Bloomberg Audio Studios, Podcasts, Radio News. Welcome to Meren Talks Money, the podcast in which people who know the markets explain the markets. I'm Maren zumsetweb listeners. As some of you will know, we have made a bit of a tradition of hosting a live recording of the podcast the morning after the budget. So earlier today I sat down with a familiar cast of Merin Talks Money guests to talk through our reactions to the budget and to take listener questions.
Joining me in Bloomberg's London headquarters was John Steppeck, my co host and author of the Money Distilled newsletter, Stephanie Flanders, Bloomberg's head of Government and Economics, and Helen Thomas, CEO of Blonde Money. Now, this we are hoping is going to become a long term tradition. We did this last year the same panel. You were here last yearn you, Stephanie, John Bial's say me.
Okay.
And the idea is that we do a.
Live podcast here the morning after the budget from Bloomberg headquarters here in London. So with me today Stephanie Flanders, head of Economics and Government at Bloomberg, Helen Thomas, you were here last your way, I was not worked. Okay, Well come every year please, founder and CEO of Blonde Money and John Steppeck, senior reporter and author of the
award winning a multi award winning Money Distilled newsletter. I will say, by the way, that this podcast has also won an award, So there's an award winning podcast right now. Before I start, I just want to check the feel of the audience.
Who is happy with the budget?
Hands up the right, Oh, well, two hands have got free, hands have gone up. I think we've got about three hundred and fifty people in the audience who thought it was a good budget for Rachel Reeves more hands okay, good budget for young people, no old people, for more of their okay, for growth, not a single hand, not a thinker. That was my aim to go to a bit where not a single hand went up.
Okay.
So can we start Helen with you now? The question that a lot of people ask before this budget and after it is is this enough for Rachel? We used to keep a job for a.
Few more weeks, maybe months at best, and she can thank the Fed's John Williams for that, okay, Because what we have had is the market giving her the benefit of the doubt because broadly the market now seeing potentially will rate cuts out of the US is sort of in a slightly more benign mood. So yes, benefit of the doubt for now, but it will unravel, It will unravel politically, and we'll probably come onto it.
Okay, So as far as the guild market is concerned, everything's basically fine.
For the next well for sort of the next few days and weeks. Okay, if you want me to read out the bit of the OBL report that means it isn't No.
I don't want you to read it out. I want you to summarize.
Okay, borrowing will be is higher, and the fiscal consolidation comes later. Yeah, that is a pretty toxic mix if anyone thinks they're going to do fiscal consolidation in the year before scheduled election.
Yeah, so this is what the markets may be missing.
There's a lot of spending up front, but the consolidation itself is backloaded, and we can't be absolutely sure that very many things those things will happen, and we'll come onto the mansion tags later, which is one of the things that I suspect the audience is super interested in and which I suspect will never happen.
John, from your point of view, Yeah, I think.
I mean, I agree with Hell and I do think the other issue is that possibly people I think they will get a little bit too excited about the gelp's market these days because of what happened to realized choice. And the thing that we have to remember is that when that happened, it was an extremely fair rail moment in global microeconomics, so interesting, it's shooting up. And on top of that, Britain had some kind of LDI leverage
inside the system. So you can think what you like about Liz Trust, but she was throwing a Molotov cocktail at Agenda Tower. That's the point. So what has happened now is the guilts market is much more stable. Also, the Debt Management Office is managing the issuance much more so.
For example, they canceled three scheduled thirty year guilt auctions, so that means there are fewer chunks of long term debt being issued, which means the supplies down, which is the reason that yield went down yesterday, because if you need thirty year gilts, that are a few of them kicking about So I think all of that stuff is easy to neglect because we do get obsessed with the politics and the ushi. But equally, as Helen said, it's also because they fed now looks as if it might
cut interest roots. So it's you know, there's a big chunk of things going on that make her you know, she's throwing a Molotov cocktail. She's thrown it at like, you know, a skyscraper or you know, a kind of fireproof trump.
Okay, and this was a relatively non inflationary budget, particularly relatively yes, well.
Yeah, I mean relatively speaking, it still wasn't you know she was pushing back against you know, like she's sort of gaming the figures a bit over the next year by you know, poising the index and the train fairs and things like that. But certainly putting the minimum wage up by four point one percent is not.
That's an inflationary younger people.
Oh yeah, And it's also because you know, because supermarket's employer paid a lot of people who I mean to be through the supermarkets all pay above minimum wage. But if you're going to keep paying above minimum wage, and then every time minimum wage goes up, you have to bump up your staff salaries. I mean quite apart from the impact on kind of wage compression and you know, damaging people's motivation to work. The point is they need
to pass that cost on somehow. In the Bank of England itself said, you know earlier this year one of these food prices have gone up. Isn't because global food prices are higher. It's because the kind of labor costs are having to get passed on by the supermarkets, which are extremely low margin businesses. As I suspect everyone in this room probably knows. So yeah, so yeah, I'm not particularly interest, but I think the reason she's got away
with it is bequised. The envitement is much more forgiving.
