The delayed Budget, the stamp duty row and the gilts wobble – what is going on?

0:02Lee Boyce: Welcome to This Is Money podcast sponsored by Charles Stanley Direct. I'm Georgie Frost and joining me and Simon Lambert today is Lee Boyce. And coming up, stamp duty has been in the news this week, but what are the rules when it comes to second homes? And regardless of who's buying, is it really fair having to fork out 70 grand to the government to buy a house? Also today, why is the bond market having a wobble? Is it Trustmark 2 or an opportunity to buy? And Uber woes? What are your rights if your cab fails to show and you miss a flight? Don't forget, you stay up to date with all the latest breaking money news.

0:39Lee Boyce: Just go to thisismoney.co.uk or download the app.

0:43Georgie Frost: Take control of your finances with Charles Stanley Direct. Invest, save, coach or plan. using technology where it's helpful and people where it matters. Our website and app make trading cost-effective and flexible, but we're more than just an online investment service. We're here for you regardless of your financial needs or if your life takes an unexpected turn. Your finances, your way. Take control today with Charles Stanley Direct. Sign up now.

1:15Lee Boyce: Investment involves risk. But first, despite many weeks, many weeks of speculation about what might or might not be announced in the upcoming autumn budget, we didn't even know the date that it would be delivered. Well, we do now. And, groan, it is blooming ages away. So strap yourself in, prepare for a heck of a lot more of what we've been having for the last couple of months already. It is going to be Wednesday the 26th of November the press release that accompanied the announcement was titled budget to address economy that's not working well enough for working people rolls off the tongue there doesn't it Lee Simon Whatcom Lee oh god oh god 26th of November you'll

2:03Georgie Frost: have something to write about yeah we'll have something to write about and the good news is it's not in half term like it was last year which just was absolute hellish when was that october it was october the 30th i'm gonna say uh it was something like that right so this is quite late it's quite late it's not the latest ever i think there was a uh george osborne december number uh back in 2014 uh and i think philip hammond did a pretty late november one and not so long ago but It's quite a big gap compared to last year's one. It means there's going to be more uncertainty. There's going to be more speculation.

2:40Georgie Frost: It's another month's worth, three to four weeks' worth of speculation, rumours and everything else in between. What Chef Reeves is going to be cooking up with sous-chef Bell, who is being confirmed Torsten Bell is going to be involved in helping with the budget, who used to be the Resolution Foundation chief there and some of the ideas that were cooked up. Very left-leaning. You can go and check back some of the things that he has previously recommended. But yeah, we've got the date. At least the date is now set. I was quite surprised. I thought it was going to be a little bit earlier than that.

3:16Georgie Frost: I think it caught quite a lot of us by surprise. But it probably indicates that the chance to feel she needs more time to sort of think up how she's going to plug this 50 billion fiscal black hole and gives her a bit more breathing space to do it. And it's obviously been quite a controversial time for the government this week with everything that's been going on that we're going to discuss. But at least we now do have the date. But my hunch is it's just going to lead to more uncertainty and more rumours. And I sometimes think I kind of just want to get it over and done with Georgia so we can get on with our lives and enjoy ourselves.

3:55Lee Boyce: Quite. I mean, I made a bit of a joke at the start saying you'll have something to do. It's sort of a double-edged sword for us, isn't it? We are financial journalists and so we do like to talk about things and whatnot, whatnot. But we also are humans who have to deal with this in our personal lives as well. So I don't really want to go over what's going to be in it. There's plenty of that and there will be plenty of that coming up. But what I do want to know, Simon, is what is the Chancellor likely to be working with? Let's take a look. How is the economy doing? There was speculation about an IMF bailout this week.

4:27Lee Boyce: We'll talk about gilt yields a little bit later on. But what is different, say, this time? What is different now compared to, say, this time last year? Have we improved at all? What are the numbers? What are the facts here? Not amazing.

4:44Simon Lambert: The state of the economy is not particularly good at the moment. Now, if you cast your mind back just over a year, you may remember Rachel Reeves discovering a£22 billion black hole that the Tories had left her. And for that, she decided to cut winter fuel payments for all but the very poorest pensioners who were on pension credit and undertake some other measures. And it led to endless speculation ahead of the last autumn budget. Then ahead of the spring statement, Rachel Reeves announced a welfare spending clampdown in order to make her numbers work. Now, the reason why she needs to make her numbers work is because she has got some fiscal rules that she said are cast iron.

5:30Simon Lambert: So she can borrow to invest into infrastructure, things like that. But she has to try over the course of the five year horizon to meet her budget stability rule, which basically means that government spending is covered by government income. right now the problem is that half of the winter fuel stuff has been reversed uh and also it cost more money than thought because it led to a big rise in pension credit the welfare spending cuts were reversed um and actually we've ended up spending more money because there was a sop included in the welfare spending cuts in order to try and get them through and when they were reversed the the sop was continued with so believe that we are now actually going to spend more money rather than less money.

6:17Simon Lambert: So in terms of the bits where we've tried to save money, we haven't done a great job. We're continuing to spend money and the economy isn't growing as fast as would have been hoped. At the same time as inflation has risen, which is leading government bond yields to rise, which adds to the cost of financing our debts and continuing to run the economy. So we're in a slightly tricky position. We're going to talk about guilt a bit later in the show. And the latest estimations, we won't know the final verdict until the Office of Budget Responsibility compiles its reports. But the latest estimations are that we now have a 50 billion pound black hole, which is, look, not all of this is Rachel Rees's fault.

7:06Simon Lambert: But she hasn't done an awful lot to help herself and you make your own luck. And she's only continuing with the mess that the tories left her okay like all of those things this is complete making it a political point here but it is true to say that nobody was concerned about the state of the uk's public finances until rachel reeve started standing up and banging on about black holes um and things have largely gone downhill since and it's really unfortunate if you did that whole banging on about black holes and the mess that you got left if slightly more than a year later you now have a bigger black hole and there does come a point where you have to stop pointing the finger at the people who were there before you and start owning your own black hole so we're in a sticky position this has been compounded by the rising national insurance for employers which has broadly led back to a cutback in jobs a cutback in employers investing it's not helped business confidence so business confidence is fairly low consumer confidence is not great all the people in the country who've got money are wandering around worried that the government's going to try to take all of their money off them rather than feeling wealthy and going out spending it um and then you've got lots of people in the country who obviously don't have enough money anyway um and their bills are going up still and inflation has gone up and their mortgage payments have gone up.

