What caught my eye this week.
I am not holding my breath for the Spring Budget on Wednesday. The current occupants of Downing Street may be intellectual giants versus the LEGO figures that preceded them. But low expectations can’t work miracles in the real world.
The UK economy is stagnant. The lunatic solution to our national woes has made things worse. The populace is still under the cosh from the cost of living squeeze at the low-end and a growing tax burden for the rest of us. I guess the richest are alright – with interest rates plateauing and markets bouncing back – but there’s a limit to how much a wealthy elite can pay for everyone else.
Some of this is cyclical. Things aren’t much better elsewhere, outside of the US. Perhaps the best thing chancellor Jeremy Hunt could do is sit on his hands and tell us to hang on in there. We’re too frazzled for more drama on the economic front. And I’d prefer they stopped fiddling with ISAs and pensions.
It seems I’m not alone in craving some stability. As Chris Giles wrote in the FT this week [search result] Hunt inherited political as well as fiscal handcuffs from his bungling predecessors:
The irony is that Truss’s most concrete economic legacy is to give economic radicalism a bad name.
Languishing with just 1% average annual economic growth since 2007 compared with 2.5% in the previous 17 years, the economy is crying out for reform, starting with this Budget.
[But…]
Were a government to show radicalism here, opponents would soon raise the ghost of Liz Truss as a weapon against it. UK taxes are not only rising but becoming more complicated, with tapers leading to extreme rates as child benefit, childcare subsidies and personal allowances are removed from the rich. Many of these have arisen because of the focus on whether changes are progressive or regressive.
Truss was right to attack knee-jerk thinking along these lines in September 2022 — what matters is the overall impact of redistribution, not individual effects. But her incompetence in voicing a sensible economic argument prevents other politicians from taking a similar stance. None could withstand the association of those ideas with Truss.
Her failure, and her naive policy positions, will undermine sensible budgetary reform in the UK for years to come.
I suppose something must be done, though. Hunt can’t just whip out a copy of Piketty from of his dispatch box and put his feet up.
Don’t panic!
To that end Simon Lambert offers a wish list in This Is Money on sorting out the UK’s messy tax system.
Abolish the personal allowance taper above £100,000 and the Child Benefit tax trap. Scrap stamp duty or cut it to a flat 1%. Peg student loans to a proper measure of inflation. Unfreeze the tax thresholds.
It’ll all cost money, but I agree it’s more sensible than knocking 1% off income tax or national insurance.
You probably do too. But that’s why we’re not politicians, I suppose.
If we were politicians then we’d read headlines like Britain For Sale: The country’s biggest firms are being picked off ‘one by one’ as foreign predators pounce – and we’d see not a symptom but an opportunity.
As I wrote on X, UK companies aren’t going cheap because of the lack of extra tax breaks.
Listed British companies are cheap and vulnerable to overseas takeovers than they were because the pound is still down eight years after the Referendum, global fund managers rightly decided the UK was going through a political moment of madness and stepped aside, and our domestic economy hasn’t done anything good to change their minds.
We were promised Singapore on the Thames. They gave us Walmington-on-Sea.
And instead of putting their hands up and admitting we made a terrible mistake, we get renewed talk of a Dad’s Army ISA.
This is all as predictable as it is ill-conceived.
Never mind that a Great British ISA would encourage a home bias that UK investors have only just shaken off. Or that it would enshrine another no-no – encouraging the tax tail to wag the investment dog, as the saying goes.
I don’t think it’ll actually happen, though the chance to slap the Union Jack on something can never be discounted these days.
Even the platforms have warned against it. They’d normally welcome all the sweeteners they can get.
But if we must must have more ISA complications, then it had better be an additional ISA. Not an unhelpful disincentive on private investors putting their money into global markets, by restricting how they can invest the existing £20,000 ISA allowance.
Put that light out!
What we really need is for these tax wrappers to be set in stone, and the annual limits indexed to inflation.
Perhaps they might be usefully reviewed once every 5-10 years. But not every six months! We are trying to plan for our lifetimes with our personal finances. Not for the electoral cycle.
The uncertainty around the Lifetime Pensions Allowance is a case in point. Hunt sensibly scrapped it last year. But Labour – presumed to be the government in waiting – says it’ll bring it back.
How are people supposed to make life-changing decisions about their pensions in this light?
Returning again to the FT:
…some advisers are recommending their clients crystallise excess funds to protect against a future tax charge, but with no guarantees. Wealth manager Tideway Wealth is advising clients […] to crystallise ahead of any election and ideally before April 5. After that date there are some changes to pension death benefits which you may want to avoid by doing the crystallisation before then.
Or then again, maybe they shouldn’t? The article is full of caveats and on the other hands and rightly so.
