Interest rates, savers and borrowers

Many people over 50 have money on deposit. They would like interest rates to go up. Some retired people think it is unfair that they have been prudent, not spent all they earned, and now find tiny returns on the cash they put by to supplement the pension.

Their children and grandchildren may see it differently. Lots of people in their twenties and thirties think house prices are too high and think they cannot afford to buy. This generation of twenty somethings has more graduates and higher wages than previous generations, but a lower percentage of home owners than their parents at the same stage.

So what is the right answer on interest rates? To keep them low for a bit longer. There is no great inflationery pressure to worry about.The UK government is pursuing a fiscal squeeze and keeping taxes very high, so higher rates as well would be damaging overall. It would redistribute a bit from young to old which we do not need to do.

Relieving the pain of higher taxes would also help. Take down the cost of buying a home by cutting Stamp Duty. Cut business rates which are worsening the pressures on traditional businesses. Upward only rent agreements for shops are being overthrown by market forces, by renegotiation and by bankruptcies and financial restructurings. Business rates remain obstinately high and rising.

These judgements are always a difficult balance between the interests of borrowers and lenders. Past gross mismanagement by Central Banks and the commercial banks they lead and control has made an extended period that favours lenders more of a necessity. Japan had a more spectacular boom and bust crash at the end of the 1989s and is still living with zero interest rates as a result. Japan also has no inflation.

During this period when long term borrowing costs are very low by historic standards, there is a good case for businesses and individuals to borrow more for worthwhile projects and investments. There is also still a good case for shifting borrowing longer where possible to take advantage of still relatively low long term rates. The UK is short of capital investment in a wide range of areas, and needs to press on with substantial new investment in the digital wave, to increase productivity to allow more better paid jobs and to replace future low cost jobs with technology.

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164 Comments

  1. Nig l
    Posted October 8, 2018 at 5:43 am | Permalink

    Anyone who has more than rainy day money either isn’t listening or is being badly advised because the return on equities has always out performed interest bearing accounts and in any event, even a ]n unachievable 5% increase only gives £50 on a £1000, so that is a red herring but yes to the rest but when you have acBlairite tax and spend Prime Minister and massive inefficiency in the public sector, what else do you expect.

    I was in Oxon on Saturday and was told by someone complaining about the sport and leisure department of their District Council that it had 9 tiers of operative from the person cutting the grass etc, through many levels of supervisiob and management to head of department!

    • Posted October 8, 2018 at 6:27 am | Permalink

      Cambridgeshire County Council is short of money. So, to make up the shortfall, it has ordered its staff to take three days off over Christmas without pay to avoid redundancy.
      This is a Conservative Council. Under the County, we also have a set of local Councils – ours is called “Fenland”. Under that, we have a Town Council. I counted about forty people in Fenland Council when they had a group photo in the paper.
      Northamptonshire County Council (Conservative) is bankrupt after spending a lot of taxpayers’ money on a spanking new Council building.
      Corby (Labour) did the same thing with “the Cube.

      There is a lot of staff out there. I imagine they are not volunteers.

      They badly need a severe cull.

      • Hope
        Posted October 8, 2018 at 12:33 pm | Permalink

        JR,

        You ,blog, to a large extent, is nonsense. The BoE is not independent and is very political doing exactly what the chancellor says. Recent events overwhelmingly show this. New quangos created to create an illusion of independence to deceive the public does not wash. Nor does the Quango allegedly independent of the Treasury add any value. Scrap both quangos and accept the responsibility of your govts dreadful actions. Tory party is no longer regarded with any fiscal competence. Quite the opposite after May’s speech last week and Hammond’s record high taxation for fifty years while he announces more ways to tax us, Brexit betrayal to largest turn out in electoral history. There is no coming back from this, your party will be in the wilderness. Five years of Corbyn will be a breath of fresh air.

        Please explain to the public why anyone would ever vote Tory again after May has sanctioned her whips to get Labour MPs to support her betrayal of the nation by keeping the UK in the EU by treaty and labelling Single market as regualtory alignment and keeping the the whole of the UK in the customs union! What purpose would there be in voting Tory?

        May claims to appeal to moderate Labour voters which means to most of us she has abandoned any sense of loyalty to your party, values or what it stands for etc. Don’t blame me for the Tory betrayal I voted UKIP.

        • Hope
          Posted October 8, 2018 at 12:39 pm | Permalink

          JR, could you tell us if this plan by May to side with Labour is in sync with the Grieve rebellion to thwart electoral democracy to leave the EU? Or are we expected to believe this is a coincidence? It clearly shows the electorate not to vote Tory ever gain.

          • Chris
            Posted October 8, 2018 at 9:21 pm | Permalink

            Another reason too, if this from the Spectator evening blend newsmail is anything to go by:
            “…Brexiteers also appeared to concede over the weekend that they are unlikely to vote down the final deal when, as expected, it comes before MPs in a few weeks’ time….”

            If true, so much for them saying that they would vote it down and it wouldn’t get through Parliament.

            Reply This story is wrong

      • Dennis Zoff
        Posted October 8, 2018 at 2:44 pm | Permalink

        Mike Stallard, you hit at the very heart of public sector profligacy, inefficiency, gross overmanning, incompetence, non-vison, etc….the list is very long?

        If the UK was managed by seasoned subject matter professionals, we could cut the public sector by half?….increase real services and assist those services that are most important to citizens, such as the Fire Brigade, Nursing, Doctors, Teachers, better Schools, Policing, Ambulance service, better health care for the aged, improved pensions, better road maintenance etc…

        Wouldn’t it be nice to see an overall UK Government budget (right down to the town council) with all the details of costs and waste? Now wouldn’t that be an eye opener?

        • Turboterrier.
          Posted October 8, 2018 at 7:39 pm | Permalink

          Dennis Zoff

          Now wouldn’t that be an eye opener?

          No it would not. If ever the real costs of the waste by the civil and public services were ever properly exposed all at the same time the NHS would be totally overwhelmed with demand for its cardiac emergency services.

          Sadly nobody is ever bought to account for their incompetence.
          In the private sector people would be told to clear their desks.

      • Lifelogic.
        Posted October 8, 2018 at 3:24 pm | Permalink

        The government usually far prefer to cull the private & rather more productive sector by over taxing and regulating it to death. Hammond and May in particular love this despite pretending to be “the party of business and low taxation”. Highest taxation for 40+ years, very complex taxation (thus expensive on admin) and idiotic over regulation everywhere too.

        Rarely do governments cull their state sector staff (who are about 50% better paid as well when you take into account pensions, sick pay and the likes).

        LEAs prefer to start motorist mugging system to fund their staff and pensions instead and push shops & businesses into liquidation with rates bill and high parking charges.

    • Adam
      Posted October 8, 2018 at 8:12 am | Permalink

      Wasting money is daft. Govt wastes far too much.

      5% pa from a bank may be near worthless.
      Someone with small funds can grow money rapidly.
      A carefully-chosen £2 item purchased at a local jumble or car boot sale may sell to a worldwide ebay audience for £22 within 2 weeks.
      £2 @ 1000% profit is better than waiting 50 weeks longer for 5%!

    • Stephen Priest
      Posted October 8, 2018 at 8:48 am | Permalink

      From the Telegraph “Pension tax relief will be cut to pay for the NHS, Chancellor expected to announce”

      Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax TaxTax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax Tax

      • a-tracy
        Posted October 8, 2018 at 10:10 am | Permalink

        This is just not fair we private sector taxpayers are supporting final salary pensions in the public sector that aren’t affected by this tax, tax, tax.

        • WeToldYou_No_EU
          Posted October 8, 2018 at 11:53 am | Permalink

          Having worked, for a long time in private sector companies, it was the norm for the Company to issue a statement fairly regularly, that the pension scheme had a deficit, and that the employees shall pay quite heavy increases in contributions. Plus Final Salary schemes were often closed.

          Contrast that, with the BBC pension scheme deficit and its ongoing commitments, being ‘kindly paid’ by TV license payers – without their permission, and knowledge, in most cases.

          I also followed a thread on the Web a few years ago, when an individual was trying to establish exactly how much of his Council Tax went straight into the Council Pension scheme. Answer was – a shockingly high amount. I must try that for myself…I’m sure it would be illuminating.

          • a-tracy
            Posted October 9, 2018 at 11:29 am | Permalink

            I know, half a million pounds was put in our local council’s pension scheme when they had made poor investments in Iceland, it was absolutely disgusting and the ratepayers can’t do anything about it because all the parties would just look after their own interests.

        • Anonymous
          Posted October 8, 2018 at 1:15 pm | Permalink

          Indeed.

          You’d need a substantial lottery win to get the lump sum and yearly payout even middle ranking public sector employees are getting.

          No way did their contributions pay for this and no wonder the country is broke.

          • a-tracy
            Posted October 9, 2018 at 11:33 am | Permalink

            To buy a scheme anything like this the employer would have to put in around 25% and the employee around 8-10% every year with a growing wage each year. Plus promotions towards the end of career are a big bonus in the civil service with too many staff not on a career average.

            How can Chancellors with guaranteed final salary pensions justify this charge on people without taxpayer guaranteed pensions and just get away with it? Who fights back for taxpayers?

      • Sir Joe Soap
        Posted October 8, 2018 at 10:18 am | Permalink

        Soon not worth saving in a pension except for IHT purposes. Why should we pay tax on the way in and on the way out?

        • Stred
          Posted October 8, 2018 at 11:46 am | Permalink

          First they wrecked private pensions. Then they sucked the profit out of Buy to Let. Dividends – suck that too. What’s left? The Central Party for those that sit back and let government provide. May says austerity is over. Plenty of other people’s money to borrow or tax.

