Consumer confidence is in the grip of the prospect of a painful budget with the middle classes scared of losing pension privileges to pay for the £22bn black hole created by post election public sector pay rises Tory fiscal incompetence.
I myself have applied for a Pension Commencement Lump Sum, (thankfully the encashment hasn’t happened yet, so I’m hoping to catch the latest market surge). It seems it takes a minimum of two weeks with my insurer to make a simple instruction.
But maybe I was over-hasty. Maybe middle-class misery will be averted by a £10bn windfall from the Bank of England. The windfall is expected to be £10bn because the Bank has discovered that it can sit back and let the majority of its £100bn target “tightening” happen from gilt redemptions rather than active bond sales. This reduces the strain on the Treasury who have to make good the losses from all this selling (or so the FT tells me). Infact it could be as much as £15.5bn and it all depends on the Office of Budget Responsibility. If the OBR are uber-responsible, then Reeves won’t get the windfall at all, if they take a middle way it will be about £7bn and if they go the whole hog and let her count 2024 as BAU going forward – well happy days.
FT’s Alphaville runs an absorbing analysis , focussing not on PCLS’ but Aresnal FC’s finances.
The “Arsenal” bit is all about Keir Starmer being allowed to keep his corporate box by his noisy neighbour.
The Times , while not going into the complexities of the OBR’s accounting , reckon that Reeves will bank £10bn and this could well be enough to save Winter Fuel payments for the pensioner proletariat.
What a way to run your finances!
I have to admit to being a little frustrated by all this. I can just about see why The Bank of England aren’t cutting my variable interest mortgage payments and I can just about understand why the OBR might not allow Rachel Reeves any extra headroom to avoid “pain” but having prepared for the worst, I am miffed that the ground rules can change every week depending on windfalls such as higher than expected gilt redemptions. OK, I am pretty well in the dark about active v passive selling of Government debt but is this really not something that can be foreseen? Why the windfall and why the voodoo economics that follow?
This is no way for the consumer to plan his/her finances. I guess this is the point of offering Keir’s box as a hostage to the OBR’s accounting.
Fiscal Rules or Fiscal Straightjacket?
Right now , we want to see consumer confidence so that we all spend lots of money, bringing in new taxes and creating lots of growth in the economy. We want companies borrowing money at lower rates so we get greater productivity and higher growth in the economy. Instead we get no interest rate cut and the prospect of pain in October which is getting people like me withdrawing money from pensions to pay off debt.
All because of the OBR and BOE’s rigid adherence to fiscal rules about managing the aftermath of Covid and requiring inflation to get down to 2%.
I just don’t get how we are asking pension funds to invest in high growth options while Government destroys consumer confidence to meet black holes which may or may not be filled with imagined windfalls that depend on the OBR’s accountancy method.
Don’t mess with our heads
I don’t want to be taking decisions about the timing of taking my pension money based on guesswork. I would rather stay invested and encash when my mortgage comes due. I would like some relief from mortgage pain by lower interest now.
Instead, all I am getting is financial headaches from all these numbers.
Government – and I mean BOE and OBR as well as HMT, can you please stop messing with my head ! Get a plan and stick to it . Voodoo economics is no basis to run a country’s finances and it’s no way to run mine either!
Productivity per capita is the long term solution but the
Skills required have been destroyed by mismanagement
The youth that is required to sustain any jump started repairs
that can come from 30th October have been fatally damaged by
Inappropriate education or lack of education of the poor.
Listen to Davis speak about the poor academic standards of the children
Of poor families and the death of the 60,s meritocracy
https://youtu.be/VfihSV-8SGI?si=Vo6jYK7lpAJ9-lpo
On the QT, Bank of England tightening of the money supply by passive (“on the quiet”) redemptions of repurchased gilts already on the books as they mature, rather than active selling of “immature” gilts at gains or losses to get them off the books, is just one element of so-called Voodoo Economics.
VE is a derogatory phrase first used during 1980 presidential primaries by George H.W. Bush, then a candidate, to describe his opponent Ronald Reagan’s proposals to reinvigorate the US economy.
Reagan won that nomination and the subsequent election, and his economic policies then came to be known as “Reaganomics”.
Reaganomics was a set of policies that combined steep tax cuts, deregulation
of domestic markets, lower government spending (except on defence), a tightening of the money supply by the Federal Reserve, and a balanced budget (which of course never happened).
I don’t recognise most of these as Labour Government policies, maybe an obsession with
fiscal rules and balanced budgeting which goes back to Gordon Brown and before him
to Margaret Thatcher.
I’ll believe lower government spending and a balancing of the books if or when I see them, but I really don’t expect to see them.