Supplement 25th May 2025 - Ang sends Rach a DM

“Don't be afraid of looking down, sometimes that's where you find your strength” - Unknown This week’s quote takes us all the way into the deep dive, and finding money - a lot of it - down the back of the sofa if you look hard enough. Before we go into this week full throttle - Rod Turner and I are running another workshop in July, on Thursday 3rd - Joint Ventures and Mergers and Acquisitions this time around, and it is sure to be a highly popular one - a whistle stop of the agenda: Market dynamics, JV opportunities, and optimal legal structuring for property businesses. Learn the pros and cons of limited companies, share classes, shareholder agreements, and sustainable JV models. Dive into capital structuring, comparing debt vs equity, managing risk, and understanding personal guarantees. Gain insight into property M&A, from due diligence to asset vs share purchases. Apply concepts through two in-depth case studies: acquiring an asset-backed property company and navigating a distressed business sale. Understand strategic disposals, company wind-ups, and how to negotiate under pressure while maximising value. Don’t miss the SUPER early bird tickets - now online and already selling like hotcakes at http://bit.ly/pbwseven This week saw less peace, more tariffs, and a hint of another change of direction in the US. More on this later - but essentially there seems to be a realisation that cuts of enough size aren’t coming, and therefore growth is the only fruit. The enemy of the state right now is the EU (depending on which state you are in) as far as the chat goes, stateside. I wonder if I should start calling this little segment “Trumpwatch” or similar. There’s certainly ever more global reverberations from the actions in the US than in recent years or in his first term, to my recollection anyway. Onwards nevertheless into the breach - the Real time property market. Thin this week as Chris is having a holiday - but props to him for taking the time to message me with the highlights of this week’s figures anyway - what a guy! The figures though - the short weeks seem to have created enough pressure, just by taking one day out - gross sales (without fall throughs) had their best week since late May 2022 (the start of the tapering down of the Covid boom, basically). Listings, net sales, and fall throughs all look really good, Chris assures me. That gives us our fix for the week, anyway, even if shorter and sweeter than usual! I always give Chris a weekly shout out here because he’s more prolific than “just” this epic tome he releases weekly on the UK property market - he comes up with some great stats on a regular basis. Drop him a like, subscribe, and all the rest of it and some kind words for his content creation. If you are in the industry and want support in growing your business or to be a more effective communicator/be more in touch with your local market - that’s his core business - give him a shout. The article gets published on the Property Industry Eye website, and the video on his YouTube channel - @christopherwatkin

Time to Macro hard or Macro home. Inflation. You won’t have missed it, but I get into the details as always. The PMIs were out, and I was waiting as you know. The ONS private rents and house prices is a must-read. That leaves room for us to be miserable about the gilts and swaps together

Inflation - a report that deflated us all. My hopes last week that the tariff announcements and the weak dollar would have kept April’s number manageable were dashed. The month on month figure was horrendous, and the outcomes were - CPIH (which the ONS prefers, which tracks better to the US inflation rate which is currently 2.3%, by the way) - inflation including owner occupier housing costs - soared to 4.1%. Over 4 really is a “bad” number as far as bond markets see it, for example. CPIH was 1.2% month-on-month. The headline CPI figure, which we are more used to seeing, and the number that you will have seen and heard, was up 3.5%. The consensus was 3.3%, and the Bank of England said 3.4%, so a miss on the upside (when there’s already a big jump) is never good. Again, month-on-month it was 1.2% - last April it was 0.3% month on month, and CPIH in April 2024 was 0.5% month-on-month. What caused this? Well, everything. Housing, household services, transport, recreation and culture. Clothing did its best to keep prices down! Core CPIH, a better measure of the underlying situation, was up to 4.5% (it was already 4.2% in March) - and CPIH annual services was up to 5.8%. These numbers, above 4, above 5, have been incredibly persistent. Core CPI, which is watched more closely, was up 3.8%, from 3.4%. CPI services were up 5.4% (having just made some progress below 5% the month before). You could look at all sorts of other contributory factors. We know council tax was up 5% nearly everywhere. This was also “the year the water went up” - water bills just DID NOT MOVE between 2014-15 and 2022-23, creating a huge backlog and the dam has broken after pressure on the regulators. The 2023-24 move from £422 to £448 was the largest increase in about 20 years, and then we saw 6% more and then 