          • Lifelogic.
            Posted October 8, 2018 at 3:28 pm | Permalink

            May and Hammond are tax to death, over regulate & piss down the drain merchants and Brexit cheats who think they can reinvent themselves as “the party of business and low taxes”. Public service are generally appalling too despite this endless tax.

            They clearly think we all are complete idiots.

  2. Duncan
    Posted October 8, 2018 at 5:45 am | Permalink

    This could have been written by a central planner which is indicative of the direction in which the Tories have been heading now since 1990

    • A.Sedgwick
      Posted October 8, 2018 at 7:35 am | Permalink

      A bit academic for me, as Mrs Thatcher said about one of her ministers – he brings me solutions not problems.

      • hefner
        Posted October 8, 2018 at 12:00 pm | Permalink

        “I would rather have questions that can’t be answered than answers that can’t be questioned” Richard P. Feynman.

  3. oldtimer
    Posted October 8, 2018 at 5:46 am | Permalink

    Debt needs to be considered in the context of ability to service it and also to repay. So far as business is concerned the government needs to start making the case for the system on which we all depend – people willing to risk capital in equity investments which is the only secure base for business debt. By default Mr Corbyn and Mr Macdonnel have been given a clear field to argue the case for confiscation of risk capital.

    Some areas of the system do seem to be functioning as intended. There are many businesses listed on AIM who succeed in raising risk capital, grow fast, generate cash and are debt free. But in other respects I do wonder if some of those in charge have any idea about the impact their words and actions (regulatory and tax) have on the ability or willingness of businesses and investors to take the risks on which innovation and growth depend.

    • a-tracy
      Posted October 8, 2018 at 9:31 am | Permalink

      I agree the people in charge have absolutely no idea about the impact of their words and actions, Corby and MacDonnel have done more to stop risk-taking business loans and development plans than anyone, combined with anti-conservative Hammond and May, more than ever before I’m just very, very happy that I’m in the later stages of my business life and not at the beginning when my mortgage was on the line and family livelihood at risk when we were loaned up to the hilt and working all hours to get several ventures creating jobs off the ground.

  4. Posted October 8, 2018 at 6:21 am | Permalink

    Allow me to link the things you mention together.

    The government – Labour or Conservative – dishes out more of our tax money than it has got. It wants to be popular. If it “prolongs austerity” it sill soon form Her Majesty’s opposition. People (that’s us) are greedy. And we need to virtue signal too.

    That means the government is a huge borrower. That keeps interest rates right down on the floor. Borrowers like that.

    That means that people have to invest somewhere, so they choose houses. It makes a lot of sense actually. If you invest (as I do) in a bank then you get almost nothing in return.

    Which means that house prices soar. And that does my grandchildren out of ever thinking of starting a family with – gasp – children.

    And that leads to immigration as the population falls.

    BINGO!

    • hefner
      Posted October 8, 2018 at 12:08 pm | Permalink

      It is one way to see it. Another one could be to choose to invest in the stock market, possibly more profitable, possibly less stressful, much more liquid, and potentially more helpful to the wealth and image of the country.

    • Dennis Zoff
      Posted October 8, 2018 at 2:49 pm | Permalink

      Mike Stallard

      Excellent point again!

  5. Roy Grainger
    Posted October 8, 2018 at 6:34 am | Permalink

    As a saver I’d like to see interest rates for my long-term savings be at least close to the inflation rate. Currently they aren’t but that is not entirely due just to the BoE base rate decision, it is because the big banks don’t need savers’ money at all, partly because they have had a lot of cheap money made available to them by the BoE following the financial crisis and partly because of the whole concept of fractional reserve banking. More competition in the banking sector might help.

  6. sm
    Posted October 8, 2018 at 6:48 am | Permalink

    I approach financial matters from the standpoint of perhaps the bulk of the population: how do I manage my very average income in a way that will pay the bills, pay HMRC and hopefully leave a little for rainy days.

    After decades of active interest in politics and history, I am coming to the conclusion that virtually every government’s intervention in trade and the economy, no matter how well-intentioned, ends up making life more and more deleteriously complex for everyone. I’m sure most of your readers here, John, could give far better examples than I can.

    “Government rarely picks winners, it usually subsidises losers”.

    • Dennis Zoff
      Posted October 8, 2018 at 2:52 pm | Permalink

      sm

      “Government rarely picks winners, it usually subsidises losers”.

      …because nobody gets fired in the government for bad management decisions!

  7. Caterpillar
    Posted October 8, 2018 at 6:58 am | Permalink

    Off Topic,

    Forbes now reporting using Blockchain to solve the Irish border problem https://www.forbes.com/sites/stephenpope/2018/10/07/brexit-blockchain-and-the-irish-border/amp/

    • Denis Cooper
      Posted October 8, 2018 at 2:54 pm | Permalink

      According to the Irish government the Irish border problem is that at present there is no border – if they just keep saying that there is no border eventually everybody else around the world will believe that there is no border – but unless the UK stays under the rules of both the EU customs union and the EU single market a border will “re-emerge”, or will be “recreated”, and – this is their strongest card, the threat of violence – that could easily lead to a renewal of terrorism, and according to their Europe Minister Helen McEntee nearly a year ago:

      https://news.sky.com/video/is-the-norway-sweden-border-a-solution-for-ireland-11141058

      “We have been very very clear from day one, there cannot be a physical border and that means ruling out cameras, that means ruling out technology, that means ruling out anything that would imply a border on the island of Ireland, it is not an option for us”.

      Perhaps when Philip Hammond referred to the potential of blockchain technology he didn’t realise that as far as the Irish government is concerned the potential of that or any other technology is zero; it has been ruled out from day one along with anything else that would imply a border on the island of Ireland.

      This is why I said at the time that it is hardly worthwhile even trying to negotiate with such idiots, we should simply make a unilateral declaration that we will not be making any changes at all at the border, they can do what they like on their side, and if we do need to collect customs duties we will do that away from the border, but to be helpful to them we will pass a new UK law to control what goods can be taken across the border into the Republic and so into the EU Single Market.

      • Caterpillar
        Posted October 8, 2018 at 4:44 pm | Permalink

        The blockchain solution will be applied throughout supply chains anyway, once adoption starts it will diffuse rapidly.

        (Unilateral declaration does though seem sensible)

  8. Narrow Shoulders
    Posted October 8, 2018 at 7:04 am | Permalink

    Whether interest rates rise or not the banks will continue to fleece savers with low rates and borrowers with high rates.

    Peer to peer lending is the future for savers.

  9. matthu
    Posted October 8, 2018 at 7:11 am | Permalink

    How will low interest rates impact large organisations – including the UK government – who guarantee pensions based on a multiple of final salary?

    How will low interest rates impact investors who invest in those organisations – including UK?

  10. Duncan
    Posted October 8, 2018 at 7:14 am | Permalink

    Chief Political Correspondent

    8 October 2018 • 5:26am

    Ministers are in talks with as many as 25 Labour MPs to force through Theresa May’s Chequers Brexit deal risking open warfare with the party’s own MPs.

    The Government’s whips’ office has spent recent months making contact with the MPs as a back-up option for when Mrs May’s Brexit deal is put to a vote in Parliament in early December, The Daily Telegraph has been told.

    News of the wooing operation has infuriated Eurosceptic Tory MPs who are now threatening to vote against elements of the Budget and other “money bills” to force Mrs May to drop her Chequers plan.

    Eurosceptic Conservative MPs back a looser Canada-plus free trade deal with the EU over the closer vision agreed by Mrs May’s Cabinet…

    https://www.telegraph.co.uk/politics/2018/10/07/government-whips-talks-25-labour-mps-push-chequers-deal-parliament/

    • Duncan
      Posted October 8, 2018 at 7:48 am | Permalink

      Pure, unadulterated betrayal by a Tory PM. The destruction of the Tory party is complete

      And we have the pathetic sight of Tories clapping at last week’s conference following May’s speech

      Self-congratulatory, smug and vile.

      Until this grotesque offence to democracy and Tory principles (May) is removed I will abstain.

      Whoever voted for this leader is not a Tory.

      • formula57
        Posted October 8, 2018 at 12:10 pm | Permalink

        @ Duncan – “…Tories clapping at last week’s conference following May’s speech”

        Oh! But surely the clapping was a way of saying “Goodbye”.

        • Mitchel
          Posted October 8, 2018 at 3:22 pm | Permalink

          No jazz hands for the Dancing Queen?!

  11. Caterpillar
    Posted October 8, 2018 at 7:16 am | Permalink

    Being prudent is part of a working mechanism. In thevshorr run it should allow some smoothing of the business cycle as savers tap into savings, in the long run it pays those who have delayed consumption some return for resources being made available for (productive) investment. Both of these have of course been broken by the BoE’s short termism over the past decade. Investment in the UK has indeed not run ahead of population growth, this is problematic. Low interest rates have not encouraged investment, moreover history indicates that dropping taxes also does not do this (it tends to lead e.g. to share buy backs). It appears that we have entered another debt bubble …

  12. Peter VAN LEEUWEN
    Posted October 8, 2018 at 7:22 am | Permalink

    Off-topic: “Always look at the bright side of Brexit”
    When this weekend, the LSE blog team wrote an article with the above title, it found that Dutch TV had already run a (now youtube) item with this title on 24-6-2016!
    For the few of you who may not speak Dutch, it summarises as “look at the improvements of having the querulous kid evicted from class”. 🙂
    . . . we’re almost there!

