29/11/2025 by Tony Redondo
This budget represents the death of aspiration, threatening to drag the UK from sluggish growth into recession. The OBR (Office for Budget Responsibility) has downgraded forecasts, indicating that real household disposable income and living standards growth over this parliament will be the second worst since the 1950s. By the end of this decade, real hourly pay will still be 0.5% below 2009-10 levels. The Joseph Rowntree Foundation, whose focus is understanding and tackling the root causes of poverty and disadvantage in the UK, goes further and warns the outlook is bleaker when housing costs are included, projecting that the average household will be £850 poorer in 2029-30 than today, with the tax burden hitting a post-war high of 38.3% of GDP.
The 2024 and 2025 budgets simply amount to the biggest tax raid at any parliament’s start since 1970. The IFS (Institute of Fiscal Studies) confirms that Rachel Reeves has raised taxes more than any Chancellor in modern times. Yet in 2023, Shadow Chancellor Rachel Reeves during a trip to New York said, “Taxes are at a 70-year high. I don’t have plans to be a big tax-raising chancellor.” This didn’t stop her in October 2024, in Labour’s first budget for fourteen years, raising taxes by a massive £40 billion, the most punitive, tax-raising budget for three decades. Chancellor Reeves said she was “fixing the foundations of the economy” and her tax rises were “once in a generation… I won’t be coming back for more.” Last Wednesday, Reeves raised taxes by another £30 billion, equivalent to around 4 pence in the pound on the basic rate of income tax.
No change to Income Tax in Rachel Reeves budget 2025 | Wimbledon Times
Labour’s July 2024 election manifesto pointed to tax rises of £8 billion during this entire Parliament until 2029. Inside 18 months, Reeves has unleashed £70 billion of extra tax in just two years, the equivalent of raising income tax by 9 pence in the pound. Something else Reeves said in opposition in 2023 was that “freezing tax thresholds is picking the pockets of working people.” But now she is playing the role of Fagin anyway. This was a political budget for the benefit of Labour MPs. Labour may have its big Parliamentary majority, but as was written at the time, Labour’s victory was “a mile wide but an inch deep,” with the party winning just 33% of the vote in the general election of 4 July 2024 on a low 60% turnout.
Sir Keir Starmer’s flagship pledge on taking office last year was to grow the economy and raise living standards at world-beating rates. Instead, the OBR has delivered a damning verdict that means most Britons will be barely better off by the next election. Growth is now projected to ease from 3% in 2024-25 to an average of 0.25% a year over the forecast, well below the last decade’s average growth of 1% a year, at the tail end of austerity. The OBR noted this was “well below the last decade’s average growth of 1% a year” and “Since the 2008 financial crisis, the UK has experienced its most significant and long-lasting slowdown in productivity growth since the Industrial Revolution. The UK’s productivity slowdown has also been greater than in any other major advanced economy.”
Analysis by the NIESR (National Institute of Economic and Social Research) also showed that Reeves’s decision to freeze tax thresholds for another three years will squeeze people on the lowest incomes hardest, in contrast to Reeves’s pledge to ensure those with the broadest shoulders pay their fair share. Adrian Pabst at NIESR said, “The Chancellor is right that the cost of living continues to be a burden on millions of households. Her decision to extend the freeze in income tax thresholds from 2028 to 2031, this Budget’s single largest tax rise will hit the bottom 30% of UK households hardest. Their household disposable income will fall by close to 5% compared with the alternative of uprating the thresholds in line with inflation in 2028, as the Chancellor had promised in her October 2024 Budget. This tax rise will knock, not boost living standards.”
Unemployment is rising faster and further than previously expected and will stay higher for the rest of the decade. The jobless rate is set to peak at 5%, not the 4.5% forecast in March. Only in the final months of this decade will it fall back into line with prior projections, at 4.1%. For those in work, prospects are bleak. Pay growth is slowing sharply and is barely expected to beat price rises in the years ahead.
HMRC data show that the top half of earners, or anyone earning over £31,300, pay 90% of all income tax. By contrast, the bottom quarter of earners, earning below £21,600, pay just 2.4% of all income tax. HMRC estimates that the top 1% of earners pay 27% of all income tax revenues, up from 25% in 2010 and 21% at the turn of the century.
