“You know the scene–very humdrum
Boredom–boredom—boredom”
As predicted the budget was a non-event, but that doesn’t have to be a bad thing.
The OBR described the economic situation as a “pretty grim picture”.
The reality is stark; any relief forthcoming from the chancellors’ budget are temporary. Households will continue to be squeezed as high oil prices caused by the Iran war further impact the energy price cap, which determines household bills, meaning yet more increases in January.
‘any relief forthcoming from the chancellors’ budget are temporary’
Chancellor Healey said the increase in inflation caused by Iran war is expected to cost the government £14bn more in interest costs
Looking forward, the OBR expect the budget deficit to shrink, company profits recovering, with households expected to move from saving C.£50bn in 2026 to borrowing a similar amount by 2031, when mortgage repayments are expected to reach 4.25% of household disposable income – the highest level since 2009. Growth is expected to rise from 1% in 2027 to 1.8% in 2029, while weak worker “bargaining power” allows firms to rebuild profit margins.
This story is repeated in many developed economies. The global economy is in a mess created by the axis of evil; Trump, Netanyahu and Putin. Until they stop, or someone stops them, the cost of living will continue to rise with governments powerless to offset it.
‘The global economy is in a mess created by the axis of evil; Trump, Netanyahu and Putin’
For anyone wanting excitement, I would refer them to Liz Truss, whose new book “Bank Job: A Short Book on How the Bank of England Broke the Bond Market and Brought Down the “Government,” was published this week.
Her 2022 mini-budget wasn’t a boring non-event, it was pure egomania; £45bn of unfunded tax cuts, that crashed the pound and Gilts. But, it wasn’t her fault, it was everyone else’s. We were all, including the BoE and the Treasury, shortsighted, failing to understand her genius
Selected highlights of the books reviews, include the Telegraph who gave it zero stars and called it “deranged”, whilst Truss’s own former trade minister, Conor Burns, called her “an international embarrassment with zero self-awareness”, and “financially illiterate”.
The current Tory leader, Kemi Badenoch, was her usual shouty self when she responded to the budget speech, proving the old saying about empty vessels.
Both parties of the right, Tory and Reform, think that there is still much fat to be found in reducing welfare spending, but that’s an old chestnut that has been unsuccessfully doing the rounds since Thatcher was first elected in 1979.
“an international embarrassment with zero self-awareness”, and “financially illiterate”
She might do better to reflect on the colossal act of self-harm known as Brexit and its impact on destroying growth and on the past squandering of North Sea oil.
If she wants radical, please see Biden’s Inflation Reduction Act and transition to clean and sustainable economy. This would create jobs, prosperity, and energy self-sufficiency, immunising us from the actions of the triumvirate forming the axis of evil.
Of course this would mean Kemi admitting she’s wrong: rule 1 she is never wrong, and rule 2, when she is refer to rule 1.
There is also the damage to “big oil” who, along with their lobbyists hold the right in the palm of their hand, and upsetting them would never do!
In his budget, the chancellor didn’t lack ambition, he lacks the funds and is constrained by previous statements of fiscal policy to deliver what is needed.
Perhaps, he was too timid with the banks; his increased levy realises just £1.5bn over 15 months, against the projected £11bn that a Thatcher-style levy on interest-free deposits could have yielded.
‘whilst 80% of homes get a £100 energy payment 1.4 million poor families miss out’
The Resolution Foundation pointed out that whilst 80% of homes get a £100 energy payment 1.4 million poor families miss out.
Aside from this short-term support to cushion consumers against soaring prices, Healey signalled a radical reform to the way energy bills are charged in the longer term – calling it “a new cost control framework, to drive down all aspects of energy bills.”
Elsewhere, it might be said that the chancellor was overly optimistic. Does he really believe he can find £11bn of cuts to “unprotected” budgets (those that aren’t defense, the NHS, schools or international aid) by 2031-32?
Can “reprioritising” other departments’ capital spending allow him to fund defense spending?
Equally, plans to devolve tax revenues without adequate redistribution risks giving the wealthiest places the most to spend, rather than giving the poorest the help they need.
Precisely what the government can deliver is largely out of their control. There appears to be no end in-sight to the squeeze on incomes being caused by Trump’s Iran follies. If anything, after his expected defeat in the midterms, and, with Netanyahu still PM whilst Israel tries to cobble together a government, it is likely the conflict will reignite.
There are signs of the government wanting to create a “social-democratic active state”: taxing rentiers, protecting vulnerable people and investing in prevention.
All we need now is funds!
“Spock pulled me through
As we went Warp Factor 2”
It shouldn’t come as a surprise to anyone that the budget was a something-and-nothing event. It was never going to do anything else.
As to why? It’s simple: we have no money.
Bond markets aren’t currently supportive of new debt, and high rates make it a bad time to borrow more.
The government manifesto pledge of tax increases paints them further into a corner.
Net result, no money to spend so we rearrange the furniture.
To all those people who decry the small attempts to ease the cost-of-living burden, I would say this: never blame anyone for trying!
The opposition did what the opposition does: denigrate things. Noticeably, Kemi was long on what she would do, but short on how we pay for it. Other than the tired old cuts to benefits for scrounging idlers and migrants.
There is also the looming menace of the axis of evil, which will no doubt continue to destabilise the world with its aggressive warmaking, leaving everyone else to count the cost.
My old saying: don’t worry about what you can’t change or influence!
Lyrically, we open with “Boredom” by The Buzzcocks, and end with “Where’s Captain Kirk?” by Spizzenergi in tribute to the late Patrick Stewart who lived long and prospered.
A good weekend to all
Philip.
@coldwarsteve
Philip Gilbert is a city-based corporate financier, and former investment banker.
Philip is a great believer in meritocracy, and in the belief that if you want something enough you can make it happen. These beliefs were formed in his formative years, of the late 1970s and 80s
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