26% more. Yes, 26%. Really, we kept them too artificially low for too long and are now paying the price, a refusal to recognise any inflation in a meaningful way for around 20 years now costs us in 2025. Sanguine, but historically accurate - and an alternative narrative to how terrible all the water companies are. There’s a ton more reasons - the NI hike, of course - some pass-through was inevitable. More than everyone thought, it seems. To go from 2.6% to 3.5% is a huge jump in one month, that’s for sure, and it spooked a few markets. The Chief Economist of the Bank of England - discussed this month significantly by me, as his views hold pretty close to mine aside from anything else - basically looked on and said “told you so” - remember, he’s one not in favour of cutting rates and has now come out and said “we’ve been going too fast” - remember, one cut per quarter is a central banker’s idea of too fast. OOH - my pet metric to watch, the synthetic “owner occupier housing costs” is “only” up 6.9% year-on-year, progress from the 8% as recently as January, and still down on last month (unlike any of the other inflation measures) - confirmation that now, in this cycle, we’ve seen the peak. Remember - that doesn’t mean costs coming down, it means costs climbing less quickly - and this is only relating to housing! In terms of individual contributions, it is very very clear that the council tax and bills situation is the outsized contributor - that alone contributed nearly 0.6% of the month on month inflation increase. I’ve never seen a graph like it in an inflation report, and that’s why I’ve used it this week. You know this hits everyone - everyone who has a house - but hits those with less disposable income even harder, because this really isn’t optional spending or discretionary spending - it is mandatory. Housing and household services have a 7% inflation rate for April 2025. This is up from 5.1% in March 2025 anyway. What took the blame - well, what I already said - plus, the price cap on other domestic energy (electricity and gas). The cap for July was announced this week, so the pain is not prolonged for long (and bills go down as the heating’s gone off anyway, of course) - as there will be a 7% drop in the price cap come 1st July. Let’s just have a recap here. In February 2021, I had realised the inflation writing was on the wall, and first mentioned it in the Supplement. I was highly sceptical, simply from analysing historical spends, that the genie would be back inside the bottle within 4 years, and have said so in the interim. We crossed the 2% mark in August 2021, and indeed by August 2025 it doesn’t look like the genie is back in. How long is left NOW, though? Well, the models at the Bank of England and the 2026 fantasy of returning to 2%, as discussed in the past weeks, now looks confirmed make-believe. I still see 3% as the new 2% at this time, until a clear-out/reset/black swan style moment - but our core measures are still well above my 3% realistic number. 12-18 months more? Further tax changes look likely in October but a lot less extreme than an NI hike - the NI moves plus the gigantic public and local government deficits guarantee another round of price hikes next April, I’m sure - not as bad as these but still something that isn’t going to be congruent with a return to a 2% world. 3.6% up is the current estimate for the national minimum wage next year, although in past years, the prior estimates have been well below what’s actually happened. £12.65, in case you are wondering or considering jacking it all in and going to work in Tesco. Now largely there’s no argument that April was a one-off (or at least an annual) shock. However, you’ve always got to consider where you start from - and where we’ve started from is a core CPI of 3.2%-3.8% which is the core CPI range for the past 12 months, now. Not a backdrop for sub 3%, we only achieved sub-3% because energy had got SO expensive that it came down in price and had a genuine disinflationary effect. That effect is absolutely over right now, and depending on rumblings on tariffs between the US and the EU - yes, the Orange Man has turned the cannon at his next biggest rival, in case you missed it - and also on geopolitics - energy strikes me as more likely to get more expensive from here, not less. The Bank of England as discussed see prices coming down a little over the coming years - or the markets do, more accurately, in the snapshot that the Bank took - I see this as unrealistic, personally. It’s certainly not the base case. OK - PMIs. Flash PMIs, to be more accurate. 4 working days left in May, unlikely to change much you would think. So - above or below 50 was my big question - and the answer is below. 49.4 on the composite. 