    • Peter VAN LEEUWEN
      Posted October 8, 2018 at 8:15 am | Permalink

      Oops! It is “Always look on the bright side of Brexit”

      • hefner
        Posted October 8, 2018 at 12:21 pm | Permalink

        On a related topic, Germany and France have announced they respectively have 50 and 62 kind of “Executive Orders” (prepared over the last 12 months) to be quickly activated in case of a no-deal Brexit. And for what I see and understand most French political parties are now looking forward, some with not so well hidden schadenfreude, to such a “denouement”.

        • libertarian
          Posted October 8, 2018 at 5:08 pm | Permalink

          hefner

          A bizarre post

        • mancunius
          Posted October 8, 2018 at 7:19 pm | Permalink

          Let them, Hefner: poor things, their own domestic circumstances give them so little genuine Freude.
          They should pay more attention to what is happening in the eurozone.

        • Peter VAN LEEUWEN
          Posted October 8, 2018 at 7:48 pm | Permalink

          @hefner: I still think that a reasonable deal is more than likely, be it after more drama during the coming months. I was surprised to read how much the EU side would be willing to do (mainly relying on FT and Bloomberg newsletters). I do think that in the end the DUP will have to give in a little as well, because there are more N.I. parties that are committed to the Good Friday Agreement, which the UK has to take account of as well.

      • Anonymous
        Posted October 8, 2018 at 1:23 pm | Permalink

        Except that ‘kid’ was a net contributor to EU finances, provided a major part of its military and intelligence led defence and rescued your country with loss of its own blood over 70 years ago.

        Either way, if we sink or swim, things are not going to improve for you.

        • Peter VAN LEEUWEN
          Posted October 8, 2018 at 4:30 pm | Permalink

          @Anonymous: There we go again: peddling UK’s WWII contribution, something I never read from the Russians, Americans, Canadese etc.

          The Dutch net EU contribution per head is and was much more than the UK one. In absolute terms you also contribute more than Malta, surprise surprise!

          • Stred
            Posted October 9, 2018 at 7:04 am | Permalink

            Last year the Europol figure showed the UK just behind. Holland in cost per head. Germany and Sweden next. Luxembourg and Belgium made most and of course the mid and Eastern countries.

          • Anonymous
            Posted October 9, 2018 at 11:28 am | Permalink

            The UK’s population is 4.5x Holland’s.

          • a-tracy
            Posted October 9, 2018 at 2:46 pm | Permalink

            We’re a very generous nation PVL, I think our contribution to EU 80% VAT plus the extra charges we get for things we don’t tax, unlike the Dutch, such as Prostitution and Drugs top up our contributions just dandy. Do not keep knocking our Nation we are kind and generous and fight for other’s rights so it is not very pleasant of you.

            The UK also sent £1bn in aid money in April 2017 to the Syrian refugee crisis to help in Jordan much more than the Dutch. So they get us in extra charges one way or another, even bailing out Ireland when we’re not in the Euro on much better terms than the Euro nations did.

        • margaret howard
          Posted October 8, 2018 at 5:04 pm | Permalink

          Anonymus

          ” provided a major part of its military and intelligence led defence”

          I’m afraid that most of the dangers in today’s world are the result of US illegal wars and general meddling in other countries affairs with us following like the obedient poodles we have become. Our actions in Iraq, Libya, Afghanistan etc have destabilised the whole Middle East causing millions to flee and flooding Europe.

          As for ‘rescuing’ them – Russia sacrificed most and shed most blood in that conflict. Like us they did it for themselves first, not to rescue Holland.

          • Know-Dice
            Posted October 9, 2018 at 6:50 am | Permalink

            Russia backed the wrong horse and paid the price, the loss of Russian lives was of their own making.

          • Edward2
            Posted October 9, 2018 at 11:11 am | Permalink

            Which wars are you claiming were illegal margaret?

          • Anonymous
            Posted October 9, 2018 at 11:31 am | Permalink

            Margaret Howard

            a) we contributed vastly more than the RoEU to the cold war

            b) there is nothing wrong with our intelligence services, just the dodgy dossiers that were used (by Remainers incidentally.)

          • a-tracy
            Posted October 9, 2018 at 2:51 pm | Permalink

            margaret “I’m afraid that most of the dangers in today’s world are the result of US illegal wars and general meddling in other countries affairs”.

            Well margaret from what I read the most danger to the UK is threatened by the Irish saying troubles will resume if we don’t give way to them and their demands, free movement, free benefits, no border when it is the EU that demands a border not the UK, their bombs killed kiddies in Warrington and blew up Manchester central not so long ago.

          • margaret howard
            Posted October 9, 2018 at 4:37 pm | Permalink

            a tracey

            “Well margaret from what I read the most danger to the UK is threatened by the Irish saying troubles will resume if we don’t give way to them and their demands”
            ==

            Considering our past treatment of the Irish people their demands are perfectly understandable.

            The ‘Irish Troubles’ are entirely of our own making.

      • Stred
        Posted October 8, 2018 at 3:42 pm | Permalink

        According to the EU stats given in September by Facts4eu.org, Holland has a trade surplus with the EU of £180bn and the UK has a deficit of £90bn. Presumably a lot is due to the Rotterdam effect? What will be the effect if no trade deal is reached and the UK has to match EU tariffs? You must be very keen for Mrs May to rat on her earlier statements and keep us in the EU for trade in goods and all the other laws that we wanted to decide for ourselves. Perhaps you could send her a large bunch of flowers every week as a thank you present, until we get rid of her.

        • Peter VAN LEEUWEN
          Posted October 8, 2018 at 4:34 pm | Permalink

          @Stred: The Netherlansd does economically well from the EU, but the EU was always much more than just an economic cooperation. If British people were mislead on this, it was by UK politicians.

    • Richard1
      Posted October 8, 2018 at 12:37 pm | Permalink

      Be careful what you wish for. The direction of travel of the EU is towards more and more integration as M Macron and the Commission explain logically and make clear. At some point there is going to be a choice: Dutch, German and other surplus taxpayers shell out a huge amount of money and send it south (& probably west), or allow countries to exit the euro and restructure the whole thing – which will be much more turbulent than Brexit, although in the long run for the best.

      • Peter VAN LEEUWEN
        Posted October 8, 2018 at 4:39 pm | Permalink

        @Richard1: We already send money south, east and west (cohesion funds) and create as such future markets to export to as well. The UK wants to be wealthy in isolation, unlike e.g. Switserland and Norway which also contribute and as such show a measure of solidarity with poorer EU regions.

        • Edward2
          Posted October 9, 2018 at 6:31 am | Permalink

          There is a big difference between islolation and independence.

          • Peter VAN LEEUWEN
            Posted October 9, 2018 at 12:31 pm | Permalink

            @Edward2: The overriding principle however is “interdependence”, which the UK seems to have sacrificed on the altar of its “specialness”.

            I’ve so often now had to bow my head in gratefulness to Britain for having spilled its blood to save us, that I had to look it up, and yes:
            The “stuck in WWII mindset” of many a brexiteer, proves the “stuck in imperial specialness” of their mindset.
            After all, the British empire’s crumbling really begun in earnest after WWII.

          • Edward2
            Posted October 9, 2018 at 5:23 pm | Permalink

            Interdependence is fine if it is a voluntary decision by both nations and it works for both nations.
            Trading nations around the world have mutually successful relationships but that doesn’t mean one has legal supremacy over another.

            I havent mentioned the war so I dont know why you have brought that up.

    • sm
      Posted October 8, 2018 at 1:05 pm | Permalink

      Which perhaps proves that the UK and Holland will get on better as friends than classmates?

      • Peter VAN LEEUWEN
        Posted October 8, 2018 at 4:41 pm | Permalink

        @sm: most likely YES.

      • David Price
        Posted October 9, 2018 at 6:04 am | Permalink

        In what way has the Netherlands proven to be friendly with the UK?

        • Peter VAN LEEUWEN
          Posted October 9, 2018 at 9:18 pm | Permalink

          @David Price: There have always been excellent relations between the Netherlands and the UK, and I expect they will continue. That the UK is determined to shoot itself in the foot is a UK national issue, we just have to respect your national folly and disunity.
          Do not forget, neither the EU nor the Netherlands are leaving the UK, it is the other way around. Brexit is your invention

          • David Price
            Posted October 10, 2018 at 6:22 pm | Permalink

            The UK is leaving the EU because both sides of the relationship have failed and we followed a procedure invented and dictated by the EU. To heap all blame on the UK is typically gutless euphilic behaviour.

            Rutte happily joined the EU herd in attempting to humiliate the UK PM, how is that being friendly. Calling it an “accident” will not prevent people remembering that behaviour.

  13. Alan Jutson
    Posted October 8, 2018 at 7:28 am | Permalink

    The real problem John is the constant moving of the goalposts with political thinking and taxation..

    Average Private Pension performance with regards to investments has been appalling in recent decades, Annuity returns are likewise near to the lowest they have ever been, it taking more than 20 years to get your own money back, during which time statistics say you will die.

    If we are to have low interest rates as a policy, then fine you can plan ahead, but when they have been as high as 15% as they were in the middle of our mortgage a couple of decades ago, your financial planning thinking simply has to change if you want to survive.

    If you are going to keep on changing the goalposts on Government policy, then allow some flexibility in the system with regards to long term investments like Pension savings.
    George Osbourne did not do much right but he certainly saw that the pension market in need of some change.

    Capital gains tax is an area where change is needed, with at least taper relief being allowed.

    Why do pensioners have to purchase an Annuity at all, why not flexible drawdown with the balance in your account going into your Estate to pass on if you die.
    How about no tax relief on contributions from income, but pensions being tax free when taken !