Yeah, definitely have any major surprises in their view.
Well, so the surprise was actually the market reaction is at some level, and I think it also underscored the missed opportunity because you had a budget that was I'm not sure, at least for the purposes of today, I'm going to be slight. I'm going to try really hard to be a bit more positive because it just feels like otherwise we're going to be beating our stick over this budget for the next hour.
But it's hard.
I have to say, it's hard to find things to good say, but I think it was if you're looking at the UK and thinking is this, and you would many people were, obviously, and the global markets were thinking this when the Labor government came in, and were actually betting on the UK, putting money into the UK on the basis that this was going to be a government that was going to be more long term, certainly more stable politically, was going to take some of these tough
choices after all this chaos, and instead you've had a series of budgets that made all the same sort of awkward short term compromises. I wouldn't say these I mean they're obviously in a labor direction. I wouldn't say they're fundamentally worse than some of the compromises that were made in the previous government. But you certainly haven't seen a step change in the quality of macro decision making or a government taking advantage of the fact that it had
a full term ahead and a large majority. And I think in this case, you know you had and our economists, chief economists Dan Hanson had identified you know, you have that money on the table that you could have got from persuading the markets that actually you were going to you were willing to take some pain, that you were willing to have some front loaded fiscal consolidation, which also incidentally could have helped the more sort of fundamental way,
Hey up the Bank of England to cut rates sooner. And when I saw how little the market had reacted to this one, you know, purely with the reassurance that there was more margin for error now, but not that we won't actually be making those errors, I thought, Wow, they really could have.
They could have come away.
We had what four basis points cut in yeals, it could have been twenty. We could have got halfway back to the US, potentially on a day where people, as we've all said, you know, the markets were feeling a little bit more favorable. Anyway, that gap with the US.
There's no sensible reason for it, even if you look at the long term fundamentals, except this feeling that UK governments can no longer do difficult things, which is true, which you know, based on you know, all available evidence, seems to be true.
What difficult thing do you think that she could have had to go at?
I mean the obvious one, but it's funny because you know, it's a bad sign for a government that has this many years ahead that you're constantly going back to things
they might have done a year earlier. Yeah, So, you know, this time a year ago, we were saying, why did she sign up to that national insurance cut that Jeremy Hunt or the two success of Jeremy Hunt national insurance cuts, and why hadn't she not just said we're going to reverse those, but we'll be back to where we were, will keep rates exactly where they were a year ago, but we don't think these cuts are affordable. That would
have saved her twenty billion pounds of pain. Then we got to this budget, we said, well, why hasn't she done you know, why hasn't she been braver on saying the world has changed, you know, and actually tackled some of the things on income tax. Same with the spring statement that we had a complete change in the global environment with Trump and the intensification in Ukraine, and yet
they still missed that opportunity. So I just think, you know, the real shame is that we are constantly saying she's missed an opportunity. She's just doing the minimum, and you know, we're going to look back and say, wow, there's just there's so many things that this government could have done that it's not done. And instead, as we're pointing out, the welfare bill is going up and the same physical challenges are there.
Yeah.
Well, we were talking about this earlier, about the signals that we're sending here, and one of the sort of extraordinary things that you can look at at the moment to see that the total welfare bill is remarkably similar to the total income tax bill. And you get to a point when you're looking at maybe young people working and working very hard paining their income tax and they can now look at it and go wow, pretty much every pound I pay an income tax is going one
way or another into the welfare bill. And that's a terrible signal to send to our young people.
And it's also just a weird signal that disc government. I mean, you've got a particular thing around.
You know. I think it was.
Really disappointing and you know, dereliction to not push harder on the welfare of formula, but to not push to not get anything in return for this kind of important contribution to child poverty. But you would always have said, given the downsides of that, you would always have said it had to go with some more serious reform and to end up with nothing.
On the other side of the ledger, I think, well.
There is something the return to face to face appointments well, and I think that sounds little bit and actually maybe quite big.
I was actually yesterday someone asked me, you know, what's some sort of the opposite of an unexploded bomb, you know, the sort of positive things that might unexpectedly go well in the last year, And that was the while I highlighted. I think, I think there is a possibility that that will have a much bigger effect on the roles. But remember you've still got a lot of people who you know, the fixed number of people already on the rolls as well driving up the bills.
Helen were let's let's pick up that, then let's go for something positive. Were there any hidden positive surprises in there for you? Do you think I have a horrible feeling the answer is going to be no.
But well I want to give I suppose give some credit to Rachel Ruves that she was trying to square an impossible circle and it could have been worse.
So it could have been worse that's not what I'm looking for, no.
Okay, okay, so yes, all right, let me let me think about that.
It's quite difficult, okay, John.
I was.
In terms of, well, I've got to go back to this thing about welfare, because the front page of the newspapers this morning pretty much singularly or negative.
But you know, it's what is it?
