Latest / Merryn Talks Money / Employer NICs Drama and The UK Inflation Slide

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Employer NICs Drama and The UK Inflation Slide · Merryn Talks Money

0:03
Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News. Hi, it's Meren here.
0:10
Speaker 1: We have got something special coming up on October thirty,
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Speaker 1: first atam at Bloomberg Headquarters. It is going to be
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Speaker 1: Merin on the Budget, Well not just Marin on the Budget,
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Speaker 1: Merin plus John, plus Stephanie and plus special guest Andy King,
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Speaker 1: who knows an awful lot about fiscal policy and fiscal matters.
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Speaker 1: So it's going to be educational, maybe interesting, and we'll
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Speaker 1: John's brilliant newsletter which I know you all get already,
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Speaker 1: Welcome to the Marrin Talks Money Weekly round up, our
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Speaker 1: debrief on the biggest stories in markets and economics. I'm
1:00
Speaker 1: Merri in sum Set Web Senior Opinion to stand Oh,
1:03
Speaker 1: I was gonna read a bit for you, John, Why
1:05
Speaker 1: don't you read your own bits?
1:07
Speaker 2: And I'm joined there or of the Money Distiled newsletter?
1:12
Speaker 1: Right John? What you are getting better at it? Remember
1:16
Speaker 1: remember back when we started doing this bit, and you
1:18
Speaker 1: never remember to introduce yourself to carry you through the intro.
1:23
Speaker 1: Here we are, we're getting we're getting better at our
1:25
Speaker 1: jobs only after what a couple of years in right?
1:29
Speaker 1: It is so today round up. There's really only two
1:35
Speaker 1: things to talk about it isn't there? National Insurance. We're
1:38
Speaker 1: not going to talk about whether it breaks manifesto blower
1:42
Speaker 1: or not. We don't really care because we were expecting
1:44
Speaker 1: all sorts of promises to be broken, so we don't really
1:45
Speaker 1: care right the way, this is not new news. We
1:47
Speaker 1: just care about impact. And then inflation numbers coming in
1:51
Speaker 1: lower than expected. Porsh you snak. I bet he's looking
1:54
Speaker 1: at all this and just really wishing he'd hang on
1:56
Speaker 1: a couple of months. But there we are, right Employers,
1:59
Speaker 1: National Insurance? What's going on? He edgeup?
2:02
Speaker 2: Rachel Reeves one of the few things that she's kind
2:06
Speaker 2: of got open to her on the pensions front that
2:10
Speaker 2: looks as if it would be both quite lucrative and
2:14
Speaker 2: quite stealthy. And on top of that, you know something
2:19
Speaker 2: that she technically hasn't ruled out of her manifesto as
2:22
Speaker 2: far as she's concerned. Now. Tom McPhail chatted toy Is
2:25
Speaker 2: about this whenever he was on while ago he did.
2:29
Speaker 2: And basically what it is is, basically, at the moment,
2:32
Speaker 2: if your employer contributes to a pension on your behalf,
2:34
Speaker 2: they don't pay employer national insurance on that amount of money.
2:39
Speaker 2: And employer national insurance is actually really high. I think
2:42
Speaker 2: a lot of people don't really know about it, to
2:44
Speaker 2: be honest. So there's a bit of national insurance that
2:47
Speaker 2: you pay, which is now eight percent in moy is
2:50
Speaker 2: twelve percent before the Tories brought it down, and does
2:54
Speaker 2: employer national insurance which is thirteen point eight percent, so
2:58
Speaker 2: which is a big chunk on top of you salary.
3:00
Speaker 1: Yeah, but it's not on everything, right, just to go back,
3:03
Speaker 1: it's not on your entire salary. They pay it abovends
3:08
Speaker 1: a year.
3:09
Speaker 2: Yeah, that's like that.
3:10
Speaker 1: It's like an allowans like with everything else. But nonetheless,
3:13
Speaker 1: you know, nearly fourteen percent, that's already a whopping great tax.
