Expect more of the same
Britain needs an imaginative government to crack down on spending, says Merryn Somerset Webb. Sadly, we haven't got that.
The UK has a problem. As Iain Martin points out in The Daily Telegraph, we are deeply in debt (£1.8trn worth) and still getting in deeper. This is no time for "spending laxity". Yet that is exactly what we are going to get. There is no group in the UK prepared to pay any more tax and no group prepared to give up any of their state-financed perks.
Pensioners, the obvious example here, have no intention of supporting anyone who might mess with the pensions triple lock or ask them to pay much towards their own social care from their huge reserves of housing wealth. The rest of the nation won't hear a word about rationing the NHS; charging for GPs appointments; or making any more than token efforts to rein in Gordon Brown's out-of-control tax-credit system.
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Ask anyone what they think is going on in UK politics at the moment and they will tell you it is riven with chaos caused by a demand for huge change. Maybe it is. Maybe it isn't. But the result of today's situation is less chaos than same old, same old: we are going to keep taxing (inefficiently) and spending (rather too much) until we topple under our debts.
Think that isn't possible? Read John Dizard in this week's issue on the subject of Illinois a US state so close to financial collapse that its debt is soon to be rated as junk. Worse, from the point of view of those holding the debt, the judge looking at the matter has made one thing very clear: the state is obliged to make good its welfare obligations before it pays the interest on its debt.
Unsustainable debt is always defaulted on, one way or another. Interest isn't paid, citizens don't get what they were promised or inflation erodes the real value of the debt. The UK tends to go for the last of these options, something that means you will want to be very careful before you dismiss last week's inflation numbers as a one-off. Investing in times such as these is tricky. We always tell you to diversify and we stick by that advice. But this week we have Jonathan Compton writing about Turkey. His advice? If you were planning to diversify into Turkey, just don't. Here we default on our debt gently (with inflation). He expects Turkey to just default. That's much worse.
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‘Sandwich generation’ carers losing £6,000 a year to support elderly relativesMiddle-aged adults are often caught between caring for children or grandchildren and their elderly parents, leaving them taking time out of the workforce and facing a huge hit to wages while they are still trying to save for retirement. We look at the true cost of caring.
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Ground rents to be capped at £250 a year – what does it mean for you?The government has published draft legislation which would see ground rents capped at £250 per year for leaseholders. We examine what it means for homeowners and the housing market.
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Inflation may be slipping but there is still plenty of misery aheadEditor's letter Inflation may be a little lower than last month as the prices of petrol and diesel fall back, but it remains structural and long-term, says Merryn Somerset Webb. And there are no painless solutions.
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Beat the cost of living crisis – go on holidayEditor's letter As inflation rages, energy bills soar and the pound tanks, what’s a good way to save money this winter? Go on holiday, says Merryn Somerset Webb.
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How to tackle rising inflation and falling stockmarketsEditor's letter Inflation is rising around the world. Even though inflation is widely expected to return to around 3.5% next year, it is still wreaking havoc. Merryn Somerset-Webb explains what to do about it.
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How capitalism has been undermined by poor governanceEditor's letter Capitalism’s “ruthless efficiency” has been undermined by poor governance, a lack of competition and central banks’ over-enthusiastic money printing, says Andrew Van Sickle.
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Don't be scared by economic forecastingEditor's letter The Bank of England warned last week the UK will tip into recession this year. But predictions about stockmarkets, earnings or macroeconomic trends can be safely ignored, says Andrew Van Sickle.
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The biggest change in the last 17 years – the death of the “Greenspan put”Editor's letter Since I joined MoneyWeek 17 years ago, says John Stepek, we’ve seen a global financial crisis, a eurozone sovereign debt crisis , several Chinese growth scares, a global pandemic, and a land war in Europe. But the biggest change is the death of the “Greenspan put”.
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The wolf returns to the eurozone’s doorEditor's letter The eurozone’s intrinsic flaws have been exposed again as investors’ fears about Italy’s ability to pay its debt sends bond yields soaring.
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Things won't just return to normal – that's not how inflation worksEditor's letter You might think that, if inflation is indeed “transitory”, we just need to wait and everything will return to “normal”. But this is a grave misunderstanding of how inflation works, says John Stepek.
