The Autumn Budget is days away, with chancellor John Healey due to set out the Burnham government's fiscal plans on 28 October.

While the upcoming Budget will be Labour’s third since they won the 2024 general election, it will be the first fiscal test of prime minister Andy Burnham’s new government which has promised to help those struggling with the cost of living and devolve power out of Westminster.

It will also be the first time new chancellor John Healey delivers the fiscal statement after he replaced Rachel Reeves in the summer.

Although Burnham and Healey have indicated that they want to increase public spending, the Budget comes at a time when the public purse is under pressure, meaning many are worried that taxes will need to rise.

What do you think? Are you dreading the Budget and its potential tax rises, or are you excited to see what the new government will do to help with the cost of living?

Tell us what you think in the poll below.

What would you like to see in the 2026 Autumn Budget? Get in touch by emailing editor@moneyweek.com and you may be featured in our Budget coverage.

• Why you shouldn’t act on Budget rumours
• Recap: What was announced in the 2025 Budget?
• Quiz: How much do you know about the UK’s chancellors of the exchequer?
• Quiz: How much do you know about the Autumn Budget?

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What was the Big Bang?

The “Big Bang” was the sweeping deregulatory overhaul of the London Stock Exchange that took effect 40 years ago this coming week, on Monday, 27 October 1986. The Big Bang reforms were part of a programme of financial liberalisation pushed through by the Conservative government under Margaret Thatcher. They led to the transformation of the City over subsequent years and decades, making it more open, more competitive, more international and much richer. The reforms were driven by the realisation that the City had to change and modernise in order to survive and prosper – and they resulted in a radical and permanent cultural shift.

What did Margaret Thatcher change?

First, fixed commissions were abolished, meaning brokers were allowed to compete on price when it came to fees. Second, the centuries-old “single capacity” distinction between brokers and “jobbers” (market-making intermediaries) disappeared, allowing brokerage firms to become “dual capacity” stockbrokers and “stockjobbing” market makers, licensed to act both for clients and as dealers trading on their own account. Third, foreign ownership rules were relaxed, opening the way for major international banks to enter the market and/or buy existing British brokers. And fourth, the trading floor itself was transformed, with the old system of face-to-face dealing and “open outcry” trading (shouted prices) replaced by electronic systems. That allowed more business to be conducted more quickly, with greater volumes and across a wider range of markets. And all these big changes took place over a single weekend.

Did the Big Bang work?

Yes. In the short term the changes led to a surge in the volume of trading in UK equities and an influx of international banks into London. Traditional British stockbroking and market-making firms, often organised as partnerships, were bought up by much larger American, European and Japanese banks – a takeover boom that paved the way for London's growth into a financial centre to rival New York. Competition increased, transaction costs fell and market liquidity improved. At the same time, salaries for traders and investment bankers soared as institutions competed for scarce talent. In the longer term, the reforms drove a broader expansion far beyond stock trading, as the internationalisation of the City strengthened its position as a major centre for foreign exchange, international banking, bonds, derivatives, asset management and specialist insurance.

Was the Big Bang a success?

Broadly, yes. The UK's expanded financial sector generated well-paid finance jobs, vast pipelines of business for lawyers, accountants and consultants, and substantial tax revenues. It attracted overseas investment and enhanced Britain's international influence. The Big Bang reforms threw out old rules that meant bank bosses had to work from offices within ten minutes' walk of the Bank of England, paving the way for the City's eastern outpost at Canary Wharf. The regulatory revolution also boosted the democratisation and demystification that made it far easier for ordinary punters to access investment for a sensible cost. No Big Bang, no MoneyWeek. At the same time, the Big Bang undoubtedly helped entrench a model of British economic success, and uneven economic geography, that has always had its critics – that of a world-class financial centre sitting awkwardly alongside a broader economy characterised by persistently low levels of investment and productivity. Others argue that the deregulation and internationalisation of finance in the 1980s and 1990s sowed the seeds for the global financial crisis of 2007-2009.

How is the City of London doing now?

Pretty well. Famously, London has suffered a slump in initial public offerings on the stock exchange since the last flotation boom in 2021. By market capitalisation, the London stock market is now, at best, sixth in the world – though on some calculations, it's not even in the top ten. But doom-mongers should remember that stock trading is far from being the City's only suit, says David Smith in The Sunday Times. London leads in other financial sectors – notably foreign-exchange trading, interest-rate derivatives and speciality insurance – where no other centre comes close. Across a range of metrics and specialisms, it comes a very close second to New York and remains – post-Brexit – the “undisputed financial capital of Europe, with no other continental financial centre in the top ten”.

Is there any need to panic?

The City retains many core strengths that mean its pre-eminence is likely to persist: language, legal system, depth in accounting and consulting services, communication facilities and handy time zone (between Asia and America), diversity of markets and their infrastructures, diversity of counterparties, and institutional tradition, combined with continuing regulatory evolution. Important, too, is the diverse talent pool of people who would rather live in London than in Frankfurt or Amsterdam. Brexit knocked London's appeal as a place to float businesses, but in lots of other ways the City looks like “it's getting its mojo back” after a few years of uncertainty, says The Economist. Overall, the UK has the same number of people working in financial services now – about 1.1 million – as it did in 2017, accounting for a slightly bigger chunk of GDP (8% rather than 7%). As for the City (where the “EU decided not to take an axe to Europe's financial plumbing after all”), some 225,000 people worked in finance in 2024 – 36,000 more than in 2019. Another 181,000 worked in related fields such as law and accountancy, up by 51,000 over the same period. If that's what decline looks like, it's a decline worth celebrating.

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A bond crisis is heading France’s way, adding to Emmanuel Macron’s troubles as rioting sweeps through the country. However, if you're feeling particularly brave, French bonds do look like a bargain.

The French bond crisis has been simmering for years. The country has not run a primary budget surplus since the mid-1970s, it has been spending way more than it collects in tax revenues and a stagnating economy can no longer sustain the debt burden. Even from the UK, where the debt load is also hard to afford, the numbers are sobering. The deficit is expected to run at 5.4% of GDP this year even though there is no immediate crisis for the government to deal with.

The debt-to-GDP ratio has hit 121% and it would be higher if its share of all the money owed by the EU were added in. It will have to issue more than €300 billion of bonds in the coming year simply to keep the show on the road. The state already accounts for 57% of GDP, one of the highest levels of spending in the world, and there is little prospect of that coming down any time soon. The government already squeezes 45% of GDP out of its long-suffering taxpayers, again one of the highest rates in the developed world, meaning there is very little scope to push taxes any higher.

Meanwhile, the country is politically paralysed, with a divided parliament unlikely to pass a Budget, and with a presidential election due next year in which all the leading candidates are committed to yet more spending. It is a mess. So it is hardly surprising that the yield on French bonds has risen sharply. The ten-year yield is close to 5% and the spread with Germany, the key measure of country risk, has risen to levels not seen since the height of the eurozone crisis in 2011-2012.

Against that backdrop, the important question is whether the European Central Bank (ECB) will intervene. The treaties suggest it won't be able to. The ECB has mechanisms in place to calm “disorderly markets”, but before they can be implemented, a country needs to commit to a credible deficit-reduction plan. There is little sign of that, and it is hard to see a country like France putting up with the humiliation of using tools designed to rescue Greece and Portugal. ECB officials insist their hands are tied. France will have to sort itself out.

The ECB will intervene if the bond crisis escalates

They have to say that. In reality, in the midst of a serious crisis, the ECB will intervene. France is too important to the eurozone to be allowed to fail. It is still the second-largest economy within the zone, it is home to two of its largest banks and Paris is a major financial centre. If France were forced to restructure its debts, then the credit of the entire zone would collapse, plunging the whole of Europe into financial turmoil. It would be far too damaging to all the other countries inside the single currency to be allowed to happen. The ECB's own survival would also be at stake. If France fails, the euro fails, and the independent national central banks would reassert their authority.

So what will the ECB do? A “whatever it takes” speech from the bank's president is not likely to work a second time. Instead, the bank will probably come up with a new “support mechanism”. My best guess is that it will be in the form of loans to the French banks, which in turn buy government bonds. If the market senses the French banks are buying junk because they have been told to, they will sell them off instead and a bond crisis will have been turned into a banking crisis. There are no guarantees of success. But it may well be the best of a whole series of bad options.

That doesn't make French bonds a good investment. There is too much uncertainty and the economic outlook is bleak. But at some point the ECB will step into the market to start buying and bring yields back down again. It won't have any choice – it is just a question of when and how it happens.

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The Autumn Budget is one of the most important dates in the political calendar, and is certainly the most important day for fiscal policy.

On the day, the chancellor lays out the government’s plans for the economy in the House of Commons.

But how much do you know about the history and traditions of the Budget? Test yourself in our quiz.

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When did we start changing the clocks?

We started changing the clocks during the First World War, as a way of conserving energy. The original idea for British Summer Time (BST) had come from a politically connected Edwardian builder, William Willett. He argued – in a 1907 pamphlet called The Waste of Daylight – that moving daylight hours from morning to evening in summer by putting the clocks forward would improve health, happiness and productivity. The idea made it as far as parliament, where a Daylight Saving Bill was defeated in 1909.

But the idea of daylight saving time was taken up by Germany in the spring of 1916, with the aim of cutting the use of electric lights in the evenings and thus reducing energy consumption during wartime. Britain followed within a month, as did several more European countries. Two years later, so did the US.

Which countries change the clocks now?

About 70 countries lie far enough away from the equator to make it worth the hassle. Most of Europe, the whole of North America, and New Zealand all spring forward and fall back. But hardly any countries in Africa, Asia or South America bother, while Australia is split; different states go their own way.

The reason days are longer in the summer and shorter in winter is that the Earth spins on a tilted axis, which sits at a relatively constant 23.4 degree angle to the planet's path around the sun. For that reason, the further you go from the equator, the greater the difference – in terms of daylight hours – between winter and summer.

In Britain, the longest day falls on 21 June with 16 hours and 38 minutes of daylight in London (and about 19 hours in Shetland). The shortest day, 21 December, lasts just seven hours and 49 minutes in the capital (and less than six hours in Shetland). In Ecuador, Uganda or Singapore, by contrast, days and nights are of equal length year-round, so there's no point in changing the clocks.

Why is changing the clocks in the news again?

Firstly, because proponents of changing the clocks argue that the case for scrapping the change and instead moving to permanent Daylight Saving Time, or Greenwich Mean Time (GMT) +1, has been boosted by the energy crisis. And secondly, because the case for permanent summer time has a powerful and committed advocate in president Donald Trump.

In terms of energy, the extra daylight in the afternoon and evening would mean people put their lights and heating on later. In the UK, daily demand for energy peaks between 5pm and 7pm, with demand in winter starting to rise sharply just before 4pm. So the extra hour would make a big difference. By contrast, the darker mornings would have a negligible impact on energy, since households tend to use lights and heating on winter mornings anyway.

According to 2022 research from Aoife Foley of Queen's University Belfast, sticking to BST could save households between £1.2 billion and £2.3 billion a year, while the Republic of Ireland could cut its carbon emissions by 3.5% due to the decrease in residential usage. The shift to permanent daylight saving time is an easy way of helping ease the energy crisis, proponents say.

Didn't we shift to permanent daylight saving time before?

Yes. During the Second World War, the UK moved the clocks forward by an hour all year-round in a drive to save energy – so using GMT+1 in the winter and even moving to GMT+2 (or “British Double Summer Time”) in the summer.

The experiment was repeated in 1947 because of severe fuel shortages. Then in the late 1960s the UK adopted permanent BST for three years, before returning to the spring-forward fall-back system. Part of the reason for switching back was the effect in Scotland, where year-round BST means horribly dark mornings in winter. Even on GMT, the sun won't rise until 8.42am in Edinburgh on 21 December. A shift to permanent daylight saving time looks unlikely. But other countries may take the plunge.

Which countries could shift to permanent daylight saving time?

Most prominently the US. In July the House of Representatives passed the Sunshine Protection Act, which – if passed by the Senate – would move the whole of the US to permanent Daylight Year-round summer time. President Trump strongly backs the legislation.

Why does Trump back the Sunshine Protection Act?

The strong suspicion, said Matt Vizer in The Atlantic, is that Trump's motivation is not national well-being, but golf. PGA Tour chief executive Brian Rolapp met Trump and discussed daylight saving a few weeks ago. He calculates that switching to year-round daylight saving time would generate 23 million additional rounds of golf each year and pump $1 billion into the golf industry. Trump, the owner of multiple golf clubs, has clearly taken note. In fact, in terms of well-being, there's a far stronger case for making standard time permanent, rather than daylight saving,

What's the rationale for permanent standard time?

Because standard time – ie, GMT – more closely aligns with the natural light-dark cycles of day and night and the human body's circadian rhythms. Choosing to shift an hour of natural light from the start to the end of the day makes light summer evenings longer – but the price of dark mornings in winter is too high, says Beth Ann Malow on The Conversation. “Morning light is essential for helping to set the body's natural rhythms. It wakes us up, and improves alertness and boosts mood.”

Meanwhile, extending evening light delays the brain's release of melatonin, the hormone that promotes drowsiness, thus interfering with sleep. This goes far beyond mere inconvenience – “springing forward” each March is connected to serious negative effects, including an uptick in heart attacks and cardiovascular disease, metabolic syndrome and poorer academic performance owing to less sleep. The question, said The Economist, is not whether we should be putting the clocks back next weekend. We should. The question is rather whether we should put them forward again next spring.

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Greece is bouncing back from its crippling sovereign debt crisis of 2009-2018. The Greek economy is starting to perform a lot better and the government has just upgraded its growth forecast for this year from 2% to 2.3%. Unemployment fell from 7.9% last month to 7.4%; it reached 27% at the peak of the debt crisis in 2013. Investment is starting to flow into the country. The government says it is running a primary budget surplus and the debt-to-GDP ratio, close to 200% at the peak, is now 136% and it is set to fall to 128% next year.

The bond markets like the look of all those figures and are charging Greece less and less to borrow money. The yield on its ten-year bonds has fallen to just 4.4%, a lot less than in France or Britain. The days when Greece was about to go bust and threatened to take down the eurozone as it collapsed are now firmly in the past.

Greece has welcomed foreign capital

At the same time, Greece is starting to acquire a reputation as the “new Dubai”. The British hedge-fund billionaire Chris Rokos, the country's third-largest individual taxpayer, recently moved there. US hedge fund Millennium Management is opening its first office there. Skyscrapers are going up along the Athens Riviera, a stretch of coastline just outside the capital.

You can see why. The Greek government has offered a series of tax incentives to bring money into the country. Executives who relocate their tax residency to Greece pay only 5% on their bonuses and carried interest, far less than they would in London, Paris, or even New York. And there is a flat-tax regime that caps tax on foreign income at €100,000, with foreign assets exempt from Greek inheritance tax. A similar deal in Italy helped turn Milan into a booming financial centre, at least until the government increased the flat-rate payment to €300,000, and now it is doing the same for Athens. With the war in the Persian Gulf, there is a space in the global market for a low-tax, trading and financial centre, and Greece looks willing to take the prize.

It has, however, been a long, hard slog for Greece to get itself back on track. At the height of the eurozone crisis, it could have left the single currency and massively devalued, while defaulting on its debts. That would have been one way out of the mess. In the end, the country resolved to knuckle down and work its way back to financial stability. Over five painful years, GDP fell by almost 30%, a collapse on the scale of the Great Depression of the 1930s, and it has still not managed to get back to its pre-crisis level of output. Public spending was cut by 25%. The civil service was slashed from one million to slightly over 600,000, while wages were frozen.

Unemployment soared, wages fell by 25% or more and up to 50% in sectors such as tourism. Pensions were cut 11 times to keep pace with the austerity programme. Most of the toughest cuts were imposed by the so-called “troika”, made up of the European Union, the European Central Bank and the International Monetary Fund, and that gave the local politicians the space to make some very hard decisions. Even so, eventually spending was brought down and the public finances started to stabilise.

There is a lesson in that. More and more countries are starting to come under sustained attacks from the bond markets. France is right in the firing line, but so is Britain, and perhaps Italy as well. Yields are starting to soar as investors become more and more nervous of the deadly combination of rising debt and sluggish or non-existent growth. They may find themselves caught up in a full-scale sovereign-debt crisis at any moment.

Greece shows that there is eventually a path to recovery. The trouble is, it takes a long time, deep cuts to the size of the state, and a willingness among the voters to make a lot of sacrifices to restore the country's competitiveness. The outlook for Greece is bright again. But it was a very tough slog. It is hard to imagine countries such as France and Britain putting up with the same kind of austerity – even though, just like Greece, it may be the only way finally to bring their debts under control.

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Further changes to the tax regime would deter businesses from investing in the UK and stunt economic growth, entrepreneur and HomeServe founder Sir Richard Harpin warns.

Prime minister Andy Burnham was rumoured to be looking at bringing capital gains tax rates closer to income tax rates in the upcoming Autumn Budget, but self-made billionaire Harpin says this, or the possible introduction of a wealth tax, would be “absolutely devastating for British business” and result in an exodus of the wealthy – neither of which would help the UK economy.

Speaking to digital editor-in-chief Kalpana Fitzpatrick on the MoneyWeek Talks podcast, which you can also watch on YouTube, Harpin said: “We’ve clearly seen people have already left the UK, and we don’t want to see more people leave.”

The threat of higher taxes on the wealthy means as many as one in ten UK adults are considering leaving the country, according to a YouGov poll commissioned by wealth manager Tideway Wealth following the 2025 Autumn Budget.

“There’s got to be incentives for risk-takers to invest and work 24/7 to make a business successful here in the UK, to hopefully grow it and expand it internationally,” said Harpin.

“So we can’t have a situation where capital gains tax is the same level as income tax. There have got to be rewards for risk-takers. That’s the key to growing the UK economy.”

Following weeks of speculation, chancellor John Healey has reportedly rejected calls to raise CGT to match income tax rates, according to the Financial Times on Tuesday.

Some argue Britain’s wealthiest should pay more tax. In July, over 100 UK-based millionaires, including broadcaster and businessman Gary Lineker and musician Brian Eno, penned an open letter to Burnham saying they would be happy to pay a wealth tax.

When asked whether billionaires should pay more tax, Harpin said, “I don’t think they should”, arguing that those billionaires had taken a lot of risk and made a lot of sacrifices in order to make their businesses successful.

“It’s a difficult job as an entrepreneur,” Harpin said. “Failure is only one step away. Those billionaires have earned their money. If they’re still in the UK, they’ve paid their capital gains tax if they’ve sold their businesses. The businesses themselves have paid a high level of corporation tax so we should not have a period of double taxation.”

How HomeServe went from losing £50,000 a month to being sold for £4.1 billion

Harpin knows the risks that entrepreneurs take better than most. His lifelong dream of becoming a successful businessman nearly led to his business running out of money – twice.

Harpin and his business partner began their company in 1992, with their combined life savings of £50,000.

The business venture, then called A1 Fast Fix, hit major stumbling blocks. "We literally saw our life savings go down the drain in the space of six months,” he said.

Harpin says the problems were due to the wrong business model, high costs and a lack of repeat business.

In December 1992, they had to borrow money from friends and family to keep the business going.

The following spring, they got £500,000 in investment from South Staffordshire Water for 52% of the business.

There was a "big sense of relief", Harpin said: “I thought, right, now I can really grow the business, and it got bigger every month.”

But the company continued to haemorrhage money. "All that happened was I took £10,000 a month of losses and they became £50,000 a month of losses,” he said.

A little over a year later, the business was back in the same position. “[We’d] run out of money. [We were] literally down to our last £10,000”, Harpin said.

He continued: “Even my business partner came to me and said, ‘Richard, your life's dream of becoming an entrepreneur…you’ve got to face it, it’s over’.”

But Harpin refused to give up. “When you’ve got a life’s dream, you’ve got to make it happen,” he said.

Luck did strike, and Harpin found out about a water company in Surrey offering annual plumbing cover.

“I went down to Surrey, stopped people in the high street and said, ‘Have you joined up? What did you like about it? What did you not like about it? And literally designed our plumbing insurance membership on the street.”

The insurance memberships took off and customer growth exploded. By 1997, HomeServe had one million customers in the UK and by 2010, five million globally.

In 2023, Harpin sold HomeServe for £4.1 billion.

How can you become a billionaire?

After selling HomeServe three years ago, Harpin is now helping other entrepreneurs grow their businesses.

In 2015, he set up Growth Partner, which provides funding and advice to medium-sized businesses to help them scale. In 2023, he acquired Business Leader, a private network where chief executives and founders of businesses worth over £3 million can receive coaching and tips on how to grow their firms.

This summer, his book ‘How to Make a Billion in 9 Steps’ was published. Harpin discussed some of those steps on the MoneyWeek Talks podcast, including why “copying” and adapting existing ideas can be a recipe for success.

“We’re taught at school that copying homework is bad. In business, it’s definitely good to copy somebody else’s idea, like I did, and then do it better and bigger and quicker,” he said.

Harpin also discussed the importance of "honing your character" and focusing on the things you’re good at – step nine from the book.