The Chancellor’s first budget was disappointing enough; the latest one only further builds on the sense of betrayal and broken promises. For now, Reeves’s decision to more than double her fiscal headroom may have done enough to keep bond markets at bay, but to further increase entitlement spending when the public finances are in such a mess and expect the rest of the economy to pay for it is a highly dangerous strategy that leaves the Chancellor just one step away from a fully blown financial crisis.
Currency Exchange Rates Update
This week, the Pound rose by 0.49% against the Euro and by 1.18% against the US Dollar. The rise has all the hallmarks of a relief rally rather than the start of a sustained trend. With the BoE (Bank of England) expected to cut UK interest rates at their next meeting on 18 December, the Pound’s yield support is set to fall in the near term. Cheaper borrowing costs could eventually help the ailing UK economy, for the Pound last week is likely to prove to be a short-lived bounce rather than a durable breakout.
Some go further. Kit Juckes heads up Société Générale’s foreign exchange analysis and strategy and said this week that the Pound to Euro exchange rate is one political calamity away from falling to parity as analysis by Juckes shows the Pound to be significantly overvalued on the important PPP (Purchasing Power Parity) metric.
Bond market yields tell the story of the market’s unease with the government economic management. Both the 10 year and 30-year gilt yields are the highest in the G7 with the latter close to its highest level since 1998.
This week, the key economic data releases include:
Monday UK / EU / US PMI Manufacturing
Tuesday UK Nationwide House Prices
EU CPI Inflation & Employment
Wednesday Australia GDP
EU PMI Composite
US Industrial Production
Thursday US Trade Balance
Canada Trade Balance
Friday UK Halifax Housing Index
EU GDP
US Factory Orders, Personal Income & Consumer Sentiment
What’s in the news?
UK
The government has reversed its contentious plans to hand all new staff protection from unfair dismissal from day one, after months of warnings about the workers’ rights package from industry and fierce political resistance from the House of Lords. Under revised proposals announced by the DBT (Department for Business and Trade) on Thursday, the protection will now come into force after six months of an employee starting at a new job. News of the climbdown will be welcomed by the UK’s largest industry bodies known as the ‘B5’, who have repeatedly urged ministers to shelve the protection laws and prioritise economic growth.
The ONS (Office for National Statistics) reported that net migration has fallen to a pre-pandemic low in the year ending June 2025, around two-thirds lower than levels a year earlier. Of concern, the fall in net migration is being driven by a “brain drain” with the number of Brits leaving increased by 252,000, a 16% increase on the year. 91% of British nationals leaving the country were of working age, scuppering suggestions that a rise in emigration was driven by pensioners leaving for Europe. More than half of the outflow was aged between 16 and 24, and 46 per cent aged 25 to 34.
Good news
JPMorgan, subject to winning planning consent is looking to build a huge new UK headquarters building in Canary Wharf at an estimated cost of more than £3 billion. The Wall Street giant said the Foster + Partners designed tower will house more than 12,000 people and will be the largest and most expensive office building in London and one of the biggest in Europe with more than 3 million sq. ft of space. The bank said the project could contribute almost £10 billion to the local economy over six years of construction, including an additional 7,800 jobs across construction and other local industries. JPMorgan Chase already has 23,000 employees in the UK, including 13,000 in London, 5,300 in Bournemouth and 4,000 in Glasgow and Edinburgh.
Not so good news
The Budget announcements today concerning business rates constitute a dismal day for UK PLC and the High Street. Together with rises anticipated in the 2026 Revaluation, businesses will be facing higher business rates bills next April with business rates set to rise by 10.2% from £33.6 billion to £37.1 billion. The Chancellor announced on Wednesday the abolition of the 40% business rates relief for the retail/leisure (RHL) sector, which had been capped at £110,000 per business, from next April. This will now be zero.