8:37Simon Lambert: If they've got mortgages, their rents have gone up. We saw those figures today. So we're not in a fantastic position. Effectively, what we need is some economic growth. We need to get growth going because that's the only way we're going to get ourselves out of the hole that we're in. We also need productivity to pick up to the level that the OBR is suggesting it's going to pick up to because actually, if you look at what's really happened to productivity, rather than the slightly magical thinking that the OBR applies to productivity, The numbers look even worse than they actually are. The difficulty is, is that we obviously have, you know, it costs a lot of money to run the economy.

9:14Simon Lambert: We have an Asian population. We've made a lot of promises. State pension triple lock to pay people. The NHS is hugely expensive. All these other things and things still don't work properly. So we actually need to spend more money. Right. So we're in this really, really sticky position. And the only way to get out of this is to get the economy growing. That is exactly what Keir Starmer and Rachel Reeves told us ahead of the election. It's also, you know, exactly what Liz Truss and Quasi Quarteng were telling us, what was it, three years ago? We were enduring that little bout of madness. And everybody has broadly agreed on it.

9:52Simon Lambert: The problem is, is you can't tax your way to growth. I think that has become abundantly clear over the last, five to ten years when that's what we've been trying to do. And I would hope that at some point we would adjust our course and start trying to learn from our mistakes. But we don't appear to be going down that road yet.

10:17Lee Boyce: Do me a favour, Simon. We talk about growth so much. It's the buzzword. What exactly does that look like? I don't want to talk about speculation of further tax rises. I want to focus more on the reality is whatever the economy is looking like at the minute, we are near 100 % GDP in debt, right? That's a big figure. How in the space of a parliament term do you even begin to eke away at that? Because building growth seems to me to take quite some time. And we would almost need to go a step back before we can go forward, reducing the tax burden. How on earth do you fix this puzzle?

10:58Simon Lambert: It's difficult and growth comes from a number of places. There's a number of levers that you need to pull. You can just throw money at it effectively. You can basically throw money at the economy. You can massively up government spending, but without doing stuff on the other side in terms of taxes, you can cut taxes to put more money in people's pocket. The problem is, is that if you are in a situation, as most of all major Western economies are, really, where they're not balancing the books, you are at the mercy of the bond markets. If you just try to do the, well, we're just going to cut taxes, and we're not going to explain how we're going to get more money in, other than just saying that cutting taxes is going to increase growth, you run the risk of doing a Liz Truss and Quasi Quartem, because that's sort of what they did.

11:50Simon Lambert: It's slightly more complicated than that. Or you can get productivity growing. And productivity is this sort of complicated economic concept. But it basically means for every hour that you work, more comes out of it. You can do that by making people just work harder, crack the rip kind of thing. That's not really a long term productivity game kind of thing. There's an argument that it wouldn't work anyway, you just get a backlash from it. But you can do it by for example, improving the systems that people are working with. You can do it by improving your factories if you're talking about manufacturing.

12:25Simon Lambert: If you think about, for example, COVID and the dramatic shift to working from home. Now, I'm not saying that working from home is more productive. I'm also not saying it's less productive. I think it's the people who are the issue here rather than the concept of where they're working. But that shift to everybody suddenly using video conferencing stuff, you know, the shift to zoom and everything like that the shift to like so it's suddenly being that instead of having to to do a meeting with someone the expectation was that person will come to your office you will go to their office you will meet somewhere and then you will have your meeting and then whatever the outcome of that will be could be actually i can just talk to you for half an hour over Zoom and we can achieve pretty much the same thing.

13:17Simon Lambert: You won't achieve the same dynamics of face-to-face interaction and all that kind of stuff. But what you do gain is that potentially in quite a few of those scenarios, people were spending quite a lot of time traveling and it was taking quite a chunk out of their day. That's not to say that just shifting entirely to online meetings would be a good idea. I think that would be an absolutely terrible idea. And I actually think more comes out face-to-face meetings. But it is to say that if you just take that little thing there and you go well hang on a minute there's this thing that everybody's doing or lots of people are doing not everybody's doing it but lots of people are doing this like all meetings must be face to face and i won't meet you until i can meet you face to face and that increases productivity so there's things like that that you can do artificial intelligence you know it's going to come for all our jobs and take over the world in a terminator style disaster but it could also improve productivity for businesses because there are tasks that would take you half an hour an hour to do that with the sage use of ai and then the checking of it afterwards because it always needs a human check you can now actually complete that task in a couple of minutes and all of those things have the the power to boost productivity and that in turn would increase the output that people have, and that would increase growth.

14:34Simon Lambert: To go back to your question, but the things that normally tend to shift growth in the short term are bigger factors, but also sentiment has a big thing to play in there. And that's coming back to my point. I know this is an incredibly rambling answer about how to increase growth, but I think we should learn from the things that have happened in the past and little incidents. And to go back to the COVID point, for example, growth rebounded really strongly after COVID. And particularly, you know, considering we're a consumer economy, this is quite important, consumer spending and consumer growth.

15:14Simon Lambert: It surprised everybody. It caught everyone out, caught the Bank of England out, caught Fed out. It was instrumental in the inflation spike that we saw that was already happening before Putin invaded Ukraine and triggered the energy spike. You know, you couldn't go back to a this is money trope. You couldn't get a hot tub for love nor money in the summer of 2020 because everyone was going hot tub crazy. You couldn't find a holiday let in the UK to get because people couldn't leave the country, but they were booking out holiday lets left, right and centre. Eat out to help out. You couldn't get a table.

