October 9, 2024 • 17 mins
In this week's roundup, Money Distilled newsletter author John Stepek is joined by Bloomberg Opinion columnist Marcus Ashworth. They discuss the UK bond market, particularly the fact that UK 10-year yields are back above those of the US, what signal that sends and what's behind UK borrowing costs going up.
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Speaker 1 (00:03):
Bloomberg Audio Studios, Podcasts, radio news. Hello, welcome to the
Merton Talks Money weekly round up, our debrief on the
biggest stories in markets and economics. I'm join Stepick, senior
(00:27):
reporter and author of the Money Distilled newsletter, and I'm
taking the lead this week while Merton's out in Japan.
You lucky things, but with me, it's someone arguably just
as exciting. That is Marcus Ashworth, Bloomberg opinion columnist. Hello Marcus.
Hello John, So Marx, I was late to hear that
you could join me today for our chat because I
want to talk about your areo of expertise, which is
(00:50):
the bond market, the mysterious bond market, and all the
trouble that it causes for both our own politicians and
the world in general. And I thought we just have
had a chat about what's been going because one of
the things that's happened this week other people have noticed
this week, and you noticed a while ago, is that
UK guilt yields have crossed above the yields or US
(01:13):
treasuries for the first time in quite a while. And
it's quite a real thing to happen. So do you
want to explain what that actually means.
Speaker 2 (01:20):
First of all, clearly the obvious rationale is that the
Bank of England has been a calctrum to ever lowering
into straights off. The Fed's very aggressive, you can call
it now after looking back on those payil numbers, that
they are not going to cut interest rates as quickly
as as a FED clearly wants to in a signal
with a fifty basis points move.
Speaker 1 (01:42):
Just for context here, So the Federal Reserve the last
time that it cut interest rates, so last month it
cut interest rates by half a percentage point and everyone
was kind of surprised by that, a bit poinchy. And
then the Bank of England had only cut by a
quarter point and also rap until sent me up until
(02:02):
last week, up until it's all with a fit Andrew
Bailey has been a bit kigia. But whether we would
cut eats a cohesivelly is that that's basically.
Speaker 2 (02:10):
It, yes, though of course, in classic Andrew Bailey form,
he then completely volt fast and article on Guardian basically
talked about being more active and all that sort of
good stuff. So and then the US non farm PERI
number for the month of September released at the beginning
of October showed that the fact that the US economy
(02:31):
is actually really quite strong, and everyone's gone headfaked again.
So we're fitting sick. We've been on a roller coaster.
We want to get off. But at the moment, the
thesis is probably the Federals will cut interest rates more aggressively.
Probably in the Bank Ofing will So that's one basis
on the guilt market yielding across the curve largely higher
(02:53):
than US treasuries. Interest rates are not a similar as
far as official rates concerned. Why are UK yields yielding more?
And there's the potential therefore of increased supply. And really
what we're all worrying about is October thirtieth, which is
what Racial Reason's budget will be, and whether or not to
(03:13):
increase the guilt remits how much the government borrows each year.
Pegged at two hundred and seventy eight billion pounds this year,
tepically not the largest number ever, However, it is really
the biggest number ever because the banking is not buying
guilts as it once did, It is now selling guilts
netnet net. Is they increased that number anymore? Oh my god,
(03:36):
who's going to buy this thing? Therefore interest rates and
overall borrowing which reflects on all corporates which are the
spread above. It's not good and I think that's something
which I write about, as you mentioned a few weeks back,
saying that we knew what happened with There's trust. In
twenty twenty two or two years on from that, have
we learned the lesson? Well, you know, labor needs to
(03:58):
bear that very much in mind. If they rejig the
fiscal rules, which broadly I think is probably right to do,
but doesn't mean they have to take full advantage of
them straight away. If they start increasing borrowing dramatically, we
could have another mini type of scare.
Speaker 1 (04:15):
To unpack a couple of things they are. So first
of all, what what you're you're saying there is and
I think often normal people if you like, forget this,
But the government bond market is a market like any other.
This this supply matters as much as anything else. And
at the moment, as you say, if the government's kind
(04:36):
of borrowing more money and therefore haven't a right more
io use, And then on top of that, the Bank
England is selling off the IOUs that it was previously buying,
then that means the amount iouse hitting the market is
much much bigger.
