Joint statement from HM Treasury and Department of Finance Canada gov.uk/government/new…
▶️ It's good news that the UK has decided to steer clear of Canada’s misguided “Defence, Security & Resilience Bank” scheme. Chancellor John Healey deserves credit for recognising the concept’s fundamental flaws, which I highlighted a while back over on Substack. dmcneill187.substack.com/p/the-rearmame…
▶️ It's good news that the UK has decided to steer clear of Canada’s misguided “Defence, Security & Resilience Bank” scheme. Chancellor John Healey deserves credit for recognising the concept’s fundamental flaws, which I highlighted a while back over on Substack. dmcneill187.substack.com/p/the-rearmame…
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Looking at this morning’s public sector finance figures:
1⃣ I’d say that PSND (“the deficit”) is shaping up to be about £130bn this (fiscal) year. That would be a slight improvement on last year, but some way above the OBR’s forecast.
2⃣ Relative to GDP, though, it might come in at around 3.5pc – an improvement on the 4.5 to 5 range we’ve seen since Covid, although not yet back to the c.2.5pc that was typical before that. Still, probably enough to keep the ratio of debt/GDP fairly steady at the 94-95pc level that has prevailed since 2021.
3⃣ The concern for the Chancellor will be the “current deficit”, which he needs to eliminate in order to meet the main fiscal rule. He still has three years to accomplish that, but on a rolling 12-month basis it has started to edge up and is running ahead of the OBR forecast for the fiscal year to date.
1⃣ I’d say that PSND (“the deficit”) is shaping up to be about £130bn this (fiscal) year. That would be a slight improvement on last year, but some way above the OBR’s forecast.
2⃣ Relative to GDP, though, it might come in at around 3.5pc – an improvement on the 4.5 to 5 range we’ve seen since Covid, although not yet back to the c.2.5pc that was typical before that. Still, probably enough to keep the ratio of debt/GDP fairly steady at the 94-95pc level that has prevailed since 2021.
3⃣ The concern for the Chancellor will be the “current deficit”, which he needs to eliminate in order to meet the main fiscal rule. He still has three years to accomplish that, but on a rolling 12-month basis it has started to edge up and is running ahead of the OBR forecast for the fiscal year to date.
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1⃣ Amongst today’s batch of data releases from the ONS, the one to focus on is “real household disposable income per capita”. It’s the best measure of overall living standards we’ve got, adjusting as it does for the effect of taxes, benefits, and inflation on people’s income. of consumer confidence, business prospects, and voting intentions.
2⃣ Today’s data shows that in the first half of the calendar year, RHDI per capita was down on the same period last year, by 0.6pc – relatively chunky as these things go. The old normal used to be annual growth of around 2pc (taking the five pre-Covid years 2015-19 as the benchmark), but it’s been a struggle since then. 2024 was a decent year (+3.0pc) but 2025 less so (+0.9pc) and today’s data suggests that we’ll be lucky to see much if any growth at all this year – and that the OBR’s forecast of +0.5pc for the current fiscal year may be on the high side. Remarkably, the level of income for H1 26 (just over £13,000) was virtually the same as H2 19, the six months before Covid.
3⃣ None of this will come as a surprise to the Chancellor, but it certainly illustrates the delicacy of the situation he faces as he draws up next month’s Budget.
2⃣ Today’s data shows that in the first half of the calendar year, RHDI per capita was down on the same period last year, by 0.6pc – relatively chunky as these things go. The old normal used to be annual growth of around 2pc (taking the five pre-Covid years 2015-19 as the benchmark), but it’s been a struggle since then. 2024 was a decent year (+3.0pc) but 2025 less so (+0.9pc) and today’s data suggests that we’ll be lucky to see much if any growth at all this year – and that the OBR’s forecast of +0.5pc for the current fiscal year may be on the high side. Remarkably, the level of income for H1 26 (just over £13,000) was virtually the same as H2 19, the six months before Covid.
3⃣ None of this will come as a surprise to the Chancellor, but it certainly illustrates the delicacy of the situation he faces as he draws up next month’s Budget.
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1⃣ Abolishing the triple lock is one thing. Rather like reform of the House of Lords, coming up with a workable alternative is another.
2⃣ The leading option would seem to be ditching the 2.5pc “floor” for the annual uprating and relying purely on the increase in average earnings or prices, if any. As it happens, the 2.5pc floor does affect the OBR projections from 2027 because it reckons inflation and average earnings growth will dip below that level. Without the floor, by the fifth year of the forecast (2030-31), the cost of the state pension would be about 1pc lower than otherwise, saving the government close to £2bn in that year.