  14. Pete Else
    Posted October 8, 2018 at 7:29 am | Permalink

    Lets be honest, the BOE dare not allow interest rates rise to historic averages. Government finances would be exposed as the disaster they actually are. Massive cuts and tax rises would follow. Also every company that has borrowed far too much would collapse. Millions of people would discover that their mortgages are far too big and they can’t pay. All the banks that have been insolvent for years would not be able to hide it any longer. In short the whole system that has been kept alive by the gross manipulation of interest tastes (and accounting fraud) would fail. America and most of the EU are far worse. Sooner or later it will happen. Our current overseerers are just holding it together in the hopes that it not happen on their watch.

  15. Adam
    Posted October 8, 2018 at 7:41 am | Permalink

    Banks needing money borrow from person A, but then ask person B to borrow A’s money more expensively.

    Banks who borrow from you claim you are ‘investing’ in them. Persons A & B would be better off investing in each other.

  16. Andy
    Posted October 8, 2018 at 7:48 am | Permalink

    Of course the government should have borrowed more at historically low rates to invest in our infrastructure. But it didn’t. Which is why your hospitals are falling down, your grandkids are learning in leaky classrooms and we are still – literally – traveling on a Victorian rail network when the rest of the developed world has embraced high speed rail. A humiliating fall for a formerly great country capped off by the angry pensioners’ lousy Brexit which will ensure our kids and grandkids are even poorer still.

    I fell no sympathy for pensioners with savings. You have swerved austerity. The services on which you rely have been extended and improved – while those for everyone else have been largely axed. A cynical plan by the Tory government not to share the pain (we are not ‘all in this together’) but to protect its voters at the expense of everyone else. So if the pensioners get a little less interest on their savings – tough. Just about every other policy ever is geared up entirely for your benefit. This one isn’t, deal with it.

    For me, low interest rates have worked our really well. The enabled me and my family to buy a very expensive house. These are good times. Keep em coming.

    • Anonymous
      Posted October 8, 2018 at 6:07 pm | Permalink

      Then why do you sound so angry all the time ?

    • Edward2
      Posted October 8, 2018 at 6:40 pm | Permalink

      You say hospitals are falling down and the transport network is Victorian and then you say old people have avoided all these problems.
      Then you say “the services you (old people) rely on have been extended and improved” and “just about every other policy is geared up entirely for your benefit”
      Totally ridiculous, illogical and plainly wrong.

      • Stred
        Posted October 9, 2018 at 7:13 am | Permalink

        An expensive house on low rates followed by a rise in bank rate and fall in income is often followed by negative equity and the rest.

  17. Mark B
    Posted October 8, 2018 at 7:49 am | Permalink

    Good morning

    The problem is greater than this article covers.

    To address the housing issue one must address the MASS IMMIGRATION issue, and no political party of MP want to do that. Essentially you needs to tackle the supply and demand, and since the government is hooked on the Stamp duty tax that is going to be a bit difficult.

    Raising interest rates is fraught with danger. There are going to be winners and losers with many not liking either.

    The banks are charging too much compared to savings. The Government needs to tell the banks that, whilst it does not wish to interfere in the markets, it will view their activities as monopolistic.

    In short, government interference in markets has created an unholy mess. No easy way out I am afraid.

  18. Kevin
    Posted October 8, 2018 at 8:09 am | Permalink

    1) “This generation of twenty somethings has…higher wages than previous generations…”

    One may quibble about the length of a generation, but given that the focus on interest rates has been heightened since the financial crisis, the above statement is contradicted by a BBC report from last month, which includes the following details:
    “The substantial impact of the financial crisis has left people’s wages 3% below what they were a decade ago, new research [by the Institute for Fiscal Studies] reveals…. For those in their 20s, the decline is 5%, compared with the drop for the over-60s in work of 0.7%, or £130…. Paul Johnson, director of the IFS…added: ‘Pensioners have done much better than younger people on average. In part this is because they are less reliant on earnings and so haven’t suffered from falls in earnings.'”
    (Source: “Workers are £800 a year poorer post-crisis”, BBC News Web site, 12/9/2018)

    2) “…but a lower percentage of home owners than their parents at the same stage.”

    Recently, you have written that “some socialists…say let’s just print some money to give more to the poor [which] leads to more inflation, often leaving the very people they wanted to help…unable to afford the basics”.

    What about the argument that loose monetary policy, including quantitative easing, causes asset price inflation, including unaffordable housing?

    3) You have also recently written that “Debt is sustainable all the time the borrowers keep their jobs”.

    What about the argument, reported in The Guardian last year, that, “Once growth becomes dependent on household debt, it can be a matter of two to three years before a financial crash, the IMF said in its annual report on the global financial system”?

  19. Nig l
    Posted October 8, 2018 at 8:15 am | Permalink

    The Bloomberg health service index putting us at 35th with an efficiency rating aim the 40% region sums everything up and your cloth eared Prime Minister wants to throw more money at it through higher taxes.

    Puts to bed the lie that it is the greatest health service in the world. And what was one of your last major announcements. Workers in restaurants etc could keep their tips. Wow!

    I have never known the levels of contempt and derision to be so high for politicians across the spectrum and their arrogant dismissal of this as populism sums them up perfectly.

  20. Christine
    Posted October 8, 2018 at 8:20 am | Permalink

    With more pension pot raids and a new dementia tax forecast for the budget I think interest rates are the least of our worries. The Tory Government has lost its way. Instead of attacking its core voters stop giving our money away in foreign aid and EU off the books payments plus reform the Barnett Formula. Outside the London bubble voters are getting very disgruntled. The time is right for a new right of centre party. Too many people feel politically homeless.

    • Bob
      Posted October 8, 2018 at 5:38 pm | Permalink

      @Christine

      “Too many people feel politically homeless.”

      Are you looking for a conservative party to support?
      Have you read ukip’s policy manifesto?

      UKIP’a policies are to abolish the following:
      – Stamp Duty
      – Inheritance Tax
      – TV Licences
      – Foreign Aid
      – EU membership

  21. Sakara Gold
    Posted October 8, 2018 at 8:25 am | Permalink

    Being enamoured of the Austrian School and an admirer of Ludwig von Mises, I disagree with this analysis of debt. The whole world is running on tick and inevitably, it will come to grief.

    An enormous “sword of Damocles” hangs over all markets now. A massive liquidity drain is underway as global QE reverses into QT and rates rise against the background of immense, ubiquitous and crippling debt burdens. What this means is that the biggest credit crunch of all time is bearing down on us, which will involve markets crashing in the absence of bids, serious dislocation of capital markets and out of control interest rates.

    The Fed has been playing a stealth game for a long time now, gradually but steadily raising rates – hoping that the market won’t notice – and is also furtively offloading its Treasury hoard. Other central banks are following the Fed’s lead and doing likewise. The liquidity that drove the massive bubbles in real estate and equities is being pulled. That must inevitably lead to these markets dropping, and we are already seeing the start of it with emerging markets plunging and hitherto red hot real estate markets cooling – globally, not just here in the UK. When investors realize that the game is over, the decline is likely to become disorderly and will probably involve a number of crash phases.

    A tipping point was reached when the US 10 year treasury yield recently crossed 3%, the yield curve is now rolling over and hitherto, this has been a prediction of a US recession. The Fed is forced to raise interest rates to compensate the buyers of US Treasury debt for a percieved increase in risk. Global central banks in the developed world are doing the same. The recent BBC program on the crash of RBS during the financial crisis shows what can happen to a big bank – with domestic depositors – when liquidity dries up.

    Gold is universal money; currently priced in sterling, gold is cheap by historical standards. In view of the fact that there is likely a global recession just starting coupled with humungous and unprecedented levels of global debt, it seems a sensible precaution to hold a modest position in gold bullion held in a vault overseas. Central banks have been buying gold for their reserves for the past couple of years. Maybe the BoE should be doing the same.

  22. Lifelogic
    Posted October 8, 2018 at 8:35 am | Permalink

    The real problem is huge margins and lack of real competition in banking. Perhaps 0.4 on deposits and base plus 5 % to 68% if you borrow. Rates should be a bit higher bank marins far lower. The difference between deposit rates and lending rates used to be more like 1 to 2 % Now 4% to 60% +. Cut Out the middle man

    Loads of unscientific political tosh on the climate alarmism religion. CORBYN’s brother is however spot on on Lbc this am and his web site. Well done to him.

    • Lifelogic
      Posted October 8, 2018 at 8:43 am | Permalink

      The other hugely damaging thing is totally misguided banking regulations, this is damaging the real economy and job creation. It is preventing lots of perfectly sensible beneficial to all lending from happening.

    • Nig l
      Posted October 8, 2018 at 12:25 pm | Permalink

      Your view on margins etc are always interesting but in this case too simplistic. You need to factor in the risk profile to the cost.

      • Lifelogic.
        Posted October 8, 2018 at 3:33 pm | Permalink

        Well when I was younger I had little money & few asset and a higher risk profile but could borrow and about base plus 1%-2.5% on secured lending and get about base on deposits. I am a very low risk now and the lending is well secured (certainly a better one than most banks) yet they want to charge a fortune.

  23. Bob
    Posted October 8, 2018 at 8:39 am | Permalink

    It’s reported in the press that the Chancellor is considering another raid on private pensions, and also that he’s dreamt up a new scheme for landlords to get a break on CGT if they sell their property to their tenant after 3 yrs and give half of the saving to the tenant, it’s called the “Good Landlord Scheme”, which implies that landlords that don’t participate are not good. On R4 this morning BBC’s Nick Robinson was quite happy that the tenant should get some cash but questioned “why should the owner get anything”.

    Two discussions this morning on BBC already featuring the subject of wealth redistribution, so it looks like Phils Halloween Budget could turn into a real “house of horrors” for anyone who prudently strives to provide for themselves and their family.