Speaker 2 (04:51):
Sometimes it doesn't matter, you can sell ever more. In
fact that you can't, please please tell more. Sometimes no
one wants anything. And the risk is it it's surprise
if all of a sudden the labor government taxes us more,
spends more, and also borrows more all through at the
same time. That's a bit of schockun awe, which you know,
(05:14):
where would be the weakest point. We're all flinch and
go or I won't, I won't spend as much, and
maybe you know, the economy will take a bit of
a shudder. But the first and quickest and nastiest reaction
will come from the bomb market, because they'll go, hang
on second, you want us to buy more of your debt, well,
we won't unless he pay us more money for it instantly,
(05:35):
And that's what happened with Liz Truss and the mini budget,
you know, two years ago. Instantly there was there was
a shock reaction. So I'm not saying it's going to happen.
I hope it doesn't happen. I hope that Treasury and
the government have done all the sort of numbers and
do this carefully but it's definitely something one of the
main reasons, not the only reason why we are charged
(05:57):
more for our debt in this country than say the
US government's happening for a little while actually happened doesn't
lead up the election. I do blame blames the wrong word,
but that core point here is that the early care
of the election, that's exactly when the spread side and
move borrowing cost god grows up in the UK compared
to the US. So you cannot not put it on
(06:17):
the fact that there's a new government coming in and
is expected to borrow more. There's definitely that's the rationale
between relatively between the US and US. Whatever the Bank
of England does on interistrates is what's a mystery at
all of us, including the Bank of England. But coming
back on that a second, but also at the same point,
yields have been dropping in Europe, particularly in Germany, because
(06:37):
they're going into a real state of recession potentially deflation
the aspects coming there. So now we now look even
worse compared to Germany and the rest of Europe as well,
so find effect.
Speaker 1 (06:51):
To be feitl I mean that it's partly because I
think this is the other thing that people will personably
like normal people make fing the bit confused and at
the end of the day them in bordering course are
going down because the German ecoinomy this is not good.
It's not a good thing. And so presumably the coin
shines between you Yuki and German yields is somewhat more
(07:14):
to do.
Speaker 2 (07:16):
Point, do not think it's all bad UK quite the
reverse in this sense. You know it's but nonetheless who's
paying the most to borrow money? It's us. Is that
something which couldn't should pass possibly, but a lot of
bit of fear and where we're coming into the October
thirtieth date. Once that passes, I don't think you'll be
(07:36):
able to do And like what certain newspapers have been
have been scaring as all could possibly happen. But the
risk of less taxes on us as individuals is more
borrowing as overall as the tax payer, and that could
be a longer term, you know, much more worrying for it.
So keep it in mind.
Speaker 1 (07:54):
So there's the actual numbers, but then there's what that
actually can what they're doing this for. So in terms
of the creator bellity, a lot of it presumably is
about is this plan a good point or is it
a bad wine? Like if they come out and say
we're going to steff all we're gonna if it's sounds
like it's an ideological attempt to steff the rich, then
(08:16):
that will have a wash reaction. Then if actually we're
trying to INVESTI grow the economy, is that fair to say.
Speaker 2 (08:22):
What this this is where the burden gets shit? So
will it be bang bang bang non doms get you know,
heavily hit cabble gains tax. It doesn't really matter what
it is. But if it's a one off and they
say very clearly right, that's the poison, take your medicine
when we move on, I don't think that ables do that.
I think because they've they've dragged this out for so
(08:44):
long and made this whole October thirties being the uh,
it's create a situation. Now they're going to have to
go in increments and that's almost worse because I think
then that then no one knows that the ends to
be taken them enough already and we can move on
the bigger It's as like you're going going back to
is if they increase the borrowing on the government bomb
(09:05):
market and build market to soak up what they can't
do on taxes. That will affect how much we borrow
and how much do everything costs. As I said, two
hundred and seventy eight billion is a large amount of money,
but it's going to only go to increase in the
next two or three years, and it could increase substantially,
and that could unsustainable. We could have a difficult situation
(09:27):
where the start of a new government that the bomb
markets are saying, no, that's really what they don't want
to go into. So I'm not saying it's going to happen.
