towards Brexit because they were motivated by concerns about “Democracy based on nation states or a supra-national system with minimal democratic accountability” …
Thanks for thoughts.
@TI #49: I hate politics and politicians (all of them, BTW, though not equally – how do you that tell they’re lying to you, their lips move).
But I think that Remainers like me have to recognise the economic arguments that motivated us to say Yes to staying in the EU are not the driver for those who voted No, regardless of the impact (if any) of the lies about extra £350 mn p.w. for the NHS on side of the (deceptively) red bus.
I can’t remember the exact wording, but a MoneyWeek opinion piece this Friday (IIRC) nicely summarised it along the lines of: expertise was the gift distainfully passed down by the smug Professional Managerial Class to the less privileged Working Classes, and proudly rejected by them in the Referendum as infringing their values and sense of self worth (the actual quote was less elaborate, but you get the idea).
Politics runs off narratives, values and feelings; not evidence, epistemic doubts and attempts at getting closer to truth.
That’s why always keep politics out of investment. I think it was Munger who said that it muddies the mind.
@Howard — I completely agree that perceptions about economics isn’t what drove the Leave vote (or the Reform vote now) let alone the *reality* of the economics. (If it was then nobody half-sensible would have voted Leave).
However as I clearly struggled to articulate in my article, this wasn’t my point. 🙂
My point is that Farage’s nonsense — still defended by some small number of otherwise very articulate and credible people, against all evidence, presumably due to the endowment affect or whatnot — is leading to economic consequences, by forcing the government’s (and Tory’s) hand on policy decisions.
I mean, people brought up the Ganesh FT article here about the reversal of the winter fuel high charge as some kind of counter to my point that Brexit/Reform irrationality is driving poor economic choices.
No, it’s a perfect example of exactly what I’m talking about! Reform has made electoral hay out of it.
What’s more, Ganesh asks for a choice between big state / higher taxes and smaller state / lower taxes.
Again, a principle reason we don’t have such a choice (which we *did* have, at least to a limited degree, for most of my working life and long before that) is because of this anti-fact populist virus that has entered politics here and elsewhere, promising anything and accountable to nobody, especially it seems its own unreflective voters.
Similarly, people could vote (can vote) Leave/Reform because of constitutional concerns, racist motivations, a doomed desire to see shipbuilding in the NE of England, because they don’t like rap music, because of concern for public services, or whatever — and regardless of the evidence about these things — as I say in my piece because of ‘feelings’ — but that has consequences.
Consequences such as a smaller UK economy, lower standards of living, creaking services, and higher taxes, for example.
Hence I roll my eyes at the acres of right-wing press coverage about Reeves’ certainly unloveable taxing/spending plans, because it virtually never mentions their poster-boy and his pet project’s role in putting us in this hole, at least in the near-term.
I fully accept the West has bigger long-term issues as others have noted. But to me that only amplifies that we couldn’t and can’t afford these Blimp-ish white elephants in the here and now as we prepare to confront them.
Monevator will keep flagging Brexit/nationalism as a factor in our economic life until (a) it’s widely and routinely acknowledged or (b) it goes away as a useful factor to work into our sums and thoughts or (c) we perhaps inevitably rejoin the EU when the Leave generation dies off and those left look at the numbers and wonder what on Earth that generation was smoking.
The evidence is we’ll wait in vain for (a) but eventually (b) will be true. However we’re talking about another decade IMHO.
And by that point (c) might even be on the cards.
p.s. Sorry all for all the typos etc in V1.0 of this comment. Phone moderating and replying on the tube. 🙁
“The idea that Britain can – or should – have an independent steel-making industry is for the birds ….”
Steel is a pretty poor example for Smithian competitive advantage these days. Yes , once upon a time steel plants started near coal and ore fields. These days, everyone buys the raw material on the market at the same price. Ditto, the equipment comes from a small nr of suppliers like Demag . Long distance shipping of ore and coal is considerably easier than shipping thousands of different end products with different packaging needs. Labour costs are pretty minor . Steel industries are not concentrated in Brazil and Australia, in fact they have a tendency to be located near to consumers – at least for commodity products. (There is also the fact that all steel-making processes use a certain amount of scrap, even blast furnace plants, and overall economics favour recycling locally).
