“I think it's worth briefly saying how honourable this is. Long-term investment doesn't pay off immediately. Its benefits take years to become known - “
This is why I’ll always respect Paul Keating and why I love the fact he pushed through superannuation as a key policy
Back in the early 90s Australian Politics realised that when the Baby Boomers retired we were going to have a real fiscal problem, even though that was all 30-50 years in the future, no way that Keating would still be PM, he spent real political capital setting up our Superannuation system (10% of our income put into forced savings that you can’t access until you retire) in the face of real political opposition, he did this because it was good for the country, the political beneficiaries being the Treasurers decades in the future who wouldn’t have to find billions for pensions, also the country having a massive pot of savings to use for investment. He would not politically benefit at all, in fact he faced real costs, but it solved a problem, I still don’t know whether I agree it was the right solution but that’s not important, what matters is we had a leader who set out to solve a problem decades in the future rather than worrying about the headline he would get in the Sunday papers that week
The Labour party has got to hold it's nerve as well. Powerful lobby groups, Pensioners and Farming to name but two are after Starmer. The party is going to get hammered in next year's local elections, mid-term blues are here early, MPs have got to stay the course and not start briefing against the Government. Reeves has done the right thing but losing councillors and windy MPs just want to keep their jobs. I fear the worst, but I'm a gambler at heart and she went for it, well done Ms Reeves.
The bond market reaction is being misrepresented in headlines. To understand what’s changing you need to look at the yields on both short dated and longer dated bonds. Short dated bonds are driven almost entirely by interest rate expectations as bond holders will get their money back relatively soon so have little concern for the long term solvency of the state. Long dated bonds are more influenced by debt levels on top of interest rate expectations.
The biggest moves have been in short dated bonds which suggests the market believes the budget has changed the outlook for rates cuts, prematurely in my opinion.
If you were looking for the positives you could say the market believes the extra spending will boost growth and there will be less need for rate cuts, but who knows what it believes. It’s just forecasting 3 rate cuts for next year now instead of 5. Give it a week and that will change again.
Long end bond yields have risen a bit too, the extra borrowing will require a bit of a premium to convince the market to lend the additional billions, but this is far from a negative reaction.
I personally believe the chancellor overdid the doom and gloom, the market was expecting more pain and was looking forward to the extra rate cuts the BoE would be able to do in the short term to offset that. Fiscal and monetary policy are connected.
Thanks Ian. The general quality of coverage of the budget in the media has been pretty poor - all very hysterical. Wheeling out the IFS as prophets whose every stare into the crystal ball is to be hung on is getting annoying….As the Tories to scream about broken promises is of course laughable. At its heart it’s a Labour budget and the adults are back in the room. Will it work - hope so. Happy to wait and see and let them get on with it with a whole lot less drama for a bit.
Lot of respect for IFS but they have hobby horses too - and they're also economists not politicians. TV coverage of politics is generally pretty dire (for every Mishal Husain there seem to be umpteen Laura Ks and Rigbys) and print is much worse. This is a marathon not a sprint. Labour needs to hold its nerve.
Thanks Ian. I thought it was a sensible budget aiming for longer term benefits not short term drama. She's a smart woman is Rachel Reeves. Shame about the bus fair thing, because even though the amounts will be trivial, it's hitting the poorest again and the pensioners now have 2 sticks to beat her with.
I'm keen to see where we are as a country in 2-4 years time. I'm hoping calm will be normal and social needs will be better met. Most of all I want to forget the horrors of the past 14 years. But saying something to that effect yesterday got be branded (on X) as economically illiterate! What a cess pit that place is now.
I haven't actually worked it out yet, but I think my family might even benefit in that we own our company but there are only 2 of us working for it and we pay a mix of salary and dividend so we might find we no longer need to pay ENIC. That would be nice, because as it stands I can't claim any state pension until I'm 67 and when it arrives it won't be enough.
Scary times ahead. I loved life in my 30's and 40's. Never worried about the future. Now I worry about the future every bloody day!
“For the record, I'm hoping it's Kemi Badenoch, because she genuinely believes in her horrible views. Robert Jenrick does not genuinely believe in his horrible views and therefore has no moral floor to his behaviour “
I swear to God this is almost word for word the answer I gave to a mate yesterday on that question
Things are so fiscally dire, whatever she did was always going to be a gamble if Labour really wants to "fix the foundations" (note the emphasis on the forecasts into the 2030s). However, given the reaction, she might as well have taken the hit and raised more tax - most notably raising fuel duty which in turn and in part could have avoided the trivial sum for bus fare support.
