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ncome of the top decile of households who have an average gross income of 180k was 540bn in 2023 and after taxes it was 329bn that is the pool in which you are fishing though note the emphasis on households and the average at 180k these are senior managers doctors heads of department and solicitors not all globetrotting plutocrats and snotty investment bankers this is the trend of how much direct tax income and nics has been taken from that decile in the last 20 years has it been higher a bit but a squint at that graph suggests raising the line by 1 2 would be quite something that is 5 11bn perhaps you solve one year of the fiscal problems set out above meanwhile to think about the politics for a moment this is not a set of people that are getting much in the way of cash directly back from the state the top 10 get more in the sense of benefits in kind but much less as a share of their income so maybe one can go after this top 10 but there has to be a limit beyond which there is not much left to get as far as i can see all of these charts are quite progressive in shape and have mostly been getting more progressive with time i tend to be sympathetic to people who think we have missed some fiscal opportunities in the last 15 years taxes were held down unnecessarily at times and investments missed you can play fantasy hindsight chancellor imagine that a bigger splurge 15 years ago might have produced more investment when rates were low and brought today s chancellor the growth to make it all better today but now we are where we are interest rates are high interest costs are an unavoidable fact the rules are not even needed to constrain the chancellor and there is probably only one or two tens of billions to squeeze out of the richest this is not a dilemma you can evade tim is right reeves prudence is needed to prevent something even worse and more chaotic and the left should appreciate her more there are plenty of puzzles in public policy right now but it is far from mysterious why the treasury wants to control spending the only exception i saw is how the top decile started in covid getting a much larger share of nhs services posted by freethinkingeconomist july 15 2025 posted in uncategorized tags economics economy finance fiscal inflation politics 18 comments on there really is no getting out of this fiscal corner you have no idea if the spending review boosted growth imagine that having committed some unspeakable acts in a former life you were asked in this one to deliver a verdict on whether the spending review was good or bad for uk growth what would be your answer the most honest one would be shrug followed by a rant about the slipperiness of treasury communications the second of these is not some cosmetic point the way numbers are presented at fiscal moments appears designed to impress the foolish and exasperated the better informed as the economist put it on june 11th the house of commons felt like a bingo hall or perhaps an auction house rachel reeves reeled off a dizzying list of wildly varying numbers and time horizons to hear the chancellor tell it almost every corner of the british state was to be showered with cash and attention this is not a dig at reeves in particular every chancellor does it sit through a budget day speech from the despatch box and you ll emerge with the impression of an endless flow of goodies a santa sack full of investments and tax bungs spreading over the country as chris giles recalls it was a feature of gordon brown s style and last week some were presented in cash terms others adjusted for inflation one or two expressed as a proportion of gdp a few compared payments over the next three years some over five and some cumulated over many to arrive at a single enormous number i ran the speech through an llm and was indeed befuddled by this constant mixture of units total spending rising 2 3 in real terms a year rate of change cumulative over sr real terms 190bn more allocated to day to day spending total amount cumulative over sr cash terms 15 6bn in total by 2031 32 for transport for city regions total amount cumulative over a different period cash terms 39bn for a new 10 year affordable homes programme total amount cumulative over yet another period cash terms nhs spending up 3 0 in real terms leading to 29bn more a year a baffling combination of a real terms top with a cash terms bottom a 30bn commitment to our nuclear powered future this one is a doozy afaik it includes a big financial investment to the sizewell c project equity debt timescale unknowable 13 9bn for the nuclear decommissioning authority surely a relatively non negotiable commitment to stop some really bad things happening 2 5bn for small modular reactors 2 5bn for nuclear fusion both more industrial strategy though each at very different stages of technological development grants loans payments for an actual reactor not sure yet perhaps a team of trained caffeinated ifs researchers can break all the tables into numbers that can be used in an comparable way but even then it is impossible to derive from an examination of such numbers any solid sense of whether the economy will thereby be better stronger healthier fairer and so on the main reasons opportunity costs in the government and in the economy inertia and a skew to the visible you don t know what was cut to pay for it take for example that 15 6bn for transport for city regions i really like that we have been told a great many times that a our second tier cities underperform and b more agglomeration might help maybe if they got denser and their centres were more accessible 15 6bn sounds like a lot compared to the 2bn transforming cities fund we got going in 2018 but then i read in the ft that there will nevertheless be a large 17 cut in the roads budget net net is an implicit diversion from one to the other good for growth you don t know the chancellor is only santa claus if santa went around stealing presents as well as giving them out you don t know about crowding out britain has a supply constrained economy our limits are not just the ones expressed in the fiscal rules but the knowledge that any policy action that brings about extra activity will come at the expense of other activity only if the new activity is better than the old will you score positive for growth ironically a relevant example can be seen in one of the government s big policy successes planning reform your mental image of what this achieves is government reforms planning fewer obstructions to housebuilding mean more houses diggers workers gdp but in the spring statement the obr actually pours a little cold water on that particular view describing how given we are supply constrained other effects will weigh against this in the end you get that small 0 2 bump in gdp just because of better construction sector productivity the diggers weren t idle you see look at this chart you don t really know about what is already there just as there is a great deal of ruin in a nation there is a great deal of inertia in the economy this can be a good thing they are harder to wreck than you may fear but it means that even when the government is really unleashing a tidal wave of new investment say you have to compare it with the literal trillions already invested a chancellor that unveiled an extra 100bn of capex really truly guaranteed by the ifs to be new is still only raising the total stock by a 2 3 percentage points the same goes for your skills