I sincerely have it won't happen, And I hope they're
just picking up the spody census here to be a
little bit careful when they change the fiscal rules they're
evidently going to go to and look, the Bank of
Ang's got out their way a bit. I don't want
(09:49):
to get into the very exciting subject of actually quantitative
tiny eye bond cells by the Bank of but they
have backed off. Yes, yes, if the bank having cuts
into straits, which they really should helper Man, we can
all go over this. And I think October thirty probably
will end up being one of those events which aren't
anywhere near as where as as we built it up
to me presumably.
Speaker 1 (10:08):
The other thing is that there isn't the same led
A problem because les trust blundered something. It wasn't just
because she didn't speak to the WIBR. I mean one
reason that you know, Rachel Reeves has had did the
lead a boutet for so long so that the l
Beard will Mark at homework saw that there isn't allays
trust moment and that's all theater.
Speaker 2 (10:30):
And I think we've got time for this. All I
can say is that you know, for one of the
many things that those trust can be blamed for, and
I think the five words from quasi quarte there will
be the business can be more coming was the biggest thing.
You know, the earlier crisis wasn't necessarily one you can
blame her, But as someone said, you walk into a
shed of fireworks with a lit match, you know that's
(10:52):
what you get, and that's shearding the fireworks are no
longer their neuralless trust. But you know at that same point,
I think you know, really at that point it's there
are lessons to be learned. Tears On be careful with
the fact that our boring cross or have already moved
to be so fifty basis points? Why didn't they were
before we knew labor was going to you know, assume
(11:13):
come into power and you know this will will work
its way through if it's handled and managed properly. I'm
sure we'll just view this as a little of a blip.
And therefore guilts are theoretically cheap, but at the moment
they're cheap, and they're cheap for a reason.
Speaker 1 (11:27):
Fair enough on the actual budget itself. We've been talking
a lot about this stuff that may investors pockets in
the podcast over the last few weeks in terms of pensions,
specifically the vidious measures that they're talking here. Is that
anything that stands out to use something that seems lately
(11:48):
it happened, Yeah, unlately.
Speaker 2 (11:50):
Harm I think you have to think fairness. We've got
a labor government, all right, What does socialism whatever the
majority of the term, But what does it mean? It
means that we should be socially fair? Is it right
that a pension and I appreciate those definite, defined benefits
die with the end. Define contributions at the moment carry
(12:11):
forward and are not part of an individual's state. Should
that be the case, Probably not. I expect them to
put them back into everyone's in a state in that sense.
Will they reduce the amount of annual allowance which is
currently been raised recently goes up to sixty thousand back
down again? Again? I always think that's sensible. Probably they
(12:34):
were bugs from the previous government which which we you know,
certain things they can reverse. The scrapping the lifetime allowance
they can't. There's a number of things they'll find very
tricky to do. Will they reduce the amount of tax
benef we get off of top higher eate tax from
forty forty five percent down to something close to the
thirty Again, I could argue that very clearly has been fair.
(12:58):
Why should a twenty percent tax payer not get as
much benefit as a forty or that doesn't egalitarian says?
Speaker 1 (13:05):
So.
Speaker 2 (13:06):
I think they'll probably do things like that.
Speaker 1 (13:08):
But the triggering of that one is that it hits
the public sector as well, doesn't. I know it does
because the tax relief side of things on on a
dB pension, if you if you.
Speaker 2 (13:21):
Know that, you know everyone gets treated equally. It doesn't.
That's the one going about a quality here?
Speaker 1 (13:28):
Oh no, No, But what I mean is if you
end up it's one thing you say you're going to
take it away from private sector workers, but extend yourself
up from a mass quite that blagant.
Speaker 2 (13:39):
They are backed by the unions, they are paid by
the unions many many ways, and yes the public section
is are the most powerful, but they can't be quite.
Speaker 1 (13:48):
Surely, I'm impressed with you.
Speaker 2 (13:50):
Did you say they're going to do that? Then? Really,
then what's the point.
Speaker 1 (13:52):
Do we say? But I mean the annual allowance was
all changed loudely because surgeons and doctors were complaining about
having to leave for various reason and.
Speaker 2 (14:00):
That was bad, which I think they were.
Speaker 1 (14:03):
Look what I'm saying is did they really want and
peck another fate with the nastias and the doctors like.