“I was only good at a very small number of things and I was really bad at lots of things,” he said.

“I used to get really miserable at my performance review with my chairman, until I realised that what I needed to do was just focus on my couple of strengths and then hire people that could do all the things that I was bad at, that I didn’t like doing, and that was the magic bullet.”

‘Why you should start a business in the UK now’

The vast majority of businesses Growth Partner works with are UK-based.

And although economic growth remains sluggish, Harpin believes it is still a good place for businesses to thrive.

“I still believe that there is no better place in the world to run a global business from,” he said. “There’s a relatively low level of red tape, and what better time to open a business or expand a business than in a difficult time?

“It will eventually get better, and if you can grow through difficult conditions, then think about how easy it’s going to be in the future.”

To learn more about Richard Harpin’s life and his tips for succeeding in business, watch MoneyWeek’s full podcast on YouTube, or wherever you get your podcasts.

About the podcast

MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick, Andrew Van Sickle and Cris Sholto Heaton are joined by influential guests – from CEOs and entrepreneurs to economists and fund managers – to share their top tips on managing money, investing wisely and building wealth.

Follow the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence. You can also watch the episodes on our YouTube channel.

Manchester City football club has been found guilty of serious financial misconduct by an independent commission appointed by the Premier League, after years of investigations and legal wrangling.

It is a damning verdict. The panel found that the club artificially inflated its revenues by at least $1 billion, with sham contracts designed to get around the rules that are meant to ensure a roughly level playing field between the teams in the league.

The details are complex, but the bottom line is something that has been pretty obvious for years to anyone who follows the game: Manchester City was using the financial firepower of its oil-rich owners in the United Arab Emirates to outspend its rivals. It could offer the biggest transfer fees and the most lavish wages to secure any player it wanted. The club is appealing the decision, but faces significant punishment if it is upheld.

There is a bigger issue at stake here: “sportswashing” – engaging with high-level sport to spruce up a country's reputation – is now under threat. It has become a huge business. The Premier League has become one of the most obvious examples, with a whole series of teams owned either directly by foreign states, their investment funds, or by oligarchs closely linked to them.

But it does not stop there. Saudi Arabia has invested heavily in the LIV golf tournament. Qatar spent billions hosting the 2022 World Cup. Russia hosted the 2018 tournament. Formula One includes races in such well-known bastions of human rights and democracy as Bahrain and Azerbaijan.

It's not hard to see what is in it for the regimes. It raises their profile, boosts tourism and softens their image. For millions of viewers around the world, most of whom are not very interested in politics, the practice introduced them to a country they may not previously have been very aware of. It was all well worth the few billion you might have to spend on stadiums, sponsorship or prize money.

Manchester City's image tarnished beyond repair

The Manchester City scandal is going to change the equation dramatically. There are two major problems. To start with, entire investments can get wiped out in the space of a few days. No one really knows how much money was spent on turning Manchester City from a mid-table English club into one of the most successful teams in Europe. That, after all, is the whole point. We have no idea what was happening with the books. It was a lot, however, that much is for certain. If the team is relegated all the way down to League Two (what used to be the Fourth Division before they renamed it), it will be worth a whole lot less, and perhaps nothing at all. Billions will be lost, with very little chance of ever clawing it back.

Secondly, even if the allegations are proved inaccurate, the club's image has surely been tarnished beyond repair. No one blames the players or the manager for the scandal, even if they might have asked harder questions about where all the money was coming from. They will blame the owners. But sportswashing only makes sense if it actually improves your reputation. In the wake of this scandal, everyone who follows football, even if only casually, will have a far lower opinion of the regime that backed Manchester City than they did before – the opposite of what was meant to happen.

We don't yet know if all the money poured into sportswashing is about to dry up completely. The scandal may blow over, and many of the contracts that have been signed can't be unwound quickly. But in its wake, countries are likely to be more cautious about backing major global events. They will be aware that the money they sink into them may well be lost. They will realise that it may well backfire and make them look very, very bad.

The result is that the money machine will be switched off. Most major sporting events will have to go back to being more modestly financed. The salaries will be lower, existing stadiums will have to be made to work instead of building new ones, and the agents and hustlers who surround the whole circus will have to find something else to do. Sport itself may be much better for that – but a lot of money will have been lost forever.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

What are tax havens?

Tax havens are small, well-governed, offshore financial centres that offer low or zero taxes, combined with secrecy – or at least strict privacy – regarding client and ownership information.

Many of them are islands connected in some way with Britain to exploit the country's legal frameworks, stability and access to the City of London, but with the convenience and flexibility of separate fiscal regimes. The islands have a massive incentive to take advantage of their position, and specialise, given financial services can generate vastly more income than other local industries.

Which British territories are tax havens?

Offshore financial centres linked to the UK fall into two categories: Crown Dependencies and British Overseas Territories. The first group is made up of Jersey, Guernsey and the Isle of Man, which have enjoyed varying degrees of fiscal and legislative independence for many centuries (and are not legally part of the UK). When international finance took off in the 20th century, these islands had the advantage of independent legal and tax systems, plus close links to one of the world's biggest financial centres.

By contrast, Overseas Territories (the Cayman Islands, Bermuda and the British Virgin Islands are the big three financial centres) are legacies of empire – self-governing microstates with their own tax and legal systems, but with the British monarch as head of state.

How big is the offshore financial centres industry?

The Cayman Islands is the legal domicile for 30,000 investment funds, with about $9.1 trillion in assets under management, according to its government's figures, with more than 75% of offshore hedge funds domiciled there.

The British Virgin Islands are specialists in company incorporation, holding companies and trusts – home to 352,000 registered companies, according to figures from the Organisation for Economic Co-operation and Development (OECD) for 2024. According to the Tax Justice Network, some $2.6 trillion of foreign direct investment passed through British Virgin Islands structures that year.

Bermuda's specialism is insurance and reinsurance, with 1,210 registered firms handling $2.17 trillion in total insurance assets and about $300 billion in assets under management through licensed investment businesses. In each case, the territories claim to provide an essential and legal tax-neutral framework that enables global commerce. Critics say they facilitate aggressive tax avoidance and profit shifting, allowing corporations and individuals to pay hundreds of billions of pounds less in tax.

Is being an offshore tax haven sustainable?

There's definitely increased pressure on low-tax jurisdictions, both from global trends towards greater transparency and from the UK itself. The Crown Dependencies and British Overseas Territories are part of the OECD's Common Reporting Standard (CRS), meaning they must exchange financial-account information with foreign tax authorities. They are also subject to the OECD's 15% global minimum tax for large multinational groups, meaning the likes of Bermuda and Jersey – which both had zero-rate regimes – have been obliged to meet that minimum.

Meanwhile, the UK has been gradually pushing for more transparency when it comes to “beneficial” (ultimate) ownership of assets, with the Sanctions and Anti-Money Laundering Act 2018. Progress is far from complete, however, and wrangling continues. The Cayman Islands, for example, finally agreed to allow “legitimate interest” access in 2025, but in practice the process is slow and subject to expensive appeals and delays that critics say are designed to discourage access requests.

Will Britain's tax havens survive?

Neither of these trends are set to lead to the collapse of the UK's offshore tax havens. But the picture is morphing from one of “tax haven” bank secrecy and zero or low tax, to one of offshore centres providing tax-neutral legal and financial infrastructure for global capital. Strikingly, in 2025 the Overseas Territories between them froze more than $11 billion of assets under sanctions regimes, on Foreign Office figures. In other words, they are well on the way to being integrated into international anti-money-laundering and sanctions enforcement.

The relationship between the UK and its dependencies and territories has sometimes been fraught, with Jersey occasionally threatening independence if London gets too heavy-handed. But they are a positive asset and shouldn't be taken for granted, says James Price in City AM. The Overseas Territories account for 4.4% of the UK's services exports – more than Spain or Italy, or any Asian country except China. And they entrench the City's global dominance, channelling “enormous sums of money into the country and fuelling finance with access to worldwide asset pools. In turn, this stimulates investment, drives productivity and more than offsets lost tax revenues”.

How is Jersey as an offshore financial centre?

It's still one of the world's leading offshore centres, says Simon Nixon on Bloomberg. But tougher competition from rivals such as Dubai, Singapore and the Cayman Islands means the island is “locked in an increasingly difficult battle to preserve a financial-services industry that accounts for 40% of its government revenues and 44% of gross value added”.

Brexit hasn't helped – EU rules mean that funds marketed to European investors must be administered on European soil and Jersey has lost business to Dublin and Luxembourg. London, the source of Jersey's deal flow, has lost business to the Middle East and Asia.

And the UK's post-financial-crisis ringfencing rules (surplus deposits can no longer be lucratively parked with UK banks) has seen the number of banks on Jersey shrink by a third since 2017. A Jersey government-commissioned review put it well earlier this year: that “the privilege has shifted”. For decades, Jersey operated on the assumption that “access to the island was itself a privilege; now, Jersey must go out and compete for business like everyone else”.

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Investors are contemplating a new eurozone debt crisis after the euro hit a 17-month low against the US dollar. Concern has focused on France, where public debt stands at €3.596 trillion, equivalent to 119% of GDP. The yield on ten-year government bonds, known as “OATs”, approached 5% for the first time since 2002. The gloom is weighing on the local CAC 40 share index, which is down 6% over the past month.

In Paris, the remaining optimists argue that France just needs to follow Italy's example, says Eric Mengus in Les Echos. After years of struggle, Rome is running primary budget surpluses (that is, before interest payments). But that consolidation rested on a political consensus that is lacking in France, where major parties continue to cling to “illusions”. Many believe that the problem can be solved through new wealth taxes. The radical left calls to cancel parts of the debt outright in order to “make the banks pay”.

Back in the real world, primary deficit reduction of three to four percentage points is probably required to rein in the situation, yet the current government is struggling to get support for a budget that reduces the deficit by 0.6%.

Eurozone at most risk since the 2012 crisis

The “old cliché” – that “France doesn't reform, it only has revolutions” – is being tested anew, says Simon Nixon on Substack. All eyes are on “Le Spread”, the gap between French and German government borrowing costs. This measure of eurozone risk has reached 1.4 percentage points, the highest level since the 2012 eurozone crisis. That remains far short of the levels seen by the likes of Italy and Greece during the eurozone crisis. And although rates have spiked, the legacy of years of ultra-cheap borrowing means interest expenses for Paris are still a modest 2% of GDP. But what is lacking is political will in a country that hasn't achieved an overall budget surplus since 1974.

It doesn't help that France is out protesting again, this time about the lack of money for high schools, says the Financial Times.

Debt has risen by more than a trillion euros since Emmanuel Macron took office in 2017. The president's pro-business reforms failed to raise enough revenue to curb runaway spending. The European Central Bank (ECB) has been reluctant to get involved, but with the way things are going some think that it is “just a matter of time”.

Still, talk of 2011-style “contagion” across the eurozone is unwarranted, argues a note from asset managers DWS. The ECB and member states have developed a series of monetary tools and procedures that would make fighting another debt crisis much more orderly than in 2011. The continent's banks are also much better capitalised today. “France's fiscal problems are real,” but trouble in the eurozone is not necessarily trouble for the eurozone.

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The Office for National Statistics has changed how it measures productivity – economic output per hour worked – and it turns out we’ve been doing rather better than we realised. In particular, the government’s official statisticians now reckon the rate of growth in the decade following the global financial crisis, from 2009-2019, was 1.3% each year, on average, rather than the 0.7% they had previously thought.

Alas, this doesn’t mean the UK economic output was any higher. It simply means the statisticians have changed their minds about how many hours we worked – that is, they think it was far fewer than originally estimated. That same level of output, divided by a smaller number of hours, equals a higher resulting figure for productivity. It means the UK’s unique productivity puzzle may not have been so much of a puzzle all along – and places us in the top half of the G7 pack on productivity, rather than as an embarrassing outlier.

What did the ONS change when measuring productivity?

Previously, the ONS had largely calculated the total hours worked from the Labour Force Survey, in which respondents are asked how many hours they’ve worked in a particular week. However, for a variety of reasons (as covered in this space previously), that survey has become notoriously unreliable, with ever lower response rates.

People may report their usual or contracted hours rather than their actual hours, for example, as economist Jonathan Portes points out on his blog. Or when “respondents drop out temporarily, the survey may carry forward their previous answer – even if the reason they did not respond was that they were on holiday”. As response rates fell, the survey’s upward biases in estimating working hours worsened – with a corresponding downward bias in the calculation of productivity rates.

By contrast, the ONS’s new “component method”, already used by many other countries, draws on a wide variety of sources, including the Annual Survey of Hours and Earnings – deducting for annual leave and other absences, and adjusting for overtime – as well as other business surveys. The resulting picture is one of falling average hours per job, and much slower growth in total hours, after 2008.

Is the UK getting more productive?

Yes, the revised figures suggest that people are more productive when they are working (output per hour is higher), but they are putting in fewer hours (average weekly hours are lower). Over the period from 2008 to 2024, the latest year for which we have the new figures – the difference is stark. Total output grew by only 8.7% under the ONS’s existing (“current”) approach, but 15.8% on the revised (“component”) method. On the face of it, that’s good news.

Productivity is one of the most important drivers of economic growth, living standards and the public finances. The metric slowed across advanced economies after the financial crisis, “reflecting weaker investment, the fading of the information-technology boom and other common factors”, says Portes. The fact that the UK was not, in fact, an exceptionally weak performer is good news.

Are there any caveats?

Always. Importantly, the revision doesn’t mean that productivity has recovered to pre-crisis levels – the revised annualised figure of 1.3% remains well below the pre-crisis average of 2%. Indeed, Richard Heys, ONS deputy chief economist, argues that the new methodology does not change “the fundamental story of a slowdown in productivity” following the global financial crisis and that the UK had still experienced “the slowest growth since the Second World War and arguably since the Napoleonic period”. Sadly, he’s right, says David Smith in The Sunday Times. Since 1997, the ONS reckons output per hour is 40.7% higher on the new estimate, compared with 34% on the old one.

That’s not a giant gap. Also, output per worker-hour is not the only way to measure productivity. The ONS has also looked at two other measures – output per worker and output per job, which are a “more relevant gauge” than output per hour when it comes to the impact on real wages and the public finances. In both cases, the new way of measuring alters the picture far less than with the output-per-hour metric: there has still been a drastic slowdown following the financial crisis.

Arguably, then, the revision of the ONS statistics is a worrying development. If productivity is already rising at 1.3%, it will be much harder to improve on it significantly – “leaving us stuck with wage stagnation and big fiscal challenges”. And if the UK’s productivity was less disastrous than feared, by corollary, our supposedly resilient jobs market was less impressive than assumed.

What do the latest stats show?

There are promising signs. Last month, the Resolution Foundation think tank published its own analysis of UK productivity based not on the Labour Force Survey, but on RTI payroll data (the Real Time Information system employers use to send pay data to HMRC) and on self-employment tax return data. They concluded that productivity has grown by a respectable 1.1% on average since the third quarter of 2024, having fallen 0.7% on average over the two years prior. By contrast, the latest (incomplete) “old” ONS figures – based on the LFS – show a fall of 0.2% over the past two years and 0.1% before that.

This strong uptick is not the result, say the Resolution report’s authors, of disproportionate contraction in low-productivity sectors such as retail and hospitality, nor expansion in high-tech sectors or increased use of AI. Rather, this is “a broad-based recovery, with 12 of 19 sectors seeing improved productivity growth in the past two years – including in information and communications, retail, science, transport and health”. It’s early days, and higher productivity is not a panacea, but there are at least some reasons for optimism.

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On Monday, the average price of diesel in the UK crossed the £2 per litre threshold and is set to go a lot higher still. The cost of diesel has risen by 54% since the start of the Iran war and is climbing higher all the time. Motorists stuck with diesel cars are starting to feel the full effect of the shortage of the fuel and so will all the haulage companies who rely on it to fuel their vehicles.

Why? The Strait of Hormuz has been largely closed to traffic, putting a squeeze on oil supplies. Refining capacity across the Persian Gulf has been badly hit by the conflict, with shipments of refined products falling by up to half over the past few months.

Ukrainian drone strikes deep within Russia have taken out a lot of that country’s capacity, and while the main purpose has been to knock out supplies to Russia’s army and inflict maximum economic damage, it means the world has less diesel than ever. Russian oil might be officially sanctioned in the West, but a lot of it was finding its way onto the world market.

Add all that up and supplies were already getting squeezed. It may be about to get a whole lot worse. With prices soaring in the US as much as anywhere else, Donald Trump is coming under pressure from Republican congressmen and senators to impose a 90-day ban on US diesel exports. It’s understandable that political leaders think keeping the domestic market supplied should be the priority. But if that happens it could escalate into a global diesel crisis.

Britain would then be facing a very bleak winter. We have only an estimated 42 days’ supply of diesel in storage to cope with any kind of emergency, the lowest buffer of any major developed country. We import a third of the diesel we consume from the US. It’s hard to see how we can buy much more on the open market. Our European neighbours have only slightly higher reserves than we do and are unlikely to want to help out.

Britain may run out of diesel

The harsh truth is that we may simply run out of diesel. If so, the price will soar and the government may well have to step in, with a ruinously expensive subsidy scheme and probably some form of rationing as well. It will have to make sure the emergency services are supplied and that the most important industrial users stay open.

The bigger problem, though, is that the diesel crisis will painfully expose how far we have run down our industrial resilience and capacity. As recently as 1995, Britain was a net exporter of diesel. We had our own oil wells and our own refineries, allowing us to export to the rest of Europe, and indeed the world. Unfortunately, that is no longer the case. We are down to only four refineries. Over the past 15 years, five have closed, with diesel imported instead. The North Sea oil industry has been relentlessly run down, with licences refused for new drilling and environmental activists allowed to tie up developers in constant legal battles. Windfall taxes make it very difficult to make any money in the oil industry anyway.

That makes a difference. North Sea output won’t affect the global price of oil by itself. But in an emergency, a country with its own oil and its own refineries can always ensure it is supplied with fuel. It can place restrictions on exports and ensure the domestic market keeps running. You can’t do that when both the oil and products refined from it are imported from abroad.

Britain has been steadily deindustrialising for the past 20 years. Punitive taxes, an obsession with net-zero targets and some of the most restrictive planning laws in the world have made this a very hard country to make things in. We can see the evidence for that across a whole range of industries. Cement production is back down to levels last seen in the 1950s. Car production is down to early 1960s levels. Much of the petrochemicals industry has closed down. The list goes on. Domestic capacity has been steadily replaced by imports because it is simply too expensive to operate in the UK.

If we face severe shortages this winter, and perhaps even rationing, it will expose the folly of 20 years of running down basic industrial capacity. If you can’t make stuff any more, then you are left completely exposed to whatever crisis may erupt in another part of the world. The price for that will be very high.

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Last November, Brazilian federal agents pulled banker Daniel Vorcaro off the tarmac at São Paulo's Guarulhos airport as he prepared to board a private flight out of the country. He was subsequently charged with multiple counts of bank fraud, corruption and money laundering, and is currently awaiting judgement, says The Conversation. Daniel Vorcaro, 42, presided over Brazil's biggest banking failure in a generation – his defunct Banco Master left a $10 billion black hole and many thousands of victims.

He is hardly “the first Brazilian scammer in a banker's suit”. But, aside from scale, what singles this case out is Vorcaro's network of influence, which extends right to the top of the Brazilian establishment. As the country approaches crucial elections, the Banco Master crisis “threatens to shake the country's democracy to its core”. It's hard to find a prominent Brazilian politician – including president Lula – who hasn't been dragged into Vorcaro's net. Portraying himself as a financial wizard, he took “the country's political system hostage”, allegedly building a massive network of tame “economists, influencers, bureaucrats, politicians and judges”. In the months since his arrest, tantalising details of high-level hobnobbing have emerged.

The Brazilian newspaper Gazeta do Povo compares Vocaro's reach into the Brazilian establishment with Jeffrey Epstein's mastery of US power circles. Certainly, the tactics were similar, says The Economist. Vocaro revelled in his “playboy” lifestyle – inviting politicians “to lavish parties with sex-workers” and feting several Supreme Court judges. His bank was essentially a “Ponzi scheme with an influence-peddling operation attached”: Bernie Madoff meets Jeffrey Epstein.

Daniel Bueno Vorcaro was born in southeastern Brazil in 1983 – the son of a real- estate broker, says The Capital Review. Vorcaro studied for a degree and then an MBA at the Brazilian Institute of Capital Markets and embarked on a series of business ventures before getting into banking in 2018, when he struck an agreement to acquire Banco Maxima and rebranded it Banco Master.

“What followed was a period of extraordinary – and, as investigators now allege, artificially inflated – growth.” The engine was “an aggressive retail strategy” based on extensive issuance of bank deposit certificates offering returns way above the market average. “Ordinary Brazilians, lured by yields that rivals couldn't match, poured their savings in.” What they didn't know was that “much of the bank's asset base was hollow”.