3:16
Speaker 1: So adding a couple of percentage onto that that's quite
3:18
Speaker 1: a lot.
3:19
Speaker 2: Yeah, exactly. And so your like I said, your pensions
3:23
Speaker 2: are currently based a pension contributions to your employer makes
3:26
Speaker 2: currently don't attract that and the idea is that if
3:30
Speaker 2: Rachel Reeves said, I should, we are going to put
3:33
Speaker 2: that on employer contributions to pensions LCP. I think Steve
3:38
Speaker 2: Webb's law at the Expensions Minister reckon. She treads about
3:41
Speaker 2: sixteen billion if they went the full thirteen point eight percent,
3:45
Speaker 2: and that's sixteen billion after you've effectively excluded the public
3:49
Speaker 2: sector from this. So then that's so that's a big
3:53
Speaker 2: summer money.
3:54
Speaker 1: And if you put just to go back to ignore
3:57
Speaker 1: the pension of stuff for a minute, if you just
3:59
Speaker 1: chucked percentage point onto employers and I as it stands,
4:04
Speaker 1: that would come in as something like eight to nine billion.
4:07
Speaker 2: Yep, that's it again. That's that's the other option. So
4:09
Speaker 2: she could just you know, jack up employer and I
4:14
Speaker 2: that would be also, yeah, pretty stealthy as far as
4:19
Speaker 2: most people have concerned. And I guess you would avoid
4:25
Speaker 2: the I mean the supposed the reason I've thought of
4:26
Speaker 2: the pensions maybe the one she goes for is because
4:28
Speaker 2: it's the most under the radar one for this sort
4:31
Speaker 2: of thing. But I mean, certainly she could just go
4:33
Speaker 2: with this straightforward option and just putting it up, especially
4:36
Speaker 2: putting up corporation tax in some ways.
4:38
Speaker 1: Yes, so you can put two percentage points onto the
4:42
Speaker 1: basic rate that would give you sixteen seventeen billion quid,
4:45
Speaker 1: and then you chuck it on to pension contributions as well,
4:48
Speaker 1: that's another seventeen billion. And she's, you know, close to
4:51
Speaker 1: filling up all these black holes she keeps inventing.
4:55
Speaker 2: Yeah, it suddenly got big girl this morning.
4:57
Speaker 1: I know where did that come from?
4:59
Speaker 2: Yeah, I don't know what, from twenty two to like
5:02
Speaker 2: forty and then someone else said one hundred, so I
5:04
Speaker 2: got him. I am actually confused.
5:06
Speaker 1: But anyway, and of course the actual black hole as
5:09
Speaker 1: well into the trillions, but we don't need to go
5:11
Speaker 1: down that road right now. Now. The oh yeah, the
5:14
Speaker 1: impact here is that you know, there's no argument about this.
5:16
Speaker 1: But of course Rachel Reeves herself said a couple of
5:19
Speaker 1: years ago, this is a tax on attacks on jobs
5:21
Speaker 1: and effectively attacks on workers. And we know there've been
5:23
Speaker 1: a fair amount of research into this. We know that
5:25
Speaker 1: if you put up employers and I eventually that feeds
5:29
Speaker 1: through into lower wage rises. So this remains a tax
5:32
Speaker 1: on workers, hard working people. John, Let's a tax on
5:34
Speaker 1: hard working people. And exactly the same way is it
5:36
Speaker 1: would be if you put up NI itself. And I
5:39
Speaker 1: also can't quite see how it works with the growth agenda.
5:42
Speaker 1: The only way it works with the growth agenda, And
5:45
Speaker 1: I don't think that Rachel Reeves agrees with me on this.
5:47
Speaker 1: It's not how she's looking at it. But it works
5:50
Speaker 1: for the growth agenda. If you were to assume that
5:53
Speaker 1: the more expensive you make workers, and therefore the fewer
5:57
Speaker 1: people companies employ, the more likely they are just spend
6:01
Speaker 1: on capex and improving productivity. So that would be the
6:04
Speaker 1: positive way to look at it, but I'm pretty sure
6:07
Speaker 1: that that's not what Rachel Reeves believes.
