Weekend reading: Britain gets the Budget it deserves

What caught my eye this week.

Now it seems like we were dreaming. The huge tax cuts. The dash for growth. The chancellor telling Laura there was more to come.

That strange Push-Me-Pull-You Mini Budget that blew up the gilt market, threatened pensions and banks, and sank yet another Tory prime minister.

Was it really only two months ago? Have we all done a Bobby Ewing?

Because if you happened to emerge from an all-consuming illness on a hospital ward this week to tune into the latest chancellor’s Autumn Statement, there wasn’t a whiff of any of it now.

Instead of tax cuts, the UK faces the highest tax burden (at just over 37% of GDP) since World War 2.

And about the only thing forecast to grow is the length of a recession that’s already underway.

Tax and don’t spend

Anyone who is interested will have heard the main points from Jeremy Hunt’s Statement by now.

More people paying the highest-rate taxes on more of their money. Frozen income tax thresholds that will mean all of us will pay a higher share of our income as tax, even as our wages are inflated by inflation. An axe taken to capital gains and dividend tax allowances. The pension triple-lock held.

Just in case you did sleep through it though, the main points from a personal finance perspective:

The Autumn Statement: item by item – This Is Money
Autumn Statement: What it means for your money [Search result]FT
How the Autumn Statement will affect various households – Guardian
What you need to know about the Autumn Statement [Podcast]Which

There was also the usual hodgepodge of measures to do with business, regulation, and investment. They amount to fiddling at the edges.

The result makes grim reading. Real incomes per person are forecast to fall 7% over the next two years – the biggest decline on record.

And then just when we’re dusting ourselves down, Hunt’s planned spending cuts will start to starve State spending.

Those cuts don’t kick in until 2024, either to give the Conservatives a chance in the General Election that year, or else because if they were front-loaded along with the tax cuts – and in the midst of a recession – then the economy might really fall off a cliff.

Probably a bit of both.

More pain, no gain

The only good news is the market is calm. Gilt yields have come down since Hunt took the reigns, and fixed-rate mortgage rates are following.

And I can entirely understand the logic of this Autumn Statement, especially in the light of what we went through under Liz Truss and Kwasi Kwarteng.

They showed the UK cannot afford to be reckless when it comes to market confidence. We’ve borrowed far too much for that, with our economy too dependent on the kindness of strangers.

Yet as I pointed out at the time, Truss and Kwarteng also correctly identified the UK economy is going nowhere as things stand, with stagnant real wages, no productivity gains, and barely-there economic growth.

Even with Hunt’s fiscal retrenchment – worth about £50bn, or about 2% of GDP – the Government’s payments on debt interest are still forecast to be £100bn a year by the end of the forecast period.

That’s more than we spend on any single public service except the NHS, says the IFS.

It adds that by the end of the period we’ll still be borrowing about £69bn a year.

Remember, that is additional debt, on top of a tally already sat at c. £2,500 billion.

If this is Austerity 2.0 then it’s worse than the original. At least George Osborne told us his cuts would be worth it to move the UK back into balance.

It all adds up

Indeed it’s hard to find any reasons for optimism about Britain for the next few years. Hunt is like a 19th Century doctor who promises he can save your life, then reveals the bone saw he’s going to use to cut off your leg.

Yet does he have any choice?

If the energy crisis hadn’t blown up and inflation hadn’t skyrocketed then things wouldn’t be so bleak. Obviously the vast spending during Covid to pay people to stay at home didn’t help either.

And if Truss and Kwarteng hadn’t frightened the horses then we wouldn’t now need to be trying to gee them back through flapping stable doors.

Oh, and there’s obviously the small matter of Brexit permanently impairing our economy. That hit is likely worth about £40bn a year to state funding – around the size of the hole Hunt is aiming to fill.

At least we voted for that one.

Things can only get better worse

Some readers hate gloomy posts. You come to an investing blog to be inspired, not dispirited. I can understand that.

But the best I can suggest is you continue to read us and pay even more attention to your finances. If anything, it’s more crucial than ever. Look after the pennies, and invest for the future because on the face of it the economy isn’t going to make it easy for you.

The only inspirational call here must be to control what you can, not be knocked off-course by what you can’t.