50.2 on services (squeak!) - up from 49 in April. Manufacturing still worsening - 45.1. Sensible commentary overall in the report as usual. The rate of decline has moderated. Business activity expectations recovered from the floor in April. “Milder May following Awful April”, they say. A rebound in confidence. Price pressures moderating. They point to the hint of a contraction in Q2’s growth, which is two thirds of the way there, now, you’d think. I’ll stick with my 0% versus NIESR’s 0.4% discussed last week. Job cutting remains “worryingly aggressive”, they tell us at S&P Global - particularly in manufacturing, particularly around the NI and NMW rises. Their conclusion - hopeful, in my view - is that moderating price pressures, faltering economic growth and job losses keeps the door open for further interest rate cuts in coming months. I’m unsure, especially after the telling off that the Chief Economist has effectively given the Bank of England MPC committee (aside from Catherine Mann, who voted with him last time out to hold the rate). Private rents and house prices, then. “Respite” as rents are “only” up 7.4% year-on-year, down from 7.7% in March. (Rent figures in this report are for April, house prices are for March, confusing I know. Tell the ONS). That broke back to 7.5% England, 8.7% Wales and 5.1% Scotland (still benefiting from removing its rent cap, go figure). The ONS now see house prices up 6.4% in the 12 months to March 2025. This print is higher than anywhere else has modelled (Nationwide, Halifax, etc) - and vastly ahead of what Zoopla has said over the past 12 months. These are the actual prices that have been achieved, of course - real transactions, the only ones to use that - and that’s why it is slower. That’s the number to the stamp deadline of course, and the number that all of us expected to be up a bit - 6.4% sounds incredibly healthy though, I’m sure you’d agree. To February 2025 the number was 5.5% - so as a very rough proxy, the suggestion is that the March transactions rushed through led to about a 1% increase in pricing. Doesn’t sound outrageous, by any means, but does it hold up or just reset itself! The house price and rent curves are coming very close to each other once again - the time of increasing yields is ticking right down, you’d think, or may well already be over. Regionally - how did everywhere fare? The North East is miles ahead at a ridiculous 14.3% year-on-year. Everywhere else stays in single digits, with London at an anaemic 0.8% by comparison. The rest of the North performed strongly, still over 9%, and the Midlands came next at around 7.5% between the two regions. The more expensive East, and South in general, lagged but still delivered 5%+. It’s only London really standing out - and if you were interested in looking for a “Bottom” in London prices after incredible outperformance and international stimulus from 2010-2015, and incredible underperformance as this cycle righted itself and international money went elsewhere from 2016 onwards, it really looks like we might not be far away. Lower interest rates would help - I’m not a believer at this time, but the market has “got used” to where we are today, I think, and soon if not now is the time to act in London if you want comparatively good pricing. Regional rents - The North other than Yorkshire and the Humber stays very strong, around the 9% mark (Yorkshire printed 4%, a massive difference). The Midlands stayed about where the capital growth has been, around 7.5% - here, as has been happening since the ONS started producing this report last year, London printed another huge 8.4% and the laggards were the other areas of the South, aside from Yorkshire. Yields need to climb to make an investment case for BTL, but cost of entry is much higher as pretty much every London property pays the extra £2.5k between £125k and £250k (compared to before 1st April) and also the extra 2% SDLT of course since October 30th 2024. Every month when I look at these numbers in detail I remember - why I invest where I invest, and just how much affordability impacts numbers. The major shift - and that’s what it needs to be called - in pushing lower paid jobs upwards means that affordability is well looked after in economically poorer areas, and they make for an excellent investment for landlords. Now if that wouldn’t upset Generation Rent, I don’t know what would! Right. Gilts and swaps. We had a ropey looking week as the US debt climbed as the “big, beautiful bill” extending tax cuts got passed by the slimmest of margins. Bond markets reacted by making US debt more expensive - the US 10-year hit 4.6% at the close on Wednesday but came back from there to close at nearly 4.5% on Friday. We had closes at 4.8% in early January as the yields wobbled once more, and at 4.9% in October 2023, so that’s the recent context. Other than that, we are back at yields that were last seen in 2007 in general, but we know that as the ZIRP period is over. The UK 5-year tracked the US, as that was the defining factor this week, and closed at 4.142% after opening at 4.178%. Technically a down week, and back well under the 4.25% “sunroof” as I see it, the current sensible ceiling on that yield. Thursday’s close was more like 4.2%, and the last swap traded was at 3.853% - that typical 35 bps discount I’ve been talking about for months now, keeping mortgage rates around that number for residential best price 60% LTV, and about 2% above that for limited company buy to let 75% LTV. Prime yourselves then - deep dive time. Two prongs to this analysis - firstly, a look at Angela Rayner’s memo to Rachel Reeves