You know, the shirkers, the strivers are paying for the shirkers. So we just roll on all the time, and what is this government about? What is its strategy, what is its narrative, what is it s message? Where are its priorities? And then this tussle over welfare turned into a temic debate about the two child benefit cap, and now it's rolled into shirkers versus drivers, which is surely not what the government wanted it to do.
So sorry, that's negative again.
They okay, okay, Well, she has, as we started on this, given something more to the sort of labor. It's a labor budget for labor people. I'm a labor person doing progressive things.
She said that. I think she's she has sold.
That to some degree, so perhaps she has managed to bring a bit together. The splitting parts elements the Labor Party.
Okay, brave Helen.
It's really didn't work with the line Fell tax. There was a line Fell tax which was basically I'm not an infrastructure of gay, so then that I might change. They were going to like multiplayer by about ten teams men. You can never build our hose again in the entire country.
So that was quite a good idea.
Slash that would be.
A much better idea because yeah, constructure and it's one of the reasons why we have dumping across the UK, because it's so expensive to move stuff to a land filled stuff there.
Is I mean, what's ironic about this government is all the good stuff they're doing is the stuff they're really trying to hide not talking about very much at all. So as she did mention John Fingleton's report on the making it easier to build nuclear power stations, I mean that goes to this whole swath of things of why is it so flipping difficult to build anything in this country? And there has been quite a lot of active involvement if you.
Look for my sins. I was actually looking.
At some of the amendments in the remember it's called now Land Planning and Infrastructure Bill, which for some reason is still not got roll ascent. But anyway, there was an intervention actually by number ten to make that even tougher in terms of overruling local councils on big projects, a number of things that should make it easier also
to do big infrastructure and those things. You know, if it becomes not impossible to build a nuclear power station, I think that's something that you know, future governments will benefit from. But it's an important change which you know, let's face it, all of those the planning, all of those things got much worse under the last fifteen years. There was no concerted pressure from the Conservatives on that,
so you know, I think that kind of thing matters. Also, I know it's not very popular and many people have said it's something that might get reversed, but we were going to have to move to a way of taxing electric cars, and for them to have had actually been brave enough to say, okay, this is the system and it's going to come in in a few years time.
You know, somebody was going to have to do that, and we don't want it to be another thing that governments are incredibly unbrave about that we have for the fuel levees.
The other positive stick sticking with electricity.
The other positive you might pull out is the beginning of a recognition that electricity builds them. You go too high because of the piling of green levels, green levees, on and on and on and on and on, and of course they will have to be paid. Shifting them into general taxation doesn't take away the fact they have to be paid, but it takes them off of electricity. But it probably should have been in general taxation. Yeah, it should be in general taxation in the first place.
But it's a recognition that we have a problem with electricity prices. So that seemed that was a very minor positive that I could.
Thing as well.
Yes, that just irritated me, to be honest.
I mean it's really it's really a limp because yeah.
And this is this is the if you I p O, then you don't. There's no stam duty on the trading of the shots for three years, which you know is fine. But the reason people don't IBO in the UK is because they're not going to get a good enough price.
And this of only three years.
Sure you capitalize that into it, you get a small uplift possibly in your issue price, but but not much. And you know stamp duty should go across the board, don't you think. I mean, you've been listening, but can't take the big steps to make the proper change that is needed.
I think that's that that is the problem, and it's kind of bog was doing a very FoST question that you asked here, and like the issue here is that this is our budget done essentially to see for the Chancellor's neck, and that means she's basically doing it for a tiny audience of labor MPs and that makes all of the difficult things even harder. I mean, it was always to have to promise that she wasn't going to
put up income tax. I don't know why people are so obsessed with the manifesto because it's very clearly been broken. I mean, if you don't think physcal drag is putting up income tax on people, and I don't know what to tell you to We're absolutely honest, you know this stuff is you know, it's very loyally kind of like way of looking at things, But if you look at all the problems that we fundamentally have, it is about
politicians being afraid to tell people hard things. And that's why they're hiding the planning stuff as well, because there's a cohort who really you know, the ymbies want to hear it, but the nymbi's don't.
They don't want to be told it.
And as soon as I mean even the ymbi's, as soon as it's actually in their backyard, very very quickly, I think.
That's the problem. And I don't.
I don't know how we get beyond that. Except for that, I guess they'll like that. It has to get source sick of the kiniscaliursis and the plaque building not in the arteries of the state, that eventually we get somebody who's got the vote online date total quilo.
You get to crisis?
Can I ask you Ellen about We're talking about fiscal drag, which is such a big deal in the UK and we worry a lot.
We talk a lot John nine on the podcast.
We talk about the rich leaving the UK, and we talk about the millionaires and the billionaires and they're all going to Milan and Luxembourg, in Dubai, etc. But I'm not sure we talk enough about high income young people. And so there's in fiscal drag like this so they're starting to pay higher levels of income tax very early. And then of course we saw yesterday the thing that
I was I was surprised by. I didn't see that coming, with freezing preshoals for student loans and the freezing of interest rates for student loans.
So you will see increasingly.
Young people hitting this level where their marginal rate of income tax at fifty one percent, really remarkably early. And this seems to me to be one of the not particularly discussed problems in this budget.