idea transform the skills of a couple of hundred thousand people and you still need to reflect that there are 33m workers finally and my absolute favourite treasury fiscal days exhibit the most commonplace feature of government comms the obsession with the visible over the invisible the above are examples of this the government is asking you to look at what they announced over what they cut and the new activity they inspire not the activity it displaces when it has a thing for industrial strategy it will want you to think about the growth sectors it is prioritising the technological wonders it hopes to promote graphene ai nuclear fusion the future champion businesses but it struggles with the humdrum buzz of ordinary economic activity even if it is in this everyday economy that most of our prosperity is founded and most of our failures occur we have gotten poorer in the recent past not just because we have failed to launch our own nvidia or build a million more houses or anything else so easily visualised but because the ordinary work of economic progress has stalle d people starting companies shifting jobs bad businesses going bust good ones expanding the search for new markets better processes different products all those near invisible forces of economic progress just slowing down a bit growth normally feels mysterious not because it is inherently hard we know plenty about what causes growth we find it mysterious because it happens through a countless number of small experiments and ventures failures and successes alike unplanned by any higher authority and invisible to the eye its failure is more like an ennervating sickness than a series of spectacular injuries and did the spending review do anything to fix it well you don t know posted by freethinkingeconomist june 16 2025 june 16 2025 posted in uncategorized tags economics economy finance growth inflation politics spending review 2 comments on you have no idea if the spending review boosted growth the hunt for the 45bn a month ago i whiled away a lunch break asking bluesky for the origin of a massive number the figure 45bn had acquired a kind of solidity by repetition in what we pretentious types call the political discourse 45bn was meant to be how much the government might save if it were to replace manual paper based and poor quality interactions with the state that are sucking up time and resource that could be allocated elsewhere quote source the thread details an amusing and frustrating chase through the citations and footnotes often seeming to end back where i started yes this is how i amuse myself but somehow this drew the attention of the dsit committee as well as lord theodore agnew and last week dsit published its response explaining how the number is arrived at all of this reflects well on everyone in my view nobody is hiding when ministers think tanks and government reports go out claiming something extraordinary they are subject to visible public scrutiny and letters are published politely this is not how the whole world operates nevertheless nothing in the response diminishes my disquiet at this number being taken so seriously hold it a mo diminishes my disquiet why am i trying to put it so decorously no i think this number and numbers like it tbi analysis are usually garbage and the scant detail we have here gives me no reason for reassurance a number this large enough to fix all of rachel reeves problems is like the proverbial elephant being explored blindly by touch it must be examined from a number of angles here are a few always be sceptical of massive numbers and look for analogs 45bn is a vast vast amount something like three times all mod service and personnel costs or in the same area as the cost base of a globe spanning bank when such a bank embarks on a cost reduction programme it is hard yards maybe 1 of the cost base taken out in a year five times that at the end of the programme source of guesswork difficult decisions the whole way these are moreover information economy entities par excellence the very sorts of organisation ideally suited to the implementation of digital cost saving ideas why would it be easier for a government in part this is because as matt clifford put it nicely there are no ai shaped holes lying around there is a huge amount of business transformation to do before your ai thing sits where your human process thing was another way of saying it if your contention is that ai is going to tranform activity xx then you need to be an expert not just in ai but very much in xx too and xx will be different depending on whether it is running a prison teaching pre schoolers triaging health services administering welfare claims or procuring weapons the method for deriving ai savings simply cannot take a portion of public services and extrapolate where there are ai shaped holes they are most likely in administrative word play jobs it is unavoidable that many of the optimists about the impact of ai can be found in the word business read superb wordsmith ian leslie s informative post words in words out is what llms literally do i have no doubt that governments could make more use of them but the admin budget of the government is a very small part of the whole less than 2 moreover most of the problems impeding productivity are not if only i could get better words faster without paying people as much they mostly involve harder problems of energy and human services in particular this point has never been put better than by tyler cowen in his endlessly patient discussion with an extreme ai optimist as he tries to explain the logic of thinking at the margin as the supply of one factor gets cheaper intelligent words the ones that don t get cheaper increase in significance look up baumol s cost disease in the end in his words the bottleneck is humans this is why it mattered much more for human flourishing when light began getting cheaper than the last tiny leap to leds why is there not more curiosity about how technological transformations have worked in the past the past eighty years have not exactly been short of administrative innovations as typewriters were replaced by wordprocessors paper legers by online databases secretaries by desktop pcs and expensive snail mail by maddening volumes of email the most tedious part of any minister s technology speech is always that bit when he wonders at the pace of change around us all as if the audience hadn t spotted that they can get live football on their phones yet throughout this period of transformation admin spending has not shifted down and hours have not reduced either this chart shows labour volume all klems data note by the way that the 45bn number has a new context it is about half of the entire gva of the whole admin sector of the uk economy nobody can deny that there have been astonishing efficiencies in office work we don t need pocket calculators for calculation rooms full of books for basic facts phone calls to communicate or a giant printing press to get thoughts out to a wider audience but whatever savings these generate appear to dissipate through new uses of the resource a sort of rebound effect some consumer surplus and the way technology creates new demands as well as supply solutions email has given us a quicker way of communicating but also more to plough through and there is also david edgerton s insight that old technologies hang around for far longer than you expect as managers and consultants slowly gene...
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