that was leaked to the Telegraph. Secondly, a look at the monthly publication by the OBR who provides a monthly update on the public finances. I’ve been looking more closely since we are so regularly underestimating how much we will borrow each month as an economy, or at least it seems like that anyway. Let’s put the leak into context first. This was from March, prior to the Spring Statement, in order to fend off welfare cuts. A bit of extended thinking around the characters involved. Angela Rayner, a mother at a very young age, someone who relied on benefits and social housing and used them alongside working very hard to become socially mobile, working through the care system and the unions. Someone who understands the ground game - no qualifications, all fight, proper “university of life” stuff. Probably (alongside Wes Streeting) the most likeable of the front bench, which is a bit like having your favourite Doctor Who baddie, to an extent. (Yes, Kier is a Dalek). Rachel Reeves - the establishment really, minus the private education. It didn’t get in her way and she reached Oxford to study the legendary PPE, matriculating in 1997 like all great students did (yes, she was in my year there, no, I didn’t know her). Masters at the London School of Economics (don’t take the low hanging fruit, I know, it doesn’t show, etc. etc.) - faithful Labour party member since age 16. Reeves claimed to have been interviewed by Goldmans but turned the job down - then again, she has made a few overblown claims about her career in the past that are well documented. She wants to be known as the Iron Chancellor by her own admission - for those who don’t know, that was the name bestowed upon Otto van Bismarck - for his “Blood and Iron” speech but also because he reverted to war to further the unification of Germany and the expansion of its colonial power. Different times, of course, but an interesting comparison to ever want to draw, in my view. As long as people don’t look too hard, I guess it sounds good - which pertains very much to the 2025 world - so perhaps not overthinking it is the way forward. The economics game, at the top level (IF you consider the Chancellor of the Exchequer to be the top level, there are of course many more highly paid economists in the world!) is simple, really. Make the numbers add up, or more precisely make your creditors believe that they do. Increase tax take (note, that doesn’t necessarily mean tax more, because tax too much and you get less), decrease government spending (simply never happens, freezing it is a bridge too far for the populace to countenance), service your debts appropriately (ideally ensure bonds that roll off are replaced by lower-cost debt) - or in plain English “get the interest rate down”. Reeves did more on point 1 in the October budget of course. No need to relive it, I have been doing so for the past 7 months, let’s be honest. Tax more. Employers were the target, jobs are more expensive to give people. The outcome - probably net zero, ironically enough. Of the £25bn headline figure, £5bn comes from government jobs and thus is a zero. £4bn came from corporation tax, lower tax receipts because of higher costs. That left £16bn. £16bn is about 0.6% of GDP. There’s an easy argument to make that the budget and the preface to it cost the UK 0.6% of GDP in Q3 and Q4. The government “only” holds on to about 38% of all GDP growth, so you’d have to argue that that move alone cost us 1.6% of GDP growth - over the 2 year period that most analysts agree is needed for it to settle in, we will find out (but never know for sure, of course, because we cannot play out the alternate reality). Nonetheless, it remained “Labour enough”, since it was putting up taxes on those evil businesses, those terrible organisations that exploit workers and the owners drive around in Lamborghinis. Apart from the fact that the real world looks nothing like that, and SMEs employ 90%+ of the workforce in the UK, and the owners are not making outrageous sums of money at all - and in many cases aren’t making anything. Still, sending a message in March was key. Reeves actually got it right, in my view, at the top level. She had to prove to the markets that she was willing to do 2), from above, as well as 1). Cut welfare. Rayner didn’t see this argument - I don’t want to dismiss her by saying she wouldn’t understand it, but I would rather characterise her by saying she doesn’t care about it. She cares about care, she cares about carers because she was one, and she feels incredibly strongly about social mobility (and if you had had her path in life, I suspect you would too - I feel very strongly about the path and the opportunities I had put in front of me, a path that isn’t there any more for future students, and when it comes to philanthropy it is a path I want to be able to help rebuild). So - don’t cut benefits, Rachel, she said - instead raise more tax. The negative messaging would, in my view, as a market realist, have been awful. But, ask she did. Could some of this be a precursor to October? Well, that’s what I’m also tacitly saying. There’s purpose to this deep dive, you know! Let’s get into the meat of what AR suggested.