Ive only just caught up on the bond market reaction and my response is they are gittery cowards and the wealthy don't like it up them quite frankly as it appears the rich are pissed off, big business is not happy about paying more employer NI which anyone who works in my profession knows is only an issue if the core of your profits goes to shareholders and not to support workers, so if the uk financial market is worried that large private firms and corporations use the increase in employer NI to punish employees with low wages and redundancy it says a lot about the lack of ethics of the most wealthy businesses owners in this country who have been allowed to hoard wealth under the Tories for over a decade, the right wing media are spinning a lie that it will punish small business but the FT states conversely most
SME's have reportedly responded positively thinking they would have faired worse. This was a huge budget and a radical one led by a woman which is huge in itself and it gave much more than I thought given the bleak economic outlook and I give
Reeves and the Labour bench absolute kudos for their bravery. I'm delighted to see
more money for breakfast clubs for children, schools in general, and SEN support which is vital, more money for carers and the slightly unfashionable but vital money for depleted departments like the MOJ as well as the largest cash injection for the national government's especially Wales. Labour will keep my respect if they hold their nerve now
against a lobby of angry wealthy farmers and business owners who don't like the screws being finally turned on them. There isn't much for the middle class which I am privileged to be I'm but I am fine with that if it means more money in the NHS, public services and the judicial system benefits us all. We have to rebuild and those with the
biggest shoulders should front the bill so hold your nerve Labour. Nevertheless at some point this government has to address the biggest reason the UK economy has
stalled and that is Brexit and until it moves towards restablishing trade links and/or returning to the single market any attempt to kick start this country and gain growth will fall flat. That sounds like my kind of album from the great Jack White I've somehow missed this release so thanks for the recommendation and I'll give that a blast after I've stopped obsessing over the new 16 years in the making Cure album - perfectly melancholic for the season. I also fully recommend Marvels Agatha all Along on Disney Plus as for a character who doesn't even have her own stand alone comic (that im aware of )Agatha Harkness played by the brilliant Hahn is not just a spinoff from Wandavision but one hell of a beautifully filmed series with a stellar cast / covern - it's been a spooky treat for the season of the witch.
If you haven’t already, check out _It Might Get Loud_ on the YT. Even if Jimmy Page and The Edge aren’t for you, Jack White casually making a guitar out of a coke bottle and a rusty nail is a sight to see.
“I think it's worth briefly saying how honourable this is. Long-term investment doesn't pay off immediately. Its benefits take years to become known - “
This is why I’ll always respect Paul Keating and why I love the fact he pushed through superannuation as a key policy
Back in the early 90s Australian Politics realised that when the Baby Boomers retired we were going to have a real fiscal problem, even though that was all 30-50 years in the future, no way that Keating would still be PM, he spent real political capital setting up our Superannuation system (10% of our income put into forced savings that you can’t access until you retire) in the face of real political opposition, he did this because it was good for the country, the political beneficiaries being the Treasurers decades in the future who wouldn’t have to find billions for pensions, also the country having a massive pot of savings to use for investment. He would not politically benefit at all, in fact he faced real costs, but it solved a problem, I still don’t know whether I agree it was the right solution but that’s not important, what matters is we had a leader who set out to solve a problem decades in the future rather than worrying about the headline he would get in the Sunday papers that week
The Labour party has got to hold it's nerve as well. Powerful lobby groups, Pensioners and Farming to name but two are after Starmer. The party is going to get hammered in next year's local elections, mid-term blues are here early, MPs have got to stay the course and not start briefing against the Government. Reeves has done the right thing but losing councillors and windy MPs just want to keep their jobs. I fear the worst, but I'm a gambler at heart and she went for it, well done Ms Reeves.
The bond market reaction is being misrepresented in headlines. To understand what’s changing you need to look at the yields on both short dated and longer dated bonds. Short dated bonds are driven almost entirely by interest rate expectations as bond holders will get their money back relatively soon so have little concern for the long term solvency of the state. Long dated bonds are more influenced by debt levels on top of interest rate expectations.
The biggest moves have been in short dated bonds which suggests the market believes the budget has changed the outlook for rates cuts, prematurely in my opinion.
If you were looking for the positives you could say the market believes the extra spending will boost growth and there will be less need for rate cuts, but who knows what it believes. It’s just forecasting 3 rate cuts for next year now instead of 5. Give it a week and that will change again.
Long end bond yields have risen a bit too, the extra borrowing will require a bit of a premium to convince the market to lend the additional billions, but this is far from a negative reaction.
I personally believe the chancellor overdid the doom and gloom, the market was expecting more pain and was looking forward to the extra rate cuts the BoE would be able to do in the short term to offset that. Fiscal and monetary policy are connected.