15:48Simon Lambert: If you think about that in the context of what just happened that's crazy but actually people had that confidence they felt rightly or wrongly that despite the incredible thing that had happened they weren't incredibly worried about their future and they were willing to go out and spend that money now some of that is thanks to the whole like stay at home you know save you save money from not going to work and the furlough and everything like that but realistically when you look at the scenario we were in okay totally unprecedented everybody stay at home you can't go out you can't meet anyone you can't go to work you can't do all those things there's no way that to two months three months later people should have been spending merrily and so you go okay well why was that happening why did that consumer and things would have been much worse worse if that consumer growth hadn't come back and it's that that sort of confidence factor so i think there's lots of different things that you can you can learn in there one thing i would say about where i do think some growth is going to come from is that i we've had some numbers out this week saying that they've got no hope of hitting this one and a half million homes thing i think we are very close to quite a lot of spades going into the ground on quite a lot of housing developments and that does generate growth especially if you then see you know more house sales off the back of it people then pay money to furnish their house they buy white goods they buy furnishings all that kind of stuff but because councils are waving through developments that they would have otherwise said no to because they are concerned if they say no to them and the developer will appeal it and they will get overruled by the government because the government has made it abundantly clear what they think should be happening and i'm seeing countless examples of this not just in my own area but stories from areas all around the country where councils are saying okay fine yeah and you if you read the reports on it the councillors are saying well we would have said no but like read the room we're having to say yes and it is not you know that far from those decisions being made to you know the actual work happening on those those properties and and that genuinely actually does have a little bit of an ability to give an uplift to growth in the short term

17:54Lee Boyce: right there you go we'll send this podcast episode to the chancellor give our ideas uh lee i just want to bring it back to what we were saying is there anything that you recommend people doing

18:06Georgie Frost: between now and november the 26th yeah don't don't panic don't make rush decisions just get on with life and make sure that you don't do things that you might not necessarily have done if it wasn't weren't for speculation so an example of that we had some data out today suggesting that there was a 60 surge in the number of tax-free lump sums being pulled out of pensions in the last financial actual year a lot of that so it's 18 billion pounds a lot of that would have been down to the speculation ahead of the last budget where people felt like they had to act another example a couple weeks ago someone in the office asked me should they pull out their house sale because of all the property tax news and they didn't want to get stung on stamp duty facing a fairly hefty stamp duty bill you know they didn't want to get to the budget and then stamp duty is overhauled or something happens, a stamp duty holiday, or all sorts of things that could happen.

19:04Georgie Frost: I can't give financial advice to people, but in that scenario, I would just say you stay on course. If you can afford to buy that house, you can afford the stamp duty, you're already going ahead with it anyway. Get on with life, get on with it. There's things that you can do, right? But I wouldn't say this is budget specific. I would say this is just what you should be doing with your finances anyway. And I would expect that a lot of our listeners and a lot of our readers are pretty financially clued up anyway and we had Sarah Coles actually giving a couple of tips six moves to take ahead of the budget that you won't regret so not rush decisions basically things that you could just be doing in your financial lives anyway number one is to get your investments into an ISA and I think a lot of people know this now you know get your get your investments get your savings into ISAs to protect from tax because number two is protect yourself against savings tax that's because a lot more people are getting a bill for their savings interest from the personal savers allowance because of income tax freezes that are already confirmed till 2028 could be another couple of years but that's speculation we don't know um it says use your pension to cut uh income tax so consider putting more in your pension to get a lower income tax bracket that's a little bit kind of i would say an intermediate level of personal finance and it's probably someone that's got quite a bit of money to be able to do that i would say really the simplistic thing is just to make sure that you are saving properly into a pension because number four is take full of advantage of pension tax relief and number five work out how to best mitigate inheritance um again it's just part of your financial planning and it should be a part of your look ahead.

20:48Georgie Frost: We had the move, obviously, in the last budget to include unspent pension pots into inheritance tax calculations from 2027. But it's just basically being on top of your finances. And the last one is to give your child a leg up in life, which I think if you're a regular listener to this podcast, I'm very much a champion of anyway, because that's what I'm doing for my two children. As much as I can possibly, my wife and I, I can tuck away for the future for them, we're doing because of the benefits of compounding over a potential 18 to 25 year period depending on what we end up using the money for whether it be university whether it be driving lessons whether it be helping them get on the property ladder you know there's there's absolutely uh you know one of the best things you can do for your children without going completely overboard and you know it impacts in your own financial life but i would say i would argue that those six things are things to consider regardless of a budget uh some so that's where i'm getting at georgia would just be make sure you're on in control as much as possible with your finances know where you're at um and just make sure that you are earning your savings and investment uh returns tax-free through an isa that's pretty simplistic right make sure you max out your pension if you're if you're worried about inheritance tax just get a grip with it and make sure you know what you're doing and have those honest conversations with people and giving a child a leg up in life all pretty sound just financial advice in general anyway decent thanks

22:22Lee Boyce: lee uh meanwhile britain's long-term government borrowing costs hit a 27 year high earlier in the week as global investors fretted about the state of public finances ahead of the autumn budget now The yield on 30-year UK government bonds, known as gilts, rose as much as nine basis points on Tuesday to 5.73%, the highest level since May 1998. Now, while we've seen a bit of a rally since then, it will be a concern, surely, for mortgage borrowers who, well, they don't have to think that far back, we've already mentioned it today in the pod, to fall out from Liz Truss's disastrous mini-budget. But could all the volatility, Simon Spell, a bit of an opportunity for investors.

23:05Lee Boyce: Before we get that, break it down for us, would you, Simon? Let's do a economics 101. Guilts, guilt yields, how it works. Professor Simon Lambert, go for it.

23:18Simon Lambert: Yeah, what is all this guilt stuff that everyone's talking about? Right, guilts are UK government bonds. The government issues debt and investors buy it. and what's happening is that investors are effectively lending money to the government usually over a fixed period of time and that could be short term could be one year could be less than one year one year could be two year could be five year could be 10 year could be 30 years and in return for lending the government money they get paid an interest rate return which is known as the coupon. They get their money back at the end of the bond's existence and the end of that set time period, which is something that's known as maturity.

24:04Simon Lambert: When a bond is issued, when bonds are issued by the debt management office, they will have a face value, usually 100p, one pound, and they will pay a set rate of interest. So for example, if the government wanted to issue a 10-year gilt now, it would have to pay a rate of interest that reflected what the market is demanding. And the rate of interest that the market is demanding at the moment on a 10-year gilt is 4.71%. Now the question is, how do we know what rate of interest the market is demanding? Because the government isn't constantly issuing bonds. It doesn't do this every day. what happens is that bonds are also traded on the secondary market so people can buy them and they can sell them so there's a market for them just like there is in the stock market people can buy a share people can sell a share and what people are willing to pay for it and what people are willing to sell for it defines the price of that share what happens with bond prices is that depending on how much demand there is um for the rate of interest that that bond will pay depends how much people will pay for the bond so if you take an example where you have a bond from five years ago when interest rates were much much lower that might pay less than one percent now if you look at the situation now where interest rates are four percent you can get 4 % on cash from a bank, then the bank of the base rate is 4%, then that 1 % doesn't look very attractive.