It is a perfectly reasonable aim for UK to have a steel industry more or less sized to our domestic market demand , steel for rails, for cars & yellow goods , for construction & yes, for aerospace & defence equipment . If we were ambitious, we could have something a little more and export some specialities – like Japan does. I agree , it is a hard business because of persistant global over-supply. But the examples of Germany, Japan and to some extent Italy show how mid-size, high cost countries can have profitable, long-term, high-value metals industries.
Some sort of government committment to industry would be helpful, not hoping for subsidies, as much as avoiding self-harm & short-termism . Some nearly competitive energy costs would help too.
“for the birds” is far too dismissive. If that’s the attitude of the home -county intelligentsia , then what choice is there but Reform : ) . We can’t all work in financial or legal services .
@Jonathan the Evil
Reminds me of Lope de Aguirre el traidor (“the traitor”), the madman who took mutinied a Spanish expedition for El Dorado. He signed his pact swearing rebellion against the Spanish using this monitor, went on to kill 200 of his expedition, his own daughter before being murdered by his own men.
@ Fremantle
Sorry, can you clarify what it is exactly that reminds you of Lope de aquirre?
@mark — You seem to know about the steel industry, so thanks for the comment and colour. However even if this is true…
…I’d still ask why? What’s the point? We both agree it’s a low value commodity industry. We can’t be independent as far as I’m concerned, beyond some trivial capacity anyway. So what’s being gained?
Agree there needs to be jobs for non-white collar types, but there’s plenty that can be done. We need loads of skilled tradespeople for example in the construction industry. Someone is going to need to build those 20 modular reactors, or at least put them together. Money is pouring into infrastructure that I also believe we’re under-staffed to deliver.
Why make something we can buy cheap and let someone else do, beyond the questionable romantic view some people have of heavy industry? 🙂
@say what?
Jonathan uses a monicker “the evil” to save time, Lope called himself “the traitor” as he signed a declaration of rebellion against the Spanish king.
They both know what they are and don’t hide, so to speak, openly mocking of those who might vilify them by adopting a name that prevents any such pretence.
It might help if you knew the bloody mutiny on the ill fated expedition to find El Dorado that resulted in Aguirre devastating rebellion against Spain and proclaiming himself Governor of Peru whilst on an incredible journey through the unexplored upper reaches off the Amazon. An incredible story.
Wim Wenders fabulous film Aguirre.Wrath of God with Klaus Kinski in the title role -mind blowing stuff
xxd09
The Economist titled “The Manufacturing Delusion” (of politicians, mostly populist ones, regarding the economic importance of factory jobs). They back it up with data – US centric but still relevant:
https://archive.is/YoMs1
That’s not to knock companies and people who make things. It’s honourable work, and satisfactory to see physical product shipped. The point is that as a strategy for the country as a whole, “back to the future” doesn’t work; and as it’s usually enacted through subsidies and trade barriers, it’s counterproductive.
If the govt really wants to help manufacturing, then restore frictionless access to the massive market at the UK’s doorstep.
@Howard #50 thanks for that, I chased the Moneyweek article (issue 1264, p19, best of the blogs though the source doesn’t open for me) in the library, it’s currently available on pressreader the nub is
.
I did go to university, but when I entered only 7% of school leavers did. I am a remoaner as much as anyone, but I have to say that TI’s #55
> I’d still ask why? What’s the point? We both agree it’s a low value commodity industry. We can’t be independent as far as I’m concerned, beyond some trivial capacity anyway. So what’s being gained?
stuck in the craw, because optimisation is not all. Globalisation had driven down costs using comparative advantage, I can follow the intellectual point. But we can’t make enough artillery shells in Europe – globalisation has driven out resilience too. Resilience always comes at the cost of efficiency and vice versa. It was a genuine surprise to see first with Covid and more recently the Trumpian farrago just how much of making stuff the west just can’t do any more, both from a lack of skills and a lack of facilities. You can do something about the facilities, the skills not so much. People will point to the high tech stuff and say that’s enough, but I do wonder if we will rue losing some of the basics. We don’t need to be a self-sufficient autarky, but it’s not too hard to imagine scenarios where globalisation is less available.