Well, this is the the thrust of if you do a smagas board rather than be brave and do and do the big income tax rise on.
Everybody that you then end up hitting.
I mean, presumably that was done to scrimp back some cow work lard wire to get the numbers swab up in that year onwards, and so to actually, you know, I think that you know the risk of this unraveling. I mean we're here less than twenty four hours later is extremely high that this unravels. Don't forget that just because she made the statement doesn't mean it gets through through. You have to vote on each tax measure. Then there's a second reading. I mean this there is you know,
the whole finance bill that goes through. Quite possible that if one of these becomes a totemic issue, that maybe it is something on that maybe it is something for young people that there's a big fuss about that various MPs aren't happy with, and that this is the issue politically now because of what happened on the welfare bill. Because of now this budget's moving slightly to the left. That side of the party is a veto it can
it can it can push harder. So we're saying in other countries as well, look at France, other places where there's fragmentation politically.
And so and so.
Yes, it could, it could, it could unravel. And then we now know. What we do now know is her political capital is very low. It hasn't yet got lower as a result of what happened yesterday, but for it.
To go up your d to see the polls shift.
Okay, so she's done very well.
She's hung on to a position as one of the most unpopular chancellors in the history of the UK and it hasn't got much worse.
Yeah, yeah, that's right. But this is only going to get rid of the original sin.
If you like was that we we've had a government with a huge majority but no mandate for various of the things it's done, and they are never getting away from that because really their real mandate was just don't be the Tories. And then actually some of the things they're doing are actually some previous government did and then that's.
Not getting it going well with anyone. And so the only way you end up resolving they'll switch leader.
That might give them a bit more romandic because that person will have some slightly different polished platform, but that still won't gather. That's not what every labor voter voted for.
Yeah. Sorry, seven No, I was just going to put back a little bit on hell.
I mean, I think it's maybe that's the parlor game that we should be playing, is what you've identified.
Marin.
I think the student the freezing of those threshold for student loads is actually one of the worst things that was done as sort of on the sly, But I also think it's one of the least likely things that's going to get voted down because all the evidence talk about, what the visible evidence for, all the evidence for is that you can really squeeze students for a very long time remember how long the fees stayed exactly the same, and you had the university sector students facing hard, worse
and worse services, and there's been no pressure to change it. So I think that's it should be one of the ones the most content students.
You can squeeze students, but can you freeze relatively high income thirty two year olds who suddenly look at their income and go fifty one percent?
And it comes from having been fixed in terms of the basic rate, because as you know, we actually have in terms of the average tax rate on average earners in the UK is much lower than certainly any other countries in Europe.
We're much more reliant on the high earners.
But we've just ended up with this really skewed system where people are some rather than having the basic rate be higher for everybody. We're hitting these very high marginal thresholds.
Yeah, and maybe they will leave, maybe they won't.
We'll find out in a few years.
When we.
Okay, so let's talk about the thing that I just think everyone would like us to talk about, the mansion tax. We're talking about things that might not make it. So this is a tax that will take years to figure out. Quite a long time to implement, will be relentlessly challenged. Do any of you think that we will ever actually see a mansion tax on houses supposedly worth over two million?
I do froll the point actually of me saying over all this labor MPs something manravel. I would think it's broadly extremely popular with labor MPs to do something on this, even if it's not very well designed, which does appear to be one of the key criticisms. So actually that I would put on the could get pasted absolutely easily.
Are you talking about in the mechanics? Is it logistically possible?
Is anyone ever actually going to pay an extra tax on their house that may or may not be worth two million pounds?
I think so, John, I mean, I guess the problem is that the logistics are quite see it is because you've got it, You've got a guess at the valuation, and the tax itself reduces the value of the house. And then the top of that I've already heard conn appracially saying, is it's split in your hosts and in two different homes each one.
I've already had two or three of those conversations literally yesterday off the basement, having got rid of themmultiple dwelling tax relief.
Everybody's put their houses back together again and put.
Them off atastic.
Yeah, we're moving into a new age of tax dodging, bign any flights.
Basically that sort of thing solve.
The granny clap problem. I think we'll have an election before then. By the way, I do like that that's the commission. They don't make it because there was an election before it happened.
Obviously, I'm sure we all think that council tax should be reformed and that it's a completely use tax at this point. And I guess if I was trying really hard to be somewhat sort of quick sostic about this, I would say they have now Remember we had even the first attempt ed Milliband's attempt to have a mansion
tax was the kind of first effort. Now they've actually managed to break the first barricade in terms of saying, okay, we're going to have this high level You're quite right, theren it's going to have lots of technical issues, but there is now an opening if you say, well, okay, if we're going to revalue some of the houses.
There's just the.
Tiniest possibility that the mess that this causes, the clear need for councils to have a better basis for funding, may coincide into having some kind of cross party effort.
And you know who could be the person who would do it be Nigel for.