25:48Simon Lambert: So you're not going to buy that for face value. You'd be a mug if you bought that for face value right now. But what you might do is you might buy it at a discount to face value. So if I own that bond and I decide that I want to sell that bond, then you, Georgie Frost, might say to me, I'm not paying you a pound for that. It only pays me 1 % interest. I'll pay 25p. so that 25p that pays for the bond will then affect the the yield that the market is measuring on the bond because the real yield on that bond isn't the less than one percent that it pays the yield that you're getting on that bond is reflected by the price that you're paying and then the interest that you'll get from it so we met the market measures these bond yields right uh and the government can't really differ that much from what the market is saying about bond yields because otherwise people just won't buy them the government can't say well look i know we've got these 10-year guilts that that you know the market says 4.71 is what we need to buy 10-year uk government debt but we actually don't want to pay 4.71 because that's a bit bit spicy we'll pay you 3.7 we think that's fairer well people would just go i'm not buying your bonds now obviously you could do the opposite if you were like really in trouble and you really needed money you can say all right well the market says 4.71 so i'll give you five uh and then the bond auction would be absolutely you know crammed metaphorically crammed you know this isn't all done with some people standing in a room casually like raising a finger i'll take four billion of uk debt anyway so this is the basics of it now what's going on is that bonds that have a longer maturity date are considered to be more risky than bonds that have a shorter maturity date because there's more time for stuff to go wrong more could change and the big risk to bond investors is inflation because it's all very well someone's saying they'll pay you five percent for 30 years but if inflation over that period averages 4.5 percent you're only getting a half percent real return.

27:55Simon Lambert: However, if inflation over that period averages 2%, for example, Bank of England's target, or 1%, then you're going to get a really good return. And actually, the other thing that matters with bonds, and the reason why government bonds are important, is what's your chances of getting your money back? Right? So company bonds are more considered more risky, because a company could go bust. Some countries are considered more risky, because they might default on their debts, go back to the eurozone debt crisis greece etc greece now actually has really good bond yields because people think its finances are in tip-top shape the uk we're considered a safe bet we're considered to have among the safest bonds in the world one of the reasons is is because we can print our own money you know we're in control of our money supply so in theory we should never have to default because we could just go right another 20 billion now obviously if you keep doing that then the market's going to go, yeah, you're just devaluing the bonds.

28:49Simon Lambert: You're literally just printing bonds, devaluing them and then printing more and then going around in circles and we're going to want even more interest off you. So you get stuck in some kind of doom loop. But we're considered to be a pretty safe bet in not defaulting on our bonds. So that's the basics of it.

29:05Lee Boyce: So what's going on now? How does it affect the UK government? We've been talking about speculation of tax rises. Obviously, if people don't trust the government as much or if they don't like bonds, we've got higher inflation. So they are going to you're going to have to get a better return than what's inflation at the moment. They're going to have to pay more money for that debt. Right. And we've just discussed that debt's really high right now.

29:28Simon Lambert: Yeah. And we're not alone in that problem. Debt is really high in lots of places. You don't need to know too much about the US economy to know that debt is really high in the US. Don't need to know much about the French economy, to know that debt is really high in France. Don't need to know much about the Italian economy to know that debt is really high in Italy.

29:45Lee Boyce: Which is interesting because you would think about the American economy and you'd think, well, it's doing all right, right? So what does debt actually, amount of debt, tell us about the state of a country's economy? Anything?

29:56Simon Lambert: I mean, the American government is notoriously spendy. And obviously, Elon Musk did his best with Doge. We won't go too much into the details of that, but it was a bit scattergun. uh has it actually achieved anything very difficult to tell but it's basically just like large western economies living beyond their means that this is effectively what's going on here now the problem for the uk is what you want to happen is for you to be seen you know if you're going to be in a bad bunch you want to be seen as the best of a bad bunch or nearly the best of the bad bunch. And the issue we have at the moment is we're seen as, and we're not even in mid-table obscurity.

30:38Simon Lambert: We're definitely in the relegation zone of the bad bunch. The premium that we pay compared to borrowing in the US, borrowing, I mean, France's finances are an absolute mess. They're much worse than ours. But we still effectively pay a premium to them. We are suffering at the moment and we're suffering the most on long-term debt because that's where the biggest risk is seen. Not because people think we're going to default, but people think that inflation is going to be high and they don't trust the government is going to get growth going, which is what they said they were going to do. They don't trust the government is going to get a grip on spending, which is what they said they were going to do.

31:15Simon Lambert: And they probably don't trust that the next government that comes in is going to do that either, whether that government is a continuation of the Labour government, a Tory government, or Nigel Farage and his magical thinking. They don't believe that we're going to sort stuff out. And then there are the more acute problems which go back to the stuff we talked about at the top of the show we stupidly drew a load of attention to ourselves with talking about 22 billion pound back holes we said we were going to get control of spending and then reversed all this stuff on the spending the market is currently saying we do not believe that you can tax your way to growth you're stuck in what has been referred to by you know uh uh paul johnson who speak the ifs as a as a doom loop they're saying we don't think you're going to get escape velocity okay so if we're going to lend you money for 30 years we want a better return and now if we're going to lend you money for two years that's not so bad so if you look at the yields by comparison to a year ago right 30 years it peaked at 5.75 this week uh we're currently paying 5.56 to borrow over 30 years if we wanted to borrow if you're a 30-year bond now we'd have to pay about 5.56 that's what the market says.

32:30Simon Lambert: A year ago, that was 4.45%. That's a really big rise, particularly when you consider that base rate has fallen by an entire percent over that period of time. Two-year bonds, though, is 4%. And it was 4 % a year ago. It's pretty much level. That hasn't changed. Now, there was, interestingly, a spike in that in January. I'll come back to this later. It's a 4.6%. There was a bit of a mini freak out over short-term debt in January. Five-year, we're currently paying 4.1%. A year ago, we were paying 3.69%. Again, you wouldn't expect that to happen over a period in which base rate has fallen by as much as it has done.

