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.