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A Dose of Cynicism from John and The Case for Becoming a Barrel Maker · Merryn Talks Money

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  Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Merin
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  Speaker 1: Talks Money weekly round up debrief on the biggest stories
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  Speaker 1: in markets and economics. I'm Maren Somethings that we're Bloomberg's
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  Speaker 1: UK Wealth Editor at Large.
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  Speaker 2: And I've joined Stepek Senior Report and what sort of
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  Speaker 2: the Money to still newsletter.
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  Speaker 1: Oh hi John, Now listen, we've been talking about the
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  Speaker 1: election and the election and the election and the election,
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  Speaker 1: and we're not going to talk about the election here.
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  Speaker 1: We have a pod coming out tomorrow with two brilliant
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  Speaker 1: guests in which we're going to fully dissect what the
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  Speaker 1: US election means for global markets and for UK market.
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  Speaker 1: And so that means hooray John, that you and I
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  Speaker 1: don't have to do it here.
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  Speaker 2: Yes, good news, right definitely.
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  Speaker 1: Oh you want to talk about the you want to
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  Speaker 1: talk about the election and now you can't.
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  Speaker 2: Oh Ain, It'll just it will descend, it will descend
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  Speaker 2: until Ryan.
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  Speaker 3: So that's not a good what between you and me?
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  Speaker 1: Now it listen, I tell you what. I'll give you
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  Speaker 1: one sentence. What does it mean? What does it mean
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  Speaker 1: for the UK stock market?
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  Speaker 2: We've got serious competition, I said, that's what it means
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  Speaker 2: we've got serious, serious competition and we really need to
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  Speaker 2: sort ourselves out or else we're going to be left
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  Speaker 2: in the wake of America for another fifteen years.
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  Speaker 3: Mm.
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  Speaker 1: Yeah, well, let's hope somewhere from the government is listening.
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  Speaker 1: We need to sort ourselves out. But what we're going
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  Speaker 1: to talk about today is the Bank of England decision
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  Speaker 1: interest rates. Does that help sort us out? Today? The
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  Speaker 1: Bank of England cut interest rates by twenty five basic
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  Speaker 1: points were now down four point seventy five percent, which
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  Speaker 1: was exactly where everyone expected.
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  Speaker 2: Right, That's exactly what everyone expected. And I think about
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  Speaker 2: the best thing you can say for this Bank England
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  Speaker 2: decision is that they managed to get through the whole
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  Speaker 2: decision and the press conference without doing anything that the
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  Speaker 2: count's market.
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  Speaker 3: Because I mean, it's it's from me all this stuff.
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  Speaker 2: It's so the budget came out, it was Robbie showing
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  Speaker 2: growth and it was a little bit inflationary, and so
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  Speaker 2: what happened in the gelts market is the gilts went
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  Speaker 2: up like a lot relative to what they normally do
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  Speaker 2: in any budget apart from the twenty twenty two to one.
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  Speaker 2: But the difference between that in the twenty twenty two.
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  Speaker 2: One is it was a purely rational replacing according to
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  Speaker 2: what Rachel Reeves had decided in the budget. And because
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  Speaker 2: it's like a little bit inflationary and it's rubbish for growth,
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  Speaker 2: that means that we'll likely have interest rates higher for
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  Speaker 2: a bit longer because the Bank England don't need you
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  Speaker 2: keep rates a bit higher to tackle the extra bit
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  Speaker 2: of inflation in theory anyway, and that was all just confirmed.
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  Speaker 1: There also likely to be a little bit of extra
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  Speaker 1: inflation coming from the US. I mean, if tariffs are introduced,
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  Speaker 1: if we've got extra spending coming into an economy that's
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  Speaker 1: already quite hot, we can expect a little bit of
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  Speaker 1: inflation added as a result of that as well. So
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  Speaker 1: we can't really tell and we haven't really been given
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  Speaker 1: any guidance on words at the Bank of England expect
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  Speaker 1: great to end up in this cycle.
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  Speaker 2: No. And the other thing is, I mean the Bank
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  Speaker 2: itself was basically saying, look, we just need you wait
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  Speaker 2: and see because for example, they talked about the employer
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  Speaker 2: national insurance contributions and they think that's going to be
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  Speaker 2: a little bit inflationary because something it'll pass suit of
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  Speaker 2: prices and it will also restrict a labor market slightly
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  Speaker 2: because it's driving up the.