33:13Simon Lambert: Ten-year, this is where you start to get into the longer term, more opportunity for stuff to go wrong, more opportunity for inflation to be higher, more opportunity for growth not to appear, and so on and so on. That we're currently paying for 4.7 % versus 3.91 % a year ago. However, to talk about the individual investor here, this does potentially offer people an opportunity. You can go out and buy yourself a 30-year guilt on the second-hand market at the moment because the government's not issuing a lot of 30-year guilts at the moment because the government doesn't want to pay people 5.7 % for 30 years.

33:54Simon Lambert: it considers that to be quite expensive. So it's doing everything it can to just issue shorter term debt rather than long term debt. As an individual investor, you can go out and buy a 30 year bond on the second hand market that will give you an effective yield of 5.7%. Now that is a pretty good, relatively risk free return. Your big risk there is obviously inflation, and also that things get worse so that the face value of your bond falls but if you plan to hold that bond right up until the end until maturity you will get all of your money back at the end and you'll pick up 5.7 percent every single year now if you look at the stock market a good return from a relatively cautious stock market portfolio would be considered to be six percent a year that would be a good return from a cautious stock market portfolio.

34:48Simon Lambert: So the fact that you could pick up 5.7 % guaranteed for the next 30 years on a bond where the government is highly unlikely to default, that actually represents a very good deal. But what makes it even better is that, you know, markets, the pendulum always swings too far. Markets freak out. If things go back the other way and bond yields fall, well, the price of those bonds will go up because people will be more willing to buy them so go right yeah i'll pony up for that higher interest rate you know the demand will rise for those bonds and so you could make an actual you could sell out early you could potentially and there's no guarantee on this right you could sell out in five years time uh or you could sell a year's time you might even be able to sell out like at christmas and make a profit and the great thing about guilt is that although the interest the coupon is taxed in the same way that savings interest is uh any profits that you make on them are capital gains tax-free which is why you've seen this thing at the other end with lots of people buying short dated gilts which you can buy for less than face value you pick up a guaranteed return and because you're only getting a very minimal amount of income off those gilts you can buy them quite a lot below face value but the profit that you make on them when they mature and you get all of your money back all of the face value money back means that you're making a tidy little capital gains tax-free profit and that's been a big thing a big niche thing in the kind of financial markets over the last year and a half but to be honest you know i'd look at these 30 year gilts i'd be like well you know 5.7 percent guaranteed for 30 years and then your money back at the end that's a pretty good return but there is obviously the opportunity for for things to

36:25Lee Boyce: move against you there well explained there simon thank you very much uh lee i want to talk about particularly mortgage borrowers because i mentioned at the start there about the liz trust disastrous mini budget where we saw guilt yield spike and we know what happened there didn't we so you know yes we've seen a rally and it just goes to show the volatility doesn't it at the minute

36:46Georgie Frost: but uh should should we be concerned well the the vital difference i would argue between these two things is that the guilt yields have been kind of rising whereas with the liz trust mini budget they spiked very quickly very fast uh and all of a sudden mortgage deals were getting repriced left, right and center and it was very difficult to keep up. It was an absolutely sweeping change and that's how that unfolded. This has been a more of a kind of slow moving thing. I should say it is incredibly volatile. So mortgage pricing is done largely based on Sondra swap rates. Now this is the interbank lending rate which is based on future interest rate expectations.

37:29Georgie Frost: so it is impacted by guilt yields because that's kind of one of the factors behind where the bank of england's direction of travel goes next now it's expected to keep base rate on hold at four percent in this month that's because inflation looks like it might hit four percent then investors are split whether there will be another cut before the end of the year which would be 3.75 percent. Andrew Bailey came out this week and kind of dampened expectations for any more cuts this year. We obviously had that strange vote last time around where it was a split decision and there had to be a second round of voting.

38:12Georgie Frost: So there's obviously a lot of conflict going on in between the MPC members and what they think should happen next. But mortgage rates have sort of stabilized somewhat and we are still at a point where you can get very best very best mortgage deals under four percent so not as bad as what was going on in the list trust uh mini budget we have had a bit of repricing this week though uh some of the bigger banks have added a little bit on to to mortgage rates so it seems like we've kind of bottomed out again uh and rates might be back on the move up but i'd be very surprised if it would be anything like the aftermath of the list trust mini budget but you know it can easily eat my words with everything that's going on in terms of savings rates again it doesn't have a huge impact on what's been offered and again they've kind of plateaued a little bit savings rates between the best deals being between four four and a half percent i think a lot of what's gone on is kind of priced into this to both both things both savings and mortgages i think it would take something quite seismic uh to make rates on easter go up or down vastly it's been quite stable uh i would say in recent months um but as you say guilt yields they peaked on tuesday they've kind of leveling back down a bit but when's the next spike the next peak you know does it cause more uncertainty more panic it's hard i just think that the big difference is that liz trust that it really caught markets completely unaware and things it was this haywire that's it for part one i'm joined now by blerham gashi of charles stanley direct for our weekly investing explained feature blerham a question topical question in

40:04Simon Lambert: fact at the moment can i invest directly in uk government bonds and put them in my isa or sip

40:10Georgie Frost: ultimately yes you can invest in gilts and hold them in an ice or a sip but it's not always straightforward as just sending off a request so for example with charles tanny direct you can invest in gilts it's done with our telephone service rather than our online platform buying gilts directly is possible but it usually involves going through a broker or a specialist platform for example the telephone dealing that we mentioned. However it's not all platforms, they don't actually allow you to hold individual gilts within an ISA or a SIP so it's best to check with your provider first if they do allow it.

40:42Georgie Frost: A simpler option for most people is to actually invest in a gilt fund or an ETF. These are actually much more available across investment platforms and they're ISA and SIP friendly as well. You still get exposure to UK government bonds or gilts but with added convenience and diversification as well. So to kind of round it off. While direct guilt investing is doable, using a fund is often the easier and more flexible route.

41:05Simon Lambert: Laram, thank you very much.