Us, because he has twelve councils now who are all realizing that council tax is completely useless and actually they have a stake in reforming it in lots of different councils across the country. And if he's listening, I would say that would be a really good thing for him to show that they were a serious party that wants to do serious things to help local and central government. When to do something really complicated, I think it's really
likely to happen. Okay, interesting pertect a positive almost a positive trying to think that, thank you for happening, and.
John, let's talk about isis yes? Right?
So you and I've talked a lot about how we don't approve of the twenty thousand pound allowance for tax iceis and this makes no sense and that's too much cash to have if you're rolling it up every zerashizers it's too much. Have you with docs and shares isis, and I think we were hoping and suddenly I was hoping that the cashized will be reduced and the element it was reduced by would be funneled into U k Rriston stocks, and that didn't happen.
No, So it's like SINS twenty's still twenty thousand pounds, and I know it's people get quite confused about this. So from April twenty twenty seven, the ISA allowance will still be twenty thousand pounds, but rather than being able to stick it all in cash, you'll only be able to stick twelve thousand in cash.
Unless you're an old persson, unless you're over.
Sixty five, which is the other thing that we've made it. I mean, it's almost like they can't do anything, just adding a little quirk. And again, I mean I wouln't write about it, but it comes back to that idea that you can't have any losers, and it's like, you know, why are we leaving the three over sixty five? I mean, there's people under twenty who want to be saving cash for a property deposit and they don't need that to
be in shares. That's one of the few times when I would say no, you know you need this soon, so you cannot stick it in something with a long risk horizon. But parking that. The only thing I will say is it's at least it's a signal, you know, it's a very again, it's kind of limp.
Is a bit like the three year business.
Yeah. And the other thing is people keep talking about who oh yeah, but I can put my money in a money market fund and said, well, that's not the point. To get to the point where you know there's a money market fund into which you can put cash, you need to have grappled to be getting an investment platform
and going into their stocks and shares. So that's one thing why I would say that that's not a kind of a reasonable objection to it, because we're actually just trying to get people to engage with investing, which a lot of people in this country currently don't.
Do you know why that this has happened with the LIMP measures. It's government by committee, it's a group of it's you know, treasure civil servants, bad others sitting around a table saying okay, right, we're going to definitely do this measure. I know, but hang on, what about this interest? Okay, Well, we'll give them a little bit of it, I know, but what about that long? Okay, well can we hand them back bits this way?
Oh no, hang on. That's and that's what's going on, which is why it's leak.
Are you saying I'm being on Trea by blaming Martin Lewis for that?
It's interesting, yeah, isn't it?
Because one of the big one of the groups that pushed back where the building society is you know, if you don't go to the guys, the mortgage rates will go up. So you definitely can't do that, and that's one of the reasons why we ended up with this measure manage.
Yeah, and you get the interest group depending how good their lobbying is. And now I thought that was quite a smart angle to take because when you're lobbying, you then need to go for well, what what is really going to worry or upset this government? Oh well, they're quite obsessed about mortgage mortgages and mortgage costs because well, because you know, that was the story for rich Reeves's mind, you know, truss led to higher mortgage rates which led
to her losing her job. Yeah, I don't want to do my job, so don't do that.
And the one thing we.
Haven't talked about is salary sacrifice and how John isn't going to be able to buy the new bicycle they wanted.
Oh I didn't supoot that gone and everyone thought it was going to go.
Did it go? I think so she didn't. She didn't check. I assumed that.
I thought it was just pension wrong. I haven't looked at the absolute microdatail thought.
It was okay, you can have the bike up.
Can not tell you know, the salary sacrificing. The thing I've been most interesting is the fact is not coming in until April twenty twenty nine. And part of that I'm wondering as if because by even just by signaling she's going to do it, everyone who was using it is going to have to go back and have a chat with her employer. Other employer is going to have to have a chat with her staff and explain about
how this is going to affect their overall compensation. And so I'm wondering if it's one of those things that she's kind of thinking, well, this is just going to unravel itself, rather than be something that we need to legislate for aggressively I don't know, but it kind of feels like, I mean, because you're going to start talking about it now because it is complicated, very complicated, you know.
I think that's the length of time is actually I think they were told that it's just because employers were actually going to have to rework a lot of their contracts and they all systems for their payments and so I think or the internal approach to company pensions all of that was going to have to change. So I think she was told, you cannot rush this, you can ask too hard, but.
It should be said.
You know, it's way more money, ten times more money than you're going to get from the mansion tax.
That's just something that will just probably.
Note and something which which doesn't mean much too many people initially. They'll only find out later howlets is going to cost them.
No questions from the audience, given the dependence of this country or the income tax on high net worth and super high networths, has this budget done anything to deter people from who are considering leaving but yet haven't from leaving, you know, in terms of capital incentives for their investment to stay.
Is there is there any reason given by this budget stay in the UK.
Is the question, John, what do you think?
I mean, I don't think so.
If you were already saying they're doing it, then I mean, there isn't anything. You know, if if you can see that eating on the wall, you know it's going to go left before it goes right again.
For one of the words, it's going to go.
Big tax before it goes lower tax again. And so no, pretty straightforward, I don't think so.