Tax Relief Cuts: Impact on Venture Capital Trusts | Newspage News
UK vacancies fell to their lowest levels since 2021 last month, down 3.61% month-on-month and 7.36% annually as competition for jobs reached a four-year high, according to the latest UK Job Market Report by job matching platform Adzuna. This follows ONS data that shows UK unemployment is up from last quarter, at 5%, the highest level since 2020. The economic inactivity rate is at a 15-year high, with 2.8 million people currently out of work due to long-term sickness. Job competition remains highest in the Northeast, where there are now 3.56 jobseekers for every vacancy. Northern Ireland (3.44) and the West Midlands (3.3) follow closely behind. At the other end of the scale, the Southwest (1.44) remains the least competitive region, followed by the Southeast (1.56) and Eastern England (1.77), where demand for workers continues to outpace supply.
The CBI (Confederation of British Industry) latest quarterly Distributive Trades Survey Sentiment amongst retailers fell at its sharpest rate in 17-years with a growing share of firms expecting their business situation to deteriorate over the coming quarter.
USA
Equities finished November on a strong note with the S&P 500 sharply up to hit its best level since 12 November, its best Thanksgiving performance since 2012, while the Nasdaq Composite surged more than 5%.
The week delivered mixed macro signals. The Fed’s latest Beige Book pointed to a softening labor market and an uneven, “K-shaped” economy, hardly a backdrop that would compel policymakers to push back against the market’s increasingly dovish expectations with the swaps markets pricing in a 90% chance of a Fed rate cut on 10 December. With the US government fully operational again and data collection is underway, last week’s jobless claims came in at 216,000, one of the lowest readings this year. Normally, this data would be screaming economic strength, but it has so far been ignored because it doesn’t fit the prevailing narrative of a deteriorating labor market that justifies rate cuts.
US consumer sentiment weakened sharply in November, with the headline index falling to its second-lowest reading since April. All five components of the survey remained soft, signalling that households are increasingly cautious about current business conditions and the labour market.
Retail sales undershot expectations with a headline rate of 0.2% versus the expected 0.4% pointing to cooling spending momentum. The data contrasts sharply with prior months of robust spending, raising concerns over the yet to be published Q3 GDP data release.
The Conference Board sentiment index fell to its lowest since April, underscoring anxiety over the softer labour market and sticky prices but as the survey was collected through to 18 November, coinciding with the government shutdown, this may have skewed responses.
US Treasury Secretary Scott Bessent said the record 43-day government shutdown delivered a permanent $11 billion blow to the US economy, but he insisted growth prospects for 2026 remain strong. He noted that rate sensitive sectors such as housing had slipped into recession, but stressed the broader economy was not at risk of contraction. Bessent blamed the services sector for driving inflation, while predicting falling energy costs would help ease prices more widely.
The number of students requiring remedial math at one US university went up 30-fold in five years, illustrating a nationwide dip in mathematical skills. University of California San Diego found 900 freshmen arrived with sub-high school and often sub-middle school math and struggled with fractions and even solving “7+2=[?]+6” type equations. Other schools have seen remedial classes double or triple. It is partly more students taking math-heavy STEM classes but also a genuine drop in abilities, possibly linked to post-2015 reductions in emphasis on standardized tests. The problem was especially acute in California where public universities dropped testing requirements for applications, so children get no “reality check” about their ability until they reach college.
The EU
Germany’s November IFO survey points to a softer economic outlook with both the Expectations Index and the headline Business Climate slipping. German GDP showed no growth in the third quarter, with second estimates flat and just inches away from a technical recession after a second quarter fall of 0.2%.
France announced a new military program for volunteers aged 18 and 19, aiming to boost the country’s reservists to 100,000 by 2030 as it prepares for a potential conflict with Russia. German officials believe Russia could attack NATO in 2029 and have secretly prepared a blueprint for war that envisions Germany as a vast NATO staging ground, with plans to move as many as 800,000 troops to a hypothetical eastern front according to The Wall Street Journal.
There are fears that Ireland’s military neutrality poses a security risk to Europe with three-quarters of the Northern Hemisphere’s undersea cables passing through Irish marine territory and the country heavily integrated into the global tech and pharmaceutical industries, rendering it a “high-value target” for sabotage. Ireland is in the EU but isn’t a NATO member and only has four naval vessels, no radar capability, no dedicated intelligence agency and lacks the systems to receive classified information.