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  Speaker 3: Cost of labor.
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  Speaker 2: But at the same time, they're kind of like, we
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  Speaker 2: don't really know until we've seen exactly how companies push
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  Speaker 2: it on, because it might, you know, it might squeeze
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  Speaker 2: some small businesses out of business. Basically, alternatively, maybe the
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  Speaker 2: fact that everyone now knows what's in the budget will
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  Speaker 2: at least make the economy a little bit more, you know,
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  Speaker 2: a little bit better, because nobody's waiting to find out
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  Speaker 2: what's going to happen.
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  Speaker 3: Because it's happened, so.
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  Speaker 1: We don't really know where we're going to end up jump,
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  Speaker 1: but we'd kind of expect something like four percent three
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  Speaker 1: point seventy five percent by the end of this year
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  Speaker 1: beginning of next year.
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  Speaker 2: I've not been the end of this year, but next year, yeah, yeah,
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  Speaker 2: next year that would be that would be quite good. Yeah,
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  Speaker 2: And I think, honestly, I just think the main thing
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  Speaker 2: for normal people to take away from why this isn't
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  Speaker 2: so much you know where the bank ends up exactly,
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  Speaker 2: and at the end of the day, this is only
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  Speaker 2: a quarter point difference from what it was before. It's
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  Speaker 2: more about we aren't going back to the post two
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  Speaker 2: thousand and eight days. And also we aren't actually going
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  Speaker 2: back to the pre two thousand and eight days either,
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  Speaker 2: because back then we were in a disinflationary trend and
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  Speaker 2: now we're in a inflation volatility trend, if you want
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  Speaker 2: to call it that, and that inflation is going to
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  Speaker 2: be somewhat higher, and it will be jaggier as well,
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  Speaker 2: it will be more proent to spikes, so it's not
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  Speaker 2: going to necessarily be that pleasant.
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  Speaker 3: Actually, lots of waste.
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  Speaker 1: Yeah, I'm not going to get anything anything optimistic out
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  Speaker 1: of you today, so I can feel it, can feel it. Yeah.
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  Speaker 1: One thing, one thing that listeners do have to take
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  Speaker 1: on board is that savings rates are falling. So if
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  Speaker 1: you haven't looked in good rates already, you know it
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  Speaker 1: might not be the worst time in the world to
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  Speaker 1: do it. We saw ns and I cut rates on
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  Speaker 1: quite a lot of it saving products. Yesterday, premium bonds
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  Speaker 1: surprise fund rate went down. I have premium bonds. I
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  Speaker 1: always hate it when I see that from four point
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  Speaker 1: four percent to four point one five percent.
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  Speaker 2: I mean that's quite that's a little bit previous of
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  Speaker 2: NSNI law because I mean it's like five years WAT
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  Speaker 2: rates have going up like a lot in the last
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  Speaker 2: six weeks, and so I mean I would expect to
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  Speaker 2: see you know, eyes of rates and things like that
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  Speaker 2: to actually possibly even nudge about higher or you know
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  Speaker 2: something coming out of that, because are probably going to
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  Speaker 2: nudge about higher.
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  Speaker 1: Yeah, I don't think you're going to see that. That's
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  Speaker 1: that's not how banking works. The other one point out
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  Speaker 1: is the NS and I Direct Save account, which I
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  Speaker 1: know a lot of our listeners will be saving their cash,
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  Speaker 1: and that's down from four percent to three point seven
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  Speaker 1: five percent, so below four percent. That's a bit disappointing.
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  Speaker 1: The other disappointing thing I wanted to talk about briefly
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  Speaker 1: today is something I know we do go on about
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  Speaker 1: quite a lot, but the increase in the cost of
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  Speaker 1: tuition at universities in the UK. We've been told that
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  Speaker 1: that is now going to start going up by inflation,
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  Speaker 1: which you might think is not unreasonable. All costs should
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  Speaker 1: go up by inflation. Univers universities have been suffering no
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  Speaker 1: end as a result of not seeing a rise in
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  Speaker 1: the fees that they are paid, and we hear regular
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  Speaker 1: complaints from students about how they are not getting value
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  Speaker 1: for money, or what they think would be value for
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  Speaker 1: money in terms of FaceTime with lecturers and tutors, etc.