    • a-tracy
      Posted October 8, 2018 at 10:12 am | Permalink

      The message is clear if you rent homes get out now because all the parties are coming to get your nest egg.

    • Sir Joe Soap
      Posted October 8, 2018 at 10:15 am | Permalink

      Next there will be The Good Employer scheme where company owners are obliged to give half their realisation on selling shares to employees in order to qualify for ER.
      It’s coming this way under Corbyn or May.

    • Know-Dice
      Posted October 8, 2018 at 10:30 am | Permalink

      Good points Bob.

      “anyone who prudently strives to provide for themselves and their family

      There is no incentive whosoever!!!

      Then you try an pass on what’s left to your children and that gets taken away as well…

    • Lifelogic.
      Posted October 8, 2018 at 3:36 pm | Permalink

      More moronic actions, effectively theft and political gimmicks from Hammond & May! They are appalling. Only very slightly better than Corbyn.

  24. Oliver
    Posted October 8, 2018 at 8:46 am | Permalink

    “There is no great inflationary pressure to worry about”

    Really?

    RPI 3.2
    Top deposit rate 1.5
    After, say, 40% tax 0.9

    Purchasing power destruction 2.3%

    And now your have connived to tax inflationary gains, and double taxation of dividends.

  25. Sir Joe Soap
    Posted October 8, 2018 at 8:55 am | Permalink

    Interest rates at current levels attract zombie business and zombie private borrowers. If these borrowers can’t live with rates at 3-4 percent, so slightly above the rate of inflation, they shouldn’t be borrowing at all. House prices are too high, and the way to get them down is a steady upward correction to rates.
    Your argument for holding rates at these levels to support the purchase of houses and other assets and pump prices up is putting this the wrong way round. Why work productively when you can borrow buy and speculate without risk?
    Perhaps you do need some Teutonic backbone after all!

  26. NickC
    Posted October 8, 2018 at 9:05 am | Permalink

    JR, Off topic – headline in DT: “Government whips in talks with 25 Labour MPs to push Chequers deal through Parliament”. I did say that is what will happen.

    Reply Its not what they tell us! Mr Cameron relied on Labour to give him his war in Syria, butt hat did not work.

    • Stred
      Posted October 8, 2018 at 12:43 pm | Permalink

      They wouldn’t tell you would they? You nasty right wing nationalists are not invited to the party. You might keep your promise made in the referendum. Time to tell the whips that they can whip the opposition and forget their own member’s support.

  27. Posted October 8, 2018 at 9:05 am | Permalink

    ‘’This generation of twenty somethings has more graduates and higher wages than previous generations, but a lower percentage of home owners than their parents at the same stage.’’

    But many more young people used to start work at 16 or 18, considered themselves adults and began saving for their own future, while paying their way in their family home.
    This is the ‘’I want it all and I want it now’’ generation, with many not prepared to forgo anything for the sake of putting aside savings, thinking that living at home is a way of keeping their own money for their immediate pleasures, with someone else supporting them.

    • Andy
      Posted October 8, 2018 at 11:52 am | Permalink

      On the contrary. To get a good job you now almost certainly need a degree. Back in the day of many of this blog’s contributors you could walk out of school with a handful of average O levels and walk into a good job. I bet this is precisely what most of these commenting on here did. My own father did it. Nowadays he wouldn’t have even got an interview for his job unless he’d had a degree first. And you can not blame employers – faced with two candidates a graduate and a dropout who do you pick?

      I suspect most of the contributors to this blog would have ended up either unemployed or permanently underemployed if they were 30 years younger. They got lucky.

      • Stred
        Posted October 8, 2018 at 3:53 pm | Permalink

        Well, today’s degree is equivalent to a grade B O level and a degree in Media or Gender Studies isn’t a lot of use. People trained part time at Techs and learning something useful could earn a living from an earlier age. Got any British trained language translators yet?

        • Andy
          Posted October 8, 2018 at 5:49 pm | Permalink

          Yeah – you see, all you are showing is your lack of understanding. For many careers it does not matter which degree you have. It just matters that you have one. The skills businesses look for are the exact same ones you develop during the process of studying for a degree – and that’s why graduates are more desirable than non-graduates.

          You will also find that a B grade at O level – if that’s what you have, is really not very good. If you left school with only that level of qualification today you’d have very few career options, and most of them would be bad.

          And, no. We can not find Britons who speak the languages we need to the level we need because there are none. Brexit will ultimately mean our business closing down – but we know that and have personal plans in place to protect us from this Tory pensioner folly.

          • Stred
            Posted October 9, 2018 at 7:29 am | Permalink

            My degree wasn’t a lot of help in earning a living. I made bugger all and only survived by making investments and being able to work hard practically. It sounds like you need to get our and cut your losses asap. You can get translators anywhere on the net. Shame British language degrees are so useless.

          • libertarian
            Posted October 9, 2018 at 8:23 am | Permalink

            Andy

            Lol lack of understanding you say? Afraid as always you are totally wrong . Do some research in the real world and stop living in a fantasy

            Heres a starter

            Apprentices life time earning surpass graduates by 270% new report finds

            https://www.independent.co.uk/student/career-planning/apprenticeships/apprentices-lifetime-earnings-more-that-university-graduates-career-planning-a7193536.html

            Just so you know Andy i own and run a multimillion pound software and data mining company that specialises in the field of employment data , why not tell us the source of your expertise Andy?

      • Anonymous
        Posted October 8, 2018 at 6:17 pm | Permalink

        Andy “I suspect most of the contributors to this blog would have ended up either unemployed or permanently underemployed if they were 30 years younger. They got lucky.”

        No. They would have got degrees, which are often handed out like sweeties these days.

        Only 5% of the population could go to university in the past and it wasn’t because they were thick, it’s because university was only for the academic elite.

        I know many average people who have them now.

      • libertarian
        Posted October 8, 2018 at 6:20 pm | Permalink

        Andy

        Ha ha ha ha , you couldn’t be more wrong if you tried. Nowadays the average earnings of a graduate are LESS than an apprentice . We have huge skills shortages and employers seek attitude not qualifications. We conducted a survey amongst 6,000 employers less than 20% valued a degree. You see Andy degrees are two a penny these days.

        Profesional firms in accountancy and law now tend to recruit straight from school and put their trainees through industry standard training in professional development . We have massive shortage of trades people who need vocational training, not degrees.

        Quote

        Martin Birchall, graduate recruitment expert at Higher Fliers Research, highlights that most employers no longer require a degree classification. He said:

        In recent years diversity has become a real issue for many employers and they’re keen to have as broad a spread of applicants for their programmes as possible. That means they don’t necessarily want to cut out people who did not get a first or a 2:1 but have CVs that are jam-packed with other skills and experiences that may be more relevant in the workplace.

        Oh and another thing you were wrong about, it seems the German car industry agrees with us Andy and not you. From Handlesblatt

        Daimler delivered 8.6% fewer cars in September as the automaker struggles to meet new environmental standards. #Germany #WTLP

        • Rien Huizer
          Posted October 9, 2018 at 9:15 am | Permalink

          Libertarian, for once (once only?) I agree with your statement. Maybe building less will reduce the problem. Or importing qualified tradies.

          The Mercedes problem is not one of lack of staff (they have that too, but the environmental standards are a real problem, highly related to cities banning diesels (old ones for now but it will not stop there) while their product mix for their two largest EU markets (Germany and France) is >45% diesel and making truly clean diesels is hard if they also have to be convenient and fuel efficient. The other is that demand for diesels (after diesel gate) has declined and it takes time to see if that is a permanent or transitory phenomenon. I personally expect diesel to do better than the zealots expect and so do the German car makers apparently. They are not ready to write off their sunk costs. So idling factories may be a good short term play.

          • libertarian
            Posted October 9, 2018 at 6:53 pm | Permalink

            Rien

            I’m sure there are probably lots of other things we agree on.

            We relied far too heavily on importing construction workers ( similar thing happened to Germany in the early 80’s) While we could do that we stopped training our own

            Yes agree totally about Mercedes , that was a secondary post , just to show Andy that he is wrong about most things

      • Edward2
        Posted October 8, 2018 at 6:47 pm | Permalink

        You miss the bit andy when years ago, young people joined a company without first going to university but then trained with that company to gain a good professional qualification.
        And we often went to college at night after a long working day.
        Earning a wage which was important for our families.
        Unable to afford three years at University.
        You have no idea how things were back in the day.

      • Anonymous
        Posted October 9, 2018 at 5:05 pm | Permalink

        Soo… like… I went to Uni… like…

    • Anonymous
      Posted October 8, 2018 at 1:33 pm | Permalink

      I disagree.

      House prices are way out of reach. There is no point in doing anything else for many.

      • Bob
        Posted October 8, 2018 at 5:51 pm | Permalink

        Demand drives house prices, so millions of immigrants arriving in the UK with access to housing benefits drives up prices. Cut the benefits and at a stroke you would solve both the immigration problem and the housing problem.

  28. bigneil
    Posted October 8, 2018 at 9:12 am | Permalink

    While watching last nights “Billion Dollar deals” program I was amazed to see people saying they wanted to get rid of cash because every transaction made , made the bank more money
    ( how far would that be taken? ) – yet nothing calling it what it was – -a way of controlling and seeing every penny you spend. Also another view was to go to negative interest rates where people would slowly have savings took away from them – but ( very kindly (sarc )) little people could have £2k without losing any. Why didn’t they call it what it is – – another tax, taken by the bank. I can’t even come up with words to describe my disgust at them. Glad i’m old and near the end. Greed breeds more greed. Evil people.

  29. Peter
    Posted October 8, 2018 at 9:15 am | Permalink

    Traditional savers today lose out. Then when they die their assets get stolen by the state.