41:07Lee Boyce: Thank you. Welcome back. Stamp Duty has been making the headlines this week. It's all because of the now former Deputy Prime Minister Angela Rayner, who also happened to be the Housing Minister, failing to pay the full amount of it on her purchase of an£800 ,000 flat in Hove in East Sussex. Now politics are the politics and we will leave that part to others. What we're interested in is how stamp duty on second home works. Money in trust is a bit of an element in this case as well. And also whether paying tens of thousands of pounds to the government anyway to buy a home, whoever you are, is even fair or indeed good for the economy.

41:50Lee Boyce: So what exactly is the issue here? Lee, do you want to take this one?

41:56Georgie Frost: Well, we're casting the politics aside here. I do find it incredible, though, that a housing minister could drop the ball like this. I understand that it's a complex situation, but to be a housing minister, what chance to ask mere folk to figure out what our bill should be for property if the housing minister can't figure it out?

42:17Lee Boyce: Well, what happened, Lee?

42:18Georgie Frost: It's essentially, it boils down to the fact of whether or not this was this home property was her main residence or whether it was a second home so she has a ministerial home that we'll leave aside the other home which is up in her constituency is in trust um we don't know the full details and ins and outs of the trust the question mark was over whether she had paid the right level of stamp duty on this hove property or not and it's just bubbled away but for like about a week or so and now she's kind of come out and admit this admitted this week that you know she took incorrect uh advice and that uh should have been classified as the second home rather than the main residence but the tax the the kind of people that were involved washed their hands of it and said hey you're chucking us under the bus here um we didn't advise this it's a complex tax issue uh that should have been discussed elsewhere but you know i'll go back to something you said at the start of the show uh george is that and that is that people even politicians you'd be surprised to hear are human and do make mistakes it's just when you make a mistake when you're in such a kind of prominent position in government it also to me highlights the fact that stamp duty is a hated thing you know it's not it's not great it's not great the way it's kind of calculated and we had this whole hoo-ha a couple of weeks ago about property taxes and you know whether stamp duty should be reformed and it should be a kind of annual tax rather than a one-off uh tax to pay it's not great it's not a great system and i know simon's got deep thoughts about this and how stamp duty is ripe for reform um well essentially it should have been classified as a second home second homes you have to pay a stamp duty surcharge on which means a bigger bill and we're a government i think the big thing that's calling to people is that the government is very kind of pro home ownership uh and it's difficult when there's people that have more than one home because there's a lack of supply of homes for people to buy and the optics don't look great as a housing minister um owning more than one home that's fine but you know listen you you've made she's worked hard angela ray she's worked hard to get on the political ladder let's not make no bones about it and there should be no you know as as someone who is very pro kind of getting people up the ladder if you deserve it and have worked hard and can do it that then i've absolutely problem no problem with that and making money and doing one in your life that's great i just think this was just such a kind of disaster that could have been sidestepped but she is human so i'm kind of on the fence it's kind of difficult one isn't it

45:16Lee Boyce: like i said let's treat angela rayner like another person and just go through the financials of this and i want to look at you know one the sort of financials of it but two the kind of actually thinking about it, is it good for anyone to be spent, apart from the government, to be spending that kind of money on stamp duty? Anyone who's bought a property, unless you're a first-time buyer under a certain amount of money, will have been stung with stamp duty amongst all the other fees that you'll have to pay for. Is it time we took a really long, hard look at it?

45:51Simon Lambert: Yes. Stamp stamp duty fundamentally needs sorting out. To go back a step, unfortunately, stupidly, we've got ourselves so addicted to the revenue from a bad tax that we can't sort it out and governments have repeatedly put themselves in a position where they can't sort it out. All chancellors dating back to when Gordon Brown first started tinkering with this, I would argue, have known that stamp duty is a problem. Stamp duty, up until Gordon Brown started tinkering with stamp duty was a flat one percent above 60 000 pounds now that 60 000 pounds in theory should have moved up with average house prices and if that had happened stamp duty would not be an issue you'd pay one percent above a certain level and that'd be it right the people who buy the more expensive houses would pay more the people who buy the cheaper houses would pay less i've always thought that's slightly crazy because effectively what you're doing as a buyer is paying a tax based on the seller's profit right but if it's only one percent it's a dealable with problem the difficulty is is that gordon brown throughout the property broom in the early 2000s started adding in extra bands pulling a bit more money and when everything was going up and people were pulling as much money out as they could possibly do on mortgages and banks with like changing from like not you know uh offering checking that you could repay your interest only mortgage to not really bothering to just say hey have an interest only mortgage and i'll lend you six times your salary and everything's going up anyway.

47:22Simon Lambert: And we've ended boom and bust and it's all good. Nobody was overly concerned about this. By the time I started at This Is Money in 2005, late 2005, it had now got to the point where even though we were still cooking on gas in terms of the property market and the economy, people were starting to say stamp duty is becoming a problem. It then became more of a problem. George Osborne then decided to change it. But rather than change it entirely for the better, he sort of half changed it for the better and half changed it for the worse, making the mistake that politicians have repeatedly made over the last 25 years of being terrified to do anything about a bad tax for fear of being seen to favor the wealthy, for fear of being seen to save the rich.

48:08Simon Lambert: Because basically what George Osborne did was made it better for people at the lower end and worse for people at the higher end. um and then you had the introduction of the second home surcharge which was try and put a lid on buy to let which adds three percent second homes and buy to lets um and then we've had various stamp duty holidays and everything since the stamp duty holidays are the one thing that is an even stupider idea than stamp duty right because all it does if you do it temporarily it encourages it skews people's behavior because they rush to try and beat a deadline and actually they end up paying more less tax but more for the house so it costs them more in the long term right come back to last april uh no sorry come back to the last budget actually the autumn budget last year there was a stamp duty holiday that was meant to run out this april temporarily done it had been in place for so long that people just presumed this was a permanent thing in her wisdom rachel reeves decided to get rid of that so first time buyers now pay more home movers now pay more the other thing she did was added even more to the second home surcharge so she topped that up from it was three percent it's now five percent so that's the backdrop to this entire scenario so basically what we've got is a situation where stamp duty is exorbitant stamp duty on second homes is even more exorbitant and in its wisdom the government decided that a tax that economists widely say needs to be totally overhauled because it's bad for the economy because it discourages economic movement, discourages people from buying homes, it discourages people from moving to different parts of the country in order to take jobs, it sucks money, you know, out and, you know, from what could be put to productive use, that it is considered to be a bad tax.