6:09
Speaker 2: I mean, then effect you're saying it makes robots cheaper
6:12
Speaker 2: putting an I up on humans. Absolutely absolutely, And I
6:16
Speaker 2: think that's a very reasonable point, And you're right, And
6:19
Speaker 2: I don't think Rachel Reeves would would say that's some motivation,
6:23
Speaker 2: and I don't think she would agree with you. In public,
6:26
Speaker 2: some people have argued that one recently drive up wages
6:29
Speaker 2: or allowed wages to go up, is to encourage companies
6:31
Speaker 2: to invest more in automation.
6:34
Speaker 1: Well, I believe, I believe that.
6:36
Speaker 2: It's not an alien you know, it's a known kind
6:41
Speaker 2: of like economic theory, So I would be surprised if
6:43
Speaker 2: if in her darken moments she doesn't acknowledge that that
6:46
Speaker 2: might be the case.
6:48
Speaker 1: So why stop at two percentage points? Why stop that
6:51
Speaker 1: turn turn?
6:53
Speaker 2: Bring on the AI.
6:54
Speaker 1: Yeah, that'll just drive productivity and never never mind those
6:58
Speaker 1: work at people. I mean, I think that's that is
7:00
Speaker 1: that is we do now believe, don't we that the
7:02
Speaker 1: most likely things that are going to happen in the
7:04
Speaker 1: budget are this rise in employers n I and a
7:07
Speaker 1: rise of some kind of capital gainst text all, they
7:09
Speaker 1: were not being told that it's not going up to
7:10
Speaker 1: the same levels the income tax and thirty nine percent
7:13
Speaker 1: is just silly, apparently according to k Stamer. I don't
7:15
Speaker 1: think he's the word silly, but something like that. But
7:17
Speaker 1: we do still. You know, if we were going to
7:19
Speaker 1: mark them out of ten, both of these two would
7:21
Speaker 1: probably be close to a tent. Yeah.
7:23
Speaker 2: Enough people have defended the employer NI thing and try
7:27
Speaker 2: to pretend that it doesn't break any manifesto commitments, and
7:30
Speaker 2: again who cares?
7:31
Speaker 1: Who cares?
7:32
Speaker 2: But you know it does. But if they're saying it doesn't,
7:36
Speaker 2: then that's what matters, and they would just come out
7:39
Speaker 2: and deny they were going to rease it if we
7:41
Speaker 2: are not going to rease it.
7:42
Speaker 1: So I think I care more about the Taylor Swift scandal.
7:45
Speaker 1: Actually that was.
7:49
Speaker 2: That's a weird one. And even even then, I don't
7:51
Speaker 2: I don't care. The police better don't care about I
7:53
Speaker 2: think they're making too much of that, which pica something
7:57
Speaker 2: happened to Taylor Swift one of UK soil, America would
8:00
Speaker 2: declared war and there's nothing. It's both avoiding that.
8:03
Speaker 1: The teenage girls of the country would declare war on us.
8:05
Speaker 1: We would need America civil war on a soil.
8:09
Speaker 2: It was both. I mean, yeah, the ticket stuffs all
8:13
Speaker 2: a bit towards you, but it is tawdry the police escort,
8:16
Speaker 2: but is okay.
8:17
Speaker 1: That's okay, that's okay. And I was also thinking today
8:21
Speaker 1: we mustn't get stuck on Taylor Swift because I don't
8:23
Speaker 1: think our listeners. I kind of care, you know. I
8:26
Speaker 1: would think it's perfectly reasonable for the Prime Minister to
8:28
Speaker 1: have what's it called it, a brush by. Never had
8:30
Speaker 1: that before. A brush by, that's what they called it.
8:34
Speaker 1: That's what they called it. To make it sounds like
8:35
Speaker 1: it wasn't any big deal. It's not a big thing.