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  Speaker 1: So the price of the university is going to go up.
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  Speaker 1: There's been a great big fuss about it. But I
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  Speaker 1: think John, you and I both believe that there's a
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  Speaker 1: complete red herring next to the appallingness of the student
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  Speaker 1: loan system in general, which of course we don't think
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  Speaker 1: is a loan system. It's more of a tax system.
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  Speaker 1: So whatever the price of the degree is, the repayments
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  Speaker 1: for most students effectively remain the same.
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  Speaker 2: Right, Yeah, And it's just you know, as you say,
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  Speaker 2: the real issue is this nine percentage point tax on students.
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  Speaker 2: And it really is wild when you look at the
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  Speaker 2: marginal rates. You know, I've posted about this on LinkedIn
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  Speaker 2: the other day, and I think there must be something
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  Speaker 2: marginal tax rates that just really kind of like stimulates
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  Speaker 2: people to get you know, annoyed or excited or something,
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  Speaker 2: because I very rarely get that level of engagement, but
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  Speaker 2: you know, lots of people, and I think it really
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  Speaker 2: kind of strikes home because so you know, you know
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  Speaker 2: that we've got a marginal rate between one hundred thousand
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  Speaker 2: pounds and one hundred and twenty five thousand pounds, and
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  Speaker 2: we do talk about this quite a lot, but you're
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  Speaker 2: paying sixty percent income tax at that level because your
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  Speaker 2: personal allowance is being withdrawn. You're paying two percent in
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  Speaker 2: eye on tops, that's sixty two percent, and then you
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  Speaker 2: get your nine percentage points you're graduate loan getting paid back,
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  Speaker 2: so that's taking up to seventy one percent.
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  Speaker 3: So you're keeping less than.
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  Speaker 2: Thirty p and pound of every chan.
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  Speaker 1: You're not including pension or to enrollment, which I think
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  Speaker 1: is really important to add on as well, because while
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  Speaker 1: it's not technically a tax, and it's also technically voluntary
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  Speaker 1: you can opt out, it really is a tax because
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  Speaker 1: I think we will slightly suspect that one days going
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  Speaker 1: to be replacing our state pension. So if you're not
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  Speaker 1: paying it that you're going to be in a lot
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  Speaker 1: of trouble later. So you've got to add that on
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  Speaker 1: as well, right, So you're heading up to seventy five percent.
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  Speaker 2: Well, yes, so there's something when you call it seventy
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  Speaker 2: sex with a five percentage and then if you did
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  Speaker 2: a postgrad degree, that's six percentage points on top of
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  Speaker 2: that because they get chads at the same time. And
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  Speaker 2: alsosly a postgraard degree kicks in at a lower income
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  Speaker 2: threshold and your graduate degree so once you're earning more
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  Speaker 2: than twenty one thousand six percentage points, so your salary
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  Speaker 2: comes off. So so yeah, you could be up to
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  Speaker 2: eighty two percent if you were a post guarde you know,
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  Speaker 2: earning over one hundred thousand pounds and presumably one of
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  Speaker 2: the reasons you became a Strands because you wanted to
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  Speaker 2: turn over one hundred thousan pounds.
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  Speaker 3: So it's and I mean, okay, I mean at that level.
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  Speaker 2: You know, if you're getting paid that salary for a
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  Speaker 2: prolonged period of time, then yes, you will probably pay
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  Speaker 2: your student going back earlier than you know.
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  Speaker 3: Some other people.
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  Speaker 2: You might even pay it off before the forty years
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  Speaker 2: is up. But it's still an astonishing barrier I think
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  Speaker 2: to people who who striving basically, and I really do
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  Speaker 2: think that.
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  Speaker 3: Yeah.
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  Speaker 1: And to productivity, I mean, there's this extraordinary high rate
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  Speaker 1: of marginal tax that people who have graduated from UK
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  Speaker 1: universities have to pay pretty much to out there working
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  Speaker 1: life has got to be a barrier people wanting to
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  Speaker 1: take on more work. It's got to be a productivity issue,
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  Speaker 1: and of course it's going to play into the fertility
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  Speaker 1: issues that we talked about the other day.
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  Speaker 3: Well, yeah, exactly.