3⃣ A handy sum, to be sure – but tiny in the context of overall projected government spending in that year (£1,600bn) and unlikely to be enough to pay for a “national care service” unless significantly supplemented by other measures.
2⃣ The leading option would seem to be ditching the 2.5pc “floor” for the annual uprating and relying purely on the increase in average earnings or prices, if any. As it happens, the 2.5pc floor does affect the OBR projections from 2027 because it reckons inflation and average earnings growth will dip below that level. Without the floor, by the fifth year of the forecast (2030-31), the cost of the state pension would be about 1pc lower than otherwise, saving the government close to £2bn in that year.
3⃣ A handy sum, to be sure – but tiny in the context of overall projected government spending in that year (£1,600bn) and unlikely to be enough to pay for a “national care service” unless significantly supplemented by other measures.
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Quantitative tightening and the fiscal rules dmcneill187.substack.com/p/quantitative… Did the Bank of England do the Chancellor a favour last week when it slowed the pace at which it is shrinking its bond holdings? I've written about this over on Substack.
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bbc.co.uk/sounds/play/m0… I appeared on the Today programme on Radio 4 this morning to try and cast some light on the mysteries of Quantitative Tightening. Here's the link (at about 0'25).
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bbc.co.uk/sounds/play/m0… I appeared on Radio 5 Live's Wake Up To Money this morning to discuss the Thames Water saga, the interest rate outlook and the latest crop of results from Big Tech. Here's the link.
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Yesterday’s inflation data show the consumer price level rose by 6.3pc during the two years of the Starmer administration. That’s better than over the two years before (+10pc) and of course there was more to the demise of Sir Keir’s government than the cost of living alone. (1/2)
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However, it’s consistent with my rule of thumb on the politics of inflation, which is this: once it gets beyond 3pc a year, the government of the day’s poll ratings will suffer, even though it may seem that 3pc is not vastly different to the BOE’s target level of 2pc. (2/2)
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I've written over on Substack about what this week's public finance data means for incoming chancellor John Healey dmcneill187.substack.com/p/john-healey-…
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I discussed the economic backdrop against which Andy Burnham is taking office on the BBC News Channel earlier today.
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Funny how fashions change. Way back in investment 101, we were taught that “home bias” was bad – irrational and likely to depress returns. Now, some of the best brains in the business, like Andy Haldane here, see it as something to be encouraged.
thetimes.com/business/econo…
thetimes.com/business/econo…
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The fiscal rules are topical once again as the embryonic Burnham administration weighs up its policy options. I’ve written about how to think about this over on Substack. issue.dmcneill187.substack.com/publish/post/2…
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bbc.co.uk/sounds/play/m0… I appeared on Radio 5 Live's this morning to talk about the week's economic data and the implications of the Makerfield by-election. Link here:
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Douglas McNeill retweeted
A historic milestone for India-UK relations.
Delighted to note that the India-UK Comprehensive Economic and Trade Agreement will enter into force on 15th July 2026.
This agreement will significantly boost our bilateral trade and investment.
It will also unlock numerous n farmers, workers, MSMEs, startups and innovators and contribute meaningfully to the realisation of Viksit Bharat 2047.
Both PM Starmer and I, who are in Evian for the G7 Summit, are naturally very happy with the significant momentum being added to our economic ties.
@Keir_Starmer
Delighted to note that the India-UK Comprehensive Economic and Trade Agreement will enter into force on 15th July 2026.
This agreement will significantly boost our bilateral trade and investment.
It will also unlock numerous n farmers, workers, MSMEs, startups and innovators and contribute meaningfully to the realisation of Viksit Bharat 2047.
Both PM Starmer and I, who are in Evian for the G7 Summit, are naturally very happy with the significant momentum being added to our economic ties.
@Keir_Starmer
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I'm surprised that this flawed idea is still doing the rounds. I explain why on Substack. substack.com/@DMcNeill187
thetimes.com/comment/column…
thetimes.com/comment/column…
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Douglas McNeill retweeted
The idea of removing defence spending from the scope of fiscal rules is gaining traction. Andy Burnham mentioned it yesterday (“There’s certainly a case, when we look at the pressure on defence spending, to consider that exceptionally outside of the rules”). What might this mean?
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I appeared on #WakeUpToMoney this morning to talk about the latest ups and downs in the oil price, tea inflation outlook, and the options available to the Bank of England's rate-setters. Link here. bbc.co.uk/sounds/play/m0…
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