8:37
Speaker 1: It's a it's a brush by meetings and you phrase
8:40
Speaker 1: on me. You learn something new every day in this world,
8:42
Speaker 1: don't you know? I would think that the Prime Minister
8:45
Speaker 1: should meet Taylor Swift that she's passing through. That seems
8:48
Speaker 1: a reasonable thing. But somehow with all the tickets stuff,
8:50
Speaker 1: and they got all muddled up, and as you say,
8:51
Speaker 1: it became very taudry. Let's not dwell, let's not dwell. Right,
8:56
Speaker 1: Inflation brush by, brush by? Yeah, yeah, yeah, okay, Well,
9:02
Speaker 1: well we'll put a prize in place next if you
9:04
Speaker 1: managed to use brush By without making me giggle and
9:06
Speaker 1: a podcast at some point over the next three months,
9:10
Speaker 1: I buy you lunch. Right.
9:16
Speaker 2: Inflation, yes, inflation, inflation.
9:21
Speaker 1: Now, we were told this, We've been told this by
9:23
Speaker 1: monitors on the podcast for some time, that we would
9:25
Speaker 1: end up below two percent before the end of the year.
9:27
Speaker 1: James Folkson was very very clear on that. He said,
9:30
Speaker 1: there missing the moment, got to cut faster. Look at
9:33
Speaker 1: the money supply, will be well below two percent by
9:36
Speaker 1: the end of the year. And here we are, here,
9:38
Speaker 1: we are.
9:40
Speaker 2: Yeah, I'm going to have to wait for the concrete
9:43
Speaker 2: proof of that. One we went, we go it to
9:47
Speaker 2: one point seven percent, which was all I think chunk like.
9:53
Speaker 2: It was expected to go down to one point nine
9:55
Speaker 2: percent and it ended up being one point seven and
9:57
Speaker 2: the vicet majority of that was kind of just a
10:00
Speaker 2: really a historically large drop in airfares between August and September.
10:05
Speaker 1: It's not the one, not the one I'd been buying.
10:07
Speaker 2: Well exactly. Yeah, I mean, I don't know where this
10:10
Speaker 2: drop in airfares is coming from and where the n
10:12
Speaker 2: is actually buy their plane tickets, but it doesn't doesn't feel.
10:15
Speaker 1: Like that well, they're not going where I'm going, which
10:17
Speaker 1: I guess I should be grateful for small mess, is it?
10:22
Speaker 2: It's a planeful little NS people, So sorry, I know,
10:29
Speaker 2: but it's coming down quite a bit because of that,
10:31
Speaker 2: but it'll probably it will probably bounce back and you're
10:35
Speaker 2: still going to be up above two percent by the
10:37
Speaker 2: end of the year. I mean probably like two twenty
10:40
Speaker 2: four to two point five percent. Not a big deal.
10:44
Speaker 2: But as much as I've got an awful lot of
10:45
Speaker 2: respect for the monitarists, I'm not seeing this absolute creating
10:50
Speaker 2: that their figures, you know, suggest or that the money
10:56
Speaker 2: supply kind of like tendency, like you know, we should
11:00
Speaker 2: be sort of seeing negative numbers if they were right
11:02
Speaker 2: by now, and I'm struggling to see how that happens.
11:05
Speaker 2: I'm not discounting it. They're clever people, and I'm just
11:10
Speaker 2: you know, pulling numbers spreadsheets. I'm not doing it and
11:13
Speaker 2: really complicated. I just don't get how it goes way
11:16
Speaker 2: below two percent even for the next year.
11:19
Speaker 1: Well, we'll see on that. We'll see on that. But
11:21
Speaker 1: the several interesting things about this, she isn't really interesting.