No headshake from Stephan.
I mean there have been some pressure, there have been some question marks whether whether you could unpick some of the most damaging changes from the removal of the non dom but she's obviously not listened to those.
So yes, I inheritance tax is the big thing. It's like people do not want to give forty percent of the global assist to the UK government just because they stayed here for ten years. I mean, what's his name likes me? Mittau just left and that's why. That's exactly why.
Yeah, so that would be a very straightforward fix. But no, it hasn't happened. So I think that that'll be a no. That'll be a no.
Can we have back here, white shirt? Please?
Thank you?
I'm fraid all these questions are depressingly easy to answer.
That's great as a London parent who is trying to provide a bedroom for my three children and has just purchased a two million pound house to do that, they still don't have a bedroom because I've got two lodgers to pay the bills. Am I being punished for not having a vasectomy? And is there a ify name that you can give to this tax for my situation? Is it the London family tax or the vasectomy tax or you know what these books?
Anyone've got a snappy name for the having too many children in central London and not being on welfare tax?
I'm glad my legs are already crossed.
Again.
I've read that one was depressingly easy to answer as well, and I'm sorry. Maybe you should have bought a tuber house or moved out of London, or personally I would just give up your job at this point, Peter.
Here in front, I just want to be go onder John sir, because this does feel awfully like nineteen seventy to me what I mentioned in the panels. Do is this ninety seventy four or is it ninety seventy six? Or is it nine seventy nine where we actually get a revolt against the current services.
Oh interesting, nineteen seventy six, Helen, I think what was your nineteen seventy nine?
No, well, no, I'm thinking what was it year with the two elections nineteen seventy four? Yes, well, I mean it's nice to do the historical parallels, and actually it's good because we need to think that that when everyone gets frustrated with politics, it's quite useful to know there were other times when things were very fractious for very understandable reasons. But I think you know, history rhymes doesn't repeat,
does it. So the key thing now, of course, is dead to GDP at one hundred percent, So we're still actually sitting on a knife edge here of at any minute.
I know she's built in more headroom.
I mean the ABR sensitivity SOD I think it was a one percentage point moving guilt yields would clear that headroom, and last time I think it was point six, So you know, she has got more space. But we are in a greatly volatile world, Assel has admitted, and so the House of cards could fall apart politically.
And economically at any moment.
So I think actually it's not quite analogous to the seventies, not least because news travels so much faster, markets move everything so much quicker, quicker. Yeah, crypto markets ripened on Saturdays. And of that ninety seventy six.
There is something.
I mean, I certainly if you look at the dynamic in the Labor Party currently, there is something that feels
a bit reminiscent of that whole period. I don't know if i'd dated to whatever, but where you started to have you could imagine a leadership battle at some point we might disagree about when it is that that show that is the sort of establishment center, sort of Callahan type figure or Heally as it was then and the Michael foot You can imagine that kind of battle happening quite easily, actually, given the concerns around the support for Green Party.
And I did think yesterday's quite interesting.
I mean, we look, you know, obviously run econoised politics globally, we're used to thinking right and left are no longer the key fractures in politics.
It's much more complicated than that.
And that's all true, and we see that when we look at the opinion polls. But actually yesterday was opened up a very old fashioned space for the Conservative Party, which actually I think Kemy did quite a good job of walking into. You know that we're suddenly back to, at least between the two main parties are very old fashioned. Do you want to spend more on high tax and
welfare or do you want to shrink the state? And if she if the Conservatives kind of lean into that, that actually makes it quite difficult for a form I think.
Yeah, thank you, right, more questions that they've got one here, Given the number.
Of policies that were trailed in advance of the budget around the housing market, there were rumors about stamp duty, potential capital gains being applied to primary residents, an all new annual property tax, council tax pans being doubled at the higher end, and then on the big day it was a big nothing.
That was a surprise to me.
I wondered if and also surprised that there was very very little that happened in the housing market, given what a big impact the housing market is having one way or other almost everybody's lives.
Yeah, John, I mean I support that didn't surprise me. And as much as they're not going to want to do in that kind of makes housing like house prices go down any more than they already are in real terms. The mansion tax is obviously just a sop to the left. It may or may not happen. I mean, the real problem is obviously the innability to get you know, house's being built, and that is partly a function of the
fact that house prices aren't going up anymore. And probably the main focus if she wanted to help the housing market was more in pushing back against inflation so that interest rates can come down a bit. And to be fair, I mean, one thing it did happen yesterday as a result, like gult yield's going down, is that you've you've actually seen mortgage rates take ever so slightly lower over the
last two months. And I suspect that, I mean, that will continue for as long as you know, the boind market remains roughly kind of happy with what's going on, so we'll see. But yeah, no, it didn't surprise me because there's so much other stuff, and I think you could raise a lot of money from those in the market in a way that we wouldn't meet the voters just abail.
Also, I mean, a.
Lot of the rumors were obviously nonsensical.
I means, we're never never going to abolished down duty for example, It's never going to happen.
