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 [1].
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 [2] 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 [3].
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 [4] 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 [5] 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 [6].
But more pertinently, the resultant accommodation of Faragian language and even thinking by the mainstream parties expands the Overton Window [7] 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 [8]
- Key points at a glance – Guardian [9]
- Seven reality checks – Politico [10]
- Which government departments were the winners and losers? – Guardian [11]
- Seven ways the spending review will affect you – BBC [12]
- Progress, but gaps remain for business – CBI [13]
- Understanding the government’s two ‘phases’ – IFS [14]
- Key climate and energy announcements – Carbon Brief [15]
- Why we should all hope Rachel Reeves can deliver growth – This Is Money [16]
- The spending review was a major political shift – Prospect [17]
- Smoke, mirrors, and no strategy [Podcast] – Spectator [18]
Have a great weekend.
From Monevator
Why small value is worth investing in [Members [19]] – Monevator [20]
UK tax brackets and personal allowances for 2025-26 – Monevator [21]
From the archive-ator: How to save money on travel – Monevator [22]
News
Millions more pensioners set to get the Winter Fuel Allowance – Which [23]
Wealth managers issue health warning over inheritance tax vehicles – FT via MSN [24]
UK trade with US falls apart after Trump tariff blitz – CityAM [25]
Treasury gains £500m to pay off UK debt from Barings banker’s 1927 fund [Paywall] – FT [26]
UK and Spain strike ‘historic’ deal over Gibraltar’s future and borders – Guardian [27]
Poundland sold for £1 – This Is Money [28]
FCA warns on ‘freemen on the land’ mortgage conspiracy theories – Guardian [29]
Wealthy UK families ‘seize moment’ to buy exclusive London homes [Paywall] – FT [30]
Yorkshire second region in England to move into drought status – UK Gov [31]
[32]
People can’t afford to have children – Sky News [33]
Products and services
Pay by Bank: can you trust this new way to pay? – Which [34]
Get two-for-one cinema tickets for £1 with Meerkat Movies – Be Clever With Your Cash [35]
What to look out for when buying a retirement flat – This Is Money [36]
Get up to £1,500 cashback when you transfer your cash and/or investments to Charles Stanley Direct through this link [37]. Terms apply – Charles Stanley [37]
Chase launches top 5% easy-access savings deal – This Is Money [38]
The skinny on three-year fixed-rate mortgages – Which [39]
Get up to £100 as a welcome bonus when you open a new account with InvestEngine via our link [40]. (Minimum deposit of £100, T&Cs apply. Capital at risk) – InvestEngine [40]
The best bank account switching deals right now – Which [41]
Santander to end all existing 123 Lite accounts – Be Clever With Your Cash [42]
Homes for sale with swimming pools, in pictures – Guardian [43]
Comment and opinion
The trick to enjoying a vacation (and investing successfully) – Oblivious Investor [44]
Winning the won game – Retirement Investing Today [45]
What’s the case for passive funds that exclude certain countries? – Morningstar [46]
“I bought our London home for £390K in 2018. Six years later it sold for the same price” – Independent [47]
The rise of the ‘carent’ – BBC [48]
What can poker teach us about risk management? – Monocle [49]
Enough is a feeling, not a number – Simple Living in Somerset [50]
British pension policy is finally stepping in the right direction [Paywall] – FT [51]
Lost decades mini-special
Sometimes even the US market taps out for a decade… – A.W.O.C.S. [52]
…but the impact on real-life savers isn’t usually too bad… – Of Dollars and Data [53]
…although individual stocks can get permanently creamed [Paywall] – FT [54]
Naughty corner: Active antics
Equal-weighted, aerospace was the best sector of the past century – Fortune Financial [55]
JP Morgan says investors are looking in the wrong place for diversification – Trustnet [56]
Wine investors thirsty for respite as prices continue to sour – This Is Money [57]
Selling Direct Line after a bumpy three-year turnaround – UK Dividend Stocks [58]
Equity analysts are over the Liberation Day tariffs – Bloomberg via F.A. [59]
On our difficulties with spending [podcast] mini-special
Spending your money now with Oliver Burkeman [Podcast] – 50 Fires via Spotify [60]
Spending money in retirement [Podcast] – The Human Side of Retirement via Apple [61]
Kindle book bargains
How to Own the World by Andrew Craig – £0.99 on Kindle [62]
The Algebra of Wealth by Scott Galloway – £0.99 on Kindle [63]
The Big Short by Michael Lewis – £0.99 on Kindle [64]
Skunk Works: A Memoir of My Years at Lockheed by Ben Rich – £0.99 on Kindle [65]
Or pick up one of the all-time great investing classics – Monevator shop [66]
Environmental factors
BYD launches cheapest UK model in bid to overtake Tesla – Guardian [67]
Why wind farm developers are pulling out last minute – The Conversation [68]
Is a smart gate the key to habitat connectivity? – Biographic [69]
Albania is rampantly overbuilding to meet tourist demand – Metro [70]
Decathlon pledges to refund all tents bought this summer – Independent [71]
When a whale dies – Atmos [72]
Is it time to rid the world of mosquitos via gene editing? [Paywall] – Washington Post [73]
Robot overlord roundup
[74]
AI native startups pass $15bn in annualised revenues… [Paywall] – The Information [75]
…while Meta just made a $15bn bet / acquirehire with Scale AI – Futurism [76]
Star Wars and the age of AI video – SatPost [77]
Here’s how much water and energy ChatGPT might be using a month – Sherwood [78]
The Illusion of Thinking… [Research paper, PDF] – Apple [79]
…is more evidence LLMs are just a fancy parlour trick, says Gary Marcus – Guardian [80]
Fighting the flood of fake job applications in the tech sector – Fast Company [81]
The AI hype is just like the blockchain frenzy – The Conversation [82]
Not at the dinner table
Everything feels like it doesn’t make sense – Kyla Scanlon [83]
Ten signs the knowledge system is collapsing – The Honest Broker [84]
Jesús polished luxury vehicles at an LA car wash for years. Then ICE showed up – BBC [85]
Off our beat
You are what you won’t do for money – Ryan Holiday [86]
Talking war-onomics [Podcast] – A Long Time In Finance via Apple [87]
We all need to be loved – We Are Gonna Get Those Bastards [88]
Anduril: an amusement park for engineers – Colossus Review [89]
The ‘repugnant conclusion’ that an Oxford philosopher couldn’t escape – Big Think [90]
Marina Hyde: Social media has broken even Elon Musk – Guardian [91]
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 [92]
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