Speaker 2 (14:12):
The fight with the rest of the world, the rest
of the economy, the private sector, I don't think. See
what the pensions are and hugely generous. Reducing the amount
that the higher rate taxpayers get down to a lower
level to equate them with lower rate taxpayers, I would
(14:32):
say would be fair and they could get they get
away with that, They could justify that rightly. Certain things
which I think they'll have real problems with, for instance,
luring them out that you can get as a tax
free cash s which is currently two and sixty eight thousands,
a random number which hasn't changed for a long while.
It was a course of what was the old lifetime allowance.
(14:52):
I think again that's breaching people's trust. When you created
a pension, you put all your money into it, you
always bankes on having a quarter of that tax free
to pay off a residual mortgage or whatever it may be.
To take that away I think would be retroactive, respectively,
gregeously unfair, and I really hope they won't do that
because that couldn't be justified. I don't think in any
(15:15):
sense of egalitarian firm so you know do I think
they'll raise capital gains tax, perhaps the square away a
little bit with private equi's carried interests, which is currently
tax or the top rated capal gains tax at around
twenty eight should it be forty five or yes, we
all know it should be forty five? I can you
don't want big step? No, could you move the cabal
(15:35):
gains tax and match that with where Karen inter just
get Yes? Probably I can see them doing things like that,
but they've got to be careful on doing too much
too soon. The tax going in the UK is obviously
extumely complex and the knock on unintended consequences here are vast,
So there's certain things I can do, they could argue.
I think in a galatarian fair way, most people who
(15:58):
are getting forty percent tax relief on the only getting
thirty three will they'll stop putting money in the pinion.
Of course they would, so I think that's probably what
they'll end up doing common sense.
Speaker 1 (16:09):
I hope that is a that's a fascinating one. That
is a fascinating one. Thank you very much, Marcus. Thanks
for listening to this week's Merden Talks Money debrief with me.
Join if you like our show, rate review and subscribe
(16:30):
wherever you listen to podcasts, as long as it's a
five star review. Also be sure to follow me and
Marcus on x or Twitter. I'm at join Underscore Stepic
and Marcus is at Marcus Ashworth and also follow Merton
at Merden sw This episode was produced by Summer Sadi,
Production support and sound designed by Moses and dam. Questions
(16:51):
and comments on the show and all the shows that
always welcome. Our show email is Merrion Money at bloombar
dot net, so please send in all your queries and
any questions you want answer to the Personal Finance Podcast
Bloomberg Audio Studios, Podcasts, radio news. Hello, welcome to the
Merton Talks Money weekly round up, our debrief on the
biggest stories in markets and economics. I'm join Stepick, senior
(00:27):
reporter and author of the Money Distilled newsletter, and I'm
taking the lead this week while Merton's out in Japan.
You lucky things, but with me, it's someone arguably just
as exciting. That is Marcus Ashworth, Bloomberg opinion columnist. Hello Marcus.
Hello John, So Marx, I was late to hear that
you could join me today for our chat because I
want to talk about your areo of expertise, which is
(00:50):
the bond market, the mysterious bond market, and all the
trouble that it causes for both our own politicians and
the world in general. And I thought we just have
had a chat about what's been going because one of
the things that's happened this week other people have noticed
this week, and you noticed a while ago, is that
UK guilt yields have crossed above the yields or US
(01:13):
treasuries for the first time in quite a while. And
it's quite a real thing to happen. So do you
want to explain what that actually means.
Speaker 2 (01:20):
First of all, clearly the obvious rationale is that the
Bank of England has been a calctrum to ever lowering
into straights off. The Fed's very aggressive, you can call
it now after looking back on those payil numbers, that
they are not going to cut interest rates as quickly
as as a FED clearly wants to in a signal
with a fifty basis points move.
Speaker 1 (01:42):
Just for context here, So the Federal Reserve the last
time that it cut interest rates, so last month it
cut interest rates by half a percentage point and everyone
was kind of surprised by that, a bit poinchy. And
then the Bank of England had only cut by a
quarter point and also rap until sent me up until
(02:02):
last week, up until it's all with a fit Andrew
Bailey has been a bit kigia. But whether we would
cut eats a cohesivelly is that that's basically.
Speaker 2 (02:10):
It, yes, though of course, in classic Andrew Bailey form,
he then completely volt fast and article on Guardian basically
talked about being more active and all that sort of
good stuff. So and then the US non farm PERI
number for the month of September released at the beginning
of October showed that the fact that the US economy
(02:31):
is actually really quite strong, and everyone's gone headfaked again.