Europe has growing concerns over whether Chinese-made infrastructure can be remotely hacked. In Norway, Oslo’s transit authority recently drove one of its Chinese-built electric buses into a mine, to shield it from outside signals, and discovered that it contained a SIM card that gave the manufacturer access to its power system, in theory allowing it to be remotely disabled. Much of Europe relies on Chinese equipment in its renewable energy systems, and some countries are restricting its use in critical installations. Meanwhile, UK’s defence ministry has warned staff not to discuss military secrets when inside electric cars or connect their devices to the cars’ Bluetooth, for fear China could eavesdrop.
Others
Canada approved a new pipeline to expand the country’s Pacific oil exports as part of efforts to reduce its trade dependency on the US.
Australian CPI inflation rate rose to 3.8% in October, beating the 3.6% forecast. Core inflation also surprised higher at 3.3% versus the forecast 3%. These stronger readings make it more likely the RBA (Reserve Bank of Australia) will hold interest rates steady for now. The markets now expect the Australian cash rate to remain unchanged throughout 2026.
New Zealand’s economy has yet to build broad momentum across sectors despite improving indicators. Manufacturing shows signs of renewed activity, but services continue to lag as consumers hold back on spending. Net migration has begun to stabilise, which should support consumption, yet weak sentiment in recent confidence surveys was reflected in flat October spending. Inflation is projected to ease toward 2% by mid-2026, with risks seen as balanced. The RBNZ (Reserve Bank of New Zealand) as expected lowered its cash rate by 0.25% to 2.25% in a 5–1 vote in favour this week. The markets now see a 50% chance of a rate rise by September 2026.
Dubai’s luxury residential property market hit a new peak last quarter according to the data from real estate consultancy Knight Frank. Sales of homes priced above $10 million topped $2 billion, but the shift isn’t just in volume. Outside of the ultra-prime segment, more buyers are now using mortgages with more than 23,000 homes financed so far this year, pointing to a move away from quick resales and toward longer-term ownership. Price growth is expected to slow, with prime values forecast to rise by just 3% in 2025. Still, as the market steadies, the Dubai glam isn’t going anywhere and demand at the top is expected to hold. The biggest transaction of the quarter was a beachfront villa in La Mer, an enclave of mansions, which sold for $95.3 million.
Iran has seen crippling power blackouts in recent months alongside a devastating drought that may force the capital to be evacuated despite having some of the world’s largest oil reserves. Tehran is currently shrouded in a toxic smog after Iran’s power stations turned to dirty fuel to mitigate the country’s ongoing energy crisis after the government authorized the use of mazut, an impurity-filled petroleum residue, to feed generators, contributing to several cities’ already poor air quality. Tehran is among the world’s most polluted cities, alongside New Delhi and Lahore, and the smog is trapped there by a layer of warm air above it. Air pollution contributed to an estimated 59,000 deaths in the 12 months to March according to Iranian officials.
Gold prices have now risen for four consecutive months bolstered by investor optimism that the US Federal Reserve will cut interest rates in December. The rally in 2025 has seen gold prices rise by nearly 59% in the last 12 months, its strongest annual performance since 1979.
Stranger than fiction
Researchers attempted to see whether AI is conscious and determined, cautiously, that current models probably aren’t, but future ones could be. The study sought to understand whether AIs can think about what they’re thinking, in the hope that that tells us whether they have real inner life.
The UN found that more than 80% of the world’s population live in towns and cities, much more than previously estimated. The last report, in 2018, said just 55% of people were urban, but it relied on individual countries’ definitions. For example, in Denmark, “urban” meant settlements of at least 200; in Japan, 50,000. The new research standardized definitions and using satellite and survey data established that 45% of people live in cities of over 50,000, and 36% in towns of more than 5,000. The increase is mainly because of the changing methodology.
Quote
Gilbert K Chesterton, writer, journalist, philosopher, lay theologian, and literary/art critic, “Political Economy means that everybody except politicians must be economical.”