i) Restate the bank surcharge on corporation tax of 5%. Banks have paid a surcharge since 2008 for bringing down the system, so at this time they would pay 30% instead of 25% if it were reinstated. This was “freed” by Jeremy Hunt, alongside the bonus cap, to make “London’s banking competitive again”. The bonus cap allows banks to hire the best talent - sensible - the shareholders getting the same return as they would from other investments, well it would stop them allocating capital to banking shares and they would put it elsewhere. However, the system worked well enough with it in, and it really depends on what functions you think and want the banking system to perform, so it very quickly becomes a free market argument. Reeves is (supposedly) an Austrian economist and so she’d be opposed to this - she prefers free market solutions, but I have no doubt she’s already compromised her personal beliefs many times - and I guess “that’s the job”.

ii) Remove inheritance tax for AIM shares. Not a big earner, theoretical raise of £1bn a year but you’d find many people would reallocate capital and it would raise hardly anything. AIM is the alternative investment market in London remember - smaller and riskier companies, but liquidity available for a number of reasons, one of them being this IHT relief. UK companies are already starved of capital compared to international opponents, so this would be ideological only, or in plain English, really stupid.

iii) Abolish the dividend allowance. Company owners still get a whole £500 tax free each year. Taking that out raises £325 million. Low hanging fruit, you’d think.

iv) Freeze the additional rate income tax threshold. Another easy one - stick it as £125,140 beyond 2028. There’s a much longer conversation to have here, though.

It’s often underrepresented just how much difference the personal allowance (the amount you can be paid before paying income tax) makes to people on really low incomes. Reform has framed this incredibly well, and made it make sense using the KISS principle. Keep it simple stupid. Farage and the party’s wide promise to raise it to £20k per person is breathtakingly expensive - £50bn+ per year in costs - and at the moment their economics don’t add up. They rely on growth at the rate of a China or an India, not a UK/developed economy. Still, the people don’t worry about that - print more money, they say - which all economies do when it suits them. What they don’t understand is that with no plan, you have Liz Truss mark II, but arguably worse (the hole is bigger, for a start). AR chose JUST the additional rate threshold, rather than all the thresholds - which have been frozen for years and have years left to go. This is in many ways the lower hanging fruit - freezing all of them - because it raises so much money thanks to inflation. She feels for everyone apart from those on >£100k, which is very traditional socialist of course, and so whack those at the top. The problem here for Angela is that all the tax is collected from all the people, not a few people at the top. Yes, the top 1% of income tax payers pay 28% of the income tax, but each person only pays that extra bit once. Her proposed freeze is just not enough - ALL of the thresholds really need to continue to be frozen. This is one of the strongest weapons that Reeves has. If you moved one, the personal allowance would be the one to move - but it’s the most expensive.

v) Increase ATED - the annual tax on enveloped dwellings. Not a bad idea, always said it would happen, doesn’t apply to rentals (yet), applies to all properties worth over £500k that are held in a limited company (which became very popular when the big money flowed into London from 2008 onwards to buy the very best properties - the super rich simply sell the companies to one another to make the most of the stamp duty savings, which are massive at that level). £100m-£200m per year, easy money.

vi) Close the Commercial Property Stamp Duty Loophole - so, charge the full rates of SDLT and “look through” the company structure, basically. Disaster, to be honest, in terms of buying limited companies - these days it offers a huge tax saving and makes some transactions work that otherwise would never work. £1bn extra tax annually being promised - this looks very attractive. Aimed at very large transactions, but takes us smaller players out in the crossfire - a bit like the removal of Multiple Dwellings Relief by Mr Hunt (Cheers Jeremy).