So we're fitting sick. We've been on a roller coaster.
We want to get off. But at the moment, the
thesis is probably the Federals will cut interest rates more aggressively.
Probably in the Bank Ofing will So that's one basis
on the guilt market yielding across the curve largely higher
(02:53):
than US treasuries. Interest rates are not a similar as
far as official rates concerned. Why are UK yields yielding more?
And there's the potential therefore of increased supply. And really
what we're all worrying about is October thirtieth, which is
what Racial Reason's budget will be, and whether or not to
(03:13):
increase the guilt remits how much the government borrows each year.
Pegged at two hundred and seventy eight billion pounds this year,
tepically not the largest number ever, However, it is really
the biggest number ever because the banking is not buying
guilts as it once did, It is now selling guilts
netnet net. Is they increased that number anymore? Oh my god,
(03:36):
who's going to buy this thing? Therefore interest rates and
overall borrowing which reflects on all corporates which are the
spread above. It's not good and I think that's something
which I write about, as you mentioned a few weeks back,
saying that we knew what happened with There's trust. In
twenty twenty two or two years on from that, have
we learned the lesson? Well, you know, labor needs to
(03:58):
bear that very much in mind. If they rejig the
fiscal rules, which broadly I think is probably right to do,
but doesn't mean they have to take full advantage of
them straight away. If they start increasing borrowing dramatically, we
could have another mini type of scare.
Speaker 1 (04:15):
To unpack a couple of things they are. So first
of all, what what you're you're saying there is and
I think often normal people if you like, forget this,
But the government bond market is a market like any other.
This this supply matters as much as anything else. And
at the moment, as you say, if the government's kind
(04:36):
of borrowing more money and therefore haven't a right more
io use, And then on top of that, the Bank
England is selling off the IOUs that it was previously buying,
then that means the amount iouse hitting the market is
much much bigger.
Speaker 2 (04:51):
Sometimes it doesn't matter, you can sell ever more. In
fact that you can't, please please tell more. Sometimes no
one wants anything. And the risk is it it's surprise
if all of a sudden the labor government taxes us more,
spends more, and also borrows more all through at the
same time. That's a bit of schockun awe, which you know,
(05:14):
where would be the weakest point. We're all flinch and
go or I won't, I won't spend as much, and
maybe you know, the economy will take a bit of
a shudder. But the first and quickest and nastiest reaction
will come from the bomb market, because they'll go, hang
on second, you want us to buy more of your debt, well,
we won't unless he pay us more money for it instantly,
(05:35):
And that's what happened with Liz Truss and the mini budget,
you know, two years ago. Instantly there was there was
a shock reaction. So I'm not saying it's going to happen.
I hope it doesn't happen. I hope that Treasury and
the government have done all the sort of numbers and
do this carefully but it's definitely something one of the
main reasons, not the only reason why we are charged
(05:57):
more for our debt in this country than say the
US government's happening for a little while actually happened doesn't
lead up the election. I do blame blames the wrong word,
but that core point here is that the early care
of the election, that's exactly when the spread side and
move borrowing cost god grows up in the UK compared
to the US. So you cannot not put it on
(06:17):
the fact that there's a new government coming in and
is expected to borrow more. There's definitely that's the rationale
between relatively between the US and US. Whatever the Bank
of England does on interistrates is what's a mystery at
all of us, including the Bank of England. But coming
back on that a second, but also at the same point,
yields have been dropping in Europe, particularly in Germany, because
(06:37):
they're going into a real state of recession potentially deflation
the aspects coming there. So now we now look even
worse compared to Germany and the rest of Europe as well,
so find effect.
Speaker 1 (06:51):
To be feitl I mean that it's partly because I
think this is the other thing that people will personably
like normal people make fing the bit confused and at
the end of the day them in bordering course are
going down because the German ecoinomy this is not good.
It's not a good thing. And so presumably the coin
shines between you Yuki and German yields is somewhat more
(07:14):
to do.