    However, this topic is something of a sideshow while most on here await further developments on Brexit.

    I note the media uniting behind May. Changes at The Mail and Express mean more favourable coverage for her and her Brexit approach. Don’t mention the ‘C’ word.

    There are several stories doing the rounds. We don’t know what credence to give them.

    A). ERG numbers are inflated. They do not have enough to defeat the Withdrawal Bill.

    B). Canada plus plus etc as offered by Tusk and the EU is Not what Brexiteers understand by Canada plus plus etc.

    C). May will try to force through BRINO with the help of Labour MPs

    D). Brexiteers will vote against the budget if things go the wrong way on Brexit. I am not sure how this squares with point A above.

  30. Barry Hughes
    Posted October 8, 2018 at 9:22 am | Permalink

    How many of the younger generation have inherited the old parental home (or even two homes in the case of a couple) and become suddenly quite wealthy? It cuts both ways

    • a-tracy
      Posted October 8, 2018 at 10:15 am | Permalink

      What if they do, if the parents have decided not to cash in and ski (spend the kids inheritance) and its their hard earned dosh they’ve saved for their old age because the majority of us aren’t in public sector final salary untouchable pensions we have to top up our meagre returns on private pensions because they have been raided and raided again and are about to get raided again to give us insecurity in our old age, why shouldn’t OUR kids benefit from us not becoming a burden on the State.

      Seriously much more of this anti savers and they’ll be ski’ing and sod the consequences to the state of having to look after a growing bunch of oldies. Next Andy will be suggesting Logan’s Run.

    • Know-Dice
      Posted October 8, 2018 at 10:33 am | Permalink

      If you own a house, then you will have to pay for your own care in your old age, will there be any left?

      And having a house to live in, does that make you wealthy?

      Best to sell up and go down the bookies and lose it all…

    • Andy
      Posted October 8, 2018 at 11:59 am | Permalink

      The notion that there are masses of people in their 20s and 30s inheriting huge wealth is frankly tosh.

      I am 45 and literally none of my friends have inherited the family home. Their parents are all still alive. A few of us have lost one parent but none have yet lost two.

      Indeed, some of my friends of my age have grandparents who are still alive.

      My mother was in her mid 60s when she inherited from her parents. Another rich old relatively I know has spent all of his money. He doesn’t want to give any away – even to his kids.

      • sm
        Posted October 8, 2018 at 3:51 pm | Permalink

        You love making sweeping and sneering assumptions about other people, Andy, and then get cross when someone makes an observation about a possibility that some YOUNGER, not YOUNG, people might have a dual inheritance!

        • Andy
          Posted October 8, 2018 at 5:51 pm | Permalink

          Of course some younger people inherit homes. I didn’t say otherswe. But the fact remains that most don’t.

      • libertarian
        Posted October 8, 2018 at 6:26 pm | Permalink

        Andy

        Whilst I dont necessarily agree with the proposition, your argument has a glaring hole in it.

        You Andy are NOT a young person, you are very middle aged, you are double the age of a 20 year old so using you and your peers as an example doesn’t work I’m afraid .

        No wonder you hate old people so much, sounds like you’ve been cut out of the will !

        • Stred
          Posted October 9, 2018 at 7:41 am | Permalink

          He will be if his dad reads his comments on this blog.

        • hans christian ivers
          Posted October 10, 2018 at 6:09 am | Permalink

          Libertarian,

          Which lecturer and when should I be attending?

          Stay with the ball not the person

          • libertarian
            Posted October 10, 2018 at 5:25 pm | Permalink

            hans

            You really need to be far more on the ball

      • Anonymous
        Posted October 8, 2018 at 6:28 pm | Permalink

        The 45 to 65 age group voted overwhelmingly for Leave.

      • Edward2
        Posted October 8, 2018 at 6:48 pm | Permalink

        The actual data shows you are wrong again Andy.

  31. Rien Huizer
    Posted October 8, 2018 at 9:50 am | Permalink

    Mr Redwood,

    Japan may be an interesting and somewhat exotic country to use as a reference, especially since the facts you mention are part of an entrenched and widely “known” legend. Japan did not have RGDP growth worth mentioning over the past 20 years and verly low inflation (both consumer and GDP deflator). It also has a n aggressive fiscal policy. To what extent that can be used to “prove” a point about the UK economy, depends on the similarity of the cases.

    Japan does have some CPI inflation now (mainly as a result of a deliberate and successful attempt at depreciating the currency) and RGDP per worker has been increasing during the past 10+ years, mainly due to a shrinking labour force. So it is not true that there is no growth and no inflation.

    What the Japanese exemple proves is that it is very hard to influence an economy mainly by fiscal and monetary means (legend has it that Japanese government debt is unsustainable but measurement of the relevant debt is very difficult and estimates vary by a factor of 1.7) in the face of very large trasitions in the real sector.

    What was the matter with Japan from, say 1980 through 2010? Japan started with an economy characterized by quasi monopolies, crony capitalism and mercantilistic support for exporting businesses. The banking sector acted as an extension of the government (directed lending) and became a rubbish dump of failed projects. Due to severe repression of domestic consumption (“saving”) and peculiar institutions re old age pensions, Japan is still having a large national savings surplus (depite gvt deficits) reflected in the current account. In the 1990s Japan set out to partially reform (under US pressure) the domestic economy, especially after Japanese multinationals went abroad from the early 1980s to manufacture items for which Japan had become too expensive or where Japanese firms were threatened with discrimunation (US car market) and manufacturing employment fell, coincident with retail and other domestic monopolies shedding workers and subcontractors. Those reforms involved putting the banking system on a commercial footing (by implementing Basle I and later II), breaking retail monopolies and allowing large firms to go bankrupt. Finally the practice of lifetime employment (another popular legend, only existing among very large firms but not their suppliers) faded away.

    The current Japanese economy has become far more “normal” (ie OECD-like), has an enormous burden of dependent elderly and a business community much less “patriotic (because they will no longer be supported by the financial system if not profitable enough) than, again, the legend had it.

    What are the parallels with the UK? And to what extent would the Japan story be an excuse for irresponsible fiscal/monetary management? If anything, the relevance of the Japanese government’s 20 year struggle with changes in the real sector for the UK is that it may show that gvt macroeconomic policies (apart from having a steady and credible monetary policy and prudent fiscal) to influence the real sector (promote growth etc) of a market economy are basically futile.Not a nice message for socialists (unless they believe in command economics) but not a nice message for populists either.

    Reply I do not say I thought the UK and Japan the same. I do think we need to understand both why Venezuela printing and borrowing produces hyperinflation and bankruptcy, whilst Japan printing and borrowing does not. These are the two extreme examples, which shows you need to analyse and judge where on a spectrum other economies might be.

    • Anonymous
      Posted October 8, 2018 at 1:47 pm | Permalink

      Japan does not rely on phoney economic “growth” created by increasing demand by importing people.

      The UN says we must make dramatic and immediate efforts on climate change.

      Well in the UK we were well on the way to doing that and reducing our population but our governments (both Tory and Labour) told us that we could not do this and that we had to import ten million more people (and rising) and that it was good for us.

      • Rien Huizer
        Posted October 9, 2018 at 9:05 am | Permalink

        Japan is faced by the problem that the available pool of workers in areas such as care is getting very low. Given that the elderly with cognitive impairment are a fast growing segment and these people especially need care without language barriers (the flip side of ethnic purity in Japan is that few other countries, except Korea, have many Japanese speakers). You may not want to face the long term problems Japan is facing wrt immigration (or lack of it)..

        • Edward2
          Posted October 10, 2018 at 7:16 am | Permalink

          So the biggest worry Japan has is a potential shortage of staff in care homes.
          What will happen is that wages offered for such staff will rise in order to attract more people to become carers.

          Here in the UK our policy is to import hundreds of thousands of people and hope some will take the minimum wage carer jobs.
          Forgetting that all the people arriving here every year also become old and will need care too.

          • Rien Huizer
            Posted October 10, 2018 at 4:22 pm | Permalink

            No, care is one of the problems caused by absence of an immigration culture in a society that does not breed either. It is areal problem when the PM (who is 75+ now suggested afew years ago that he would consider a traditional alternative to care if care would be too much of a burden on family and friends. Strangely enough, the popular response was not, Yes Prime minister, we understand what you mean and honorable suicide is part of the national folklore. But the demographic problem is clear: too few youngsters and too many elderly plus no immigration is very difficult. Because care is one of the hardest areas to make more productive. Price does not work when supply is inelastic, remember?

    • Rien Huizer
      Posted October 8, 2018 at 3:14 pm | Permalink

      Mr Redwood,

      “printing and borrowing” can be a shorthand for a vriety of policies. I am no expert on Venezuela, but have done research on the Japan case, over the past 25 odd years. From what I understand, Venezuela has ceased to be a market economy quite a while ago and then things become different.

      As to Japan’s “borrowing” (or rather inefficient spending of what is borrowed): the extent of that is poorly understood for lack of relevant public data. I thought that it might help if I pointed to the (IMO) most important lesson of Japan’s tribulations : in a market economy, government fiscal and monetary policy only matter to the extent that they can support an already efficient and productive economy, but cannot make the economy grow (beyond short term business cycle intervention, and even that is questionable). Irresponsible policies can cause turbulence (in Venezuela possibly lethal) that achieves the opposite of growth. Pseudo-Keynesianism. When Japan started with “Abenomics” (a sort of QE with some condiments) many thought that this meant a switch to market monetarism but given the political influence over the Bank of Japan, something much more crude was probably, in hindsight, intended: engineering some imported inflation plus boosting the JPY value of corporate earnings, laying the foundations of the subsequent share price increases. It did not contribute much to making Japan a more attractive production location.
      The IMF in their 2017 Art IV consultation criticise the use of fiscal/monetary stimulus in an economy operating above potential (my criticism of your plans for the UK too) and instead promote streuctural reforms that lift potential output plus a higher employment share (equates higher wage level). I agree with the IMF with the proviso that IMF looks at the official debt levels (and deficits) while I think that the official figures are too high or are mitigated by some intra government financial asset complex (“Zaito”). In Japan rational expectations may apply only to some extent but they are not absent, hence the limits to what gvt spending and monetary expansion can achieve. Of course in n economy where the “IMF’s structural reforms” have taken place or were unnecessary , like the UK, that applies even more.