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  Speaker 2: I mean, like, if it's costing you so much to
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  Speaker 2: set up the kind of home that you want to
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  Speaker 2: have kids in, and then you know, and also you
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  Speaker 2: know the delayed start of all that because of extended education,
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  Speaker 2: then yeah, we're just going to keep making things worse.
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  Speaker 2: I do think something in the university front needs to change,
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  Speaker 2: whether it poils down the more people taking advantage of alternatives,
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  Speaker 2: Like I think it's encouraging that apprenticeships are now seen
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  Speaker 2: as an alternative route. I also think that trade making.
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  Speaker 2: I think if if middle class kids understood better what
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  Speaker 2: because they tend to follow pathways, if there was a
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  Speaker 2: more obvious pathway to become a plumber or a brickie
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  Speaker 2: or an electrician, then a lot of them would do
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  Speaker 2: that instead. And I think the main kind of barrier
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  Speaker 2: to that, if you like, is it's weirdly the inverted
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  Speaker 2: one of the academic one. It's like they don't understand
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  Speaker 2: how you get to be a plumber, the same way
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  Speaker 2: as maybe a plumber's kids don't fully get how you
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  Speaker 2: get to be a lawyer. And I think that if
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  Speaker 2: we can maybe communicate those things a bit more broadly,
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  Speaker 2: we'd have a much more or diversity within all the
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  Speaker 2: different trades.
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  Speaker 3: But we would also, you know, have fewer rubbish.
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  Speaker 2: Degrees, because I mean, what was it saw someone to
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  Speaker 2: start this morning? So there's a small group of universities,
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  Speaker 2: but like a thod of the students that have graduated
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  Speaker 2: have not paid anything to the degrees.
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  Speaker 3: Can I well, why are we subsidizing that? Yeah?
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  Speaker 1: Why is it happening at all? Listen? I tell you
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  Speaker 1: what one I did something very interesting this week. I
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  Speaker 1: learned about the coopridge trade, making barrels, you know, for
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  Speaker 1: whiskey and wine, et cetera, et cetera. And I can
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  Speaker 1: tell you that is an extraordinary trade, a niche trade,
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  Speaker 1: highly skilled trade, one on which you can get an apprenticeship,
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  Speaker 1: and if you're really good at it, you're going to
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  Speaker 1: find yourself paying that sixty percent regional rate. Money's good,
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  Speaker 1: absolutely fascinating. And you know these many routes, many routes
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  Speaker 1: to earning. Well that the middle classes and you know,
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  Speaker 1: those words who think there is only one route to
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  Speaker 1: success and it's through university are really missing, really missing.
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  Speaker 2: Yeah, I think that's that is that is something that
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  Speaker 2: we could definitely do with address and and you know,
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  Speaker 2: I think people will find these routes after throwing back,
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  Speaker 2: once they realize what law value are potentially getting from UNI.
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  Speaker 2: But you know, you can excelerate that process just by
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  Speaker 2: making it a bit easily.
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  Speaker 1: Find John, that was all pretty depressing, apart from the
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  Speaker 1: coop Bridge bit. If you got anything else you'd like
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  Speaker 1: to add that is positive bit about the election or
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  Speaker 1: the Bank of England or even the budget, I would love.
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  Speaker 2: To, but I know what it gave me a really
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  Speaker 2: good topic for money to still today.
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  Speaker 3: So go and read that.
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  Speaker 1: Okay, don't listen to him, go read him Money Distill.
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  Speaker 1: There is an excellent newsletter, and I'm sure you've all
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  Speaker 1: signed up to it, but if you have not, now
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  Speaker 1: is your chance. Because John's not going to tell you
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  Speaker 1: his positive news. You have to go and read it.
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  Speaker 1: Thanks for listening to this week's Marin Talks Money Debrief.
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  Speaker 1: If you like our show, rate review and subscribe wherever
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  Speaker 1: you listen to podcasts. Also, you should follow me in
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  Speaker 1: John on x or Twitter at marinesse w and John
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  Speaker 1: Underscore Stepics. This episode was produced by Summersidi production supported
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  Speaker 1: by Moses and Questions and comments on this show and
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  Speaker 1: all our shows always welcome. Our show email is merin
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  Speaker 1: Money at Bloomberg dot nem