vii) Reinstate the pensions lifetime allowance - could yield £1bn, they say, but people change behaviour and save less in pensions - that’s what we saw when it was in. There is a HUGE issue around public sector pensions that just gets larger and larger every year it isn’t tackled, and a lack of full tax relief alongside complete pension reform - critical for the solvency of the UK in the coming decades - would be my number one target if I was ever anywhere near number 11. Which is exactly why I would never be voted in - but my ideas are (in my view) a lot more palatable. Advance pensionable age by one month per year. No-one gets trapped in a “WASPI women” situation. Every year, retirement gets one month further away, for the rest of this century. That keeps us solvent and able to invest in our NHS which primarily looks after our elderly. I’d state it better than that, of course, but this isn’t a political campaign - just pragmatic, real world economics. You also don’t want people leaving jobs just because they’ve reached their capped pension - don’t drive stupid and wasteful behaviour, we did that before. viii) Increase dividend tax rates - a strange one, because dividend tax rates reflect income tax plus national insurance already when you consider 25% corporation tax. However, it is an argument you can imagine - well, the company pays the corp tax, the individual pays the income tax. You’d see different ways of extracting money from companies then, I’d imagine.

ix) Reverse high-income child benefit charges - so, if on over £50k, taking away child benefit. A bit short-sighted I’d imagine when the birth rate is already too low to replace the existing population and workforce, but it could raise £600m, AR tells us……

x) Restrict Migrant Access to Welfare. Angela will have a few fans on that one, and we are seeing the first UK left-wing Government with any sort of remote hint of a hard line on immigration, here, as you can see (compared to a Blair/Brown approach which multiplied net migration by around 5 to 6 times - the Conservatives actually held it steady until post-pandemic, when they just weren’t prepared for how much people’s behaviour would change, and history just will not remember them like that).

The migration pendulum is swinging, and Labour have got that message front and centre. At the moment, they get to benefit from changes that were made (that were too late, sure) by the past administration in 2023 in two larger amendments - students not being allowed to bring dependents, and a similar tightening for care workers. The increase in the Skilled Worker Threshold, to £38,700 from £26,200 made a difference (there is a concession for care workers to £25k, which is effectively the minimum wage now on a 40 hour week). The 20% “salary discount” abolition in 2023 for the Shortage Occupation List stopped companies undercutting onshore salaries with cheaper migrant salaries as well - although in the real world these loopholes still exist. They obviously have their White Paper in, but that needs consultation before proposal and implementation of course. Or - there’s years to go yet on that one, and indeed it has been timed to coincide with “action before the election”, of that I have no doubt. So - of Rayner’s “ten to work on”, what did Reeves do? None. None yet. Unpopular but workable measures for the UK in the upcoming budget should really include a restriction on tax breaks for cash in ISAs - a patriotic move would be ISAs are tax free for a much smaller amount of cash per year (say 4-5k) and then after that, only for investments in UK company shares (and why not put the threshold up!). UK companies desperately need UK capital. In other countries companies often get this from much larger, much more powerful pension institutions - we don’t have the same concentration. All the capital has flown out of the UK - although recent US wobbles may well give people the US jitters, particularly as the tariff cannon fires on. There’s also a huge change in rhetoric in the US this week. You couldn’t make it up, but it seems that their Secretary of the Treasury, Scott Bessent, is going down the “growth, growth, growth” route. Must have seen how well it has worked in the UK, eh? In seriousness, if taxes are kept low (already happened in said Big, Beautiful Bill) and regulations are kept on the lower side, it is of course possible and fits the narrative. However, it is what it doesn’t say - DOGE has saved $160bn annually, not small but small in percentage terms in the US, from quotes of $2tn which you will remember. If you can’t cut, you have to grow…...but watch that interest rate. If the markets don’t believe you, you will pay just as much. Japan has, historically, had huge government debt but not suffered from huge fiscal drag on the back of it. Indeed, they effectively had (note the past tense) yield curve control - whenever yields got anywhere near even a quarter of a percent on the 10-year, they could play “whack-a-mole” and take them out. That control has had to be