  32. Geoff not Hoon
    Posted October 8, 2018 at 9:58 am | Permalink

    Once upon a time we had many building societies competing to take our savings and pay reasonable rates of return. Whether through the fall in new house build or the drop in buyers moving to rent and of course government action such as low base rate and printing money those societies do not want savers. The original idea of a building society as a friendly society with savers and lenders often being the same folk has all but gone. Government action or inaction has led to this state of affairs and it is in their power to put things right. Will they? I doubt it.

    • hefner
      Posted October 8, 2018 at 12:54 pm | Permalink

      “Government action or inaction …” The UK Building Societies Act 1986 started the whole process of demutualisation, and some of the BSs that changed to banks thanks to the pressure of carpet-baggers who opened an account in those just to be able to vote for such a transformation (and pocket an usually nice packet in the pressure) disappeared (as banks within 10 years).

      • hefner
        Posted October 8, 2018 at 12:55 pm | Permalink

        sorry, not “pressure” but “process”.

  33. formula57
    Posted October 8, 2018 at 10:35 am | Permalink

    Risk allocation is materially compromised with sustained historically low interest rates.

  34. Alison
    Posted October 8, 2018 at 11:15 am | Permalink

    Apologies, off topic. The only sensible ‘deal’ -and which honours the referendum result – is ‘no deal’ (which doesn’t mean no deal, it means no deal yet, and also means no giving away sovereignty and lots of money for nothing, as our wise host said the other day). However, the prospects of getting that don’t look great just now. Some right-minded MPs have been far too polite over the last year. That’s not how the Remainers in government, the civil service, and other key institutions, are playing. They are playing dirty, and they are playing cloak and dagger. And they will continue to play dirty.
    I strongly disagree with Douglas Carswell, who has tweeted that we should ‘make do’ with what is put to parliament and then mend it. How do we mend it … it will take years and years, by which time the efforts of the current Chancellor and the Governor of the Bank of England will have borne their fruit (an emasculated economy, more debt, austerity … all to ‘prove’ that ‘Brexit’ – really BRINO – does not work).
    What makes me so angry and sad is that numerous generally sensibly-minded MPs are putting their own interests before those of the British people. (not our brave host)

    • Andy
      Posted October 8, 2018 at 12:06 pm | Permalink

      On the contrary. Those MPs you insult are actually putting your interests ahead of their own. They know that Brexit voters like you are angry and that there may be political consequences as a result.. But they also know that – whatever you claim now – you will be even angrier when Brexit makes your life worse, which it will.

      The trouble with Brexiteers is that you think all the bad things about Brexit will not harm you. You are all very wrong. And seeing that many of you are already on the political extremes that begs the question where you turn next.

      As for the allegation that Remainers are ‘playing dirty’ – it is not dirty to expose the incoherence, the incompetence, the nastiness and the downright dishonesty at the centre of the Brexiteers case. The Brexiteers promised you a golden unicorn. At best they will deliver you a donkey with an ice cream cone stuck on its forehead. One day they will be held to account.

      • Anonymous
        Posted October 8, 2018 at 6:26 pm | Permalink

        “And seeing that many of you are already on the political extremes”

        Like what ? What’s extreme ? Anything extreme is outlawed – except continually insulting old people, it seems.

        —-

        There are also other extremes:

        – openly discriminating against white boys in job selection (several journals are advocating for this now)

        – using the expression ‘Stale pale and male’

        – casting white Englishmen as villains and dullards on TV, imagine if any other race treated this way.

        – Labour’s anti semitism

        Those (except for militant Islam) are examples of extremism that I see.

        Certainly not any extremism in Brexit.

      • Steve
        Posted October 8, 2018 at 6:32 pm | Permalink

        Andy

        We know certain aspects of life will be harder, and we’re ok with that because we will roll our sleeves up and just get on with it. Why ?…because we’re British and this is our country, not the EU’s.

        It occurs to me that you are unhappy with the prospect of our country being run and owned by us.

        It is obvious that you have no respect for democracy, unless gives what you want.

        You were out voted and that’s that. Get over it or move to a country you’d be happy in, is the best advice I can give.

      • Edward2
        Posted October 8, 2018 at 6:50 pm | Permalink

        Having read your many posts Andy, it is odd you do not realise that it is you that is “on the political extremes”

    • Roy Grainger
      Posted October 8, 2018 at 12:15 pm | Permalink

      Carswell should consider that if May’s deal is passed by Parliament it will be easier in future to change it so we move closer to the EU and re-join rather than change it so we move further away (all those new treaties to withdraw from).

    • mancunius
      Posted October 8, 2018 at 12:41 pm | Permalink

      Alison – 100% agreement.

    • Denis Cooper
      Posted October 8, 2018 at 1:04 pm | Permalink

      Theresa May previously said we should not do what Douglas Carswell suggests, in her Mansion House speech of March 2 2018 she laid down as a condition:

      https://www.gov.uk/government/speeches/pm-speech-on-our-future-economic-partnership-with-the-european-union

      “Second, the new agreement we reach with the EU must endure. After Brexit both the UK and the EU want to forge ahead with building a better future for our people, not find ourselves back at the negotiating table because things have broken down.”

      But of course those were just more meaningless words coming out of her mouth, we’ve since realised that nothing she says can ever be taken on trust.

    • Posted October 8, 2018 at 3:14 pm | Permalink

      Well said, Alison.

      Do these remainers, who STILL think (incredibly) we should stay shackled, really believe that the EU would welcome our staying in their sinister ”fold”, allowing us to keep said shackles with no extra locks and chains?

      It becomes more and more obvious that those in power do have vested interests in remaining. Certainly the ”little man” will gain nothing by staying under the boot.

    • Turboterrier.
      Posted October 8, 2018 at 8:05 pm | Permalink

      Alison

      What makes me so angry and sad is that numerous generally sensibly-minded MPs are putting their own interests before those of the British people. (not our brave host)

      Don’t they always? Nothing has changed it has always been run this way.
      There are very very few “sensibly-minded MPs in Westminster.

  35. mancunius
    Posted October 8, 2018 at 12:37 pm | Permalink

    I cannot speak for the rest of the country, but in London the reasons why it has become impossible for most young professionals to afford to buy a leasehold (let alone a freehold) are:
    1. Almost all available lower-cost (entry-level) leaseholds in residential areas have been snapped up by BTL landlords, in the years 2006-2015, and that has raised both property prices and rents. There is now very little on the market that an entry-level young professional could afford: what remains is either in insecure or downmarket locations, or in a condition only a leveraged borrower can afford to remedy.
    2. As a result, young people rent flat-shares and cheap flats, or spend the vast proportion of their income on decent rental accommodation in a decent area.
    Life is not a rehearsal, and most do not want to spend 10/15 years saving painfully in the deferral of a gratification that may never arrive.
    3. Mass immigration into the capital – and the foreign non-resident buying of newbuilds that have been built with that sole purpose in mind! – puts a pressure on all London accommodation and continues the vicious circle of
    4. SDT further inhibits leaseholders from upsizing or downsizing, further reducing supply.

    • mancunius
      Posted October 8, 2018 at 12:40 pm | Permalink

      continues the vicious circle of rising rents and prices. Nor is there a gain: absentee owners do not pay for the city’s costs.

    • Yorkie
      Posted October 9, 2018 at 2:41 am | Permalink

      There are places outside London….by land.

      • mancunius
        Posted October 9, 2018 at 1:02 pm | Permalink

        Living outside London is no use for young professionals who have to work long hours at a pressurised job. They cannot afford to live remotely from the their place of work. That is why they live in London, and for no other reason. The National Theatre, the LSO, V&A, BM etc – they might as well not exist for hardworking people.
        They would much prefer an amenable home in East Sussex or Suffolk, but it becomes instantly unbearable when they have to face the daily grind of commuting. The rail network (or the traffic) constantly makes them late for business appointments. And they rarerly see their home.
        It is only the privileged few who can spend half the day commuting to their place of work.

        • mancunius
          Posted October 9, 2018 at 1:02 pm | Permalink

          rarely

        • Edward2
          Posted October 9, 2018 at 5:31 pm | Permalink

          I know tjisbmay come as a shock but there is life and jobs outside London.
          And a lot of very affordable property too.
          Nice 2 bed homes under £200k in Birmingham Leeds Manchester Liverpool
          There are theatres cinemas art galleries top bars and restaurants.
          Less traffic too.

      • a-tracy
        Posted October 9, 2018 at 3:59 pm | Permalink

        Yorkie and pay a rail fare of £4500 to £5000 pa plus 1 to 1.5 hours commute each way.

  36. Helen Smith
    Posted October 8, 2018 at 1:14 pm | Permalink

    Young and old both have cause for complaint.

    When hubby and I set out to buy a house interest rates were horrendous, we only managed by buying a one bed wreck spending all our free time doing the place up, selling and buying a 2 bed wreck, etc, until,we reached our optimum 3 bed house.