Speaker 2 (07:16):
Point, do not think it's all bad UK quite the
reverse in this sense. You know it's but nonetheless who's
paying the most to borrow money? It's us. Is that
something which couldn't should pass possibly, but a lot of
bit of fear and where we're coming into the October
thirtieth date. Once that passes, I don't think you'll be
(07:36):
able to do And like what certain newspapers have been
have been scaring as all could possibly happen. But the
risk of less taxes on us as individuals is more
borrowing as overall as the tax payer, and that could
be a longer term, you know, much more worrying for it.
So keep it in mind.
Speaker 1 (07:54):
So there's the actual numbers, but then there's what that
actually can what they're doing this for. So in terms
of the creator bellity, a lot of it presumably is
about is this plan a good point or is it
a bad wine? Like if they come out and say
we're going to steff all we're gonna if it's sounds
like it's an ideological attempt to steff the rich, then
(08:16):
that will have a wash reaction. Then if actually we're
trying to INVESTI grow the economy, is that fair to say.
Speaker 2 (08:22):
What this this is where the burden gets shit? So
will it be bang bang bang non doms get you know,
heavily hit cabble gains tax. It doesn't really matter what
it is. But if it's a one off and they
say very clearly right, that's the poison, take your medicine
when we move on, I don't think that ables do that.
I think because they've they've dragged this out for so
(08:44):
long and made this whole October thirties being the uh,
it's create a situation. Now they're going to have to
go in increments and that's almost worse because I think
then that then no one knows that the ends to
be taken them enough already and we can move on
the bigger It's as like you're going going back to
is if they increase the borrowing on the government bomb
(09:05):
market and build market to soak up what they can't
do on taxes. That will affect how much we borrow
and how much do everything costs. As I said, two
hundred and seventy eight billion is a large amount of money,
but it's going to only go to increase in the
next two or three years, and it could increase substantially,
and that could unsustainable. We could have a difficult situation
(09:27):
where the start of a new government that the bomb
markets are saying, no, that's really what they don't want
to go into. So I'm not saying it's going to happen.
I sincerely have it won't happen, And I hope they're
just picking up the spody census here to be a
little bit careful when they change the fiscal rules they're
evidently going to go to and look, the Bank of
Ang's got out their way a bit. I don't want
(09:49):
to get into the very exciting subject of actually quantitative
tiny eye bond cells by the Bank of but they
have backed off. Yes, yes, if the bank having cuts
into straits, which they really should helper Man, we can
all go over this. And I think October thirty probably
will end up being one of those events which aren't
anywhere near as where as as we built it up
to me presumably.
Speaker 1 (10:08):
The other thing is that there isn't the same led
A problem because les trust blundered something. It wasn't just
because she didn't speak to the WIBR. I mean one
reason that you know, Rachel Reeves has had did the
lead a boutet for so long so that the l
Beard will Mark at homework saw that there isn't allays
trust moment and that's all theater.
Speaker 2 (10:30):
And I think we've got time for this. All I
can say is that you know, for one of the
many things that those trust can be blamed for, and
I think the five words from quasi quarte there will
be the business can be more coming was the biggest thing.
You know, the earlier crisis wasn't necessarily one you can
blame her, But as someone said, you walk into a
shed of fireworks with a lit match, you know that's
(10:52):
what you get, and that's shearding the fireworks are no
longer their neuralless trust. But you know at that same point,
I think you know, really at that point it's there
are lessons to be learned. Tears On be careful with
the fact that our boring cross or have already moved
to be so fifty basis points? Why didn't they were
before we knew labor was going to you know, assume
(11:13):
come into power and you know this will will work
its way through if it's handled and managed properly. I'm
sure we'll just view this as a little of a blip.
And therefore guilts are theoretically cheap, but at the moment
they're cheap, and they're cheap for a reason.
Speaker 1 (11:27):
Fair enough on the actual budget itself. We've been talking
a lot about this stuff that may investors pockets in
the podcast over the last few weeks in terms of pensions,
specifically the vidious measures that they're talking here. Is that
anything that stands out to use something that seems lately
(11:48):
it happened, Yeah, unlately.
Speaker 2 (11:50):
Harm I think you have to think fairness. We've got
a labor government, all right, What does socialism whatever the
majority of the term, But what does it mean? It
means that we should be socially fair? Is it right
that a pension and I appreciate those definite, defined benefits
die with the end. Define contributions at the moment carry
(12:11):
forward and are not part of an individual's state. Should
that be the case, Probably not. I expect them to
put them back into everyone's in a state in that sense.