Daniel Vorcaro spent millions wooing Brazil's political class

Daniel Vorcaro put substantial effort into wooing Brazil's political right. He spent millions financing Dark Horse, a biopic of former president Jair Bolsonaro, who was jailed for orchestrating an attempted coup in 2022 – reportedly at the request of the latter's son, Flavio Bolsonaro, a senator and presidential candidate who until recently denied he'd ever met Vorcaro. But perhaps most worrying, says The Economist, are the relationships forged with leading members of Brazil's judiciary – not least Supreme Court justice Alexandre de Moraes, whose lawyer wife was recently revealed to have signed a $25.5 million contract with Banco Master.

As the probe into Vorcaro's affairs – dubbed Operation Compliance Zero – continues, comparisons with the “car-wash” bribery scandal that rocked Brazil a decade ago are inevitable, says Bloomberg. Much as it might like to, Brasilia's political class can't “put the Master case behind it”. Still, the “biggest loser”, says The Economist, is democracy. Amid all the corruption scandals that have tarnished their country, Brazilians at least used to trust their top court. “Now that trust is fraying.” Corruption at the heart of the country's institutions “could undermine trust in democracy more than Bolsonaro ever did”.

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What's happening with British schools?

British schools – and English schools in particular – are doing remarkably well. Results from the OECD's 2025 Programme for International Student Assessment (PISA) were published earlier this month, and the UK is close to the top of the class among European peers.

The closely watched comparative survey, which began in 2000, is conducted every three years, assessing the educational skill levels of 15-year-olds around the world, with an emphasis on critical thinking, problem solving and the application of skills to real-world contexts. It now covers 91 rich and middle-income nations.

For the first time, the UK was in the top ten countries globally for each of the three subjects covered – reading, maths and science. The highest reaches of the combined league table are dominated by East Asian nations: China, Singapore, Macao, Taiwan and Japan are the top five; South Korea is seventh. Of countries outside that region, the UK, eighth in the table, lies behind only Estonia, ranked at number six.

Are education standards rising globally?

No, most countries' results continued to decline, while in the UK they held steady in England, and only dropped a little in Scotland and Northern Ireland and a bit more in Wales (the exception being science, where they improved across the UK).

That flatlining doesn't necessarily take away from the UK's success. “Staying still, in the face of headwinds, while nearly everyone else drops back precipitously, is still an achievement,” says Sam Freedman on Substack.

But it obviously raises questions about what is going on globally, with potential factors including a pandemic hangover and decreasing levels of concentration in line with higher screen usage among children. In reading in particular, school pupils are struggling with skills such as interpreting information and assessing evidence, with an increase in “hasty reading” (quick but inaccurate). The OECD suggests this may be an effect of technological distraction and more reading happening on screens.

Is this good news for British schools?

Yes, and for England in particular. The PISA scores are also broken down in line with the separate school systems within the UK and show England now significantly outperforming Scotland and Northern Ireland, with Wales the weakest of the four. The results also show England has pulled further ahead since the last three-year PISA cycle compared with the rest of the UK, and with European peers more widely.

These striking results have been widely reported, says Freedman, but the extent of the gap between England and the rest of Western Europe has been underplayed. For example, in reading, the 25% most disadvantaged young people in England outperformed the average for all pupils in Germany, France, the Netherlands, Norway and many other countries. “The overall gap has gone from nothing to significant in a decade.”

Where did it all go right for England?

England's increasingly impressive record over the past decade has its roots in stable and sensible long-term policymaking under successive governments, says Iain Martin on Reaction – dating back to the creation of the national curriculum under Conservative education secretary Kenneth Baker in 1988. In the late 1990s and 2000s, the Blair governments did “fantastic work” expanding the Tories' reforms, sharpening teaching and giving schools more autonomy.

Then the coalition government, with Michael Gove as education secretary, “supercharged the raising of standards”. The basic planks of England's educational strategy are a curriculum focused on core knowledge, greater emphasis on behaviour, more high-stakes assessment, the use of synthetic phonics in early reading and a strong culture of professional development.

Is Britain’s old-school approach to learning paying dividends?

Indeed. England's model of curriculum and assessment is often “mischaracterised” as “rote-learning” and a “factory model” of schooling, says Freedman. Sceptics argue it might lead to good test results, but, compared with more modern “competency-based” approaches, is of little relevance to real life and less engaging for pupils.

Yet the PISA test results, which focus on creative problem-solving and critical thinking, are a big vote of confidence in England's education reforms. There are two other factors that may well have contributed to our success – namely a more sceptical attitude towards screen-learning and smartphones, and greater success at integrating the children of immigrants.

According to PISA, distraction from digital devices in class is far lower in England than most European countries. And in England, immigrants outperform non-immigrant 15-year-olds, whereas in France and Germany they lag far behind. That reflects greater success in integrating new arrivals.

What has Labour got planned?

Since coming back to power in 2024, Labour has passed the Children's Wellbeing and Schools Act 2026, which was concerned with free school meals, safeguarding and professional standards. This year, it has also announced an overhaul of SEND provision (for children with special educational needs and disabilities) in its Education for All Bill.

Alas, the new education secretary, Lucy Powell, is now making ominous noises about in effect copying the Scottish approach that has led to Scotland falling far behind England, says Fraser Nelson on Substack.

Powell says she wants to replace the “exam factory with the talent factory” – a very Nicola Sturgeon-like soundbite. She's proposed a broader curriculum and qualifications, fewer written examinations and more coursework and practical assessment, alongside “stepping-stone” qualifications for pupils who fail English or maths. “But why? The experiments have been done. The answers are in. Her way was pioneered by Scotland, and it leads over a cliff.”

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In the weeks after the Budget of October 2024, pension schemes started receiving an unusual request. Savers who had taken their tax-free cash wanted to hand it back.

They had taken it because of rumours that the then chancellor, Rachel Reeves, was about to cut it in the Budget. She didn't.

By December 2024, HMRC was writing to schemes to explain the position. The money could go back into the pension pot, but because there is only so much tax-free in a lifetime, what these savers had taken had counted against that limit for good. The decision they took could not be reversed. There are strict rules around the tax-free pensions lump sum allowance.

The same thing happened the following year, before the Budget of November 2025, and again the rules were left alone.

Now the same warnings are circulating ahead of chancellor John Healey's first Budget on 28 October about pensions tax changes.

Healey himself has not made an announcement. This does not mean that this year's speculation is wrong, but the rumours simply mean you are being invited to act on a claim that has been made twice in two years, and been wrong twice. Which raises the question of where the claim keeps coming from.

Why Budget tax rumours keep appearing

I've worked in financial journalism long enough to know how these stories start. Journalists hear genuine policy discussions and think tanks publish proposals - and out come the warnings.

Interested parties lobby, and readers do need warning about measures that might plausibly arrive. But often, stories are

The difficulty is what happens on the way to the reader. 'This is being discussed' becomes 'this may happen'. By the time it reaches the kitchen table, it has become 'this will probably happen’, prompting some to take action too soon.

Where the numbers actually come from

In August 2024, the Fabian Society proposed that the maximum tax-free lump sum be cut to the lower of £100,000 or a quarter of someone's pension wealth. Torsten Bell, the pensions minister, had argued for £40,000 back in 2019, when he ran the Resolution Foundation.

The case for reform is a serious one, and it isn't confined to think tanks with a political affiliation. Writing in September 2024, the Institute for Fiscal Studies called the tax subsidies for pension saving generous, opaque and poorly targeted, and said they could sensibly be reformed. But it also warned against constant tinkering, and argued that savers need to know where pensions policy is going, whatever any one Budget does.

Two Budgets have come and gone since then, and savers are no clearer than they were. What they do have is a set of proposals, and no statement from any chancellor that he intends to act on them.

But the seeds of fear have been planted.

Why you can't simply put your tax free pension back

You can usually take a quarter of a pension without paying income tax on it. What far fewer people know is that there is also a limit on the total you can take tax-free across all your pensions in your lifetime, currently £268,275. It is called the lump sum allowance, and it moves in one direction. Once you have used part of it, it stays used.

HMRC's position is that sending the money back does not restore the allowance, and that there is no legal mechanism for doing so. The Financial Conduct Authority, which regulates pension providers, has said that taking tax-free cash does not by itself give you a right to cancel. Cooling-off rights attach to buying something new, an annuity for instance. Taking your own money out of your own pension isn't buying anything.

Suppose someone of 58 with a £600,000 pension draws the full quarter she is entitled to, £150,000, years before she needs it, because she has read that the allowance may be cut. The Budget comes and goes and nothing changes. Her £150,000 is now sitting outside a pension, where growth would have gone untaxed. And of the £268,275 she could have taken tax-free across her lifetime, £150,000 is gone. That part of her allowance is spent. None of what she had read was from anyone who really knew.

Are Budget rumours ever right?

Waiting is not always cheaper than acting.

In October 2024, capital gains tax rates rose from 20% to 24% for higher-rate taxpayers, and they rose on Budget day itself. People who had already decided to sell something, and brought the sale forward, saved four percentage points. The official forecasters later confirmed that enough of them did it to show up in the tax figures.

The speculation about cash ISAs proved right too. The cash allowance falls to £12,000 for savers under 65 from April 2027. So did the speculation about salary sacrifice, though that change doesn't take effect until 2029. Anyone who reorganised their pay in the autumn of 2025 moved more than three years early.

The people who gained in these three cases had something in common. They were mostly bringing forward a sale or a change they had already settled on, not doing something new because of something they had read.

Not everything in the news this autumn is speculation. Two changes affecting pensions and savings are already settled. The cash ISA change and the pension inheritance tax change both arrive in April 2027. You can plan around both, because both are coming.

A cut to the lump sum allowance is different. It has been proposed, and it has been reported. No government has said it is going to happen.

Three questions to ask yourself before 28 October

Before acting on anything you read between now, here’s what you should ask yourself first:

1. Has this been announced, or is somebody predicting it?
2. If the prediction is wrong, can you undo what you did?
3. What will waiting cost you?

The third question isn't a way of talking yourself into doing nothing. Sometimes waiting has a real price, as anyone who sold an asset after 30 October 2024 discovered. But that price is usually one you can work out in advance. The cost of acting on a rumour that turns out to be wrong often isn't.

The Budget is on 28 October. Until then, the thing to keep hold of is the difference between what the government has announced and what other people think it might do. The first one you can plan around. The second is a forecast, and there's no way of knowing in advance which forecasts are the right ones. Where a decision can't be undone, that difference is worth waiting a few weeks to resolve.

Gary Stevenson, a gobby former City trader turned socialist firebrand, known for his advocacy of a wealth tax and “for dressing like a 16-year-old scally despite being a 39-year-old man”, as Christopher Snowdon puts it in The Critic, was briefly all over the news during the silly season, when Parliament was in recess, and there was hence nothing better for political hacks to talk about.

Stevenson's perhaps most stunning achievement was to make and present a Channel 4 documentary about himself and his ideas in which he allowed his arguments to get severely and embarrassingly bested by people who know what they're talking about. His five minutes of fame ended with his early retirement from social media, citing burnout and exhaustion.

The big issue with wealth taxes

Sadly, his ideas have a bit more life in them yet, and for a simple reason – Andy Burnham, the new prime minister, is sniffing around for more money to fund his spending commitments. Where the cash will come from is, as Gerard Lyons says in The Times, the “defining fiscal question” of the present moment. Most economists rule out imposing wealth taxes as a solution to that problem, and for good reasons. But politicians are prone to forget sound economics when they have more pressing problems to deal with, such as huge fiscal holes to fill and political constituencies to placate.

Chancellor John Healey, now preparing his first budget for delivery at the end of October, has pointedly refused to rule out tax rises and faces the challenge of rebuilding a fiscal buffer eroded by the Iran war and weak growth while funding new spending commitments from a prime minister whose premiership so far seems distinguished mostly by his inability to see a spending commitment he doesn't like.

Healey's options are limited. The Office for Budget Responsibility is unlikely to upgrade its forecasts for economic growth or future tax revenues, and borrowing more will not be easy. Gilt issuance is already around £250 billion this fiscal year and debt servicing costs are on the rise. And Labour's manifesto commitments rule out increases in any of the main taxes. Attention has thus long been shifting to wealth and other taxes, presented as a simple way out of the predicament.

“They are not,” as Lyons says. Modern tax systems have evolved in the way they have because governments need “large, reliable and predictable” sources of revenue. That consideration means that revenues generally come primarily from taxing recurring flows of income, profits and spending. Such taxes generate around four-fifths of tax revenues across the OECD club of developed nations. Wealth taxes depart from this principle, seeking to draw income from a stock of wealth held in assets rather than from flows – and that is far easier said than done. Countries that have tried to impose them have usually ended up abandoning them. Where they remain, they have simply become another burden, not on idle wealth, but “on entrepreneurs, business owners and productive capital”.

Supporters of a wealth tax often cite the Wealth Tax Commission, the report of a group of independent experts tasked with studying the feasibility and impact of a wealth tax, but its own research undermines the case, says Lyons. Even at a tax rate of just 1%, the Commission estimated that behavioural responses could shrink the tax base by between 7% and 17%. “Many people are asset rich but cash poor. A tax that is detached from recurring cash flow eventually forces borrowing or the sale of assets simply to pay the tax. It alters behaviour, depresses asset values and adds administrative complexity.”

Why are wealth taxes so popular?

It is easy to portray those who oppose a wealth tax as “bootlickers for the haves and the have-yachts”, says Snowdon, but “the reason most economists are dismissive of the idea is the same reason governments of both right and left have abandoned them over the years: they are costly to administer, don't raise much money and drive talent out of the country”. What most people who advocate soaking the rich don't realise is that the money of the very wealthy is “not just sitting there in a bank account”. It is invested in shares, the value of which fluctuates daily and can spike or collapse dramatically. It is invested in property and possessions, the value of which is not known until they are sold. And in the case of people who technically own £10 million or more, it is the value of the businesses that they founded and own, the price of which is also not known until they are put up for sale.

The first task of a government that wants to introduce a wealth tax is to calculate how much wealth people have, but this is therefore an inevitably expensive and bureaucratic exercise requiring many arbitrary decisions that are open to challenge by those being assessed, says Snowdon. And that's just the start of the problems. In 1990, 12 OECD countries had a wealth tax. Today, there are only three. Norway and Switzerland use them as substitutes for inheritance and capital-gains taxes, and Spain's is “so full of holes that what remains can be considered largely symbolic”: it raises so little revenue that most fiscal accounts do not even bother to list it. In short, it soon dawns on governments that try to introduce them that wealth taxes are simply not worth the bother.

Why then are we still talking about them? Mainly because “more sensible proposals take five minutes to explain and therefore have little chance of being adopted in the current political environment”, says Joseph Heath, an academic philosopher writing on Substack. The main merit of the idea of wealth taxes for those on the left is that they are very easy to explain: “Billionaires are bad, so let's take away their money!” Wealth taxes are, in other words, a perfect example of “slopulism” – “policy ideas that make for quick, effective soundbites”, but that are useless and “almost universally rejected by experts”.

It is not even necessary to take a position on whether inequality is a big problem that we must deal with to see this. Perhaps you think it is. Even if so, there is nothing a wealth tax can accomplish towards whatever end you have in view that can't already be accomplished through the current tax system – that is, by taxing capital income. Some might say that this does not capture the increase in value of the stock of wealth when those assets earn a return or appreciate in value, but that is just an argument for treating the increase as income and taxing it – as happens already. All income derived from wealth in the form of dividends, interest payments and capital gains must be declared as income. The principle, as already stated, remains to tax the flow, not the stock of wealth. “For people who are angry about the Elon Musks and Peter Thiels of the world, a wealth tax offers the most immediate and intuitive way of channelling that anger. Unfortunately, the desire to punish one's enemies is not a sound basis for tax policy.”

Heath was talking about the situation in the US, but it is hardly very different here in the UK. Given that unfortunate fact, what we can expect from the current government in terms of tax policy? Nothing very pretty. Imagine you are a politician who does not believe in wealth taxes, but who wants to be popular with people who do, says Kristian Niemietz on Substack. You know wealth taxes don't work, you have economic advisers who tell you so, and you know they are usually more trouble than they are worth. But at the same time, you believe that the Gary Stevensons of this world have won the argument and, in any case, you need revenue sooner rather than later. What would you do? You would probably, says Niemietz, come up with “all sorts of policies that mimic aspects of what a wealth tax is supposed to do, without being a wealth tax proper”.

That would explain a lot of otherwise puzzling moves by the current government – why, for example, we have seen increases in the rates for capital gains taxes while tax-free allowances have been cut; why landlords face higher rates on rental income and higher stamp duty land tax rates; why we will see a “mansion tax”, a council-tax surcharge for properties worth more than £2 million. Polls show that such reforms are popular with the public. They might not be so popular when the consequences come home.

All such changes will probably decrease savings, investment and wealth generation while raising only minor amounts of additional revenue, as Niemietz points out. But other consequences will be more immediate, visible and intrusive. The government plans, for example, to send tax inspectors around the country to value homes believed to be in the price range of the mansion tax. Those inspectors will have powers to demand entry into people's homes so that they can conduct a valuation. This may seem to be an intrusion into the private sphere and a violation of civil liberties, but it is an inevitable consequence of the bureaucratic process of valuing wealth that hasn't yet been sold in order to impose wealth taxes. “If this sounds like a terribly inefficient way of raising money to you, just imagine what an actual wealth tax, which does the same thing for assets across the board, would be like.”

Policymakers need to heed the lessons of history

The popular support for higher rates and wealth taxes may not be all it seems either, says Viggo Terling, also in The Critic. Westminster has “convinced itself that the public is desperate to tax the rich harder”. But new polling conducted by the Adam Smith Institute suggests otherwise. True, asked whether they support a wealth tax, 61% of voters say yes. But told additionally that such a tax could drive high-net-worth individuals abroad and reduce the money available for public services, support plummets to 37%.

Voters should be capable of doing the maths themselves. The top 10% of earners contribute 60% of all income-tax revenue. If enough net contributors flee Britain to escape an ever-increasing tax burden, the resulting bill will land on everyone else, either in the form of higher taxes or worse public services, says Terling. Worryingly, the millionaire exodus seems already to have begun. Britain now has 442,000 sterling millionaires, down 7% since 2024 and the lowest number since the financial crisis. Britain's tax burden is already testing post-war highs – a level the Office for Budget Responsibility has called “uncharted territory” – and imposing new wealth taxes and leaving tax thresholds unchanged will change incentives dangerously for the super-rich and workers alike.

Today, earning between £100,000 and £125,140 can leave you facing an effective marginal income-tax rate of 60%. Yet 81% of the public agree that people should be able to keep more of what they earn and pass it on to their children. “That is about as close as Britain comes to a settled moral position on tax, and no major party currently builds its policy around it.”

It's beyond time that policymakers heeded the lessons of history and stopped “wasting public resources reviving failed ideas, especially ones that are more about political signalling than devising meaningful solutions”, says Cristina Enache for Project Syndicate. “To restore public confidence in our political and economic system, we should instead focus on fostering growth and expanding opportunity – on building the bottom up, not tearing the top down.”

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Soaring oil prices have pushed UK inflation to a five-month high. Consumer prices rose 3.1% in the year to August. Motor fuel prices rose nearly a quarter, with petrol rising to 161.3p per litre and diesel hitting 181.8p. Brent crude is back above $100 a barrel. Trading at $108 as of Wednesday, it has risen 78% since the start of the year.

While there is no end in sight to America's war with Iran, until recently the White House had seemed to be gaining the upper hand in the economic battle. Despite the closure of the vital Strait of Hormuz artery, oil prices had stayed below $100 for several months. That was in large measure thanks to clandestine shipments through the strait – high-risk “dark crossings” made by crude tankers with their transponders turned off so as to evade Iranian detection, say Dmitry Zhdannikov and Anushree Ashish Mukherjee for Reuters.

Together with pipelines that circumvent the Strait of Hormuz, the “industry consensus” is that roughly two-thirds of pre-war Persian Gulf volumes are still making their way out of the region. All told, such “dark shipments” may have reached 500 million barrels between June and August, enough to put a meaningful dent in the world's thirst for fuel.

Now the pendulum is swinging the other way. Last week, Saudi Arabia was forced to close its vital east-west pipeline following attacks by Iranian-backed militias in Iraq. That may cut global oil supplies by as much as 3.6 million barrels per day, equivalent to 3.6% of global demand, according to analysis by Kpler.

Pipelines have been a major tool for bypassing Hormuz, but these strikes are a reminder that they can be destroyed, Anne-Sophie Corbeau of Columbia University tells the BBC. In war, pipelines are “sitting ducks”.

Meanwhile, the alternative Red Sea route is coming under renewed threat from Yemen's Houthi militia, says Gideon Rachman in the Financial Times. The Houthis are a tough nut to crack. They have been fighting better-equipped enemies for more than two decades. The persistence of the Taliban, another US adversary that ultimately outlasted Washington's patience, comes to mind. Another vital energy route is being squeezed just as the northern hemisphere enters winter.

Surging oil price at the root of the debt crisis

Surging energy prices and inflation are the root cause of the global spike in government borrowing costs, says Aaron Back in The Wall Street Journal. The benchmark US ten-year Treasury this week topped 5% to hit its highest level since 2007. After years of deficit spending and the “twin crises” of Covid-19 and Russia's invasion of Ukraine, the world's developed nations entered this year in a “weakened fiscal position”. That was “the dry timber that the Iran war now threatens to set ablaze”.

