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The UK Economy & the 2023/24 recession

brogdale

Coming to terms with late onset Anarchism
The BoE base-rate hike of 0.5% to 5% may well herald the next recession?

Time for a thread to discuss matters relating to macroeconomic 'policy', the 'pledge' to cut inflation by half by 31/12/23, the soaring public debt etc. etc.

Some views on today's base-rate increase:

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The whole "everyone is on variable-rate mortages" thing is madness -- I wonder what % of UK voters are currently paying a variable-rate mortgage?

The recession is, I fear, going to increase the already massive inequality between London and the rest of the UK, and push more poor people out of London (which is part of that process)
 
The Times had a load of more recealing than usual stats analysis from the OBR yesterday, including this on page 2 (subsequently barely mentioned or not at all):


The rise in people suffering from illness after the coronavirus emergency has dealt an annual blow to the public finances of almost £16 billion ...

The Office for Budget Responsibility (OBR) estimated that the jump in benefit payments caused by the pandemic, combined with a decline in tax receipts, had added £15.7 billion to the state’s annual borrowing, equivalent to 0.6 per cent of the UK’s GDP.

“As of early 2023, there were 2.6 million working-age people — 6.1 per cent of the working-age population — outside the labour force for health reasons, making this group, for the first time, the single-largest segment of the economically inactive population," the watchdog said.

Since the worst of the pandemic, there had been a 440,000 increase in the cohort of people who blamed long-term sickness for being economically inactive by early this year.
The number of people who are struggling with illness but continuing to work has risen by 490,000.

This wave of sickness has led to a £6.8 billion increase to the annual welfare benefits bill, including a rise of £4.5 billion in spending on incapacity benefits and £2.3 billion on disability benefits. Lost taxes amounted to a further £8.9 billion, the OBR said.

So Long Covid is causing a huge problem for the economy, which there's a certain amount of panic about among the boss class, but no-one wants to make a big deal about it cos the whole existence of a pandemic thing is supposed to be memory holed and they can't really pretend disability benefits are a wastrel's paradise having spent the last decade turning it into a complete nightmare.
 
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The Times had a load of more recealing than usual stats analysis from the OBR yesterday, including this on page 2 (subsequently barely mentioned or not at all):


"The rise in people suffering from illness after the coronavirus emergency has dealt an annual blow to the public finances of almost £16 billion ...

"The Office for Budget Responsibility (OBR) estimated that the jump in benefit payments caused by the pandemic, combined with a decline in tax receipts, had added £15.7 billion to the state’s annual borrowing, equivalent to 0.6 per cent of the UK’s GDP.

“'As of early 2023, there were 2.6 million working-age people — 6.1 per cent of the working-age population — outside the labour force for health reasons, making this group, for the first time, the single-largest segment of the economically inactive population,' the watchdog said.
Since the worst of the pandemic, there had been a 440,000 increase in the cohort of people who blamed long-term sickness for being economically inactive by early this year.
The number of people who are struggling with illness but continuing to work has risen by 490,000.

"This wave of sickness has led to a £6.8 billion increase to the annual welfare benefits bill, including a rise of £4.5 billion in spending on incapacity benefits and £2.3 billion on disability benefits. Lost taxes amounted to a further £8.9 billion, the OBR said."

So Long Covid is causing a huge problem for the economy, which there's a certain amount of panic about among the boss class, but no-one wants to make a big deal about it cos the whole existence of a pandemic thing is supposed to be memory holed and they can't really pretend disability benefits are a wastrel's paradise having spent the last decade turning it into a complete nightmare.

The article identifies the fundamental issue from the treasury perspective as bluntly folk who can’t work are also not just part of the tax base, they’re also receiving money from the state in the form of benefits etc. Someone too poorly to work at say 40 is forgoing 25 years of tax paying. Not a judgement here - if people are too ill to work I believe them - more an actuarial assessment. Exacerbating the demographic issues already in situ from the aging population.

What do you need to resolve this? Immigration - young healthy workers who have many years of tax paying ahead of them. Of course that’s electoral poison to both parties so nothing will change.
 