Will they reduce the amount of annual allowance which is
currently been raised recently goes up to sixty thousand back
down again? Again? I always think that's sensible. Probably they
(12:34):
were bugs from the previous government which which we you know,
certain things they can reverse. The scrapping the lifetime allowance
they can't. There's a number of things they'll find very
tricky to do. Will they reduce the amount of tax
benef we get off of top higher eate tax from
forty forty five percent down to something close to the
thirty Again, I could argue that very clearly has been fair.
(12:58):
Why should a twenty percent tax payer not get as
much benefit as a forty or that doesn't egalitarian says?
Speaker 1 (13:05):
So.
Speaker 2 (13:06):
I think they'll probably do things like that.
Speaker 1 (13:08):
But the triggering of that one is that it hits
the public sector as well, doesn't. I know it does
because the tax relief side of things on on a
dB pension, if you if you.
Speaker 2 (13:21):
Know that, you know everyone gets treated equally. It doesn't.
That's the one going about a quality here?
Speaker 1 (13:28):
Oh no, No, But what I mean is if you
end up it's one thing you say you're going to
take it away from private sector workers, but extend yourself
up from a mass quite that blagant.
Speaker 2 (13:39):
They are backed by the unions, they are paid by
the unions many many ways, and yes the public section
is are the most powerful, but they can't be quite.
Speaker 1 (13:48):
Surely, I'm impressed with you.
Speaker 2 (13:50):
Did you say they're going to do that? Then? Really,
then what's the point.
Speaker 1 (13:52):
Do we say? But I mean the annual allowance was
all changed loudely because surgeons and doctors were complaining about
having to leave for various reason and.
Speaker 2 (14:00):
That was bad, which I think they were.
Speaker 1 (14:03):
Look what I'm saying is did they really want and
peck another fate with the nastias and the doctors like.
Speaker 2 (14:12):
The fight with the rest of the world, the rest
of the economy, the private sector, I don't think. See
what the pensions are and hugely generous. Reducing the amount
that the higher rate taxpayers get down to a lower
level to equate them with lower rate taxpayers, I would
(14:32):
say would be fair and they could get they get
away with that, They could justify that rightly. Certain things
which I think they'll have real problems with, for instance,
luring them out that you can get as a tax
free cash s which is currently two and sixty eight thousands,
a random number which hasn't changed for a long while.
It was a course of what was the old lifetime allowance.
(14:52):
I think again that's breaching people's trust. When you created
a pension, you put all your money into it, you
always bankes on having a quarter of that tax free
to pay off a residual mortgage or whatever it may be.
To take that away I think would be retroactive, respectively,
gregeously unfair, and I really hope they won't do that
because that couldn't be justified. I don't think in any
(15:15):
sense of egalitarian firm so you know do I think
they'll raise capital gains tax, perhaps the square away a
little bit with private equi's carried interests, which is currently
tax or the top rated capal gains tax at around
twenty eight should it be forty five or yes, we
all know it should be forty five? I can you
don't want big step? No, could you move the cabal
(15:35):
gains tax and match that with where Karen inter just
get Yes? Probably I can see them doing things like that,
but they've got to be careful on doing too much
too soon. The tax going in the UK is obviously
extumely complex and the knock on unintended consequences here are vast,
So there's certain things I can do, they could argue.
I think in a galatarian fair way, most people who
(15:58):
are getting forty percent tax relief on the only getting
thirty three will they'll stop putting money in the pinion.
Of course they would, so I think that's probably what
they'll end up doing common sense.
Speaker 1 (16:09):
I hope that is a that's a fascinating one. That
is a fascinating one. Thank you very much, Marcus. Thanks
for listening to this week's Merden Talks Money debrief with me.
Join if you like our show, rate review and subscribe
(16:30):
wherever you listen to podcasts, as long as it's a
five star review. Also be sure to follow me and
Marcus on x or Twitter. I'm at join Underscore Stepic
and Marcus is at Marcus Ashworth and also follow Merton
at Merden sw This episode was produced by Summer Sadi,
Production support and sound designed by Moses and dam. Questions
(16:51):
and comments on the show and all the shows that
always welcome. Our show email is Merrion Money at bloombar
dot net, so please send in all your queries and
any questions you want answer to the Personal Finance Podcast
Host
Merryn Somerset Webb
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