49:54Simon Lambert: In its wisdom, the government decides to put it up. Then lo and behold, we discover that the Deputy Prime Minister and the Housing Secretary has somehow managed to only pay the less exorbitant version of stamp duty on what is not apparently her second home but her third home and people are like huh what she's got three homes and she still pays the lower level now obviously it's way more complicated than that but that's how the story initially emerged so first people discover that actually it turns out mps are allowed to have two homes without paying second home stamp duty and they're like honestly this system like how is this working uh and then it's and then there's the debate over whether it's actually her third home or not and and the the situation there is she has a son who i understand is disabled he was born incredibly premature she's no it's really tough um looking after him and everything look and i admire angela rayner for the way that she has pulled her socks up and got on with life and she's a great advert for social mobility she's also pretty bolshy pretty chippy and pretty gobby and so when that bounces back on you i think maybe you just have to own that rather than you know there are some people saying oh everybody's just being really horrible to Angela Rayner because, you know, she's a northern woman and stuff like that.

51:10Simon Lambert: Maybe there is a bit of that, but I think she's a tough cookie, right? But I do feel sorry for her in this family situation and everything, and she thinks what she's done is right. But I must say, whilst I don't believe that people in power and the rich and those in authority should get favourable treatment from the tax man in the tax office, I would like to think that there is a scenario where if you're the prime minister or the deputy prime minister and you've been presented with a situation where instead of paying£70 ,000 in stamp duty, you're paying£30 ,000 in stamp duty. And this sounds like a suspiciously good deal that you're getting here to the point where you're saving£40 ,000 compared to what would normally happen to someone, that you might be able to pick up the phone to someone very senior at the tax office and say could you do me a favor and could you just absolutely check that this is totally kosher that I'm absolutely right here and I'm absolutely correct in paying 30 grand instead of 70 grand because if it comes out that I'm not it's gonna look really really bad but the lesson that we should take from this to go back to your point is that nobody should be paying 70 ,000 pounds in stamp duty to buy an 800 ,000 pound home whether they're a second home buyer or a buy to let landlord and if they're a home buyer which is what it was originally going to be that it was going to be a first home it would be 30 grand you shouldn't be paying 30 grand to buy an 800 ,000 pound home obviously people are going to be reluctant to move if that is the case they are they are going to buy less homes they are going to move less often.

52:59Simon Lambert: If Angela Rayner was just anybody, right? You would think, absolutely, you would think twice about moving from somewhere up north, where property prices are cheaper, to somewhere down south in Hove, where property prices are way more expensive. And on top of having to fund that, you have to just hand 30 grand to the government, just for the privilege of buying a house. That is totally, totally, totally crazy. and I think the one lesson as I said that we should take from this is that stamp duty needs a complete overhaul from the bottom to the top and just to put a figure on this right okay one of the problems in the London property market at the moment the high-end London property market now let's weep for the super rich here the overseas resident super rich but this stuff does trickle down it does genuinely happen do you know how much you'd have to spend on stamp duty if you were somebody who is an overseas resident.

53:56Simon Lambert: So say you've moved from another country to London and you own another property in your home country, but you've moved to London for work to buy a one and a half million pound house, which is a lot of money, but doesn't get you that much in London. How much stand to you do you think you'd pay? 198 ,750. Did you pay nearly 200 ,000 pounds to buy a one and a half million pound house? That's bonkers. Anybody in charge of that system who looks at that number should just be embarrassed. this is it's clearly a bad tax unfortunately i sense now's not the right time to think about

54:30Lee Boyce: overhauling stamp duty it just is the optics of it just probably aren't ideal well that's the

54:35Simon Lambert: problem isn't it it's never a good time do you know the best time to have overhauled stamp duty

54:38Lee Boyce: you haven't got someone up for a thing about not paying enough of it no it was when it was when

54:42Simon Lambert: that mug rishi sunak brought in the stamp duty holiday that would have been the best time look we've just as i said before totally unprecedented we've all been locked on our house everybody's worried about TOEFL economic disaster and everything like that. Don't have a stamp duty holiday. Just sort the problem out. And Rishi Sunak knew there was a problem with stamp duty, just like all the other chancellors did. I hate stamp duty. It's such a toxic tax. It's such a toxic tax.

55:05Lee Boyce: Do you? We'd never guess that, Simon. Finally, you've had your rant, Simon. Now it's my turn. This isn't about me. Well, the first part is not about me. This is about a reader because it's a reader question. And we're talking about Uber. I went to Rome, not me sadly, at the end of May with my 12-year-old daughter. On departure day, we were due to fly home with Wizz Air at lunchtime, but the flight time changed to 7am. I pre-booked an Uber the night before for 4.45am. When I woke up at 4.15am, there was a message from Uber to say the driver was running 38 minutes late. I had left enough time, so didn't worry.

55:43Lee Boyce: By 5.15am, it was still showing a 38-minute delay. so after I couldn't contact the driver I cancelled it we were not able to get to the airport in time missed our flight and I had to fork out£475 for new tickets this is so unfair now yesterday for me I had a bit of a a contretemps with Uber as it were but you see I had booked to go from my house to London for filming it was peeing it with rain wouldn't normally do it but I was like it's so bad I'm going to go and add a big bag and I got a bad bag. Anyway, as soon as the driver had typed in my code and worked out that we were going into central London, he got very arsy about it.

56:26Lee Boyce: He didn't outright refuse, but it became so uncomfortable that I was like, I cannot sit in this car for like an hour and a half and go to London. I retyped in, he showed me how, a new address. I went to a train station fairly nearby, lugged my bag, got a couple of tubes, got a couple of trains, managed to get up into London on time. Absolutely soaked, but that's fine. Contacted Uber because I said, this isn't quite right. What did they do? Now, bearing in mind, I was stuck in that cab very uncomfortably. We got into a bit of an argument, not a bad one, because I'm a bit conflict averse, but it was uncomfortable.