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The Chinese economy is facing headwinds. There is weakness in consumer spending, its property market is still in a slump, and there’s weakness in business investment.

Speaking on the latest episode of MoneyWeek Talks, Dale Nicholls, manager of Fidelity’s China special situations fund says while there may be negative things to say about the country’s economy, there are also bright spots to look out for,

“In terms of the domestic business, things are relatively muted. But, as always there’s pockets of strength in certain areas.”

He pointed to some constituents of his fund which are producing good numbers, like high-end mall operators and some restaurant chains, and added that while there is a “relatively weak consumption market”, the firms that have the right business model are taking market share.

Artificial Intelligence (AI) is also an exciting area for the region. “The companies that are involved particularly with anything AI-related, there’s somewhat of a tech boom. Business is strong for the companies that are involved with that,” he said.

AI is a major growth area for the global economy, and the controversies around it are mirrored in China too. For example, the concerns around the extent of capital expenditure and the return on investment.

Nicholls said: “The big technology companies – the Alibabas, the Tencents of the world – the market’s reacted badly to them increasing capex, but this feels to me a little bit overdone.”

The investors who are scorning increased capex are not asking the right questions, Nicholls claimed, namely whether the firms have a reputation for bringing returns on their investment.

“A lot of these companies have pretty good track records of generating good returns, and the feedback we get from them on what the return they’re getting on their spend is pretty good,” he said.

Nicholls was confident that parts of the AI market in China still provide good value. “Some of those big tech names I would put in that category. They’ve been sold off but if you think about the businesses as the sum of its parts – things like cloud – you’re actually seeing accelerating growth now, so it’s definitely seeing things pick up.”

Is China winning the AI race?

Although the models produced by US-based firms are currently the global leaders in AI, Chinese models are giving them a run for their money.

“[China] has some of the most competitive LLMs (large language models) out there, but the market doesn’t seem to be giving them a lot of value for that. Particularly if you look at the standalone LLM companies listed in China, they’ve done quite well.”

Chinese models have already disrupted the Western AI market multiple times. The release of DeepSeek’s R1 model in January 2025 brought with it a lot of panic in the West as investors reacted to Chinese AI challenging Western models.

A similar panic was caused when Kimi K3, another Chinese AI model, caused panic was released in July.

“Kimi K3 is interesting because it’s quite different in terms of size relative to others, but the performance is right up there with global frontier models. It’s much bigger, and they’re pricing it that way as well. So not quite the levels of US models in terms of their pricing, but obviously much higher than the other open weight models that the Chinese have been offering.

“So I think it’s another indication of the innovation that’s happening on the ground.”

For more, watch the full episode of MoneyWeek Talks with Dale Nicholls in conversation with MoneyWeek’s Cris Sholto Heaton on YouTube – or listen on any podcast platform.

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Britain gained full access to the CPTPP, the huge Pacific free-trade zone, last week after Canada's ratification. It is by far the most significant trade deal that Britain has been able to secure since leaving the EU. Though, with the bond markets in meltdown, the cost of Britain's debt starting to soar, and the economy sliding closer to recession, it is perhaps not surprising that this piece of positive news did not get much attention.

The CPTPP – or Comprehensive and Progressive Agreement for Trans-Pacific Partnership, to give it its full, if slightly cumbersome name – is a free-trade zone that covers 12 countries across Asia and the Americas, including Canada, Japan, Mexico, Australia and Malaysia. It became fully operational on 1 September. Our exporters now have full, tariff-free access to its 600 million consumers. The Treasury estimates the deal could deliver a £2 billion boost to the economy. It could be far larger: the CPTPP represents a vast market that is growing at a rapid rate.

The problem is that at precisely the same time that the CPTPP comes fully into effect, the government is talking about a “reset” with the EU. Prime minister Andy Burnham has talked constantly about getting closer to the EU, and senior ministers have come out in support of joining the customs union. But any closer relationship would, in effect, mean leaving the CPTPP. Brussels would demand full control of our trade policy as part of any deal, and membership of the customs union would mean that the EU would set Britain's tariffs again, including levies on anything we buy from the Pacific. The two trade deals are incompatible.

It would surely be crazy to choose Europe over Asia. Europe is a larger overall economy, it is a lot closer, and it still accounts for more than 40% of British exports. But we already have tariff-free access to the EU's market through our existing agreement. For growth, which is what really matters, the Pacific bloc is far more important than the European one.

To start with, it is rising in significance, while Europe is steadily declining. At the start of the century, the EU accounted for 25% of global output. Today it is down to 15%. By contrast, the Pacific, on both Asian and American coasts, has been growing far faster. Right now, the CPTPP is only £4 trillion behind the EU, measured by total GDP. Within a decade, the Pacific bloc will have overtaken the EU. That makes it a far more lucrative market.

The CPTPP is what the EU might have been

Next, the legal framework of the CPTPP is far superior. Members have full access to each market within the bloc based on recognition of each other's standards. Subject to local vetoes, if your product is on sale in Japan and meets all its safety and regulatory standards, then you can sell it in Mexico or Australia, and vice versa. It acknowledges that there is no need for an extra layer of bureaucracy. More importantly, there is none of the paraphernalia of an emerging superstate. There is no CPTPP flag, or anthem, or foreign minister strutting about on the world stage. There is no freedom of movement. It is just a simple free-trade zone that allows goods and services to be sold, and without tariffs, across a huge range of territories – akin to what the EU was back when it was just the Common Market.

Finally, it is easier to do business with. When an economy is stuck with zero growth, as Italy, France, and now Germany are, there are very few commercial opportunities. Not much is getting built, companies are not investing and consumers don't have much money to spend. By contrast, when it is growing rapidly, as most of the Pacific is, lots of possibilities open up. People are ready to sign deals because they need stuff. British firms will find it far easier to grow their order books in Australia, Chile or Malaysia than they will in Portugal, Greece or Austria.

So long as the PM keeps talking about a reset with the EU, there is no point in British businesses embracing the opportunities offered by the Pacific deal. The government should make it clear that Britain's main trading bloc is the CPTPP and that we have no interest in anything other than our existing trade deal with Brussels – and then seize the opportunities the CPTPP offers.

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What is a data centre?

A data centre is a big, highly secure building full of computers and the other physical infrastructure that the digital world is built on. They've been around for decades (since the 1940s, reckons IBM, in the form of “server rooms”), but the internet, cloud computing and now the widespread adoption of AI have all radically increased the need for giant – and now “hyperscale” – centres. Nowadays, much of what we do online every day – from Google searches to banking to streaming Netflix – depends on computing power and connectivity housed in data centres. There's no single authoritative figure for the number of such centres in the world, because there's no universally accepted definition of how big an installation has to be to count as one. But in terms of large data centres, commercially operated by companies such as cloud providers, there are around 11,000–12,000 worldwide, with the majority in the US.

What's inside a data centre?

A typical data centre will contain servers (powerful computers that process, store and distribute data); networking equipment (to connect the servers to the internet); sophisticated cooling systems (otherwise computers get very hot, and then stop working); and power infrastructure (such as substations, back-up generators and batteries). In recent decades, data centres have got much bigger, with so-called “hyperscalers” – the likes of Microsoft, Google and Meta – building vast campuses covering many acres. A data centre with 150 racks holding 25 servers each equates to 3,750 servers; but that's no longer considered large. According to the International Data Corporation, a true “hyperscale data centre” is one that contains at least 5,000 servers and occupies at least 10,000 square feet of physical space and uses more than 100MW of energy. And many are now vastly larger than that. A hyperscale data centre can hold thousands of racks and hundreds of thousands of servers – all built on vast sites covering hundreds of acres.

Why are data centres controversial?

Much media coverage of the backlash (or “techlash”) against data centres focuses on distrust of Big Tech and AI, and fear of job losses. More than half of Americans say they're more concerned than excited about the growing use of AI in daily life, according to a recent report from the Pew Research Centre. But the dominant sources of opposition are more mundane, says The Economist. Polls suggest that what worries people about the centres is their perceived local impact. In a recent Fox News poll, 75% of respondents cited concerns such as energy use, utility and water bills, construction disruption and traffic as the main reason they opposed a data centre in their area. Just 11% pointed to AI itself.

The politics around building data centres

More than 500 US counties and municipalities have passed data-centre bans or moratoriums, while dozens of proposed projects have been abandoned. Research group Data Centre Watch calculates that grassroots groups blocked or delayed at least 75 data centre projects worth about $130 billion in the first three months of 2026 alone. That's close to the $156 billion worth of facilities that were disrupted during all of 2025. What's striking, too, is how swiftly politicians have shifted their position. The Republican governor of Texas, Greg Abbott, once touted the state as the “epicentre of AI development” – it boasts the most of any state except Virginia. Last week, though, now up for re-election, he said data centres had “dug their own grave” by overreaching. Across the US, the issue has emerged as a surprise key battleground in the US midterm elections, with some unexpected opponents (Republicans) and supporters (union-backed Democrats) of development. With typical grace and tact, president Donald Trump opined that: “The only reason that communities throughout the USA should not want data centres is if they want to end up being backwards and poor. If they want to be successful and rich, with far lower taxes and jobs all over the place, let data reign.” China is delighted with the US backlash, he claimed. “If we kill the golden goose, you will only have yourselves to blame.”

Is Donald Trump right about data centres?

Perhaps. “Voters and politicians alike are making a big mistake” in blocking data-centre growth, says The Economist. One common myth is that data centres guzzle endless water. In fact, a mid-sized centre uses about as much as two golf courses and much less if it recycles its water, as many now do. Concerns over energy use are more credible, but there's little evidence that they raise energy prices for households; rather, by increasing demand they spread the fixed costs of infrastructure among more kilowatt-hours sold. And in any event, the “answer to competing demands on resources – whether water, electricity or something else – is to price them according to their scarcity, thereby encouraging more provision and higher living standards over time. It is not to ration inputs according to the arbitrary judgment of scolds.”

What about here in the UK?

Britain has a claim to being the home of the first data centre – in the large shed at Bletchley Park where wartime cryptographers built Colossus, the world's first programmable electronic computer. Today, the UK has 450 “large data centres”, according to government figures, with more than half of them in or close to London. In September 2024, the government designated data centres as critical national infrastructure and in January 2025 announced five “AI Growth Zones”, with £28.2 billion of planned investment. Our biggest data centre to date, says James Price on CapX, is a 148MW site outside Cardiff, but progress is slowing, with the likes of the UAE and Japan now steaming ahead. This, of course, is hardly a surprise. “In Britain, we can force £100 million to be spent on a bat tunnel; imagine what our planning system will do with a gigawatt campus.”

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New chancellor John Healey has laid out the principles of his economic policy, saying he will stick to the existing fiscal rules and seek to control public spending while trying to boost growth in Britain.

Healey emphasised his commitment to fiscal discipline and stimulating growth in his first major speech in his new position, delivered at a manufacturing plant in Coventry on 7 September.

The cost of borrowing was a major focus. Gilt yields reached record highs last week with the yield on 10-year UK government bonds (gilts) rising above 5.29% on 2 September, the highest level for 19 years.

"Staying true to our values means being honest about the need to control government spending,” Healey said.

He noted that government debt as a share of GDP has soared from 64% in 2009 to almost 100% today and placed the blame at the foot of successive Conservative governments.

He said borrowing costs were around the G7 average until the Truss budget “crashed the economy [...] Since 2022 we have been paying that Truss penalty as we battle to re-establish belief in Britain.”

“There's nothing progressive about the government spending £1 in £10 on debt interest,” he added.

Healey also sought to reassure markets that he will not let borrowing get out of control or ignore Britain’s self-imposed fiscal rules, saying: “On my first day in the Treasury I said fiscal discipline was my first priority as chancellor.

“It underwrites every promise this government makes and the Prime Minister and I are in lockstep in our commitment to meeting the fiscal rules at the upcoming budget: to balancing the books, with a buffer to protect against uncertainty, to controlling borrowing to bear down on inflation and reducing long term pressures on our public finances.

“This isn’t about lines on a graph, or numbers on a spreadsheet. It’s a matter of values.”

What will happen in the Budget?

As Healey’s speech was mostly in broad strokes, he did not provide specifics on what new policies may be announced in the Budget and refused to answer any questions about it.

Responding to questions from journalists on the subject, Healey said: “If I respond to speculation now that will only fuel more speculation. Every chancellor would say ‘that’s for the Budget’, and I will set out my plans and the future route for the government for this country at that Budget.”

Although we will have to wait for a full economic plan, Healey did make some broad announcements.

On devolution he said: “At the Budget, I will set out a roadmap to fiscal devolution, a permanent transfer of power and resources from Whitehall to our regions, with greater business rates retention for local councils and strategic authorities, grants from central government replaced by a share of local income tax for every mayoral strategic authority beginning in 2028.”

He also made a new commitment to reduce the regulatory burden on businesses by 25% before the end of this parliament in 2029 by taking “an axe to the thicket of consultation, litigation and administration that has a stranglehold too often on private investment.”

The chancellor also said he will make changes to the Treasury Green Book, the guidance on how to evaluate public spending, to skew investment into projects with “more long-term potential.”

Meanwhile, the way the government decides where to invest will start to include “economic potential analysis” in business case decisions to judge regions not on their current state, but on what they could become in the future.

Will taxes rise in the Autumn Budget?

Although Healey did not directly address whether or not taxes will be hiked in his first budget, he stood by the 2024 Labour manifesto which he said made “very strong, very clear, very specific" commitments on tax.

That manifesto pledged that none of the ‘big three’ taxes – income tax, national insurance, and VAT – would be raised on ‘working people’, ruling out the possibility that these taxes will rise.

However, these commitments still leave the door open for alternative tax hikes. For example, Rachel Reeves emphasised this same commitment in her first two budgets but still raised taxes in alternative ways.

Government debt markets have been around since the city-state of Venice issued its first bonds in 1171, but public debt only became tradable in the English-speaking world six centuries later.

Contemporaries held conflicting views about the development. Several leading members of the Scottish Enlightenment were downbeat. As government debt across the developed world escalates, their concerns are proving timely.

In his book, A Fabulous Debt: The Epic Story of How Bonds Built the Modern World, Financial Times journalist Robin ‌Wigglesworth explains how Britain's geopolitical ascendancy was inexorably linked to its public finances, and in particular its ability to issue vast quantities of low-cost debt.

Thomas Mortimer, an 18th-century financial writer, described the nation's bond market as “the standing miracle in policies, which at once astonishes and overawes the state of Europe”.

Not everyone was sanguine. In his 1752 essay Of Public Credit, the Scottish philosopher David Hume fretted about Britain's newfound tendency to “mortgage the public revenues, and to trust that posterity will pay off the incumbrances contracted by our ancestors”.

Access to the bond market, said Hume, allowed politicians to behave extravagantly without having immediately to raise taxes. “The practice, therefore, of contracting debt will almost infallibly be abused, in every government.”

Adam Smith, the economist who wrote The Wealth of Nations, claimed the issuance of long-dated public debt “has gradually enfeebled every state that has adopted it… When national debts have once accumulated to a certain degree, there is scarce, I believe, a single instance of their having been fairly and completely paid.”

Another Scottish contemporary, Adam Ferguson, opined that a permanent and unproductive national debt was “to be reckoned among the causes of national ruin”. In the decades after these warnings were issued, Britain's national debt kept expanding. No crisis appeared, however, and the country's prosperity grew apace.

Looking on the bright side

In his History of England (1848), Thomas Babington Macaulay mocked the debt doomsayers. He hailed Britain's “fabulous debt” as “the greatest prodigy that ever perplexed… statesmen and philosophers.

At every stage in the growth of that debt, it was seriously asserted by wise men that bankruptcy and ruin were at hand. Yet still the debt went on growing; and still bankruptcy and ruin were as remote as ever.”

The error of the pessimists, said Macaulay, lay in their comparing national debt to that of an individual borrower. Since most of Britain's public debt was held by its countrymen, the nation was in effect borrowing from itself.

They also ignored that economic growth rendered the debt sustainable: “They greatly overrated the pressure of the burden; they greatly underrated the strength by which the burden was to be borne.”

The conditions that created a stable bond market in Macaulay's day have vanished, ‌however. Economic growth across much of the developed world has faltered. Excessive borrowing and spending by governments is partly responsible.

Bloated government spending is to blame for the collapse in productivity growth, according to Swedish economists Andreas Bergh and Magnus Henrekson. Hume expected that excessive debt would lead to debilitating taxes.

Government debt levels have risen inexorably since the financial crisis. Worldwide public debt has reached 94% of GDP, according to the International Monetary Fund. US federal debt is around 114% of GDP, reckons Fitch Ratings.

Economists Carmen Reinhart and Kenneth Rogoff concluded that when government debt breaches the 90% threshold, economic growth falters.

Hume would have agreed: “We have always found,” he wrote, “where a government has mortgaged all its revenues, that it necessarily sinks into a state of languor, inactivity and impotence.”

He cautioned that overseas investors owning big portions of a country's debt “render the public, in a manner, tributary to them”.

A large share of the national debt issued by the US, Britain and France is held abroad. For instance, a third of Washington's $40 trillion in borrowing comes from beyond its shores.

Whereas Britain in the 19th century was the world's top creditor, the US today is the world's largest debtor.

The Bank for International Settlements notes that rising geopolitical tensions could disrupt capital flows, threatening nations with large current account deficits.

After interest rates shot up four years ago, government borrowing costs soared. This wasn't a problem in Macaulay's Britain, where public debt was mostly financed with fixed-interest perpetual bonds.

By contrast, US public debt has a relatively short maturity profile, rendering it more sensitive to changes in short-term interest rates. Rising interest costs on a large stockpile of debt strain government finances.

The historian Niall Ferguson says the decline of a political superpower becomes evident when it spends more on servicing debt than on defence. The US breached this threshold two years ago.

Hume envisaged a day when an overburdened government would stop paying interest on its debt.

Since governments nowadays print the money in which their debt is denominated, an option not available in 18th-century Britain, formal default is unnecessary.

Instead, bondholders can be short-changed through inflation, financial repression and the management of long-term interest rates.

“The natural death of public credit,” said Hume, is inevitable when “overbalanced by a great debt”. The Scottish philosopher's timing was disastrous, but his principles remain sound.

A longer version of this article was first published on Reuters Breakingviews.

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What's the current situation with adult social care?

A few years ago a parliamentary committee memorably summed up the adult social care system in England as “unfair, confusing, demeaning and frightening” – and that remains a good summary.

A central problem is the “care lottery” involved in a complicated patchwork of funding rules, means-testing, local-authority decisions and private providers – with families taking up the slack.

Whereas a patient with cancer receives free state-funded treatment on the NHS, someone with dementia must fund long-term care costs themselves if they have assets worth more than £23,250 – so even modestly wealthy individuals can be forced to sell their homes to fund residential-care costs, which can easily top £100,000, or indeed multiples of that for the most unfortunate.

Addressing that unfairness in a way that's acceptable to taxpayers, those requiring care and those eager to protect hard-gained assets is a problem that has so far proved unsolvable.

What about quality of adult social care?

The squeeze on funding for local authorities, which provide social care, has led to a “fragile and fragmented market of providers”, says the Financial Times– leading to even lower pay levels, problems in recruiting and retaining staff and huge variations in quality.

As the population ages, demand is growing – at present only 42% of requests for help can be met. But it's not just about age: half of council care budgets go toward care for working-age adults, whose care needs can last much longer.

Overall, two million people have unmet care needs because they can't afford help, while more than 30,000 died last year while waiting for a social-care package, such as residential care, to be provided.

Under this badly functioning system, unpaid family carers absorb enormous personal costs, while delayed discharges owing to gaps in social care account for almost one in ten hospital beds, adding costs and stress onto the NHS.

What has Andy Burnham announced?

Andy Burnham has reconfirmed Labour's pledge to reform and rebuild adult social care in England via the creation of a National Care Service.

So far, though, that is very much an aspiration, with no fixed plan on how to achieve it – nor a clear picture of what that service will look like.

Burnham has also begun cross-party talks, and last month launched a “big conversation” with the public to get buy-in for whatever funding model is ultimately proposed.

And he has asked Louise Casey, a cross-bench peer, to bring forward delivery of her Independent Commission, begun under Starmer, to the summer of 2027.

Haven't we been here before?

Many times. Ominously, even Andy Burnham himself has been here before. As health secretary in 2009, Burnham floated a national-care scheme to revitalise and fund social care in England.

The Conservatives promptly branded the funding model – a levy on estates – a “death tax”, a label that stuck. But even so, Labour went into the 2010 election with a very familiar sounding policy – the creation of a National Care Service implemented in phased stages.

Under the Conservatives, a series of white papers were promised, but successive PMs failed to take action, with Theresa May's attempt at the 2017 election backfiring spectacularly with voters.

Labour accused her of planning a “dementia tax”; in fact she'd proposed a rather promising state-sponsored equity-release scheme that protected assets up to £100,000.