Pension are complicated enough, without adding a Wheel of Fortune angle to the legislation.
Remember these are savings amassed over 30-40 years that are meant to last for decades more to come. They should not be subject to the last-minute whims of politicians of any stripe.
Ho hum. For a more sober roundup of the announcements Hunt could make next week, head over to Which.
Let’s see where we stand by the end of play Wednesday.
From Monevator
UK tax deadline: how to make use of all your tax allowances – Monevator
Augmented reality [Mogul members] – Monevator
From the archive-ator: A landlord is someone who borrows money on your behalf – Monevator
News
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.
Nationwide reports house prices up the first time in a year – Standard
St James’s Place sets aside £426m for client refunds, shares crash 30% – This Is Money
Millennials on course to become ‘richest generation in history’ – Guardian
Scammers using AI and deepfakes to forge documents and steal money – This Is Money
The pension lump sum ‘emergency’ tax trap could cost you thousands… – Telegraph via Y.F.
…and some examples via Freedom of Information request – This Is Money
Winklevoss crypto firm Gemini to return $1.1bn to customers – BBC
A Protestant retirement ethic? – Klement on Investing
Products and services
Investment platforms failing customers on cash interest – Which
What’s the cheapest way to get solar panels installed? – This Is Money
Cost of insurance soars for previously-flooded homes – This Is Money
Transfer an ISA to low-cost platform InvestEngine and get up to £2,500 in cash as a bonus (T&Cs apply. Capital at risk) – InvestEngine
UK annual property sales forecast to recover by 10% to 1.1m transactions – Guardian
How to apply for Attendance Allowance – This Is Money
Homes for sale linked to film and TV, in pictures – Guardian
Comment and opinion
The UK stock market isn’t working – Guardian
Has the rise of passive funds really broken the markets? – Behavioural Investment
The rise of financial dopamine culture – Portfolio Charts
A mid-life inheritance: handling a painful windfall [Search result] – FT
Coast FIRE is the most dangerous FIRE strategy to follow – Financial Samurai
How rising interest rates affects your retirement plan – Morningstar
The problem with the 60/40 – Cullen Roche
Cash and your portfolio – Oblivious Investor
What lies beneath your money habits – Humble Dollar
Advice for the workaholic in your life – Next Big Idea Club
Naughty corner: Active antics
Ali Hamed: Building an Investment Firm [Podcast] – Invest Like The Best
‘Sell Apple’ [Search result] – FT
Stocks and bonds for the long run: part 3 – Klement on Investing
The new case for active managers – Institutional Investor
Crypto factor investing [Presented without comment] – Sparkline
Diving into Berkshire Hathaway’s 2023 results – The Rational Walk
Kindle book bargains
The Success Myth by Emma Gannon – £0.99 on Kindle
Eat Shop Save by Dale Pinnock – £0.99 on Kindle
Lean In by Sheryl Sandberg – £0.99 on Kindle
The Making of a Billionaire by John Caudwell – £0.99 on Kindle
Empty-planet bring-it-on mini-special
Why South Korean women aren’t having babies – BBC
Marriages in Japan hit a 90-year low – Semafor
UK fertility rate at a record low – Merryn Somerset Webb via X
Environmental factors
Bitcoin miners win a legal bid to withhold their energy data – Semafor
UK a ‘tax haven’ for polluting SUVs, says thinktank – Guardian
Warren Buffett sees a bright future for fossil fuels – Semafor
Robot overlord roundup
Yudkowsky: humanity’s survival timeline looks ‘more like five years than 50’ – Guardian
Musk sues OpenAI and Sam Altman, for putting profit over public good – Sky
AI ‘dream girls’ are coming for porn stars’ jobs [Registration required] – WSJ
What if large-language models change the biz model of the Internet? – Tomasz Tunguz
AI deepfakes are cheap, easy, and coming for the 2024 election – The Verge
Of top-notch algorithms and zoned-out humans [Search result] – FT
Willy Wonka Experience Glasgow: a metaphor for AI hype – Venture Beat
What’s going on with Google mini-special
How Google is killing independent websites via poor search results – HouseFresh
Google reneged on the monopolistic bargain – Pluralistic
Gemini and Google’s culture – Stratechery
Off our beat
Why we don’t trust each other anymore – Kyla Scanlon
How Portugal eased its opioid epidemic while US deaths skyrocketed – NPR
When media outlets shutter, why are their websites wiped, too? – Slate
Should you drink a shot of olive oil a day like the celebrities? – The Conversation
We paid a price for our ape ancestors losing their tails – The Conversation
Learn from people who do, not those who preach – Darius Foroux
And finally…
“When the taxperson takes more than a third of what we earn, we can be sure that the way they take it matters.”
– Paul Johnson, Follow the Money
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