I have a generator and an inverter in my garage. I don’t want to be self-sufficient in electricity, but I have experienced a two and a half day power cut in the last storm. I tolerate the inefficiency and the general PITA that is keeping a rarely used petrol engine available to have resilience. Efficiency isn’t all.
The PMC does palpably despise the deplorables, Hillary Clinton summed it up well. And people really, really hate being despised. The Remain camp didn’t even try and sell what was good about being in the EU, it majored on what was wrong with the alternative. We are storytelling critters, and the story’s so much better if you run towards the light rather than away from the darkness.
@Alan S (#46)
Thanks for the link.
There seem to have been different estimates for the number of pensioners severely impacted, even within the DWP. Their analysis also indicated 780,000 pensioners in England and Wales probably lost their winter fuel allowance because they were not expected to apply for benefits they were entitled to. See:
https://www.bbc.co.uk/news/articles/cr54n3r0l50o
The charity Age UK said “We strongly oppose the means-testing of Winter Fuel Payment (WFP) because our initial estimate is that as many as two million pensioners who badly need the money to stay warm this winter will not receive it and will be in trouble as a result …”
https://www.ageuk.org.uk/norwich/about-us/news/2024/as-many-as-2-million-pensioners-could-face-the-cold-following-winter-fuel-payment-cuts-says-age-uk/
Anyway this is all immaterial now. I expect that enough of the Labour MPs disagreed with both the cuts to the Winter Fuel Payments and also the withdrawal of Pip benefits from those too sick or disabled to work, to force changes to be made.
@ermine: The emasculation of blue collar in the name of efficiency hearalded it’s own downfall. Brexit was a symptom not a cause. Optimisation is typically a weak point in systems. The system is optimised for one thing, and then another happens.
The US has outsourced shipbuilding to S. Korea. Very cost effective. Short term. But now it has negible native capacity, whilst China closes in on 50% global share. And S. Korea is just across the DMZ from the largest massed concentration of artillery in the world, and just across the Sea of Korea from the Northern China plain heartland of Eurasian power.
We’ve gone from “it” (the world of things) to “bit” (the world of data), but bits look more vulnerable, and not just because of the need for electricity.
Enterprise accounting software and social media platforms aren’t much use against drone swarm or EMP attacks.
Chimerica has come to its end. The perceived vituous circle of Chinese surpluses recycling into US debt and then US consumption to produce yet more Chinese surplus couldn’t continue forever, and when the Donald came down the golden escalator a decade ago today the bell began tolling. It tolled for all of us.
@ ermine — Hi, you write:
So your ‘why’ as I understand it is that we must have a sizeable national steel producing capacity in case of some kind of globalisation shock.
Sorry, but I don’t buy it. I agree it might mean ‘the West’ must have such a capacity, which for us would mainly mean incumbents in the likes of Germany, Italy, from memory Austria, but probably more cheaper nations in Eastern Europe. (From memory Turkey produces quite a bit of steel but they don’t go into my ‘resilient’ bucket 😉 )
However the UK is a small island with lots of aging NIMBYs with very expensive energy costs, a strong dislike of pollution, and a very low demand for steel versus other countries of our size. And as I’ve already noted, we don’t have coking coal or iron ore on tap currently either.
I have a tendency to extrapolate quickly to the end point, so to be clearer what people who ask for this kind of thing are really saying is “I want much more steel demand” (my sweatshops and boatbuilding) and “I want much more local mining and production” (so we have some independence for raw materials, given that the stated goal is resilience so relying on say iron ore imports is presumably as bad as importing steel?) and “I want much lower energy costs for industry” (so let’s roll back the push to renewables) to, finally, “…because I want to produce lots of uncompetitive steel that is a commodity product that can be imported cheaply.”
All of this would cost hundreds of billions assuming it was even feasible (we couldn’t even do HS2, good luck reopening the mines etc), take decades, and would result in a structurally much higher cost base for this stuff that would hit our productivity further and damage economic growth.
We’ve already seen the hit to the economy of trade frictions and lower investment from Brexit. The above project would be magnitudes of that.
The UK cannot afford this kind of Blimpy nostalgic folly. It’s not even clear that the likes of Germany, which at least consistently and properly supported a well-trained efficient heavy manufacturing base, can afford it.