That was a very bizarre float.
I know we'd all love it, but it's never gonna get worst worse tax in the UK give will take and there's a lot of competition right with another one in the front here.
Yeah, if I could just come back to John's comments about cash ices and whether that's actually going to work, I would have thought that if Rachel Reaves wants ordinary working people to invest more in stocks and shares, and you mentioned that you've got to get your head around the money market sort of approach to do that, wouldn't it make more sense to do that in the safest long term way, which is to put more money in
their pensions through salary sacrifice. And yet that seems to be cut So I don't know if you have any insight into those two seem to work against each other, you know they do.
I mean, so there's absolutely doubts, a completely confused.
So it's not confused.
It's basically again it's a sock to the idea that they support investment, but everything that they're doing in the tax system pushes against that. You know, it's kind of you know, so the tax on savings interest properly, we could basically got NI imposed on earned income yesterday. You know, We've got lots of measures that the dividend taxes, that sort of thing.
And you know how.
The fact that pensions constantly have the rug pulled out from under them is another thing that militates against private sector pensions constantly. So I think nothing's absolutely right. I think that if we spent more time focusing rather than gimmicks, making the tax system simpler, but that's not going to happen because I think yesterday had something like I should Bloomberg. I did it up and it was like over eight hundred different measures unless I'm getting that long, but we
had a chat. I need to get my glades when'm leading these charts. But it's just just it was more, exactly, it was more than anyone for a very long take. And they have been getting more and more complicated as we go on, and again that's partly duck in difficult decisions, but just.
The direct response.
So I was just checking it in the thinks, not that I'm a Treasury spokesman but it's the cost of the salary sacrifice are predominantly I mean, was going up to eight billion, and a huge chunk of that was going to not just higher rate taxpayers, but the very higher end. You know, people who are putting their bonuses
in other things. They claim, judged on the current thing, at seventy four percent of basic rate taxpayers will be protected by the CAT because they're not saving, they're not putting more than two thousand pounds in.
So, just as a direct response.
That always it comes back to this thing people not seeming to realize that the fort basically tax pills, know, aren't basically tax pills for the entire lives. And it was like the number of people who hit forty and hit forty five during their life cycle is much greater than the current number. And so what we're actually doing is we're punching people in the face when they get to the point where they should be when they're at peak earnings and should also be at peak savings, because
that's kind of the big issue. You know, everyone probably hits kind of forty or fifty and starts to look at their pension, assuming they're not working for the public sector, and goes, oh my god, I'm going to be poor when I retire, and that's why you need that kind of thing when people are on forty or forty five percent. So it's not enough for the government tongue and say, oh yeah, but we're protecting this lot. We're getting to the stage where, I mean, the minimum a lot.
Of money did that say, is getting to people who were on maybe half a million.
It's just as sorry, but I think that there's too much of this again. It's that sort of zero some thinking as opposed to why don't we stop worrying about how this guy's got this and start thinking about, you know, why is the econ source and complexities?
All in these I mean, I'm partly saying Devil's advocate, but in these conversations we do tend to think of tax relief spending as great spending that is somehow very different from other forms of public spending. You're deciding to spend eight billion because you're foregoing that you could have spent it or something else you are spending. You're deciding to spend eight billion on people being able to do these pension savings.
Well, we all just remember that it is exactly I'm going to stop this one here. This is extent.
Extent to which how much easy you have an event and all that kind of thing. We'll come back to this, but we've got a very enthusiastic question answer at the back here.
Hi, good morning.
Thanks.
You are now selected as our new chancellor and you have one wish.
This is pre budget.
What would your one major policy be cut welfare spending?
Yeah, exactly what I was going to say, Just fine, in a way to cut welfare spending.
Or try and even do what she tried to do, which was reduce the rate of growth, which is what she was trying to on that.
John, Yes, it's a good question.
If I'm trying to thank you, Paul, I'll see then I mean something I've always been mainly attracted to as I can align the value tax.
And if you no, no, no, no, no, no, nor John.
Definitely I think you have to. I mean, well, it has to be welfare. Although do you think of this ships in particularly.
If there was outside wealth for one thing that I would really would have loved to see and it wouldn't have been hard and it would have sent a brilliant signal, would be the full abolition of the stamp duty on equity trading, and we've talked about it on the podcast.
Over and over and over.
It's not a big money thing five billion here or there, and it's a huge signal to the rest of the world that we were taking our equity market seriously. That would have been I think that the one and so easy, so easy, so quick, such a signal here in the front.
You've had your hand up a long time.
Thank you, given that physical drag seems to be a very good way of raising revenues without letting people know you're raising revenues. How long, particularly given what's happening in the States with do we have Kevin has it coming in as a fetchair? How long until we have QE back in the UK?
Ooh?