What are the funding options?

The phrase “National Care Service” suggests a universal NHS-style service free at the point of use and paid for out of general taxation. But the Health Foundation estimates the costs at £18.5 billion a year – and the UK's delicate fiscal position, demographics and low-growth economy make such a scenario highly unlikely.

More money will be needed, either via some form of hypothecated tax, or some form of compulsory social insurance that caps liabilities and pools risks – a model that works well in Germany and Japan. Here, civil servants have produced a model where workers over 34 pay an extra 1.8% income tax (above a £6,240) threshold to fund a national Later Life Care Fund.

Separately, Burnham has mooted scrapping inheritance tax and introducing a 10% levy on all estates, not just the largest 5% or so. Such a system would be simple and potentially raise large sums, but it's a tough sell politically and open to the “death tax” accusation.

So what's the solution?

Britain can't afford a “blank cheque” National Care Service that pours resources into a “taxpayer money hole”, says Eamonn Butler on CapX. But it urgently needs a “targeted safety net against genuine catastrophe”.

The first stage of any resolution will surely draw on the 2011 Dilnot report, says the FT: impose a lifetime cap on individuals' contribution to care costs and raise the assets threshold for making them pay. Such a cap would remove the threat of crushing expense that would overwhelm all but the very wealthy. And it would “create an insurable risk against which consumers could take out private insurance, avoiding having to sell their homes in their lifetime”.

The second plank, says Bloomberg, should be to “make more private provision workable”, for example by more stringent regulation that facilitates transparency and comparability, and by ensuring no one is penalised insuring themselves. “New financial instruments – from auto-enrolment pensions with a social-care component to annuities attached to home equity – could play a role if carefully regulated.”

In terms of funding, there “will be fights over thresholds, taxes and who gets what. So be it. The option Burnham can't afford is the one governments have been choosing for decades: pretending the bill disappears if nobody opens it.”

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It took both Andy Burnham and Friedrich Merz three attempts to win the leadership of their parties and ultimately reach the top job. Neither was their party's natural favourite, but time, doggedness and perhaps the exhaustion of the alternatives eventually delivered the prize they had long coveted. Burnham should hope that is where the similarities end.

Fifteen months after becoming chancellor, Friedrich Merz is in trouble. His approval rating has collapsed, his coalition is fractious and his centre-right CDU/CSU is trailing the populist-right Alternative für Deutschland (AfD) by seven percentage points in the polls. Friedrich Merz has recorded the lowest approval rating for a chancellor since records began. CDU politicians recently told Politico of internal discussions about a Kanzlertausch, or “chancellor swap”. This is an extraordinary prospect in a traditionally stable political system.

The immediate danger comes in east Germany. The AfD is polling above 40% in Saxony-Anhalt, which votes on 6 September, putting it within reach of taking control of a German state for the first time. Two weeks later, Mecklenburg-Vorpommern votes, with the AfD ahead on 36%. An AfD breakthrough into government would be a political earthquake and heap further pressure on Friedrich Merz. Yet his problems contain a broader lesson for Britain's new prime minister.

Friedrich Merz stretched the mandate

Friedrich Merz fought the 2025 federal election promising fiscal conservatism. Within days of becoming chancellor, he performed an extraordinary U-turn. Working with the outgoing parliament, he pushed through constitutional changes exempting much defence spending from Germany's debt brake and created a €500 billion infrastructure fund. Germany needed to rearm, its crumbling infrastructure required investment and its restrictive fiscal rules had become an impediment. It was realpolitik in response to a global order reshaped by Donald Trump's return to the White House. But it was also a betrayal of the proposition Merz had put to voters. Political mandates are not infinitely elastic. Voters may accept that circumstances change, but repudiating a central election commitment risks losing the trust required to make subsequent difficult decisions. Merz has discovered that borrowing more money does not magically resolve the political constraints on governing.

Burnham starts with an even bigger problem: he has no personal electoral mandate at all. In 2024 the electorate voted for Keir Starmer, Rachel Reeves and their programme while Burnham was not even an MP. That programme promised “change”, but combined higher spending ambitions with a pledge not to raise the three big taxes on working people. Burnham is now trapped. He wants to spend more, his party has demonstrated that it will not readily let him spend less, and Labour's tax pledges have closed off the most straightforward way of raising the money.

The problems facing Burnham

The result is a government searching for increasingly inventive ways to square the circle before the Budget on 28 October. The danger is that Burnham follows Friedrich Merz in concluding that the only escape is to reinterpret the mandate he inherited – except Britain has far less room for manoeuvre. Germany entered its fiscal expansion with government debt of just 63.5% of GDP in 2025, rising to 68%. Britain's public-sector net debt is already 94% and the Office for Budget Responsibility expects it to peak above 96%.

The financing requirements make the contrast starker. Germany's abandonment of its cherished debt brake has been described as a historic fiscal splurge, yet it plans to issue roughly €335 billion of longer-term federal securities this year, against £252 billion of gilts from Britain – almost as much in the same currency despite the German economy being around 50% larger. Britain is already running the sort of debt programme that Germany regards as extraordinary. That leaves Britain far more dependent on keeping bond investors onside. Germany is borrowing from a much stronger starting position and directing much of the money towards infrastructure and defence. Burnham would be asking investors to tolerate yet more borrowing from a country already carrying a much heavier debt burden.

For investors, Britain's weaker fiscal starting point leaves gilts vulnerable to a greater risk premium than Bunds, particularly if Burnham tests the bond market's tolerance. The outlook is brighter for defence equities. Rheinmetall's order book has swollen to around €80 billion, while BAE Systems boasts an £84 billion backlog and its shares have performed well this year.

Britain has advantages elsewhere. Its deeper venture-capital markets and more flexible economy give it a better chance of producing European winners from AI and other emerging technologies. It also has a shock absorber unavailable to Germany: its currency. Sterling can fall when the economy needs to adjust, whereas Germany is locked into the euro. But depreciation is no free lunch: it raises import costs, risks higher inflation and can become a verdict on investors' confidence.

For Burnham, Friedrich Merz is therefore both a warning and a useful comparison. Merz responded to changing circumstances by abandoning one of his clearest election promises and has paid a heavy political price. Burnham has inherited promises that leave him wanting to spend more and constrained in raising taxes. Borrowing offers an apparent escape, as it did for Merz. But with our debt burden already far higher, the bond market may prove far less forgiving than the electorate.

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US Treasury secretary Scott Bessent has found himself caught in a standoff with currency traders more than a fortnight after the US and Japan jointly intervened to buy yen for the first time since 1998.

The move strengthened the yen at the start of August, but it has since given back roughly half of its post-intervention gain. Currency analysts warn the fundamental drivers of a weak yen, especially a yield gap between Japan (where rates are 1%) and the US (where rates are over 3.5%), have not gone away.

Scott Bessent knows a thing or two about currency trading, says The Guardian. He was part of the George Soros team in 1992 that made a billion dollars by forcing the pound off the European Exchange-Rate Mechanism. His intervention to stabilise the yen wasn't an act of charity. Japan is a “cash spigot”, with the cheap yen funding a global “carry trade” that helps prop up US technology shares.

If the yen's slide continues, then Japan might be forced to respond with “aggressive” interest-rate rises. That could quickly unwind the carry trade and trigger a Wall Street rout, as happened two years ago when a surprise Japanese rate rise sent global markets tumbling.

Don't worry, the risk of a “disorderly” unwind “seems low”, Masayuki Nakajima of Mizuho Bank tells Katie Martin in the Financial Times. The danger of higher Japanese rates is now “extremely well understood” by traders, who have made appropriate preparations. Rather than a snap yen rally, “all the ingredients are in place” for the carry trade to continue and yen selling pressure to persist. “It is increasingly clear that the market is in the mood for a fight” with the US Treasury.

What does Scott Bessent’s intervention mean for the global economy?

The “US currency intervention was not only ineffective, but counterproductive”, says George Saravelos of Deutsche Bank. Washington has been encouraging Tokyo to tap an emergency Federal Reserve dollar facility, inadvertently sending a signal that “it is not comfortable” with the “direct US Treasury sales” that Tokyo usually uses to prop up the yen.

If Scott Bessent's yen “ruse” was designed to keep US borrowing costs under control, then it has failed, agrees Simon Nixon on Substack. Washington's use of “unorthodox” tools, including selling euros rather than dollars to fund the yen intervention, has only “deepened the anxiety it was meant to soothe”. Bond traders sniff out hesitation like sharks detect blood in the water.

The spike in government debt isn't only affecting America. Japan's own ten-year yield hit a 30-year high on Monday, while France's has topped 4% for the first time since 2008, potentially pushing the country closer to the brink of a “debt crisis”.

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Tina Fordham is the former chief global political analyst at Citigroup and founder of Fordham Global Foresight. Tina has spent more than 25 years advising senior business, government and military leaders on navigating political and geopolitical risk; she has served as a senior adviser to the UK prime minister and advised military leaders. She also sits on advisory boards at Columbia University and the University of Cambridge. Her forthcoming book, Mad World: A Geostrategy Survival Guide for Leaders, is published by Whitefox in September 2026.

Matthew Partridge: Your new book, Mad World: A Geostrategy Survival Guide for Leaders, argues that in the current geopolitical climate, companies no longer have the luxury of ignoring politics?

Tina Fordham: Yes, ignoring geopolitics was something you could only afford to do in the era of globalisation, which happens to be the time that most of today's executives, myself included, grew up in.

Matthew Partridge: You've talked about the emergence of a new geopolitical supercycle.

Tina Fordham: The data for that study examines the period between 2010 and 2025. So even before Donald Trump's second term, we detected a tripling of events posing geopolitical risk. People hope things will get better after Trump leaves office in January 2029, but the evidence suggests that the drivers of geopolitical risks are multiplying and have been for a long time. Moreover, the guardrails that temper the risks are either eroding or being actively dismantled. So the idea that we only have to survive another year and a half before things return to normal is misplaced.

Matthew Partridge: Which guardrails in particular are being eroded?

Tina Fordham: There's a diagram in the book of the supercycle framework, where we talk about some of the long-term drivers, like declining trust, climate change and income inequality. However, when there are risky events or shocks, good government, liquidity from central banks, institutions or even social cohesion can help you mitigate these problems. But when these guardrails are damaged, even relatively small risks can become quite disruptive. This is difficult for most executives to get their heads around, but it's how we try to apply a systematic conceptual framework to thinking about geopolitical risk.

Matthew Partridge: Your book is primarily aimed at business leaders and executives, but would it also apply to ordinary investors deciding how to structure their portfolios and which assets to choose?

Tina Fordham: There are certainly implications for everyday people who are having to think about how to manage their own lives, their families and their careers in a time of unprecedented global change.

Most people have yet to recognise that we are in a new age. They assume we are still in the period most of us became used to: one of continuously improving living standards. In fact, the period between the fall of the Berlin Wall [1989] and the collapse of Lehman Brothers [2008] was actually the most peaceful and prosperous period in all of human history – not the baseline for the future. You can mess it up.

Matthew Partridge: Turning to specific issues, I've noticed that in your recent talks you've been a lot more pessimistic about the prospects for a lasting resolution to the situation in the Strait of Hormuz. Why is that?

Tina Fordham: We were among the few to come out strongly and say that the conflict between Iran, Israel and the US would not be a short war, which was counter to the consensus at the time that it would all be over very quickly. Our reasoning was based on how Iran has always negotiated. It was never going to be enough simply to order them to meet the White House's maximalist demands.

I also felt that there is vanishingly little evidence in history of aerial bombardment causing regime change, one of the original aims of the conflict. Every US president since Jimmy Carter in the 1970s has wargamed and studied possible options for dislodging this regime and concluded that it was too hard to do without massive loss of life and huge disruption, so president Trump wasn't going to change that.

So now, we've got the situation where the US has seemingly depleted its stock of long-range munitions, while Iran can regenerate its drones faster than the US can replenish its stocks. While the markets have been reacting to the good news – in the short term – that there may be a resumption of oil supplies to the Strait of Hormuz, the actual long-term effect of this war has been to give Iran a source of leverage that it didn't have before, a power it is not going to relinquish. Meanwhile, Trump seems to have got bored with this conflict, except he's realised he can't just walk away.

Matthew Partridge: What is the most likely outcome?

Tina Fordham: Most market participants have assumed that America doesn't want to have high petrol prices before an election. However, while this might have applied over the last 25 years, I think this time we're going to end up in a situation that is between war and peace, where Trump will keep threatening because that's the only tool he has.

What's more, the Gulf states have prevailed upon the White House not to destroy Iran's energy infrastructure because of what that would do to the rest of the region. So, we are likely to be left in a situation where Iran is more powerful – if battered – after this war. What's more, the situation sends a message to the rest of the international community that if they don't like their present borders, or have some beef with their neighbour, the US has a much smaller capacity to stop them.

Matthew Partridge: On a more positive note, it looks as though Ukraine is fighting back against Russia and seems to be regaining some of the territory the invader stole. Will that continue?

Tina Fordham: The Ukraine conflict is being fought over feet and yards of territory. While this is a quagmire for Russia, with China prevailing on Putin not to go nuclear, neither is he going to come to the negotiating table in any meaningful way and agree to a ceasefire. Russia will not seek a deal that gets sanctions rolled back. That is simply not how Putin thinks.

Given that 40% of Russia's energy infrastructure has been destroyed, resulting in queues for petrol, Putin may want to make a grand gesture to demonstrate control. There is therefore a material risk of Russia attacking a Nato member. Most British people don't seem to have factored this risk in, even though we're being attacked by Russia all the time.

Matthew Partridge: Could Putin end up like the Serbian dictator Slobodan Miloševic – who was overthrown in 2000 – and succumb to internal dissent or a palace coup?

Tina Fordham: While there is no chance of Putin ending up in The Hague, a palace coup is more plausible than a popular revolution. But, the trouble with palace coups is you really need an alternative. And Putin has made sure that there are no plausible successors to him. So, while he and his policies are increasingly costing the Russian elites more than they're gaining, leaders like this can hang on for a long time.

Matthew Partridge: Do you think Ukraine's brave resistance and the fact it's actually been able to at least block Russia will give hope for other countries like Taiwan?

Tina Fordham: Ukraine has certainly given Beijing pause for thought. The fact that both the US and Russia have been dealt a serious blow by much weaker middle powers suggests that might doesn't necessarily win and can leave you stuck in a very awkward position for a long time.

Matthew Partridge: Trump will have to leave office in January 2029. The Republicans are now expected to lose at least one House of Congress seat in the midterms. Do you think that a bad result in the midterms will rein in Trump, or do you think that he might become even more unpredictable?

Tina Fordham: This is the question on the minds of many. The Iranian regime have said that they weren't going to negotiate any longer with the US but are going to wait until after Trump has left office.

While the US constitution means that Trump is limited to two terms, he is printing “Trump 2028” hats already. There's also the possibility that Trumpism may outlast Trump himself. In the most sinister scenario, the dubious behaviour by many in the administration means that even if they are voted out, the threat of possible investigations may complicate the usual peaceful transfer of power.

Matthew Partridge: In your book, you say that while the big losers from automation had been older, blue-collar workers, the worst affected by AI will be middle-class people in their 20s and 30s, who tend to be more politically aware. Will this fuel opposition to AI?

Tina Fordham: Absolutely. It will also increase demand for policy solutions. Covid has led to a rise in both benefits and expectations of government support. The historians who speak very grandly about previous waves of innovation and industrialisation forget that during the Industrial Revolution, working-class people didn't have the vote, which is not the case today.

In any case, revolutions are not fought by the poor, they are launched by the middle classes, and it's not only university students and recent graduates who are angry, but also those in the their 50s who are being told they need to work longer because the pension age is being delayed. All of this is going to add to pressure on governments at the same time that Europe needs to spend more on defence.

Matthew Partridge: What is the upshot of all this for investors?

Tina Fordham: We used to think about geopolitical risk in terms of what could go wrong and undermine a portfolio. But recent geopolitical developments and other themes such as AI have led to a situation of constant potential danger, as opposed to sporadic upsets. The threats won't dissipate within a year or two; this backdrop is set to last longer than a decade.

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Investors were feeling deeply bearish about European stocks earlier this year, with warnings that the closure of the Strait of Hormuz would unleash the continent's second energy crisis in a decade. That danger has not passed, but markets got carried away. Unusually strong second-quarter earnings have allayed fears of stagflation. The Stoxx Europe 600, a pan-European stock index that includes UK-listed shares, is up 13% since its low in March.

German earnings on the DAX index rose 11% year on year, the best showing “in at least ten quarters”, according to Deutsche Bank analysts. The country's carmakers remain in poor health, but that was more than offset by a superb showing from industrial and chemical firms. The wider Stoxx 600 did even better, recording year-on-year earnings growth of 23%.

European stocks have turned in their “best earnings season in nearly four years”, say Sagarika Jaisinghani and Alice Atkins on Bloomberg. Miners and industrials are booming. The continent's small technology sector is outperforming the US giants, led by Dutch chip specialist ASML, whose shares have risen 57% this year. Foreign investors are piling in, with European stocks attracting the second-strongest inflows in a decade so far this year. Given the challenging backdrop, the “resilience” of the continent's corporations is deeply reassuring.

European stock markets have long been overshadowed by Wall Street and some of the racier Asian markets, says Joseph Wilkins on CNBC. Goldman Sachs analysts argue that many of the things investors think they know about Europe are “myths”. Chinese competition, for example, isn't an existential challenge, because carmakers represent just 1% of the continent's market capitalisation. “Since 2022, European banks have considerably outperformed the Magnificent Seven.” And with anxiety growing about AI exposure, the old continent offers an obvious “hedge”.

Eurosclerosis continues for European stocks

US equity valuations are “on the nuttier side of bonkers”, but that doesn't necessarily make European stocks good value, says Stuart Kirk in the Financial Times. The Euro Stoxx 50 index of eurozone blue-chips has managed a fairly boring annualised return of 11.1% over the past decade. True, ASML is a “world-class firm”, but the performance of the continent's other industrials and banks is underwhelming when compared with US peers. “Europe's 25% price/earnings discount to US shares is not deep enough.”

European growth remains sclerotic, says James Carter for National Review. The EU's GDP per capita is just half that of the US, down from 76.5% in 2008. Contrary to popular belief, Europeans work just as much as Americans; indeed, employed Europeans average longer working weeks than their US counterparts. The real issue is sluggish productivity growth.

The danger of an energy shock has not gone away either. European natural gas prices have been trading above €60/MWh, levels not seen since the tail end of the 2022-2023 energy crisis. The continent's gas storage is the lowest it has been for this time of year since at least 2009.

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The Bank of England might be best known for setting interest rates and printing banknotes, but there’s much more going on at the central bank you might not be aware of.

Jack Leslie and Rupal Patel, Bank of England (BoE) economists and authors of the new book Money: The Inside Story, discussed how the central bank holds 400,000 bars of gold and ‘giant’ and ‘titan’ banknotes worth up to £100 million in its vaults.

Speaking on the MoneyWeek Talks podcast, they also explained how electronic payments in the UK, from coffees to house purchases, go through the Bank’s ‘black box’.

They recalled a “spooky” story of how a sewer worker in the 1800s accidentally discovered an old drain which led to the Bank’s gold vaults.

Plus, Leslie and Patel explained why the first colour banknotes were printed amid a German plot during World War Two to airdrop counterfeit notes over the UK and crash the economy.

The episode is also available to watch on our YouTube channel.

Bank of England facing ‘uncertain’ external environment

As well as some of the quirkier Bank of England-related facts, Leslie and Patel also addressed the biggest challenges facing the central bank – such as the rise in wholesale energy costs due to ongoing tensions in Ukraine and the Middle East.

Speaking to MoneyWeek’s digital editor-in-chief, Kalpana Fitzpatrick, Patel described increasing interest rates as a “blunt tool” to combat inflation, in that it can reduce demand, but that it is less effective at counteracting shocks on the supply side.

Patel also said interest rate decisions taken by the BoE’s Monetary Policy Committee can take “about 18 months to two years” to filter through to inflation.

She explained: “What the Bank of England is looking at is trying to think about inflation about two years ahead, and that’s quite difficult to do when the external environment is quite uncertain and you keep getting these new shocks.”

Leslie also addressed the issue of soaring government debt – recent analysis from The TaxPayers Alliance, a pressure group, estimates public sector debt has now tipped over the £3 trillion mark.

Asked whether printing more money could be the answer to pay off some of the debt, Leslie said: “When there’s more money in the system, you can actually buy fewer things because those things are more expensive.

“And so it’s really not a useful tool in helping out governments when they need more money.

“We can see the effects of that in other countries. A lot of people would’ve heard of Zimbabwe or Germany where money was printed and caused something called hyperinflation…and that’s just not useful.”

How you can get rid of old banknotes

They also explained what you can do if you come across an old banknote that’s no longer classed as legal tender.

You can exchange any Bank of England note that’s ever been issued back to 1694, for the same value modern note with the Bank of England, Leslie said.

He added: “You can physically come into the Bank of England because we have a counter for the public to exchange those notes.”