Yep, I suspect the Tories are hoping Labour will take the task of telling rainy fascist island it needs more foreign workers but I don't see Starkers being the guy to do so.
 
I firmly believe that further interest rate increases from this point on are about being seen to be doing something and not about economic “best practice” (ie orthodoxy). The increases to date have taken FX from <$1.20 to >$1.30, which should eventually cause a massive reduction in input costs. Meanwhile, the money supply has had a dramatic squeeze. These effects take 6 months or more to come through, and that has to be factored in. From here on in (at least), rate increases are just about optics and likely to drive an ever bigger recession.

In short, follow the Fed. They’re going to make one more increase at most.
 
In a piece of synchronicity, I was sitting next to Sam Woods on a panel today. I bottled it on giving him my opinions of Bank interest rate policy, though.
 
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That's quite a line to use entering the last phase of the electoral cycle.
 
I’m reminded this morning of the 2010 vermin attack lines that denied that there were any exogenous shocks (global forces) affecting the UK economy post 2008; it was all the government’s fault.
 
The whole "everyone is on variable-rate mortages" thing is madness -- I wonder what % of UK voters are currently paying a variable-rate mortgage?

Another brilliant scheme of the financial sector that we're all supposed to be so thankful for.
 
meanwhile Hunt is looking to the (very short) Truss play-book in a desperate, economically suicidal bid to hold onto to some of the core-cunt vote...

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Resolution foundation reminding us to look beyond the headline figures at the per capita numbers and actual living standards falls, which are even worse...

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I found this from 2023:


So about 28% of homes are lived in by people who own them outright, and thus not affected by interest rate changes at all. About 35% are not owner-occupied — this has a complicated relationship with interest rates. And 38% are owner-occupied with a mortgage, which therefore exposes the occupants to interest rate changes (either immediately or over the short to medium term). Saying that, those 38% will range from brand new 90%+ mortgages right down to ones that are almost paid off.

This is from 2022, but contains more stats:

That indicates that about 60% off mortgages have less than 75% LTV, but that’s unsurprising given that mortgages are normally gradually paid off.

Despite seemingly having every statistic under the sun, the second link still doesn’t show a breakdown of lenders between fixed versus variable rate. So I gave it one more go and found a full systematic statistical analysis of the UK mortgage market by the FCA. It still lacks details regarding fixed versus variable proportions but it does have this buried on page 41:


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So this kind of suggests that about 80-90% of people are on a fixed rate at any time, but that the remaining fixed term probably has a median of only 1-2 years. So it’s fixed but kind of not really fixed.
 
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I found this from 2023:


So about 28% of homes are lived in by people who own them outright, and thus not affected by interest rate changes at all. About 35% are not owner-occupied — this has a complicated relationship with interest rates. And 38% are owner-occupied with a mortgage, which therefore exposes the occupants to interest rate changes (either immediately or over the short to medium term). Saying that, those 38% will range from brand new 90%+ mortgages right down to ones that are almost paid off.

This is from 2022, but contains more stats:

That indicates that about 60% off mortgages have less than 75% LTV, but that’s unsurprising given that mortgages are normally gradually paid off.

Despite seemingly having every statistic under the sun, the second link still doesn’t show a breakdown of lenders between fixed versus variable rate.

So I have it one more go and found a full systematic statistical analysis of the UK mortgage market by the FCA. It still lacks details regarding fixed versus variable proportions but it does have this buried on page 41:


View attachment 412242

So this kind of suggests that about 80-90% of people are on a fixed rate at any time, but that the remaining fixed term probably has a median of only 1-2 years. So it’s fixed but kind of not really fixed.

I mean against the likely timescale of a mortgage, 2 years is pretty irrelevant. Not fixed at all would be the more accurate description.

It does amuse me when they call mortgages and things 'products' though. It's finance adopting the disguise of an industry that actually does something besides appropriate value.
 
The official per capita numbers do show that a growing population is masking the vermin's accelerating immiseration of working people in the headline figures:

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No surprise that people are able to afford less and less and the economy is shrinking.
 
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