Thanks Ian. The general quality of coverage of the budget in the media has been pretty poor - all very hysterical. Wheeling out the IFS as prophets whose every stare into the crystal ball is to be hung on is getting annoying….As the Tories to scream about broken promises is of course laughable. At its heart it’s a Labour budget and the adults are back in the room. Will it work - hope so. Happy to wait and see and let them get on with it with a whole lot less drama for a bit.
Lot of respect for IFS but they have hobby horses too - and they're also economists not politicians. TV coverage of politics is generally pretty dire (for every Mishal Husain there seem to be umpteen Laura Ks and Rigbys) and print is much worse. This is a marathon not a sprint. Labour needs to hold its nerve.
Thanks Ian. I thought it was a sensible budget aiming for longer term benefits not short term drama. She's a smart woman is Rachel Reeves. Shame about the bus fair thing, because even though the amounts will be trivial, it's hitting the poorest again and the pensioners now have 2 sticks to beat her with.
I'm keen to see where we are as a country in 2-4 years time. I'm hoping calm will be normal and social needs will be better met. Most of all I want to forget the horrors of the past 14 years. But saying something to that effect yesterday got be branded (on X) as economically illiterate! What a cess pit that place is now.
I haven't actually worked it out yet, but I think my family might even benefit in that we own our company but there are only 2 of us working for it and we pay a mix of salary and dividend so we might find we no longer need to pay ENIC. That would be nice, because as it stands I can't claim any state pension until I'm 67 and when it arrives it won't be enough.
Scary times ahead. I loved life in my 30's and 40's. Never worried about the future. Now I worry about the future every bloody day!
late 1990s to 2010 were such good years and I didn't realise at the time that this wouldn't last
“For the record, I'm hoping it's Kemi Badenoch, because she genuinely believes in her horrible views. Robert Jenrick does not genuinely believe in his horrible views and therefore has no moral floor to his behaviour “
I swear to God this is almost word for word the answer I gave to a mate yesterday on that question
Thank you for this, I always appreciate your clear sighted takes.
Things are so fiscally dire, whatever she did was always going to be a gamble if Labour really wants to "fix the foundations" (note the emphasis on the forecasts into the 2030s). However, given the reaction, she might as well have taken the hit and raised more tax - most notably raising fuel duty which in turn and in part could have avoided the trivial sum for bus fare support.
Ive only just caught up on the bond market reaction and my response is they are gittery cowards and the wealthy don't like it up them quite frankly as it appears the rich are pissed off, big business is not happy about paying more employer NI which anyone who works in my profession knows is only an issue if the core of your profits goes to shareholders and not to support workers, so if the uk financial market is worried that large private firms and corporations use the increase in employer NI to punish employees with low wages and redundancy it says a lot about the lack of ethics of the most wealthy businesses owners in this country who have been allowed to hoard wealth under the Tories for over a decade, the right wing media are spinning a lie that it will punish small business but the FT states conversely most
SME's have reportedly responded positively thinking they would have faired worse. This was a huge budget and a radical one led by a woman which is huge in itself and it gave much more than I thought given the bleak economic outlook and I give
Reeves and the Labour bench absolute kudos for their bravery. I'm delighted to see
more money for breakfast clubs for children, schools in general, and SEN support which is vital, more money for carers and the slightly unfashionable but vital money for depleted departments like the MOJ as well as the largest cash injection for the national government's especially Wales. Labour will keep my respect if they hold their nerve now
against a lobby of angry wealthy farmers and business owners who don't like the screws being finally turned on them. There isn't much for the middle class which I am privileged to be I'm but I am fine with that if it means more money in the NHS, public services and the judicial system benefits us all. We have to rebuild and those with the
biggest shoulders should front the bill so hold your nerve Labour. Nevertheless at some point this government has to address the biggest reason the UK economy has
stalled and that is Brexit and until it moves towards restablishing trade links and/or returning to the single market any attempt to kick start this country and gain growth will fall flat. That sounds like my kind of album from the great Jack White I've somehow missed this release so thanks for the recommendation and I'll give that a blast after I've stopped obsessing over the new 16 years in the making Cure album - perfectly melancholic for the season. I also fully recommend Marvels Agatha all Along on Disney Plus as for a character who doesn't even have her own stand alone comic (that im aware of )Agatha Harkness played by the brilliant Hahn is not just a spinoff from Wandavision but one hell of a beautifully filmed series with a stellar cast / covern - it's been a spooky treat for the season of the witch.
Could not agree more. 🎸❤️
If you haven’t already, check out _It Might Get Loud_ on the YT. Even if Jimmy Page and The Edge aren’t for you, Jack White casually making a guitar out of a coke bottle and a rusty nail is a sight to see.