I’d agree if we all had to be our own North Koreas then fair enough, we’d have to create our own steel.
But the UK only prospers in a more hostile world with allies, trade, and imports. If we must focus on more homegrown manufacturing then let’s concentrate on the top of the value-chain (which is being flogged off to foreign buyers currently on the cheap and has been for years) not on the messy making of huge lumps of stuff that can be made much cheaper elsewhere.
Someone may pop up and say “You go too far, I just want to make steel here because a few million tons is symbolic”.
Which proves my point. It’s just expensive national vanity and toy trains for 60-somethings as far as I’m concerned. 🙂
And as I said, let’s just stockpile a bunch of the stuff if we really need ‘steel resilience’ (we don’t, because in any world where that’s helpful we have much bigger problems, like getting food and antibiotics…)
@Ermine
Exactly.
It doesn’t have to be steel – that’s the example TI chose though – and it certainly doesn’t have to be exactly as in the past. Nuclear would be another example of UK throwing away an industry, and renewables of effing-up the opportunities in a new sector. However
– there are good “green” and economic reasons for least having a metals industry to deal with scrap reprocessing & a chunk of local demand. If the market is saying the answer is to ship heavy scrap to Turkey and ship heavy processed product back, one has to wonder what is distorting the market .
– Metal bashing is a mix of high value and low value (I didn’t agree that it is all low value). Like all process industries it is heavy into technology – machining learning – and has been for many years. It is difficult to keep the high value stuff alone though without a broader base.
– “we can’t do H2S” and so on. Do we just give up and emigrate ? Do we make tea & hold the coats in future while French / Americans / Koreans get on & build new nuclear plants and take the profits ? The point is the UK could and can do things better. Is is totally out of the question to imagine that a long-term industrial strategy a la Japan might have served the UK well over the years ?
– Resilience. The government intermittently recognises this . I believe there are a couple of small semiconductor plants in UK on life support for the defence industry . Sheffield Forgemasters has been rescued at least once. Joined up thinking isn’t much evident though.
– net zero. The renewables drive is constrained by supply chain capacity (manufacturing, fabrication yards, installation ships and so on) , if this really is the priority it is claimed to be, then we should do our bit about it. The flip side of the argument for shutting down North Sea oil production.
@mark — Fair comments, except (as you sort of acknowledge at the top) you’re kind of arguing against my position that we should just shut down British Steel by yourself calling for more nuclear facilities engineering.
Well fair enough, I didn’t say we shouldn’t be making nuclear reactors! I said we shouldn’t be bothered about making our own steel. 🙂
As I’ve already noted, there’s plenty of higher-end stuff that’s being flogged off / damaged by Brexit (e.g. car making) / underinvested in that’s much further up the food chain that we could more usefully try to nurture.
I say this as a very active investor in UK industrials over the past 20 years, including everything from Renishaw (disclosure: currently hold) to Rolls-Royce to Spectris (sold to the yanks last week) to Arm (was really cross when it was sold cheaply to Softbank, and again when listed in the US, the latter despite hostile comments here telling me “there as nothing to see” about the liquidation of the UK market a couple of years ago, which has in actuality continued apace since then).
My point is I agree there’s high-end industry we can be getting on with here. Agree with the push for nuclear, and that it’d be nice if we took more of that value chain for ourselves.
I even agree the over-financialism of the UK economy and (especially) short-termist thinking and underinvestment has not been good for aspects of Britain PLC.
But those are arguments for trying to support, say, businesses like Rolls, BAE, Qinetic, and Rotork, which have all shown they can create a high-end product that meets a global demand very profitably. Not the UK steel industry which hasn’t and can’t. 🙂
@Howard #50 @ermine #59
Thanks for that MoneyWeek article. I’m surprised how willing people are to write-off the ~50% of Trump voters as ‘idiots’ or similar. If you really push them, they will offer strawman arguments which only reinforce how stupid those voters are. Normally it’s because Trump voters were unable to understand the inevitable consequences or were readily deceived (unlike those who didn’t vote for Trump because they had superior enough intelligence to evaluate the campaign trail claims). There are obvious parallels with Brexit.