loosened (otherwise a George Soros “man who broke the Bank of England” opportunity could have arisen) and yields at 1.5% sound tiny, but are in reality back to post-GFC levels like many other countries. The yields were zero, or negative, between 2016 and 2022 for context. The difference - from 180% in 2008 to 250% today. A modern monetary theorist might indeed say - well, so what if you owe 1000% of GDP, you are never paying it back and if it is at a low rate, it’s manageable. Sure - it is, while at a low rate. What happens when that low rate ends? That’s why most of the modern monetary theorists are currently very much back in their box, as interest rates in so many countries have gone back to pre-2010 levels. If you owe 250% of your GDP, at 0% it literally costs 0 to service. At 1.5%, it costs 4.25% of GDP to service. So - to round off the leaked memo. Is this a flavour of some of the October budget coming up? Some, maybe a bit, but not the majority by any stretch, would be my sense. Going after the savers - those who are older - “those with the broadest shoulders” - that all sounds believable doesn’t it? As a second half to that extended first-half effort - some words on the OBR’s monthly public finances release. I have been concerned for some time that every month it seems we “overborrow” at the moment, overshooting by amounts like £2.5bn versus the forecasts. However, I know enough not to pay too much respect to the forecasts either. There is really one that matters - and that’s the OBR’s forecast. Why? Because that’s the one that the markets listen to, the one that the bond yields are derived from. A quick precis to see how much my mind had played tricks on me, or not. Until and including the election in 2024, we borrowed either less or what was forecasted. The forecasts were very accurate. In July we were just below, in August we were spot on. In September we underbudgeted, same in October - we got back closer to the forecast in November, but in December we suddenly went more than £10bn over what we borrowed in December 2023. We ended the year borrowing £14.6bn more than forecast, with December seeming to be all of the damage in one month. We had “lower-than-expected January receipts” of tax, particularly self-assessment and corporation tax, we were told. December was revised upwards significantly, by £3.7bn, due to higher debt interest payable than forecast and central government receipts also going downwards. Comparing the OBR’s forecast to the “outturn”, as they term it, February’s borrowing was also way over forecast. They simply put it as “we borrowed more, and received less than expected”. Why would we borrow more? Because interest rates stayed higher than many had forecast (not all of us, ahem). Why would we receive less? Because tax changes change behaviour (and yes, this would include leaving the UK). We await a proper piece of analysis on this, but anecdotally we can all see people talking about leaving, and I don’t think there’s any doubt there’s a net loss of millionaires, who pay a lot of tax per head but only take up the same number of hospital beds (and they pay for private ones of those, generally) - and that is part of what’s hurting tax receipts. Is it 1%, 10% or 40% (I doubt it is the latter!) - we cannot say. It’s also more complex than that. Tax receipts can drop because companies make large investments in automation that increase GDP, increase GDP per capita, but create unemployment. That’s possible. Is the state therefore better or worse off? It depends on the rate of job creation. I hear this argument (or one side of it) in podcastland at the moment. AI will kill all jobs - no - AI will create new jobs. It will, of course, do both. It is the rate of creation versus the rate of destruction that needs to be monitored, managed (within reason) and handled at the Government level that is the key to the situation. Plenty of high paid consultancies see AI as a net job creator, but are they just fishing for work so we can all pay them to tell us what new jobs there are and how to create them? It’s hard, isn’t it? So - back to the OBR. We found £3.6bn down the back of the sofa after last month’s report, and “only” borrowed £148.3bn last year, not £151.9bn. Note to OBR - check more frequently, these finds are handy! Enough flippancy. That’s good news. More good news is that we “only” borrowed £20.2bn in April, £1bn more than last year but £3.5bn below the March forecast. Great news, that’s £3.5 in the coffers for the October budget. It doesn’t quite work like that, but suffice to say if we borrowed £3.5bn less than forecast each month and found another £3.6bn down the back of the aforementioned sofa, we would be laughing. Compare this to the results since Labour were elected (this isn’t me trying to blame Labour, but the growth side I have squarely laid at their doorstep, and rightly so in my eyes): By June we are £3.2bn above budget July it is £4.7bn August £6.2bn - then a gap for budget prep November £2bn (on their amended October budget