If you’ve got half or more of a note, you can exchange it for a new one.

“As long as you’ve got more than 50% [of the note], so just a fraction more than 50%, we’ll swap it for a new note,” he said.

About the podcast

MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick, Andrew Van Sickle and Cris Sholto Heaton are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.

Subscribe to the MoneyWeek Talks podcast and get ready to make it, keep it and spend it with confidence. You can also watch the episodes on our YouTube channel.

Shrinkflation is rife. When did you last open a tube of Pringles and find the crisps reaching the foil seal? The gap at the top is no optical illusion – the makers of Pringles narrowed the canister and cut the contents from 200g to 165g while the price climbed towards £2.25. The result was a 118% increase in the price per gram.

Customers may see fewer crisps, but shrinkflation isn't just an irritation for consumers. Investors should see something more revealing: it can be an early signal that a company's ability to raise prices openly is beginning to weaken.

Economist Pippa Malmgren coined the term “shrinkflation” in 2009 to describe the practice of reducing a product's size while leaving the headline price unchanged, or even increasing it. Rather than risk the backlash of an overt price rise, manufacturers subtly trim the contents, relying on a simple behavioural quirk: shoppers notice the price on the shelf far more readily than the net weight printed on the packaging. It has become one of the defining responses to the inflationary era, helping consumer-goods companies to defend margins while avoiding the shock of higher prices.

When reducing pack sizes risks becoming too obvious, manufacturers often turn instead to “skimpflation”, replacing more expensive ingredients with cheaper alternatives. Tesco has reduced the pork content of its Finest sausages from 97% to 90%; Morrisons has lowered the beef content in its ready-meal lasagne. The prices barely changed, but the products became cheaper to make.

Why do companies rely on shrinkflation instead of raising prices?

For investors, the question is why companies rely on such tactics. Businesses with genuine pricing power can usually raise prices openly because customers value the product sufficiently to want to pay more. Companies serving more price-sensitive consumers have fewer options. Rather than test demand with a visible price rise, they shrink- or skimpflate. Executives describe this as “revenue growth management”, or “pack architecture optimisation”. Investors should recognise it as an attempt to protect margins when conventional pricing power is under pressure.

The reason the tactic works lies as much in psychology as in economics. Consumers are generally more sensitive to changes in the price printed on the shelf than to slight reductions in weight or volume. Behavioural economists describe this as asymmetric price perception. For a time, shrinkflation allows manufacturers to recover higher input costs without risking the sharp fall in demand that often follows an outright price increase. The strategy has limits. Used sparingly, it can help preserve margins during periods of unusually high inflation. Used repeatedly, it risks weakening the brand value that once gave a company its pricing power. Once consumers begin to question whether a trusted brand still represents good value, winning back that confidence can take years.

Shoppers who feel they are repeatedly paying more for less become more willing to switch to private-label alternatives offering similar quality at a lower price. Brands that repeatedly rely on hidden price increases risk training customers to look elsewhere.

Fortunately for investors, listed companies rarely succeed in hiding the effects indefinitely. The evidence usually appears in the accounts. Looking beyond headline revenue growth to the split between pricing and volumes often provides a clearer picture of a brand's health than sales growth alone. Mondelez's financial results reinforce the point. It reported 4.3% organic net revenue growth in 2025, which appears respectable at first glance. A closer look shows pricing contributed 8.0 percentage points, while volume and mix reduced growth by 3.7 percentage points. Revenue was still rising, but customers were buying fewer products. Nestlé's reporting tells a similar story. Organic growth remained positive as higher prices offset rising costs, yet its measure of physical demand, “real internal growth”, remained negative.

This matters. Strong pricing supported by stable volumes often signals genuine pricing power. Strong pricing accompanied by persistent volume declines deserves much closer scrutiny. Companies can protect profits for a time through smaller packs and higher prices, but falling volumes may indicate that customers are beginning to question the value of the brand.

A changing environment around shrinkflation

The environment that allowed shrinkflation to flourish is also changing. Consumers are more aware of the practice, retailers are paying closer attention to perceptions of value and regulators are making price comparisons easier. In the UK, reforms to the Price Marking Order require unit prices to be displayed more clearly and consistently from April 2026. French supermarket Carrefour has gone further, placing prominent shrinkflation notices beneath affected products during pricing disputes, while UK supermarkets have continued expanding their own-label ranges. Together, these developments make it harder for manufacturers to rely on shrinking packs without attracting greater scrutiny.

For investors, the lesson is not that every company using shrinkflation should be avoided. Commodity inflation sometimes leaves management teams with difficult choices and modest reductions in pack size may be preferable to price rises that drive customers away. The important question is whether shrinkflation has become a temporary response or a permanent habit. Investors spend plenty of time analysing margins, cash flow and valuation. They should devote equal attention to whether revenue growth reflects customers' willingness to pay higher prices, or simply the effects of shrinking packs and higher prices. Shrinkflation can be a valuable clue to a company's underlying health.

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With a new prime minister and a blank sheet of paper, John Healey could have started his chancellorship with a burst of announcements. After all, Andy Burnham appears determined to try to do things differently and, even if most of the policies announced so far are very small-scale, at least he is trying. His chancellor, by contrast, has been very quiet. He popped up briefly to replay a few familiar complaints about price gouging by the supermarkets, even though the major grocery chains operate on some of the slimmest margins in the world, and there have been a few leaks about more borrowing. Apart from that, No. 11 has remained silent.

He may, of course, be storing up the major announcements for his first Budget, now scheduled for the end of October. But the really significant chancellors of the last 50 years all made major policy decisions within their first few weeks in office. Gordon Brown announced the independence of the Bank of England. Nigel Lawson slashed the top rate of tax from 60% to 40%. George Osborne created the Office for Budget Responsibility and set out plans for controlling the growth of public spending. You might agree or disagree with any of those decisions, but there is no question they were significant and had a major impact on the economy. Each of these chancellors seized the day to make big reforms, aware there would never be a better time for a change of direction.

It would not have been hard for John Healey to hit the ground running. He could immediately have licensed new fields in the North Sea, as well as reduced the windfall tax on new developments. That would have made it clear from day one that the new government was more interested in energy security than in virtue signalling on climate change. He could have suspended the rise in employers' national insurance for six months to give companies a chance to start hiring again. To help with the cost of living, he could have lifted a range of tariffs that are still left in place from when we were part of the EU. He could have suspended some of the green levies that, when added to the highest industrial energy prices in the developed world, have crushed manufacturing. He could have cancelled pointless taxes such as the packaging levy that have added to the costs of retailers.

He could have demonstrated a commitment to curbing Britain's out-of-control welfare spending, perhaps by replacing the “triple lock” for pensioners with a slightly more affordable “double lock”. The list goes on.

John Healey appears to have pressed the “repeat” button

Instead, he is sticking to the script written by Rachel Reeves. There are lots of attempts to shift the blame onto business for persistent inflation, ignoring the impact that the constant criticism is likely to have on confidence. There are repeated attempts to manipulate the figures to allow the government to get away with borrowing yet more. Most of all, there is a complacent assumption that the economy will recover so long as the government spends more, despite all the evidence to the contrary. Reeves took months to announce anything of significance and even then it was just a huge tax raid. John Healey appears simply to have pressed the “repeat” button.

Meanwhile, genuine reforms to the supply side of the economy, such as freeing up planning rules to make it easier to build things, scrapping pointless regulations such as the GDPR on data protection inherited from the EU, and creating incentives for entrepreneurs and firms to start investing again, have been sidelined. They might come in the Budget, but I don't think anyone is holding their breath. There might only be two years left before a general election, and if Labour doesn't manage to get the economy growing before then, accelerating wage growth and getting unemployment down, it will surely lose. It is becoming painfully clear that the centre left doesn't have any ideas apart from taxing and borrowing more to try and keep the public-spending juggernaut on the road for a few more years. John Healey seems content with a re-run of the Reeves years – the results will be just as bad.

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Is the UK too centralised and will devolution help?

Devolution has long created separate administrations for Scotland, Wales and Northern Ireland, rather creating the illusion that the British state must be a quasi-federal one. But the whole of England – 85% of the UK’s population – remains governed by Whitehall. Westminster decides everything, says The Economist, from the sums that local authorities can charge for planning applications to how long the tinkling of ice-cream vans may go on. Local and regional taxes account for less than 2% of GDP, much lower than in peer nations.

It wasn’t always this way. In the 19th century, the great cities were beacons of civic pride and municipal power. But the post-war centralisation of the state has turned us into a country where the phrase “postcode lottery” is used to describe the supposedly “horrifying prospect” of public services differing from place to place.

Voices from across the political spectrum have long argued that decentralising power would help build a more effective and responsive state, and spur growth. The basic argument is that regional leaders are better placed to understand their economies and public services – and can join up policies across transport, housing, skills and employment.

What is Labour doing?

The government under Keir Starmer had already made a start on devolution with the English Devolution and Community Empowerment Act, which came into force in April this year. The Act establishes a framework for shifting powers out of Whitehall by creating elected strategic authorities, expanding local mayoral powers and establishing a Community Right to Buy, giving localities a “true right of first refusal” for Assets of Community Value.

The Act also beefs up the Local Audit Office, in charge of monitoring the local council’s finances. The underlying presumption is that devolution will become a default constitutional arrangement, rather than something individual councils negotiate with ministers on a case-by-case basis.

What has Andy Burnham added?

The new prime minister has announced plans to go further. In March, the then chancellor, Rachel Reeves, announced that the Treasury would develop a fiscal devolution road map and consider giving regional leaders control over a share of national taxes. Burnham has now confirmed that this will happen, with mayors (and perhaps also other local authorities) being handed a slice of regional income-tax receipts from 2028, in place of central grants.

Details of the plan will be unveiled in the Budget on 28 October and a new devolution White Paper (draft legislation) will be published this autumn. This will build on a new blueprint called “The New Model of Government”, which takes the existing settlement further, and gives local leaders even “greater power to shape their places through control over local transport, housing, innovation, local energy and cultural investment”.

Is this good news?

Potentially, yes. Burnham’s diagnosis of “the link between centralisation and poor local performance is almost certainly right”, says The Economist, and local and regional governments must be given a better incentive to drive their own growth, rather than beg for bigger handouts. For that, more fiscal devolution is needed – devolution of spending powers, if not, at first, tax-raising powers – and income tax is the obvious choice.

The sums won’t be large at first: the Centre for Cities think tank estimates that around 2% of income tax raised locally is enough, on average, to replace the grants that existing mayors receive. But it’s an important move in the right direction and means that if a place can create more and better-paying jobs, it will directly reap the benefits via higher tax revenues. Burnham’s plans are a welcome first step, agrees Robert Colvile in The Times. Naturally, however, there are some big question marks and caveats.

The challenges to devolution

Most crucially, devolving finance will mean nothing while councils’ budgets are dominated by “the frightful four” spending liabilities of adult social care, temporary accommodation, children’s services and school transport. “These are services that councils are legally obliged to provide, but haven’t been given the money to pay for, meaning they’ve squeezed out everything else.”

Second, there’s no point in devolving power if it’s only the power to do what Labour wants. Burnham’s first policy announcements on capping bus fares across England and offering more favourable tax arrangements to pubs and clubs at the expense of “what he deemed ‘anti-social business’”, such as vape shops, signal a very top-down kind of local politics.

What’s needed is devolution that lets places keep the fruits of their success and allows for competition between regions. Labour’s instincts will be to “enforce equality of outcomes via all the levers available to it”.

Is there any hope of genuine change with devolution?

There’s certainly a risk that devolution is “oversold as the answer to everything”, says Sam Freedman on Substack. In reality, it is likely to be a slow process and there will necessarily be trade-offs and problems along the way. Local authorities have been eviscerated since the 1980s, meaning that devolving too much power too quickly would be unwise; “much of the initial focus will need to be on capacity building”.

Currently, when powers are devolved to mayors, Whitehall retains responsibility for the approximately 50% of England (by population) that does not have one. So there’s much work to do in terms of strengthening local authorities and building new structures.

For devolution to work, many similar trade-offs will “need to be balanced right – between speed and sustainability; autonomy and national consistency; freedom and accountability; neatness and historical identity; equality and incentives to grow”. Devolution promises to be the defining issue of Burnham’s premiership, but there’s a long and hard road ahead.

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Andy Burnham is the UK’s newest prime minister, and the seventh since 2010. It makes him the 59th person to hold the office in Britain.

Each one has left their mark on UK history, but how much do you know about them?

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• Will taxes rise in the Burnham government's first Autumn Budget?
• Three tasks for new chancellor John Healey
• Can Andy Burnham’s Manchesterism work for Britain?

“Baby-faced” billionaire Yang Zhilin recently dealt the biggest shock to Western markets since DeepSeek, wiping hundreds of billions of dollars off the valuations of AI and chip stocks.

Kimi K3, developed by Yang’s Moonshot AI, is the most advanced “open-weight” large language model to emerge from China yet, topping many benchmarks with its capabilities “at a third of the cost”.

At a stroke, notions of Silicon Valley's technical dominance have been swept away, with its developer, Moonshot AI, challenging the likes of Anthropic and OpenAI at the frontier – prompting questions about their mega-valuations.

Moonshot's founder has a good story to tell too, says The Telegraph. Yang Zhilin is a prog-rock devotee who named his firm in honour of Pink Floyd's The Dark Side of the Moon, seemingly in tune with Western ideas and culture.

The 34-year-old has built a “mythology” that has “helped distinguish Moonshot from China's otherwise austere AI industry”, says the Financial Times. Employees describe an intense culture of long hours in Moonshot's headquarters in Beijing's Haidian district. “But Yang has also infused the company with his own... obsession with rock music... A white piano stands prominently in the office.”

Yang Zhilin heads to China's MIT

Yang Zhilin was born in 1992 and grew up in Shantou in the southern state of Guangdong – China's industrial heartland. Former classmates recall that he was always “unusually gifted”. Having started coding in high school, he won first prize in the National Olympiad in Informatics, earning him direct admission to Tsinghua University, often dubbed “China's MIT”.

Even in that specialised atmosphere, he was known as “Yang the genius” because of the way he managed to balance elite academic performance with his musical interests. He was a drummer in a campus band called Splay, organised music competitions and gained a reputation for being “romantic and idealistic”. Some reports suggest that he switched his undergraduate degree from thermal engineering to computer science, having been inspired by a Haruki Murakami novel.

In 2015, Yang Zhilin completed his PhD at Carnegie Mellon University, where he studied under AI gurus Ruslan Salakhutdinov and William Cohen, worked at Google Brain and Meta, and founded a retailer-focused start-up, Recurrent AI, before returning to China in 2019.

In 2023, he co-founded Moonshot AI with Tsinghua University classmates. “Recurrent AI taught him how to woo investors and scale a business,” says The Telegraph. “But he learned painful lessons too.” Moonshot's early years, when he attempted to build a “Chinese-first version of ChatGPT”, were marred by a lawsuit from investors in Recurrent AI that saw him hauled before the Hong Kong International Arbitration Centre before a settlement was reached.

Moonshot's chatbot Kimi was an instant hit, but also “plagued by outages and... overtaken by larger rivals”, says the FT. Rival DeepSeek's successful R1 model was another “existential test”. Yang Zhilin returned to the laboratory to focus on model training. He also made the pivotal decision to make Moonshot's AI models available to developers globally.

Moonshot's open approach has enabled China to “cast itself as a champion of low-cost, open-source AI”, says The New York Times. But that openness has raised concerns in Beijing about “the potential threats the technology might pose” to Communist Party rule. “[He] may be wise to moderate his views,” says The Telegraph. “Other tech billionaires in China have found... that the Party likes its economic champions on a short leash.”

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London hasn't been “left behind”, it hasn't suffered from “deindustrialisation”, and there is little sign that it was harmed by “40 years of neoliberalism”. So Britain's new prime minister, Andy Burnham, probably hasn't given much thought to London, except as a place to escape as he pursues his relentless focus on Manchester and the rest of the North. But he should. There are worrying signs that the economic decline of the capital is starting to accelerate – and that is turning into an emergency.

Last week, we learned the population is falling for the first time in three decades. More than 400,000 Londoners left the capital for other parts of the country in 2025, according to the Office for National Statistics. Sure, plenty of people still moved to London, but there was still a net outflow of 130,000. That might make it easier to get a seat on the tube, or to find a flat to rent, but it is hardly a sign of economic vibrancy.

What's more, the latest data from HM Revenue & Customs showed that figure includes 1,200 non-doms. Not everyone approves of allowing wealthy foreigners to pay less tax than the locals, but there is no question that the money they brought into the country fuelled a lot of London's finance and service industries, from lawyers to wealth managers to family offices.

Meanwhile, the property market is slumping. In Westminster, prices are down by 23% over the last year, and are still going down. It is almost as bad in other areas, with falls of 10% in Kensington and Chelsea, and 7% in Hammersmith and Fulham. Measured in real terms, prices are now down by 40% or more from their peak, as a slow-motion crash unfolds.

Even some of our best-known retailers are feeling the pain. Harvey Nichols was one of the most glamorous stores in the capital – a destination for celebrities and high-rolling tourists from around the world. Yet its long-time owner, the Hong Kong entrepreneur Dickson Poon, has tired of its constant losses and has put the business up for sale. Rewind 20 years and the world's luxury giants, or the wealth funds of the Gulf, would be battling for control of this trophy asset. Not now. The leading bidders are Next, Mike Ashley's Frasers, and even Gordon Brothers, the owner of Poundland and Laura Ashley. There is nothing wrong with any of those companies – Next is one of Britain's best-run businesses – but they are hardly the kind of owners associated with Knightsbridge. London’s high-end retailers are not worth as much any more.

London is the engine of the British economy

Add it all up, and one point is surely clear: London's economy is in deep trouble. That matters for the rest of Britain, since London is central to the wider economy. The capital accounts for over a fifth of the nation's output, even though it has only 13% of the population. The average worker is 28% more productive than workers in other parts of the country. London pays 27% of the income tax the Treasury collects every year, and 36% of the corporation tax. It is the engine of the British economy. It is impossible to imagine any other part of the country replacing it.

It is not hard to understand why London is in trouble. The decision to end non-dom status may have played well to voters and activists, but it was hugely destructive. After leaving the EU, we could have done a lot more to help the City find new business, but instead kept it wrapped up in regulation. The city's infrastructure is in steady decline, and housebuilding has collapsed. Shops have been hit by the decision to end VAT refunds for tourists. Successive governments seem to have been on a mission to damage it as much as possible.

So while the new government spends its time worrying about the regions, it urgently needs to get to grips with London's rapid decline. Once a city starts to contract, that can accelerate very quickly. The world's wealthy stay away because it does not have the services they require. Global businesses don't bother with it because it doesn't matter so much any more. Success is turbo-charged by a network effect, but so is failure. London, unfortunately, is starting to switch from one to the other.

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What is the UK's new social media ban?

The government said in June that it will bring in a social media ban for children. Modelled on a similar ban already in place in Australia, the necessary legislation is due to be put to Parliament in the autumn, and to take effect early next year. The restrictions will broadly define social media as sites that promote social interaction between users, allow them to post material or links to external sites, and use recommendation algorithms or “persuasive design”, such as infinite scrolling. The onus will be on the technology platforms to enforce the ban by introducing age checks on users; they will face fines if they don't.

What platforms will be in the social media ban?

The social media ban will mean YouTube, Facebook, TikTok, Instagram, Snapchat, Kick, Reddit, Threads, Twitch, X, and Bluesky will be off limits to under-16s. Some dating apps and live-streaming sites could also be covered. However, other platforms popular with young teens – including Discord, Roblox, Pinterest, YouTube Kids and WhatsApp – will not be banned. Educational services, e-commerce, libraries, museums and music streaming platforms are also expected to be exempt.

However, the UK is going further than Australia by also specifically banning all platforms – including Discord and Roblox, for example – from offering live-streaming for under-16s, and from allowing strangers to contact child users. Chatbots offering romantic companionship will also be banned for under-18s.

What's the rationale behind the social media ban?

Supporters argue that the evidence of harms caused by social media is now overwhelming. Numerous studies have found that teenagers who spend large amounts of time on it report higher rates of anxiety, depression, loneliness and poor self-esteem. Teens are especially vulnerable to the features designed to make platforms addictive (auto-play, infinite scroll, and so on), and recommendation algorithms tend to reinforce access to undesirable or toxic content. Social media is a breeding ground for cyberbullying, while late-night scrolling leads to poor sleep and exhaustion.

A ban is needed because the current system is not working. A survey by Ofcom found that among children aged 10-12, over half use Snapchat, more than 60% TikTok and more than 70% WhatsApp. All three apps have a national minimum age of 13. Also, even if no ban will be perfect, that's not a reason for not having one. Bans on sales of cigarettes and alcohol to teenagers are also not 100% effective, but few would dispute their usefulness. A ban is also enormously popular, with polls showing large majorities in favour.

What are the arguments against banning social media for children?

The tech firms naturally oppose any bans as an unjustified interference in their businesses. But it's not just Big Tech that's worried. Smaller UK enterprises that make apps aimed at teens are waiting anxiously to discover whether their in-app features will see them classed as social media.