57:01Lee Boyce: I'm a woman of my own. Now it was seven in the morning. Imagine that was 11 at night and the driver had just decided they didn't want to go where I was asking them to go. The system is messed up. What was even more messed up, though, is what they did is they re-evaluated. This was their solution to this. They re-evaluated how much. The fare was£21. They took£4 off. Why, I don't know. And then they said, we will do our best to make sure you're not matched to this Uber driver in the future. That was it. How can you have a cab system where the cab driver doesn't know where he's going until he types in a code and then goes I don't want to go there what anyway that's all about me this is not all about me I think that

57:44Georgie Frost: the one thing I will say is that the response in both cases have been lacklustre and would make me question using it given that the case that we have here in Italy actually I'll just start with this this case there's always that kind of fear factor of being somewhere you're not particularly familiar you're with you might not necessarily know the local roads you don't know your a plan b especially in that time of the morning to get to an airport and Rome is a pretty hectic place one thing I would say here is a real bugbear of mine and it's happened more frequently I'd say since the pandemic is when an airline changes the time of your flight as someone with a young family I quite often book trips now with the flight time is like one of the two most important things of the whole holiday as in i do not want to be getting a flight at 7 a.m um with two young children and to have a flight time change from lunchtime to 7 a.m is absolutely infuriating ruins your night before

58:48Lee Boyce: and everything i've never had that though lee i've no it's not something i've heard that much about

58:52Simon Lambert: either yeah just to chip in here on what lee's saying and people listening if this has happened to you if you've had your flight changed by a lot a lot i think lee's right we're seeing loads more of this i've i've heard it happening to lots of people happened to my sister when we were on holiday at easter last year drop us an email at podcast at this is money.co.uk because i think airlines are pulling a fast one on people here uh and i think that this this needs to be investigated and we we'd like to try to like really push this so podcast this is money.co.uk if you've had your flight moved by like hours and hours either at short notice or like well in advance but then you've discovered they're still selling the original flights or something yeah

59:31Lee Boyce: drop us a note so this is a two-fold question isn't it it's one about the airlines changing flight times to you know very inconvenient times but two then that has a knock-on effect to all the other things that you've planned i.e ubers and all that sort of thing but this particular case with the uber was something wrong with the app something wrong with the driver i've absolutely

59:51Georgie Frost: no idea well with uber it said it agreed the service that was received fell below part but said that it was not liable for the missed flight and it said that there'd been a problem with the booking but it blamed the reader for not cancelling the trip much sooner and then trying to rebook with another driver which i find a bit strange because if it was a problem surely the driver would have just cancelled and would have just like put a note saying sorry you know family emergency can't do this trip book with another driver but it feels like they've been strung along here with this kind of like 38 minute thing because if that was me i'd be like okay well 38 minutes that is quite quite a long time but i'm still going to make it to the airport in time also you don't know that

1:00:34Lee Boyce: there's not a problem on the roads that maybe every uber driver has got a delay so i would be very reluctant having in the past cancelled and then you're waiting ages for another one so

1:00:43Georgie Frost: i can understand why you wouldn't do that so they've ended up forking out 475 pounds for some new flights to get home after not making it and they were offered a goodwill gesture of 20 pounds which was which was which was raised to 50 pounds then we kind of said well maybe your travel insurance would help but the policy that the reader had only covered problems with public transport not taxis some providers do cover issues for taxis but typically only if there's a traffic incident or a vehicle was broken down but they've been left severely out of pocket here um and uber doesn't believe it's liable to have to cover these uh this flight it does not shed good light on uber this story whatsoever if you're in this boat you know when you're away just always always always have a plan b and at the end of the day if you ended up booking a second taxi with a second taxi firm it's your fallback you know if you have to cancel one of them it's one of those things at that time of the morning i think it's one of those things you just want to make sure you can get to

1:01:47Lee Boyce: the airport all right then that's it you can keep up to date with all the latest breaking money news just go to this is money.co.uk or download the app if you have any comments or questions for the team anything you'd like them to look into simon email us at podcast at this is money.co.uk and come to

1:02:05Simon Lambert: So this is money.co.uk forward slash podcast to join the debate and read the comments.

1:02:09Lee Boyce: And you'd especially like to know if anyone has had their flight changed.

1:02:13Simon Lambert: Yeah, I had a really cheeky one. Some easy jet flights I've got like way in advance. I got emailed to say that like your flight's changed. It's changed from like eight in the evening to three in the afternoon or something. I was like, what? I deliberately like booked the eight in the evening ones. So it's like it's literally so we can spend the day on the mountain and then we fly home in the evening. I'm like, I wouldn't have like you've literally just destroyed my my last day. I wouldn't even be able to go up in the morning at that time. And then I looked on the EasyJet website, and they were still selling the evening flights.

1:02:43Simon Lambert: Wow. I'm like, whoa, hang on a minute. So I managed to get in touch with them. I said, look, you've moved my flight, but you're still selling this flight. I don't want this flight. So I want to be moved back to the original one. So I went around in circles. They did move me back to the original one. I don't know what's going to happen, whether that original one's going to exist or not. But I think this is to do with airlines consolidating. This is my suspicion. This is why I want to hear from people. I think airlines are flogging tickets. And then if they don't have the flights full, consolidating the flights.

1:03:17Simon Lambert: They're just like cutting one of the ones they've sold a load of tickets for, putting people onto the other planes, squeezing them all onto the flight ahead so they can get away with not running one of those flights. And I don't think that they should be allowed to do that.

1:03:30Lee Boyce: Oh, they're selling cheaper tickets a long time in advance and then realizing that actually your eight o 'clock flight is a lot more popular. There's not a lot of people on the three o 'clock. Bump a couple of people on three o 'clock and then flog the eight o 'clock for a lot more money.

1:03:41Simon Lambert: Well, that's the thing. Like if they're still selling the flight, then it's outrageous. I don't know what's going on there. I'm very nervous about what's going to actually happen when it comes to getting this flight. I've seen enough of this and I've seen a big rise in it in the last year or so that I think something's going on here. And I think they're playing very fast and loose with it because the knock on effect, like we said, is you book somewhere to stay based on the time that you're flying home. you've booked car hire or you've booked transport or you've organized to do something or it might be that you would never have actually even gone on that trip if you couldn't stay for that second day or something like that um or if you'd have had to fly at that time so yeah the knock-on effect is huge and i think it's i think it's underhand all right then wait to see more on that one and

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