forecast) December £4.1bn January £12.8bn March £14.6bn (but we then have gone back to the March forecast) Clear as mud, eh. The organisation running our budget, the most influential organisation in fiscal policy, the fiscal equivalent of the Bank of England. Outrageously messy, to be honest. Finding that £3.6bn in April actually then puts us back to £11bn over budget - or £11bn into the black hole. If you split that by party governing - £3.2bn thanks to the Tories, the rest thanks to Labour - but Labour were in government for three-quarters of it. Or - they were both as bad as each other. OR - the OBR aren’t great forecasters. But when you think about the political capital used (and not really very well) on the £22bn Tory black hole by Reeves, we don’t want to hear about being £11bn over, do we (over in spending or under in receipts, same consequences, different root causes)? Well we got £3.5bn back in April. Somehow. Hunt actually had some quite following winds in his outturns versus the forecasts which helped him massively - very little is made of this in the media, because it is an abstract argument to follow - but, regardless of my own thoughts I always try to be as objective as possible as regulars will know. There’s no room or value in ideology or bias, which is why I call it out quite so loudly when I see it. This report also contains the net debt - 95.5% of GDP - steady. With the massive (and likely false) boost to growth in Q1 this year, we are 0.5% below forecast and 0.7% up on a year earlier. Sustainable after what was a below-par year, in terms of printing 1.3%-1.4% of GDP growth. The remainder of the report is useful (and will be in future) but at this stage in the year contains comments such as “Highly provisional” - for example, consumption expenditure (the engine that will REALLY drive this economy) was £1.4bn or 3.8% above forecast for April - a good sign overall for the economy. But it’s “highly provisional”. I’ll be keeping a closer eye on the OBR’s monthly output from hereon in, simply because of its huge importance in driving what Rachel Reeves HAS to do in October versus what Rachel Reeves WANTS to do in October. And we’ve got a spending review next month to get stuck into anyway. A little aside. The report is generally very poorly written, and doesn’t even look like it is proofread. How can we allow that? Forecasts are “above the first one months” (rather than the first month). Dates are not always referenced - “forecast in March” when referring to March 2024 rather than March 2025. Obvious enough if you look closely - but compare this to the quality of the Bank of England’s output - very rarely do I see a presentation error (much as I might malign the forecasts). Either this organisation and its output is important, or it isn’t. Make your mind up, Government. Overall, though - always remember “one swallow doesn’t make a summer” and a few weeks of good weather doesn’t either, it seems………this is a good month for the economy from the OBR perspective (within the lens of the trouble Reeves has caused with the NI hike, for example) and things are better than have been forecasted for the moment. The OBR only has growth at 1% now in 2025 in their forecasts, and hopefully we can avoid going too far backwards in Q2 to make this number or a bit higher now (I have Q3 concerns too, I must confess, but it is early days, and the PMIs could still rebound in June back to a “steady Labour state” of 51-52). All of that leads to a “least worst” budget in October - or, maybe a more “what Labour WANT” budget, which is likely to be good for the majority of the people, although might not be good for the average Propenomix reader and listener (and none of you are average, which is why you are reading or listening to this!) I hope that other alternative take, particularly the necessary evil of politics seeping in, was worthwhile and is well received - let me know in the comments! As we’ve come to the end once more, remember to book your tickets for Thursday 3rd July for the next Property Business Workshop too, on Joint Ventures and Mergers & Acquisitions - another fabulous day of learning and discussion is guaranteed! Get those SUPER EARLY BIRD tickets here: http://bit.ly/pbwseven Above all - please remember to Keep Calm, ALWAYS listen to or read the Supplement, and Carry On; there will be opportunities abound this year and towards 2030 - the risks around at this time, while they feel significant (the geopolitical ones) are far less meaningful to the UK housing market than they have been for several years - of that I have no doubt. Good luck! Joining the Property & Poppadoms revolution gives you access to sources of advice and guidance. As the UK's fastest-growing property networking community we are reshaping how professionals connect and succeed. Our mix of expertise, genuine relationships, and innovative thinking has established us as the go-to destination for everyone from experienced investors to curious newcomers. 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