    We went without, scrimped and saved, coped with three day weeks, now approaching retirement we see bankers doing very nicely thank you while we get a pittance on our savings and the young pay sky high rents because of a lack of affordable housing.

    A few bankers going to jail or gaving all of their capital and pensions confiscated and paid to the exchequer would be a start.

  37. Jack snell
    Posted October 8, 2018 at 2:54 pm | Permalink

    Am afraid that the subject matter offered for discussion at this critical juncture is of no consequence..just a time filler..everyone knows it..our host knows it..what is being decided in Brussels this week and next will effect us and for generations to come.

    Reply What nonsense. There are many issues we need to tackle with or without Brexit. Going over the same old ground on Brexit does not help. The government knows the Eurosceptic MPs position, and we await events. The two sides, UK/EU, are still a way apart on several important topics.

    • Rien Huizer
      Posted October 8, 2018 at 3:29 pm | Permalink

      May I add to Mr Redwood’s reply that these issues are indeed highly relevant and that (in a “binary” brexit environment: little change vs dramatic change) policymakers are more challenged than normal. If the UK were, a “going concern” (ie no disruption from events like Brexit or otherwise) BoE and Treasury might have a different policy mix than when they prepare for a disruptive event, the extent of which is difficult to predict given uncertainty (at the very highest levels it seems) about demand and supply responses within the real economy to various modalities of the future relationship. For instance, if the UK’s potential output could be lifted quickly by some policies affecting the supply side (investment incentives, easier immigration of labour, relaxation of planning regulations etc) the BoE’s policy might be less cautious (although I believe they are not very cautious right now) and in such an environment banks might find it easier to raise more regulatory capital to support more production oriented lending. However in the case of aggregate uncertainty (especially among large foreign firms involved in manufacturing) more caution would be in order. That such caution may have a pro-cyclical effect is unavoidable.

  38. M.W.Browne
    Posted October 8, 2018 at 3:29 pm | Permalink

    Why do people have more than just emergency funds in a cash account.
    The returns are usually derisory, especially nowadays.
    I often ask people why they don’t invest in stocks, and they look at me as though I’m speaking in a foreign language. These people should do as I did, and educate themselves about investments, by reading the right sort of newspaper and magazine.
    Most of them say they don’t want to risk their money, forgetting that they are losing money all the time after inflation, when it’s in a cash account. They could invest in an ETF, for example, and get a much better return, provided they accept that there will be ups and downs.

    Reply There is no guarantee there will be a better return. The Japanese share index is still way below its peak levels at the end of the 1980s.

    • Alison
      Posted October 8, 2018 at 6:35 pm | Permalink

      Andy, I was not promised anything by Brexiteers. I base my knowledge and views on decades – decades – of direct, hands-on experience of what the EEC and then the EU is doing to us – removing our ability to vote out the people who impose laws on us, impose decision-making processes on us which are opaque, unaccountable, extraordinarily slow and inefficient, and favouring multinational corporations, especially those spending money on lobbyists. I suggest you actually go to Brussels.
      The people who suffer are those who are trapped in jobs where they cannot push for higher wages because there is an infinite supply of labour, courtesy of so-called freedom of movement. Which is costing our country billions in infrastructure costs.
      Talk to me about dishonesty? There are people out there, busy tweeting how much we get from the EU. Look at their claims and they are double and triple counting – deducting, two, three times over the amounts that the EU decides to spend in the UK. I have a shed load of examples.
      Talk to me about incompetence? Mrs May, conceding and conceding, not using the negotiating cards we have in spades

      Talk to me about the UK’s future if we stay in the EU – the slowest-growing economic region? The system which guarantees low productivity? low wages? Which doesn’t accept a democratic vote (eg Greece, Netherlands, Eire, France …)
      .

  39. Denis Cooper
    Posted October 8, 2018 at 3:40 pm | Permalink

    Somewhat off-topic, on Sky News Ed Conway notes that it is ten years to the day since the Labour government has to bail out the banks:

    https://news.sky.com/story/uk-recovery-is-slower-than-us-after-great-depression-11521000

    and argues that compared to other crashes the UK recovery has been unusally slow.

    Of course his purpose is to blame Tory austerity rather than Labour profligacy, but leaving that aside and just looking at the red line on his chart:

    https://e3.365dm.com/18/10/1600×1200/skynews-depression-financial_4446869.jpg?bypass-service-worker&20181007233631

    the interesting question is this:

    “Where on that chart did the EU referendum take place?”

    Was it right at the left hand side, precipitating that 6% decline in GDP, as we were warned would happen if we so much as dared to vote to leave the EU? Nope.

    Or at around the 19 quarters mark, where there was a bump? Nope. Or around the 26 mark where there was a perceptible change in slope? Nope, that was long before the EU referendum took place …

    In fact the EU referendum in June 2016 would be at about the 31 quarters mark, and despite all the Remoaners’ increasingly dishonest efforts to find evidence of economic catastrophe, actual or incipient, looking at that chart it is impossible to detect anything significant which has happened since then in terms of the evolution of GDP.

  40. libertarian
    Posted October 8, 2018 at 4:04 pm | Permalink

    OFF TOPIC

    Andy/Newmania

    Any comment?

    Rolls-Royce Motor Cars have announced the company is adding 200 more staff to their UK workforce, bringing the total to more than 2,000 for the first time. Rolls Royce CEO Torsten Müller-Ötvös said that this reflects “our confidence in the future of our business” and stressed that they “remain fully committed to luxury manufacturing at our home here in Great Britain.”

    • fedupsoutherner
      Posted October 8, 2018 at 5:33 pm | Permalink

      Libertarian. That is music to my ears!! They are not the only company to have faith in this country. Shame our politicians don’t.

    • Edward2
      Posted October 8, 2018 at 6:55 pm | Permalink

      They won’t even accept the actual statements from Unilever so I don’t expect they will say much other than…”We haven’t left yet”
      The MSM have two stories one is “because of brexit” story the other is “despite brexit”

    • Rien Huizer
      Posted October 9, 2018 at 8:56 am | Permalink

      BMW

  41. Denis Cooper
    Posted October 8, 2018 at 5:31 pm | Permalink

    I expect Theresa May has put him up to this, she wants a pretext to keep us under the thumb of her beloved EU as far as she possibly can and this is a good one:

    https://www.telegraph.co.uk/politics/2018/10/08/brexiteers-show-deep-ignorance-wanting-put-time-limit-peace/

    “Brexiteers show their deep ignorance by wanting to put a time limit on peace in Ireland”

    NEALE RICHMOND, CHAIRMAN OF THE IRISH SENATE’S BREXIT COMMITTEE AND THE EUROPEAN AFFAIRS SPOKESMAN FOR FINE GAEL.

    Later on another treacherous Tory government can take us right back in.

  42. Steve
    Posted October 8, 2018 at 6:14 pm | Permalink

    Anyone noticed how quiet the news is just lately concerning brexit ?

    Yep, they’re up to no good, slyness again.

  43. Lindsay McDougall
    Posted October 8, 2018 at 8:06 pm | Permalink

    I have some money in an instant access account but only the amount that I consider necessary. The rest is in a SIPP which, for the most part, gives a higher rate of return. Others go one better and invest in Venture Capital Trusts. Most people are reluctant to put money into a savings account yielding 0.5% per annum in nominal terms, that is minus 2.0% in real terms.

    A consequence must be that banks have less to lend than they would like. So how do they ration credit? Do they do it by price, having a large spread between borrowing and lending rates? Or do they do it by lending only to those with copper bottomed collateral? Banks are conservative institutions and I suspect the latter is true. That policy favours the ultra-rich and large corporations at the expense of the middle classes and SMEs. Small wonder that peer to peer lending is gaining ground.

  44. Chris S
    Posted October 9, 2018 at 3:51 am | Permalink

    As someone who has been involved in the financing of house purchase for more than 30 years, I do not believe that younger people are generally renting because they cannot afford to buy.

    A fundamental shift in lifestyles is mainly responsible.

    It has almost always been the case that to afford a house or flat, most people starting out need two incomes. That was never a problem in the 1970s, for example, when most married in their early 20s.

    Today, most relationships amongst 20 somethings and those in their 30s are transient, at best. The costs associated with buying and selling a home make renting a more attractive and flexible proposition.

    The whole process needs root and branch reform. Buying a home should be no more difficult than buying a car on a PCP contract. Online agents, full electronic conveyancing and a much simplified mortgage application process are needed.

    That would encourage couples to buy without having to worry about the current very high costs of property transactions.

    • GilesB
      Posted October 9, 2018 at 10:15 am | Permalink

      Also our host claims that ‘This generation of twenty somethings has more graduates and higher wages than previous generations, but a lower percentage of home owners than their parents at the same stage.’

      You are not comparing like for like. The majority of my age cohort left school at 16. By their mid-twenties they had been working for ten years, living at home and the more ambitious were saving for a deposit. That’s why there is a high percentage of homeowners who bought in their twenties.

      The majority of people in their twenties left home at eighteen to continue full-time education. Many of them took a gap year, some did four year qualifications, some did one or two year masters. By their mid-twenties they have hardly started work. And they have taken on a load of debt for their living costs for an extra six or seven years (leave aside the fees issue). Of course they havn’t saved up a deposit. That may take ten years, like it used to, or longer if they don’t live at home and are paying rent at market prices. Home ownership won’t start until they are approaching forty. But it is the fault of overeducation and wasted years when they could have been earning. Blame Blair for the arbitrary target of 50% going to university

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    John Redwood won a free place at Kent College, Canterbury, He graduated from Magdalen College Oxford, has a DPhil and is a fellow of All Souls College. A businessman by background, he has been a director of NM Rothschild merchant bank and chairman of a quoted industrial PLC.

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