There seems to be a contradiction in claiming to be intelligent enough to not vote for Trump but being stupid enough to think all those who voted for Trump were stupid. It’s like the Chesterton quote “to be clever enough to get all that money, one must be stupid to want it.”
Why so many chose to vote for Trump is the difficult question to answer, but instead they reach for simple answers which they accuse the same Trump voters of falling victim to.
Dostoevsky (referenced in the MoneyWeek article) would steelman the arguments he disagreed most with (Ivan vs Alyosha).
If you haven’t seen it before the idea of ‘luxury beliefs’ has some similarities to ‘conspicuous cognition’ being “ideas or opinions that confer status on the upper class at very little cost, while often inflicting costs on the lower classes.”
@platformer — People have made stupid/short-term/miopic decisions many times throughout history. Of course they have their own motivations and reasoning. And I’m sure nothing like all 50% of Trump voters are idiots. But a significant number appear to be rust-belt/red state working class voters who are worried about their incomes / US government debt / corruption in US politics who have nevertheless voted for someone who is arguably likely to make them in the long-term poorer (especially in terms of ‘lived wealth’, such as access to subsidised healthcare), who is pushing through a huge bill that will increase the debt through tax cuts for the rich (nobody disuputes this) and who is brazenly mercantile and self-interested. So, as they say, go figure?
Of course there are plenty of people who would benefit (financially) from such an agenda, too. Strikingly, many of them would be wealthy democratic voters in the cities.
About the best can be said for MAGA is it has, far too destructively, drawn some kind of a line in the sand against the left’s tendency towards intolerance and thought policing. However given it has its own brand of intolerance and thought-policing (such as firing people who disagree with you, or who do their jobs that you happen not to like) even that’s a mixed blessing.
As for Brexit, well they got nothing that they voted for with Leave. Many weren’t stupid, but they were delusional. It was a stupid decision.
Edit: Okay, the minority who were truly motivated by it got full technical sovereignty (though in practice it’s not much use). I always acknowledge this but sometimes forget to mention in every comment. 🙂
@TI I’m not claiming to have the answer but it could be that you’re fighting on the wrong battlefield.
Ivan vs Alyosha is the perfect example. Ivan is the intellectual who destroys his brother Alyosha’s arguments with brilliant analysis but it’s Alyosha’s appeal to faith and morality which prevail (often reaching the opposite conclusion to Ivan).
This isn’t a new way of thinking either. The Greeks distinguished between logos (logic) and mythos (myth). They knew you needed both whereas we have more recently becomes obsessed with logos as the only way to understand the world and how to act in it (e.g. see the rise of the four horsemen of New Atheism).
I distinctly remember someone in the audience responding to claims about Brexit’s negative impact on GDP with “that’s your bloody GDP, not ours.” Logos has little to say about that statement other than ridicule. Mythos has much more to say and is in no way an inferior way to understand the world (even if I disagree with its conclusions).
@platformer — Interesting thoughts, but they don’t really diverge from mine. As you know I said in my article above (and many times before) the Brexit vote to Leave was about Feelings, not thoughts.
Is that legitimate? Well individually I guess so, but it doesn’t mean I have to respect their decision as rational or intellectually credible.
More generally, this is an investing and money blog. There are readers who think even straying into Brexit/political territory is going off-beat. I don’t agree with that, not least given the financial consequences. But I do think straying too far into psychoanalysing the motivations of self-harming Leave voters is probably not the territory this blog should be over-exploring.
Long story short, I’ll keep flagging up the financial / economic impact of Brexit/petty nationalism on this blog, as it’s relevant.
No doubt people (not you specifically!) will continue to initially argue I’m wrong, but present no financial/cultural/economic Brexit benefits, eventually say “it was feelings / a protest / about immigration anyway”, and perhaps miss the point that they agree with me. 🙂
@TI I have some thoughts in response but agree this is probably way off-topic now. Thanks for the reply either way! 🙂
@Platformer. Based upon the last Gallup poll on 2024, 37% of the US population believed in Creationism. That God created the humans in the last 10,000 years. Sorry but if you believe that you are an idiot. There is no way to sugar coat this.