11:25
Speaker 1: I don't know. Sometimes I think things are interesting and
11:27
Speaker 1: then when I think about it again, I think it's
11:28
Speaker 1: not interesting at all. But the consensus forecast was more
11:32
Speaker 1: accurate than the Bank of England's expectation. Again, and someone
11:37
Speaker 1: did do an outcome relatively recently about how strange it
11:40
Speaker 1: is that people outside the Bank of England tend to
11:43
Speaker 1: have more more accurate forecast than the Bank of England's
11:46
Speaker 1: economists themselves, although they're both always wrong. But external forecasters
11:51
Speaker 1: tend to be slightly better than internal forecasters, which is fascinating,
11:54
Speaker 1: really is.
11:55
Speaker 2: But I mean, that's the wisdom my crowd, isn't it.
11:57
Speaker 2: I mean, the external forecasts arguably get more incentive to
12:01
Speaker 2: get it right because they're mostly working for private companies
12:05
Speaker 2: and that's kind of mostly their job for clients, whereas
12:10
Speaker 2: the Bank England forecasters are not as answerable anyone, I
12:16
Speaker 2: don't think, okay, And they all have one institutional view.
12:20
Speaker 2: You got a load of institutions who get a different
12:23
Speaker 2: set of incentives. I think it's I think it's it's
12:26
Speaker 2: kind of a good sign.
12:28
Speaker 1: I don't know. I feel like if I worked to
12:29
Speaker 1: the Bank of England, I would feel responsibility of the
12:32
Speaker 1: of the nation on my shoulders.
12:34
Speaker 2: Maybe yes, but that's why you don't work for the
12:37
Speaker 2: Bank of England.
12:38
Speaker 1: Yes, currently get fired, can you right? Not for getting
12:43
Speaker 1: get wrong? Anyway, they wouldn't be anybody left there. This
12:48
Speaker 1: reminds you of the thing that really upsets you, which
12:50
Speaker 1: is the pension triple lock.
12:52
Speaker 2: Right, Oh yeah, I don't shouldn't wind me up as
12:56
Speaker 2: much as it does, because I obviously I would like
12:59
Speaker 2: to have a really massive state pension by the time
13:03
Speaker 2: I retired. That I like the way I've grown up
13:05
Speaker 2: in real terms.
13:06
Speaker 1: I like the way you always say one day I'd
13:07
Speaker 1: like to be a pensioner, as though deep deep inside
13:10
Speaker 1: you know you're from Glasgow and the risks.
13:11
Speaker 2: That high exactly I aspire to being a pensioner. It's
13:17
Speaker 2: like was the classic called the Guardian line about men
13:22
Speaker 2: from easter House having the same life expenses as men
13:24
Speaker 2: from me to you Opia nineteen nineties. But but assuming
13:30
Speaker 2: that I do get to a pension, it would be lovely.
13:32
Speaker 1: To fingers crossed.
13:36
Speaker 2: But the problem is that's that's not what happens. So
13:39
Speaker 2: what's going to happen is because I mean, God, the
13:42
Speaker 2: Tories were saying before they get thrown out this time
13:45
Speaker 2: in a fit of desperation, that weren't going to introduce
13:48
Speaker 2: the triple lot plus, where the actual you know, the
13:51
Speaker 2: personal allowance for pensioners goes up in line with inflation
13:54
Speaker 2: as well, so that you never pay tax on your
13:56
Speaker 2: state pension. I mean, that is luding Chris, and it
14:00
Speaker 2: also shows that there's absolutely no political will to tackle this.
14:04
Speaker 2: And the actual thing that's going to happen one day
14:07
Speaker 2: is that a government's not going to turn and get
14:09
Speaker 2: rid of the triple lock or the triple lock plus
14:11
Speaker 2: as it will be by then they'll say this is
14:14
Speaker 2: going to stay and we're going to protect pensions, but
14:16
Speaker 2: you're not going to be able to become a state
14:17
Speaker 2: pension until you're eighty, and that's how we're going to
14:20
Speaker 2: have it taken away from is and they'll always be
14:23
Speaker 2: one year ahead of you know where you know, you
14:26
Speaker 2: and I are in our you know, biological age. And
14:29
Speaker 2: then that's what irritates me. It's like it's going to
14:32
Speaker 2: be unsustainable at some point and then it's just going
14:34
Speaker 2: to be taken away. They need to have a serious
14:36
Speaker 2: conversation about this.