There have always been moral panics about how children waste their time, says Christopher Snowdon in The Spectator. But what the government has planned is “more like banning the printing press than banning Grand Theft Auto”. It won't work, and no one really expects it to – so why bother?

Moreover, the science, in terms of the harms caused by social media, is far from settled, says the FT, with much research showing only weak associations between teenage usage and mental ill-health. And, strikingly, not all campaigners on this issue support an outright ban.

There are fears that bans will encourage children to move to riskier platforms and instil a counterproductive false sense of security in parents. Such campaigners say the government should force the companies to make their products safer, for example by banning addictive features such as infinite scroll.

Is the social media ban working in Australia?

No. The Australian government's eSafety Commission found last week that 81% of children aged ten-15 had accessed at least one of the banned platforms following the ban. Slightly more encouragingly, the proportion of that age group who actually held their own social-media account fell from 52% to 42%. The research is hardly definitive, based on surveys involving just 800 children and parents. But it's broadly in line with other surveys.

Why did Australia's social media ban have such a limited impact?

The biggest issue was “ineffective implementation of age-assurance measures by platforms”, the research found. More than half of children said they had not been asked to confirm their ages. Some 18% said platforms had incorrectly estimated their age to be above 18, and 37% said they had simply claimed to be 16 or above to maintain access.

The federal government in Canberra recently doubled the maximum penalty for companies that fail to comply with the ban to A$99 million (£52 million), arguing that tech giants were “not doing enough” to comply with the new rules. But even so, the early signs are that the road to compliance – even if possible – will be long and winding. “The impact of the law will not be measured in weeks or months, but over generations,” said Julie Inman Grant, the eSafety commissioner.

What are the alternatives to banning social media for under-16s?

Some campaigners favour more nuanced policy interventions. Rather than banning access altogether, governments could regulate the design of platforms – for example by prohibiting addictive features such as infinite scrolling or autoplay for younger users, limiting algorithmic recommendations, making accounts private by default and preventing children from being contacted by strangers.

All these interventions would still rely on effective age verification. But rather than raise age limits, regulators “should redouble efforts to make social sites more suitable for teens”, said The Economist. This would be preferable to an unproven and almost certainly unworkable outright ban. Governments should also “force web firms to cough up more data on how teenagers use their products–the better to help researchers measure harms, and come up with ways to prevent them”.

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Bond markets have a habit of reminding governments that they, not politicians, determine the price at which the state can borrow. Despite Andy Burnham’s message to the New Statesman last September that we've got to “get beyond this thing of being in hock to the bond market”, ten-year gilt yields remain around levels not seen since the aftermath of the Truss-Kwarteng mini-Budget.

There is no doubt that Andy Burnham's affable persona and savvy TikTok game are a refreshing contrast to his predecessor's stiffness. But while politicians trade in popularity, investors are interested in profits.

The rising stock of a prime minister is not necessarily reflected in the stock market. Indeed, external shocks have undone the plans of every occupant of Downing Street over the past decade. And each, whether Conservative or Labour, has reached for much the same economic playbook: more borrowing, higher spending, a larger state and, ultimately, higher taxes. With public debt already elevated and fiscal room increasingly scarce, Burnham may become the first prime minister forced to discover whether that playbook has finally reached its limits.

The public-sector finances data for June were marginally stronger than expected, with borrowing £300 million below the Office for Budget Responsibility's (OBR) forecast. The cost of inflation-linked debt interest fell as the ceasefire in the Iran conflict pushed down energy prices. It was a timely reminder that governments do not control the most important variables in their own fiscal forecasts. With hostilities resuming, inflation is unlikely to remain so well-behaved, leaving Burnham's fiscal headroom squeezed.

As one official reportedly told the new prime minister on arriving in Downing Street: you might not be interested in foreign policy, but it's interested in you. Events overseas can force an indebted government into making unpopular decisions. The National Institute of Economic and Social Research (NIESR) estimates that higher energy prices and weaker growth have eroded most of the government's fiscal headroom of £24 billion.

Higher inflation creates a double squeeze for the Treasury, raising debt-interest costs while reducing what departmental budgets can deliver. The director of the NIESR, David Aikman, says that “Commitments must be funded through taxation or savings elsewhere – not through more borrowing. That is the minimum needed just to hold the debt level where it is”.

Burnham vs the bond market

Burnham might want to get beyond bond markets, but unless he can unwind the relentlessly vicious circle of higher debt, higher deficits and stagnant growth, he will be doomed to repeat it. In her first act as chancellor, Rachel Reeves tried to pay for higher public-sector pay by removing the winter fuel allowance, sowing the seeds of her own demise. Taxing jobs through higher national insurance while raising the minimum wage made employment more costly, bearing down on growth. She then assembled a smorgasbord of wealth taxes owing to Labour's manifesto commitment not to raise the three main taxes. Although Reeves reduced gilt issuance, it remains historically high. The Debt Management Office plans to issue around 50% more gilts this year than in 2022-2023. Burnham inherits the same fiscal constraints, but with Labour polling around ten points below the level that delivered its 2024 landslide, reducing his political as well as economic room for manoeuvre.

There is a more fundamental problem if he attempts revolutionary change. He was not even part of Labour's 2024 election victory and, like all unelected prime ministers before him, will face complaints that he lacks a mandate to make difficult decisions. He has repeatedly stressed that Britain is a parliamentary democracy where parties choose their leaders. It is not unusual: 12 of the 19 people to serve as prime minister since 1945 first entered Downing Street between general elections. But that has never made governing easy. Only four went on to win a majority at the subsequent election.

With a fragmented electorate split at least four ways, Burnham may need little more than 25% plus one vote for a majority. Yet volatile voters are unpredictable. His strategy will be to unite the left by invoking his favourite bogeyman, the “Thatcher tribute act” Nigel Farage. Failing that, his programme itself has a distinctly left-wing flavour: capping household bills, re-industrialisation, stronger public control of utilities and a National Care Service. Politically, it is an attempt to rebuild Labour's coalition. Economically, however, it assumes global events remain reasonably benign.

But the more he talks left, the more the bond markets will push him to the right. His priorities are expensive, and his options for paying for them are shrinking. The Laffer Curve is already alive and well in the disappointing revenues generated by a tax burden that has reached its highest level in decades.

Gilt issuance remains elevated, inflation an ever-present threat and he cannot afford to lose credibility by breaching the fiscal rules. “Events, dear boy, events,” as Harold Macmillan put it, still have a habit of overwhelming even the best-laid plans. Burnham's greatest opponents may not reside in the House of Commons, but in the bond market.

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Over the past five years, the Japanese yen has lost 30% of its value against the US dollar and nearly as much against the pound. The currency recently hit a 40-year low against the greenback. Now, powerful figures in global finance are drawing a line in the sand.

Over the weekend, Japan's Ministry of Finance and the US Treasury confirmed they had jointly intervened in currency markets to support the yen. Japan is thought to have sold $59 billion to buy yen, with Washington staging a smaller intervention – its first in Japan since 2011 – in support.

The move sent the Japanese yen up 3.5% against the US dollar, a significant rise in foreign-exchange terms that reversed months of depreciation. Japan's own interventions had become increasingly ineffective. America brings much more potential firepower to the table.

Why is the US buying Japanese yen?

US Treasury secretary Scott Bessent has shown markets there is “a new sheriff in town”, says Katie Martin in the Financial Times. The real mystery is why Washington is getting involved at all. One explanation is simply that Donald Trump likes Japan, telling reporters “Japan's been very good to us, with the exception, of course, of Pearl Harbor”.

Self-interest, too, may be motivating Bessent. Japan's “massive sales” of dollar assets (mainly US Treasuries) are raising US borrowing costs at a time when government yields are already under pressure. His solution? “Stand behind Japan like a scary big brother” to “scare off the yen sellers.” The Japanese yen stabilised at around 157 to the dollar this week, stronger than the 163 level prior to the intervention.

The operation is likely to halt, at least temporarily, a “disruptive further depreciation” of the yen, says Brad Setser of the Council on Foreign Relations. A weak yen tends to pressure other Asian currencies lower. By making the region's exports cheaper, weak Asian currencies cut against the White House's desire for US re-industrialisation. The administration of a short, sharp shock to speculators betting against the Japanese yen might cause them to re-evaluate the trade.

Recent market “negativity” towards Japan has been overdone. The country has several important strengths, including a big current account surplus and ownership of huge tranches of overseas assets.

The one missing piece is higher interest rates. At 1%, Japanese rates are far below those in America, which causes steady selling pressure as local investors seek better yields overseas. Therein lies the rub, says Robin Brooks on Substack. Japan cannot afford to raise interest rates because of its mammoth government debt, which is equivalent to 248% of GDP. But without the support of rate hikes, this currency intervention will ultimately “fail like all previous ones”. Despite its slide, the Japanese yen is probably still overvalued. Its rout is “a symptom of a debt crisis that's getting papered over”.

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Marcel Stötzel, lead manager of the Fidelity European Trust (LSE: FEV), isn’t deterred by claims that Europe’s economic record and outlook are just as dismal as the UK’s.

“Europe is plagued by poor demographics, low productivity and high government debt, none of which are getting any better,” he agrees. Economic output per capita is half the level of the US. But European stocks are not proxies for their economies, as they derive only a third of their turnover from Europe. “We are more bullish than ever.”

Meanwhile, on the macro front, he sees five reasons to be positive. “Germany's fiscal brake has been lifted, Mario Draghi's report on EU competitiveness promises to cut red tape, there is a large savings rate to be mobilised, Europe is spending more on defence and European integration is tightening.” As a result, “the GDP growth gap will not continue to widen” and “we are overweight domestic Europe for the first time.”

A disappointing year for Fidelity European Trust

Following its merger with Henderson European Trust nearly a year ago, Fidelity European Trust has become a £2.2 billion investment trust. It trades at a modest 5% discount to net asset value (NAV) and yields 2.3%. However, while performance has been excellent since its 1991 launch (13.2% per year against 9.5% for the FTSE Europe ex-UK index), it has lagged the index by 10% over one year, 13% over three, and 12% over five. This puts it 11%, 31% and 33% respectively behind JP Morgan European Growth & Income (LSE: JEGI).

In the latest annual report, Sam Morse, fellow portfolio manager, attributed last year's disappointing performance to “limited exposure to defence stocks, holdings in Novo Nordisk, chemical producer Symrise and software company SAP”. Novo Nordisk soared on the back of its weight-loss drug Wegovy, but then crashed 75% from its mid 2024 high before a slight recent recovery. SAP has suffered from concerns that AI will disrupt the businesses of established software companies. JP Morgan European Growth & Income had been more nimble, selling SAP early last year and Novo Nordisk the year before.

Still, every manager has a bad year, and Stötzel will surely get performance back on the rails again, maintaining the long-term record. He focuses on “companies with the ability to grow dividends sustainably for three-five years.” Examples include Inditex, owner of the Zara chain, which kept manufacturing at home and in North America instead of outsourcing it to China. This has enabled better quality control, less wastage, faster delivery and more flexibility.

Other top holdings include ASML, with a virtual global monopoly in the supply of machines for manufacturing semi-conductor chips, pharmaceutical company Roche, cosmetics giant L'Oréal and oil and gas producer TotalEnergies.

Should you invest in Fidelity European Trust?

Stötzel says the portfolio has a higher return on capital and better dividend growth than the market, while trading at no more than the historic valuation of 18 times earnings. Overall, European equities are no better than fair value, but if Stötzel is right and economic growth picks up, earnings growth should accelerate and investment returns continue to be strong. There would be a further boost if the historic aversion of Europeans to investing in equities abates.

Stötzel's thesis about the improving economic outlook for Europe relative to the US may prove optimistic, but it is more plausible than any thesis for the UK, to whose market investors continue to be patriotically attached. Europe is a much larger and broader market than the UK with many more growth stocks, offering managers a better choice for long-term investment. Fidelity European Trust may have tripped up last year, but it has a great long-term record, while investors in JP Morgan European Growth & Income must hope that pride doesn't come before a fall.

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There’s a huge growth story going on in Vietnam that investors would be well-advised to pay heed to.

Its economy grew by 8% last year, making it the 13th-fastest growing in the world according to World Bank.

While much of the rest of Southeast Asia’s stock markets are heavily dominated by artificial intelligence (AI) hardware makers, Vietnam’s has a much more broad-based composition, including a relatively high weighting towards more ‘traditional’ industries, meaning it can offer genuine diversification.

“The combination of economic growth, reform and attractive valuations creates a compelling long-term environment for active investors,” said Tung Dang, chief economist at Dragon Capital – an asset manager that specialises in investing in Vietnam.

It isn’t yet an emerging market – but its reclassification has been confirmed, and is only weeks away. The redesignation will immediately add substantial amounts of passive fund flows into the country’s stock market, and over the following years this could be followed by billions of additional capital from active managers, adding to the many reasons why, of all the regions to invest in, Vietnam is well worth consideration at the present time.

Government reforms are driving growth

Strong growth is one of the most compelling reasons to invest in Vietnam, and government policies are underpinning the story.

Craig Martin, co-chairman of Dynam Capital, says that Vietnam is one of the few markets in the world that offers investors the combination of structural economic growth, political stability and attractive valuations.

“Over the past three decades, Vietnam has transformed itself into one of Asia's most dynamic manufacturing and export economies,” he said. “Today it is moving into a new phase of development, driven not only by exports but increasingly by domestic consumption, rising household wealth, financial deepening and technology adoption. This is being driven by government reforms.”

These reforms are explicitly focused on empowering Vietnam’s private sector, for example by boosting R&D spending and foreign investment. Entrepreneurship is also at the core, with Resolution 68 describing entrepreneurs as “new warriors on the economic front”.

“The government has now set an ambitious target of 10% annual growth over the next decade and has rolled out a new wave of domestic reforms – dubbed Doi Moi 2.0 – to help get there,” said Khanh Vu, lead portfolio manager of Vinacapital Vietnam Opportunity Fund.

“The original Doi Moi reforms in the late 1980s lifted Vietnam from poverty to middle-income status,” Vu added. “This second wave aims for a similar step-change to a high-income economy, similar in the path to what we have seen in other developed Asian economies.”

As with many emerging markets, there is also a strong demographic trend underpinning this – including a young, expanding and consumption-driven middle class, alongside rapid urbanisation and rising productivity.

Vietnam’s stock market

The Vietnamese market, as characterised by the MSCI Vietnam Index, is dominated by the real estate and financials sectors, which account for 44.4% and 24.6% of the market respectively (as of 30 June).

This is slightly skewed because two real estate stocks – Vingroup and its former subsidiary Vinhomes – account for more than 38% of the index between them.

But this dominance of real estate and finance is to be expected in an emerging economy, says Vu.

“Banks remain the primary source of funding and the backbone of economic growth, while real estate developers play a key role in driving urbanisation — a rate that stands at only ~40% in Vietnam, compared to 67% in China, 63% in Thailand, and 75% in Malaysia,” he said.

Vu also highlighted the importance of hard asset-linked sectors (industrials, construction materials, energy and utilities) within the Vietnam market and picked out Hoa Phat, the country’s largest steel producer, as a key beneficiary of urbanisation and infrastructure spending.

“Consumer businesses are another important theme, benefiting from rising incomes, urbanisation and an expanding middle class,” said Martin. “Retailers, food producers and consumer services continue to enjoy long-term structural growth.”

Vietnam is also conspicuous among emerging markets for the relative lack of state-owned enterprises in its largest stocks. “Many of the leading companies were started by entrepreneurs,” Martin points out. There is some state investment in the financial sector, but this tends to happen alongside specialist foreign investors.

Vietnam’s emerging market status confirmed

In April 2026, FTSE Russell confirmed that it will reclassify Vietnam from a frontier market to an emerging market, a process that will begin on 21 September and be implemented in four tranches over the following 12 months.

This could potentially mark a step-change from recent years during which, as Vu points out, foreign investors have been net sellers of Vietnamese stocks.

“The higher interest rate environment in the US and the AI-related frenzy [have been] pulling capital elsewhere,” he said.

Emerging market classification could reverse this trend, because the market will be accessible to a wider pool of institutional investors and passive funds whose mandates currently prevent them from investing in Vietnam.

“The most immediate effect will be passive investment from funds that track emerging-market indices,” said Dragon Capital’s Dang.

But the impact is unlikely to happen overnight – especially as most of the anticipated new capital is likely to come from active investors.

“While passive inflows receive most of the attention, I think the bigger story is that an upgrade raises Vietnam's visibility among global investors,” said Martin. “Once institutions begin researching the market, many active managers also become interested, creating more durable sources of capital.”

Dang quantifies the potential passive tracker inflows at around $1.5-2 billion once inclusion completes (expected to be September 2027). Active allocations following after this are expected to raise total foreign inflows to $5-10 billion.

Finding value in Vietnam

For one reason or another, Vietnam’s market – despite impressive growth rates – is often overlooked, and this means that it offers remarkable value.

“Currently, the market trades at around 13x forward P/E — and if we exclude some anomalies, closer to below 10x,” said Vinacapital’s Vu. “That's a valuation typically associated with a period of economic stress, not an economy growing at one of the fastest rates in Asia.”

Dang argues that valuations for Vietnamese stocks remain attractive compared to historical levels despite rising earnings and the country’s strong economic growth.

“We expect profit growth across the larger companies to remain robust, yet the market continues to trade at a discount to many regional peers and below its own historical valuation ranges,” he said. “Earnings expectations have also held up well despite geopolitical uncertainty, higher oil prices and tighter global financial conditions.”

Vietnam can also offer diversification for the typical portfolio, which is frequently dominated by a handful of large-cap US technology companies.

“Investing in Vietnam means investing in the ‘traditional’ sectors but experiencing tremendous growth potentials, following the same pattern as developed markets experienced 20-30 years ago,” said Vu.

How to invest in Vietnam

Given its small size, lack of investment coverage and the outsize weighting of the index’s two largest stocks, passive investment isn’t generally seen as the best way to invest in Vietnam.

“Vietnam is not simply an index story,” said Martin. “There are very significant differences in quality, governance and capital allocation between companies. Stock selection remains critical.”

There aren’t many passive funds available to UK-based investors tracking Vietnam’s market either. It is also difficult to buy the country’s stocks directly, but fortunately there are a handful of investment trusts focusing on the country.

The largest of these by market capitalisation is Vietnam Enterprise Investments (LON:VEIL), managed by Dragon Capital. This targets Vietnamese companies with attractive growth and value potential, good corporate governance and an alignment with the country’s underlying economic growth drivers. Vingroup is the top holding as of 30 June (though VEIL is significantly underweight compared to the index), followed by state-owned bank BIDV and consumer retail chain Mobile World.

Vinacapital Vietnam Opportunity Fund (LON:VOF) invests in privately-held Vietnamese companies as well as publicly-listed ones, and is sector-agnostic. As well as Vinhomes and Mobile World, top holdings (as of 30 June) include real estate development firm Khang Dien House, commercial bank (and Vietnamese Ministry of National Defence subsidiary) MB Bank, and port operation and logistics firm Gemadept.

Finally, Vietnam Holding Ltd (LON:VNH), managed by Dynam Capital, focuses on high-growth companies in Vietnam particularly in domestic consumption, industrialisation and urbanisation.

For more information on each of these Vietnam-focused investment trusts, see our article on The best funds to buy as Vietnam evolves.

When looking for Asian stocks, I look for good businesses run by competent management teams, available at a price that leaves a margin of safety. I focus on managing absolute risk and losing little money during market downturns, which should help compound returns at higher rates over the long term.

This discipline leads the portfolio away from popular thematic investments, start-ups, highly geared companies, cyclical businesses earning peak margins and stocks on high multiples to earnings.

As a result of this approach, the Fidelity Asian Values trust is primarily invested in mispriced small and medium-sized companies – the “winners of tomorrow”, before they become well known. Here are three examples.

Asian stocks to watch

Orion Corporation (Seoul: 271560) is a South Korean snacks and confectionery business that owns the well-known brand Choco Pie. It is a good-quality franchise with about a 25% market share in the domestic market as well as notable international revenues, supported by its production bases in China, India and Vietnam. Its international operations continue to grow and China makes a sizeable revenue contribution.

Choco Pie is its largest growing category, but Orion is using the recognisability of its brand to branch out into premium snacks as well as targeting a health-conscious demographic as a future driver of growth. Management has been focusing on enhancing shareholder value –it reported a 40% year-on-year rise in its dividend in 2025. The business is debt-free; the stock is valued at a 12-month forward price-earnings (p/e) ratio of nine times and offers a return on equity of more than 12%.

ManpowerGroup Greater China (Hong Kong: 2180) serves businesses that require workers for a limited time or a specific project, or those who wish to manage their own direct headcount. It also offers its clients headhunting and recruitment services, payroll outsourcing and training services. It is an asset-light business model and the company earns higher margins in its headhunting and recruitment division.

ManpowerGroup Greater China was spun off from ManpowerGroup, a world leader in its field, and therefore has the reliable operational processes of its erstwhile parent and retains a strong emphasis on risk management. Given the highly unorganised nature of the recruitment market in China, ManpowerGroup's scale and geographical spread is advantageous.