Trump voters skew very heavily toward such beliefs. So I think it’s valid to argue the average Trump voters are pretty stupid.
@ TI > I agree it might mean ‘the West’ must have such a capacity, which for us would mainly mean incumbents in the likes of Germany, Italy, from memory Austria, but probably more cheaper nations in Eastern Europe.
Yeah, that’ll do, I didn’t strictly mean we had to do all of it on this septic isle. Though I’m not tremendously distressed by the rail production agreement even though I’m sure it would be cheaper to buy and ship rail from China FOB Port of Felixstowe 😉
The point the Moneyweek article was making is that the rejection of the PMC is about dignity, not facts – in another part of the extract there is
What modern business optimisation has been doing is stripping out dignity in work. Companies increasingly disrespect both their workers and their customers in the interests of efficiency. Their customers because they abuse their personal data and flog it or abuse it, and enshittify the products. Their workers because they want to sweat the asset so they surveil and control them. These firms probably need AI to work because the way they treat people they will have serious problems of sabotage and people going postal. Dignity and respect matter, even at work.
The economy is a human construct and the collective creation of an oddball social animal. Not all the constraints are technical or computable – homo economicus clearly doesn’t exist other than as an alloy with something else. All optimisation seems to be about number go up, but it seems to be costing us an increasing alienation and disaffection, which may impair efficiency in a different way.
I really do wish the PMC would take the time out to try and understand this. They can still scratch their heads about how or why people vote against their own interests, but until they get the dignity thing they will fail the last part of the Moneyweek article
The alternatives will be either dictatorship or the outcomes described in Joseph Tainter’s The Collapse of Complex Societies. It’s happened before in history, to societies less complex than ours. I’m not educated enough to understand the Dostoevsky reference, but I do know that people will sometimes act against their own economic interests for pride. After all, when I left work for the last time I gave up many future years of earnings for freedom. It was undoubtedly a bad economic move given what I knew at the time. Je ne regrette rien
@ZX Again, I’m not saying I’m right but my response is the same about fighting on the wrong battlefield.
Intellect / logos is not the only way to understand the world and determine how to act in it. You could say you’re making an Ivan argument and dismissing Alyosha.
There could be an entirely wrong intellectual / logos claim that supports a mythos claim that better helps you understand and operate in the world. Your example is a good one because the intellectually wrong creationism claims are buttressing mythos God claims. Ideally they work in tandem.
You could disregard mythos and say logos should always reign supreme. That is the story of Milton’s Lucifer, the fallen angel exiled from heaven for thinking his intellect was superior to God. “Better to reign in hell than serve in heaven.”
Buddhists have a similar outlook: “Grasping concepts is not awakening.” The more you try to use intellect, the further you fall from awakening. Intellect obscures reality in their view.
Even if you disagree with all the above, it at least provides a framework for starting to understand how millions of people are creationists.
@platformer – all the major Buddhist traditions value intellectual study and conceptual understanding on the way to Wisdom*. The concepts are useful as starting point and prepare the mind for deeper realisation. Buddhism prescribes disciplined practice in very specific ways so that the mind becomes capable of Insight*. This is sober and pragmatic.
Buddhism couldn’t be further from the Brexity-Trumpist post-truth where everyone makes up their reality as they like, without any effort and usually based on ego, fear and hate.
From the Buddhist perspective one could say that both logos and mythos need to be transformed and, eventually, transcended.
*) these are technical terms with specific meanings
#68: OTOH YouGov marks 9th anniversary of the Referendum with a poll showing 56% saying Leave a mistake, compared to 31% the right decision, with 61% saying Brexit a failure, and only 13% a success.
OTOH: DT’s poll shows Reform, led by Brexit’s architect, Farage, now on 34%, against 25% for Labour and just 15% for the Tories – heading, if replicated in 2029, for a nearly 200 seat majority, with Labour loosing over 150 seats, and the Tories getting as few as 10.
Understanding why this dichotomy exists is key. It’s not about logic. It’s the absence of narratives about alternatives to Reform and Brexit, which is widely shared and believed. The mythos trumps the logos.
Well put Howard and should be a subject for constant discussion -from all sides on a financial forum -if only for the way investors financial plans must be affected/ implemented going forward
xxd09