Definitely, really long time, I think actually, I mean that's one of the things. That's one of the missed opportunities, right, I mean, inflation has narrowed her room for maneuver in some ways. And obviously she was sort of punished a bit for doing things last year that increased inflation because
then that slowed interest rate cuts. But one of the advantages we have in the current environment from the higher inflation is that the Bank of England has plenty of room to cut and if you look at the revisions that were made in the next few years growth, I mean, one of the reasons why we haven't got into the fact that she wasn't faced with a hole to fill thanks to the Office of Budget Responsibility, because their reset, their lowering of real growth was actually largely offset by
them deciding actually inflation and wages were going to be higher over the next few years, and that they hadn't fully factored that in in their nominal GDP cash GDP estimates. So without getting too much into the sausage making, I think, yeah, I don't think Q. Well, we can see in a few years time, but I don't think q's on the horizon.
Helen Quey coming.
I think it could come back.
Sorry not q E, but as it purchases could come back if we do get to a dysfunctional point in the bottom market, which I do still yet to see there being a risk of purely because huge amounts of debt, as we know throughout the world, huge amounts of issuance.
Inflation broadly speaking is higher now than it was in the sort of fifteen year decade before fifty a decade, fifty a period before and so at some stage, you know there's going to be a serious case of indigestion, and then they may well need to sort of step in with bomb purchases just to stabilize things.
Okay, not qui all.
Right, there's a sort of maybe for you more questions on the aisle here that's close by.
Thank you, thanks, Yeah, it's just a quick question on unemployment. So unemployment rate's been ticking up the last two years, even a little bit before the last ge, from like four percent to five percent. Given John mentioning the minimum wage going up and everyone mentioning the fiscal drag, do you think this budget is going to sustain keep ticking up an unemployment rate, will perhaps even accelerate it.
Anyone wants to say anything beyond yes, Well, don't you think that there's We've not been much discussion of recession risk there, but a lot of stuff talk about procesession in the US.
I mean, I know, were sort of bumbling along at pretty much zero a bit above it.
OBR said, this doesn't really change the growth outlook that much this budget, but you know what if there is some sort of shock, could be external could be here.
What if on the salary sacrifice.
Element, I think that's going to be a hit to employers. The cost for them will be going up, you know, the minimum wage as you mentioned. So, God, I now sound really gloomy. I didn't mean to sound. I mean, obviously we be going to a session. We'll have loads of bagging and rate cuts, so that will that will help.
But we have in the new workers riots, et cetera.
So there's a lot going on.
Of course that doesn't necessarily move in the direction of making people think themselves. Got I'll go and employ another ten people next week exactly.
Yeah, I think it's a risk.
I mean, I think you've obviously one of the big factors that's been supporting employment has been immigration, and if that we're now on, so that's something which is kind of offsetting some of this.
But you know, we get back to the welfare reform thing. It's not the unemployment rate that matters. It's the huge number of people in activity rate active inactive.
Okay, because someone please ask a question which we can give an upbeat answer. Can we go in the front here, Well, whatever the question is, we're going to have an upbeat answer.
Okay, I'm not sure if this makes sense of them.
I wrote it down, how much is fiscal drag affecting how much people spend, especially since households have a high like marg margin oppropunity to consume. Well, I mean, any any reduction in your income is going to affect how you spend, right.
Yeah, I guess it's because it's kind of in the future that people maybe don't think about it in the same way. Because actually, going back to your point the Henry the point about fiscal drag, I think people are aware of it, but I do not think that they fully understand what it means in kind of number terms, and so I don't think that people will sit there and think, in five years time, my income is going to be lower by this amount, therefore I'm not going
to spend today. My own view tends to be that if people have got money in their pockets, they spend it. But I'm not an economist, and I know the economists have slightly different views of expectations. I think people are a lot more short term perhaps than economists.
And I'll say this is an interesting one because it means people need to have an understanding of how inflation works.
To understand how physical drag works.
It's visible either.
It's like inflation. You go to the supermarket every week and that's why the Bank of England people care about food place inflation because when the place of food goes up, people do notice it and they will change their behavior. Beyond that, some of this longer is kind of hard to do, especially if your wages have grown up as well and you can't quit work. Got how much more you get and compare to how much more your life course than you It was a good question.
Sorry, just on the comparison, because there was a lot of discussion around whether they would raise the basic rate of tax and then offset that with a reduction in the National insurance and that would have actually been slightly better for lower income All sort of basic rate taxpayers actually people in the lower brackets and they tend to spend more. So on your point, I think this is going to have a bigger impact on spending potentially than if they've gone that route.
I apology to those you didn't get your question asked, Well, we'll be around for a few minutes afterwards, so do ask them then. And all there is to say, thank you, So much for joining us today.
Hugely appreciated it and thank you you wonderful gust.
Thanks for listening to the special post budget episode of Merrin Talks Money. If you like us show, rate, review, and subscribe wherever you listen to podcasts also be shored follow me and John on ex or Twitter at marinas w and John Underscore Stepic. This episode was produced by Summersadi and Moses and Dunn. Special thanks, of course to Stephanie Flanders, Helen Thomas, Vic Wakely and all those at Bloomberg who helped with this production. Questions and comments on
this show and all our shows are always welcome. Our show email is Merrior Money at Bloomberg dot net