Who knows? Maybe Putin will look at his kids one morning and decide to pull out of Ukraine. That would be helpful.

But as things stand, there’s no getting around it. Britain is an impaired asset. It is run by old managers who triple-lock their incomes and shout at the telly while sat in properties inflated by vast windfall gains and collectively voting to make things worse for their grandchildren.

The country thinks it is richer than it is, confused by the reality of a successful top-tier (which includes the average Monevator reader, to be clear) and ancient visions of Empire.

In 2016 it decided to make things even worse on the back of a hissy fit. There was no upside.

And I’m truly sorry, but now we have to suck it up.

Enjoy the weekend regardless.

From Monevator

Nominee accounts: what you need to know – Monevator

If 2022 taught you never to own bonds, you learned the wrong lesson  – Monevator

From the archive-ator: The cautionary tale – Monevator


Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.

House prices expected to fall for the next two years – BBC

UK economy “permanently damaged by Brexit” says ex-BOE policymaker – Yahoo Finance

Hunt acknowledges Brexit effect on UK trade but says barriers can be lifted [Search result]FT

London loses crown of Europe’s biggest stock market to Paris – Bloomberg via Yahoo

Fans paid to attend World Cup by Qatar have daily allowance cancelled – Guardian

The record proportion of people who pay higher-rate income tax will rise further  – IFS

Products and services

Fixed mortgage rates are falling… – This Is Money

…and unsurprisingly fixed-rate savings rates might have peaked, too – This Is Money

ASDA launches new credit card that can help you boost your credit score – Which

Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor

Beware removal firms that offer unusually low prices – Guardian

Premium Bond conspiracy theories investigated – This Is Money

Five things you need to know about how to store and find a will – Which

Urban loft-style homes for sale, in pictures – Guardian

Get a job mini-special

Proof of work – Of Dollars and Data

“Nothing good happens after midnight”MoonTower Weekly

Comment and opinion

Invest like a pigeon – Fortunes & Frictions

Sneaking a peek at your battered portfolio – Humble Dollar

Feeling of wealth – Indeedably

Four steps to overcome your spending habit – Morningstar

How people have been hit by the rising cost of mortgages – Guardian

Investment bubbles and fraud have a lot in common – Behaviourial Investment

How to lose money, and cope with it – Impersonal Finances

Boring is beautiful in investing – A Wealth of Common Sense

Eugene Fama: a life in finance [Podcast]The Meb Faber Show

A kick in the cryptos

Glamour – The Reformed Broker

The casino and the genie – The Generalist

Magic Internet money… – Young Money

…versus taking a long-term view of Web3 – Fred Wilson

How did so much ‘smart money’ get tangled up in FTX? – Institutional Investor

Reasonable FOMO – Dror Poleg

Naughty corner: Active antics

Discounting belief – Not Normal

When to change your investment process – Validea

Mistakes have been Made [.com]The Motley Fool

It’s hard to get excited about investing in TrustpilotShareScope

What about digital infrastructure investment trusts? – Interactive Investor

Kindle book bargains

No Rules: Netflix and the Culture of Reinvention by Reed Hastings – £1.99 on Kindle

How Will You Measure Your Life? by Clayton Christensen – £0.99 on Kindle

Why the Germans Do it Better: Notes From a Grown-up Country by John Kampfner – £1.19 on Kindle

Your Next Five Moves: Master the Art of Business Strategy by Patrick Bet-David – £0.99 on Kindle

Getting things done mini-special

When procrastination turns into regret – Darius Foroux

Distractions – Spilled Coffee

Off our beat

I remember the bookstore – Longreads

Maybe Trump was right to want to ban TikTokVox

Festival of Brexit: less dismal than expected [I guess pics don’t do it justice]SLIS

Twitter ‘closes offices’ after Elon Musk’s loyalty oath sparks more resignations… – Guardian

…and these tech lay-offs teach us a lesson about the war for talent [Search result]FT

Using Airpods as hearing aids [Research]iScience [h/t Abnormal Returns]

And finally…

“The more wonderful the means of communication, the more trivial, tawdry, or depressing its contents seemed to be.”
– Arthur C. Clarke, 2001: A Space Odyssey

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The bill comes due for six years of bad stuff, plus the rest of the week’s good reads…
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