Our research on the ground indicates that the recruitment business in China is at its lowest ebb in the business cycle. The stock trades at a 2026 forward p/e of six times, offers a dividend yield of more than 7% and about 95% of its market capitalisation is in net cash on its balance sheet.

JW Life Science (Seoul: 234080) is the largest producer of intravenous (IV) fluids in South Korea, with a 45% market share. Demand for IV fluids is stable as the products are essential components in surgery, intensive care, hydration and patients' nutrition. The company faces competition from three to four players, but there are high barriers to entry given strict quality criteria, the need for strong brands and distribution capabilities, and for high levels of capital expenditure.

An ageing demographic in South Korea is supportive of revenue growth prospects for JW Life Science. The company has robust operating cash flows and a net cash balance sheet, a sustained mid-single-digit earnings growth profile, and offers a return on equity of an about 15%. It is valued at six times 2026 earnings.

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Cornwall is one of the poorest corners of northern Europe. Its output per head has sat at roughly two-thirds to three-quarters of the UK average for two decades. A typical full-time worker there earns around 84% of the national wage.

For 25 years the gap was cushioned by Europe. Cornwall and the Isles of Scilly took well over £1 billion in EU structural funds between 2000 and 2020, something like £100 million a year. That money has gone, its replacement is worth roughly half as much, and from April 2026 the successor to that replacement excludes Cornwall altogether.

But now something has changed the calculus entirely. That poor, peripheral region also happens to have hard-rock lithium and tin deposits, the largest tungsten resource in the West, Britain's first deep geothermal power station and a mineral-processing industry with two centuries of pedigree.

Forty miles away in Bridgwater, Somerset, Tata's Agratas is building a £4 billion, 40GWh factory that will be the largest in the country. Resources, low-carbon power, processing know-how and a battery end market, all in one economic-geographic area. Nowhere else in Britain has all four.

China accounts for about 80% of world tungsten mined production and an even larger share of the downstream conversion. From February 2025 it placed tungsten under export licensing on national security grounds and by late 2025 had restricted authorised exporters to around 15 firms for 2026 and 2027. Ammonium paratungstate, the key traded intermediate, went from roughly $300 to $940 per metric tonne unit in early 2025 to above $3,000 by this spring. That is why Devon's Hemerdon, the West's largest tungsten resource, and Cornwall's Redmoor, Europe's highest-grade undeveloped tungsten deposit, matter to people who have never heard of either.

The activity on the ground is real and, in places, world-leading. Cornish Lithium has sought regulatory permission to develop a former china clay pit at Trelavour and is pulling lithium from geothermal brine at Cross Lanes. Cornish Metals is developing South Crofty, closed since 1998, aiming at production in around 2028 and a company with an estimated net present value of nearly £500 million. Geothermal Engineering's plant at United Downs delivered the UK's first deep geothermal electricity in February this year, with lithium carbonate coming from the same well. Tungsten West at Hemerdon is hoping to start production by the end of this year.

This is not a thesis about the geology waiting to be proven – it has already been proved. What is missing is the next step, the chemistry that turns concentrate and brine into battery-grade or defence-grade material, and Britain is building most of that capacity at Teesside rather than in the region that actually holds the ore.

Cornwall's lithium project pipped at the post

Here is the part investors and ministers alike should pay attention to. In February this year, Imerys placed its St Austell lithium project on hold. It was not a bad project; it was simply not the project the company chose to go ahead with because the French state had just taken a €50 million stake in Imerys's rival venture in France, Emili. Capital did not leave because the geology failed. It left because a rival state turned up with a cheque and Britain did not. That single episode should worry anyone backing UK critical minerals more than any drilling result. Geology is necessary. It has never been sufficient.

Britain has the wherewithal. The National Wealth Fund has put £31 million into Cornish Lithium and £28million into Cornish Metals, real money into the right projects. But its remit now stretches from clean energy to defence to life sciences to the creative industries, and a fund asked to do everything risks losing focus.

France did something narrower and, I think, smarter: it took a direct stake in one named asset, through one named vehicle, and said plainly that this is the project the state has decided to back. The US has done similar. Britain's equivalent is, for now, an announcement of an up to £50 million fund and a set of sector programmes that may not add up to much.

The investment case follows from policy

None of this needs a white paper. It needs a decision. Back one properly scaled mid-stream processing hub in the South West rather than subsidising several plants that are too small to matter. Build a stockpile mechanism for defence-critical tungsten, given that Britain currently produces none and refines none. Speed up the permitting process that has seen

South Crofty take years to develop a mine before a tonne of tin comes out. And close the funding cliff-edge Cornwall now faces with an argument based on national security rather than regional deprivation, because the latter has manifestly not worked for 25 years and the former might.

The investment case follows from the policy case, not the other way round. Companies with permitted, de-risked, assets that have already been built, Cornish Metals and Tungsten West among them, are the ones best placed to benefit if Britain decides to act like it means what it says about supply-chain security.

The lesson from Imerys is that being right about the rock is not enough. Somebody, whether it's the government or private capital, has to be willing to be the anchor. Cornwall has spent 25 years waiting for a growth story. It's finally got one under its feet. The only question is whether Britain gets there before France, or Kazakhstan, or the next country willing to write the cheque.

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Andy Burnham has taken power with remarkably little scrutiny – no general election, no contest for the leadership of his party, and no form of questioning in Parliament. A few sound bites aside, we have very little idea of what his plans are. Instead, over his first week, he made a series of small announcements, all of them to be financed by some form of creative accounting or financial conjuring trick.

On his first day, for example, Andy Burnham announced a plan to end rough sleeping, at an estimated cost of £340 million over five years. Where is the money to come from? Apparently from some “uncommitted” funds in the housing department – in other words, they found some cash down the back of the sofa.

Then the new PM announced a plan to cut VAT on electricity at an estimated cost of £840 million. This time, the money was found by scrapping the digital ID scheme. The only trouble is that the ID plan was never funded in the first place. In effect, one form of imaginary money was being replaced with another.

Then came a £2 cap on bus fares, reversing the decision taken by his predecessor to raise them. The cost is £500 million and the money to be found by replacing “grants” for international climate projects with “loans”, which might shift it to another part of the balance sheet, but won't make any difference to the amount of money that has to be spent over the next few years.

There is a common thread here. Each of the policies involves some clever-clever financial tricks. With a deft sleight of hand, money is shifted around, redesignated and reallocated. That might seem clever to a politician, but if it were happening at a listed firm, the shares would have crashed and the board would have been charged with fraud.

Financial trickery is the reddest of red flags. It may not matter for now because the sums are tiny. Andy Burnham's policies mean a commitment of slightly more than £1.6 billion of extra spending. Given that the government spends £1.3 trillion a year, that is a drop in the ocean. But it is the thought that counts. Andy Burnham has made it clear that he is happy to play games with the public finances if he thinks he can get away with it.

Andy Burnham's policies are making bond markets suspicious

That matters. There are two big problems. First, Britain's debts are already precarious. The government is set to borrow more than £140 billion a year, and the interest due on all the money we already owe has climbed over £120 billion a year. Yields on ten-year gilts have spiked past 5% and are rising faster than for any other major developed country. The bond markets are already treating the UK with well-justified suspicion.

Next, the government is going to have to borrow vast sums, not just to finance ambitious plans for taking utilities into public ownership or building more council houses, but simply to cover day-to-day spending. With the welfare bill spiralling out of control and with defence spending set to rise, Andy Burnham's policies will need more and more money every year, while a stagnant economy means that tax revenues will flatline at best, and may soon start to fall.

Add the two together and Andy Burnham's government is going to have to borrow £300 billion or more over the rest of its term, as well as persuading the markets to roll over all the existing debt. It was always going to be a tough sell, even with plenty of goodwill from investors. Now the markets have, in effect, been warned not to trust the government's figures.

It could have been more straightforward – finding the £1.6 billion needed by making serious savings elsewhere, for example. The completely pointless National Wealth Fund would have been an easy place to start. Instead, Burnham simply tried to pretend he could magic the money out of nowhere. At some point over the next year, the government may well have to spend some serious money. It might be for the debts of the newly nationalised British Steel, the collapse of several of the water companies, a spike in energy prices, or something else that no one is thinking about right now. Whatever it is, the government will need to tap the bond markets. And yet it has already thrown away the support of the markets by treating investors like idiots. A crash now looks all but certain – and it will be very messy when it happens.

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Asian small companies are often overlooked – but they shouldn’t be, Gabriel Sacks, manager of the Aberdeen Asia Focus fund says.

Speaking to Cris Sholto Heaton on the MoneyWeek Talks podcast which is now available on all podcast platforms and our YouTube channel, Sacks says Asia is the largest economic region in the world, and it acts as the engine of growth for the global economy.

“Asia is delivering over 50% of global growth. So a lot of people will look at Asia small caps as being niche but actually in my view it should be really core to people's portfolios because you get away from some of the mega caps and get access to really the engine of domestic and global growth.”

With the region being so large both geographically and economically, there are many opportunities for investors to find real returns.

Sacks says his fund is able to get broad access to Asian markets and look at the opportunities presented by all the different countries in the region and the thousands of listed firms.

That being said, there is a need to narrow it down to just the most exciting ones, but the low amount of research available presents a challenge. Sacks says that this is partially caused by the fact that the Asian small caps market changes very rapidly and the research struggles to keep up.

“One of the differences I think with Asia and emerging markets is that the universe is changing very quickly. It's a very dynamic region. If you look at places like Latin America or EMEA there's a narrower set of opportunities and you can buy these companies and they're great businesses.

“In Asia you need to refresh your views quite frequently.”

He adds that the quality of research available “has probably got worse throughout my career. Things like MiFID (Markets in Financial Instruments Directive) and a passive focus has meant the focus has been on large caps.”

Though Sacks says a passive focus also presents an opportunity for active fund managers to take initiative and make the most of the fast-changing market.

Artificial intelligence is part of the story, but not all of it

Although the broader Asian small caps market encompasses many diverse firms, the current focus of much of the market is, unsurprisingly, artificial intelligence (AI).

While historically the Asia focus fund has been most heavily weighted towards the domestic-oriented India market, the AI boom has shifted the focus to export-oriented Taiwan and Korean markets.

This is a function of good performance coming from firms in that sector, particularly in the semiconductor supply chain.

Sacks said the other factor to consider is that “the market has actually rewarded that part [Taiwan and Korean] of the market much more than other parts. So the index and our portfolio weights have drifted upwards.

“I think we've been taking profit from our AI winners for at least the last 6 months and the weight has still crept up. So we've had some fantastic stocks in that space.”

The performance of some of these firms, like TSMC, Samsung, and SK Hynix, has been boosted by the fact there are very high barriers to entry in the supply chain and the firms who already occupy the area are able to profit from the huge boom in AI.

“There's a lot of money being thrown at AI at the moment, driven by the US, and the Asia supply chains really earn this profit up front because they develop the chips [needed for AI]. They're the ones doing the cooling, they're the ones doing the testing and the services side.”

Sacks adds that the fund is also looking at the firms that are benefiting from the AI boom too.

“We increasingly find second or third order derivative plays on AI which are just emerging. Those businesses that are part of the AI-driven part of the [market] weren't there before. These are very leveraged plays on AI. So many of these names have actually done better than TSMC which again I think goes to show that you don't need to necessarily buy TSMC or large cap to get that AI and tech exposure.

“The nice thing in our space is that it can be more diversified than a single stock, and actually within our portfolio tech is not as high as it is in a large cap portfolio.”

For more on the opportunities in Asian small caps, the tech supply chain, and the consumer sector, you can listen to or watch the full episode of MoneyWeek Talks wherever you get your podcasts.

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MoneyWeek Talks is a podcast that helps you unlock the secrets to financial success. Editors Kalpana Fitzpatrick and Andrew Van Sickle are joined by influential guests – from CEOs and entrepreneurs to economists and policymakers – to share their top tips on managing money, investing wisely and building wealth.

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Andy Burnham has appointed John Healey, the former defence secretary, as chancellor. It was certainly a surprise. Home secretary Shabana Mahmood had been seen as a certainty for the job at No. 11, but at the last moment The incoming prime minister, appointed Healey instead. The markets were relieved. Given that the potential alternatives were Ed Miliband or Angela Rayner, that is not saying very much.

Still, at defence, and as a former minister in Gordon Brown's Treasury, John Healey carved out a reputation as a tough and effective minister. For now investors will trust him to stick to the fiscal rules and at least make some efforts to control the huge rise in public spending. The choice is better than could have been hoped for a few weeks ago.

The trouble is, Rachel Reeves has left behind a dismal inheritance. After less than two years in office, growth has stagnated, real wages are stuck, investment has been crushed, retail, hospitality and manufacturing have been suffocated by higher taxes, and unemployment has begun to steadily rise. Meanwhile, borrowing is starting to run out of control, overshooting even the £70 billion increase planned in Reeves's first Budget, and the cost is rising all the time, with the country now spending £125 billion a year on debt interest alone.

If Healey is to have any hope of fixing that and saving the government from a financial crisis, he will have to make it clear he is making some decisive changes and is willing to make them right away. It won't be easy. But here are three places he could start.

1. Schedule an early Budget

To begin with, he should schedule a Budget for early September. Parliament can always be recalled for a few days if necessary. One of the worst mistakes Reeves made was to allow months of speculation about which taxes might go up. It will be even worse under Burnham, who is at his happiest when pandering to the free-spending wing of his party. A wealth tax? A steep rise in capital gains tax? A lower threshold for the mansion tax? A land value tax? Each time one or other option is floated in the media, assets are sold or reorganised to try and minimise the impact. It damages the economy, and you don't even raise any revenue. The best thing John Healey could do is to set out what his plans are as quickly as possible. At least that way, all the damaging speculation would be brought to an end.

2. Stop battering businesses

Next, John Healey should call off the war on wealth creators. He should make a big speech within the next few weeks praising entrepreneurs, start-ups and small businesses. Another big mistake Reeves made was to relentlessly batter businesses, and new small businesses in particular, with an endless series of levies, charges and new rules. She made them feel that their staying in business was not worth the effort, and increasingly that feeling was unfortunately justified. Apart from the increase in employers' national insurance, none of them raised very much money, and they all crushed the life out of companies. Instead, Healey should offer one major concession such as restoring the 10% rate of CGT for entrepreneurs or exempting family businesses from inheritance tax. It would hardly cost anything and would send out a signal that enterprise was back in favour.

3. Reform welfare spending

Finally, John Healey must start making serious cuts to welfare spending. We don't have any real idea what Burnham's plans are, but they will be expensive. A lot more money will have to be found from somewhere – not least for defence given Healey's previous stand on this issue – at a time when the government is already breaking through its borrowing limits. Welfare spending is already projected by the Office for Budget Responsibility to go above £400 billion by 2030, and given the rate at which it is rising, may well go much higher.

Unless that can be controlled, the country faces endless tax rises, with no improvement in services and with no money left to do anything else. Welfare will simply consume every spare penny. At defence, John Healey showed he is capable of tough decisions and doesn't mind confronting his party. He will have to do the same as chancellor – he had better make a start from the very first week.

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Could Andy Burnham’s leadership mark a shift in tone and pace for the UK’s beleaguered economy?

Business leaders hope so. Gregor Paterson, fund manager in the UK team at fund management group Amati Global Investors, highlights that the new prime minister ought to have the expertise on hand to do so.

“Burnham himself has a lot of experience, and has a pretty heavyweight team of advisers around him,” says Paterson. “He must be aware – as we all are – of how much Keir Starmer’s team struggled to get the economy moving, and you’d hope that he has a plan.”

The sense of urgency is critical. One key frustration with the previous government was the lack of clarity around policy direction, especially around the Budget.

“Businesses weren’t able to hire, expand or build because they didn’t know what was coming,” Paterson says, pointing out successive delays around fiscal events, whereas Burnham already looks to be moving at pace.

“It looks like he’s putting his team in place and keen to get things moving much more quickly than might have been the case if there had been a messy leadership battle.”

To the business community, speed and clarity are essential for planning – not merely political virtues. There is a deeply felt need for a credible and ambitious growth strategy.

Anna Leach, chief economist at business leaders’ professional body the Institute of Directors (IoD), says some elements of the previous government’s approach were well-intended but overshadowed by uncertainty.

“We need a better industrial strategy and it all needs to be done a bit more quickly and at a grander scale,” she says.

Infrastructure is a key area of focus

Leach would welcome a clearer long-term framework that gives companies the confidence to commit capital, hire staff and expand their operations.

Planning reform and infrastructure investment should form two central pillars of a growth strategy and she supports Burnham’s ambitions for a more balanced economy.

“A regional growth agenda and devolution are really good ideas. There’s strong economic evidence that – if well-designed – these can deliver strong growth and help draw in private sector investment,” she adds.

But execution will be key.

“It does come down to design because while Manchester looks like it has been successful, I don’t think one could look at Wales and Scotland and say that devolution has unleashed any animal spirits in those two regions.”

Job market dynamics are another area of concern. Cost pressures have intensified, the jobs market has cooled, hiring is declining and vacancies are falling. This all raises questions over how to meet conflicting priorities.

“We want to see how we shape the labour market in a way that balances everybody’s needs… because at the moment things are looking a little bit risky, particularly when you layer in artificial intelligence,” says Leach.

All eyes on Burnham’s tax policies

Given the £3 trillion debt burden, the key question is one of tax. For many in the business community, their immediate wish is not further reform but stability, with uncertainty particularly acute around the non-domicile regime.

“The constant speculation about what tax increases should fall on wealth creators, following big tax increases on businesses themselves, is all detrimental to private sector investment,” adds Leach.

She also highlights the cumulative effect as the business tax burden has been creeping up in successive budgets.

“In the near term… more certainty and a lack of vilification of business would be pretty pleasant to start with.”

Darius McDermott, managing director of investment platform Chelsea Financial Services agrees; he’s a clear believer that if you overtax the wealthy, they will leave the country, shrinking future potential tax revenues.

“If additional rate taxpayers face a 1% increase, I don’t expect you’d see a huge outcry. But if it goes up to 60% over a certain number, then I think you’d see a lot of unhappy wealthy people,” he says.

Markets rely on confidence as well as policy

From a market perspective, the challenge is not just policy design but sentiment.

According to Anna Macdonald, investment strategy director at Hargreaves Lansdown, the UK needs a “credible, investment-friendly plan for economic growth, alongside clarity and stability on tax”, otherwise investors will remain hesitant.

“Constant speculation, including around capital gains tax, risks making people more cautious about moving their money from cash into long-term investments, at precisely the moment when the UK needs more people to invest for their future.”

Critics of Starmer say that Labour was voted in on the promise of growth and change, but it soon emerged he didn’t have a clear plan to achieve it.

“What markets want to see is how we're going to start to grow the economy and grow productivity. We thought the answer to that previously was going to be in housebuilding but that didn’t really materialise,” adds Paterson.

“When you have such high levels of debt, you have to grow your economy. And I think neither people nor businesses feel confident enough to invest – hire people, build factories and expand.”

It’s early days, but if Burnham can shift the mindset, his impact could be significant.

“If he can inject some confidence back into the system, then people and businesses will hopefully start to react,” adds Paterson.

One move that would encourage investors towards UK companies is if the new administration were to lower the rate of stamp duty reserve tax on most UK-listed stocks and shares.

Currently investors directly purchasing more than £1,000 of UK-listed shares, unless they were newly listed or traded on the Alternative Investment Market (AIM) – even inside an ISA – would need to pay 0.5% stamp duty.

“If you were to buy Tesco shares to put in your ISA, you’ll pay half a percent tax when you buy those shares, but if you buy Walmart shares, you won't pay any tax,” Paterson says.

Scaled up, those amounts soon mount up. He says as well as eroding returns, the UK could be putting itself at a disadvantage compared to other markets.

“It’s something most markets don’t have. The French do, but it's only 0.3% and it’s only on the very largest companies. So we're a bit of an outlier in charging people to participate in our stock market.”

Which investments could benefit under Burnham’s government?

John Healey being named chancellor was the big announcement many of us were waiting for.

He stood down as defence secretary on 11 June in protest over insufficient funding of the country’s defence strategy; he’d been calling for a defence budget of 3% of GDP by 2030.

Healey’s appointment saw a bounce in some defence names. Babcock International Group (LON:BAB) jumped roughly 7% following the news and BAE Systems (LON:BA.) was also up around 3% the following day. Both share prices climbed further over the next few days.

While it remains to be seen which defence companies are the specific longer-term beneficiaries, the sector as a whole will be a clear structural winner, according to McDermott.

He says: “The increase in spend isn’t over one year; it’s a multi-year increase. We may see the investment into companies from other countries, the US or elsewhere, but I think European defence, of which we’re obviously a subsector, is likely to see a decent amount of growth over the next decade.”

As always, individual investors should try to avoid overreacting to political headlines or any market noise as the new government sets out its plans.

“Changing a long-term investment strategy in response to a change of chancellor can easily do more harm than good. Staying invested and focused on long-term goals remains the most sensible approach,” says Macdonald.