14:37
Speaker 1: On the other hand, you feel bad in aw, don't
14:39
Speaker 1: you about the winter feel allowance being taken away kind
14:41
Speaker 1: of makes absolutely you feel better. Okay, good that. Listen,
14:44
Speaker 1: I'm going to tell you. I'm going to one thing
14:47
Speaker 1: about how this stuff happens. Right, I'm going to give
14:50
Speaker 1: you a statistic on Japanese voters. Election coming up in Japan. Right,
14:54
Speaker 1: there are one hundred and two million people eligible to
14:57
Speaker 1: vote in Japan. Of those, based on past experience, around
15:01
Speaker 1: fifty four million will vote. Thirty one million of those
15:05
Speaker 1: will be under sixty five. Twenty three million will be
15:09
Speaker 1: over sixty five. So the first time ever in any
15:14
Speaker 1: country anywhere across all time, over forty percent of voters
15:19
Speaker 1: will be over sixty five. Just wait till they get
15:22
Speaker 1: the triple lock plus plus plus plus plus plus plus
15:24
Speaker 1: plus plus plus plus.
15:26
Speaker 2: That's still I'm surprised it's still that. Lord, that is
15:30
Speaker 2: under forty. It's only just going over forty. Well of
15:35
Speaker 2: the actual for us who vote, Yeah, no, but is
15:38
Speaker 2: there not? And do all of these people actually vought
15:42
Speaker 2: because one of the things people always complaining about here
15:44
Speaker 2: is one reason that stuff that older people get behind
15:48
Speaker 2: kind of wends is because only older people vote. Yeah, yeah, yeah,
15:50
Speaker 2: well this is always a bit of stuff to do
15:52
Speaker 2: or whatever.
15:53
Speaker 1: This is based on past voting patterns. That's kin interesting.
15:55
Speaker 2: I suppose the Japanese are a bit more socially responsible
15:59
Speaker 2: in lots of respec we stereotypnically. I don't know if
16:02
Speaker 2: that's true or not.
16:02
Speaker 1: And you know, the other thing that has actually now
16:04
Speaker 1: happened in Japan is that the population is actually falling.
16:07
Speaker 1: You know, I've been talking about it for a while
16:09
Speaker 1: affic and I was actually falling. So I have many
16:12
Speaker 1: thoughts on that, which we will come back to another time.
16:14
Speaker 1: Because that that's fascinating. That does not fit into this
16:16
Speaker 1: week's round up. We'll talk about it another time. There's
16:19
Speaker 1: lots to think about there in terms of you know
16:20
Speaker 1: productivity and cost of labor, digitalization, but we'll come back
16:25
Speaker 1: to it. Anything else on triple locks you want to complain.
16:29
Speaker 2: About, John, I don't think, and just to be clear byby,
16:33
Speaker 2: I think the Winz thing, the Winter fuel loans, I
16:35
Speaker 2: don't they should have taken a way. I think they
16:37
Speaker 2: should have wrapped it into the pension at the point
16:39
Speaker 2: that they said they were taking away their triple lock.
16:42
Speaker 2: I think that has been politically more sensible and somewhat
16:44
Speaker 2: less brutal.
16:45
Speaker 1: Yeah, I think you're absolutely right. I mean that we
16:47
Speaker 1: talked about this at the time, didn't we the Winter
16:48
Speaker 1: feel that was effectively part of the state pension. And
16:51
Speaker 1: that's one of the reasons ye taking it away. It
16:53
Speaker 1: has been so incredibly difficult because it was universal, everyone
16:57
Speaker 1: got it. People perceived it as being part of the pension.
17:00
Speaker 1: If you take that away, what do you take away next?
17:03
Speaker 1: It's a glide path and means testing. We don't want that.
17:07
Speaker 1: Maybe we do want that. Thanks for listening to this
17:10
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