Why investors are worried about a giant AI bubble - and what happens if it bursts

0:03Welcome to This Is Money Podcast, sponsored by Charles Stanley Direct. I'm Georgie Frost and joining me and Simon Lambert today is Ankara Carrick. And coming up, is this a week of history repeating itself? AI hype is causing a fresh wave of fears over a repeat of the dot-com boom and bust. Is the gold price warning us of an impending crash? Plus, has the regulator just fired the starting gun on PPI Mark II? Could you be in line for a£700 payday from the car finance scandal? Also today we look at Conservative proposals to scrap stamp duty and why some people paid nothing for their energy last weekend.

0:39So if you're getting up to date with all the latest breaking money news, just go to thisismoney.co.uk or download the app. But first, a message from our sponsors. Ever feel like you've got a money question but not sure where to get it answered? Well, now you do. Charles Stanley Direct's financial coaching service gives you one-to-one time with a real expert. Someone who'll cut through the jargon and help you feel confident about your finances. And the best bit? You can start with a free 15-minute call. Just head to charles-stanley.co.uk forward slash financial coaching. Go on, your future self will thank you.

1:13Remember, investment involves risk. Right, back to the show. Welcome, Simon. Welcome, Ang. Now, the Bank of England has joined the growing chorus, warning of the risk of an AI bubble, drawing comparisons to the dot-com mania 25 years ago. And we all know what happened there, don't we? The top five tech firms listed in the US now represent 30 % of New York's S &P 500 index, the highest proportion in 50 years, while market data comparing earnings to prices were close to the lowest level in 25 years, comparable to the peak of the dot-com bubble. Meanwhile, veteran city commentator Alex Brummer, not mincing his words in his recent article, the signs of a global financial crash, he says, are everywhere.

1:55Gold's hit record prices. We'd be wise to prepare for catastrophe. photography. Simon. Not subtle, there is he, Alex Brummer. Are we headed for a crash? What's the deal with AI and the warnings from the Bank of England? Right. So to unpick this one, how have we gone from AI being the key to our bright future to the thing that's going to cause a financial crash in a few short months? That is the question possibly many people are asking themselves. Up until now, we've worried about AI taking our jobs, taking over the world, causing a Terminator-style apocalypse, those minor issues. But crashing the stock market and then causing a financial crisis hasn't been at the top of people's AI worries.

2:49In fact, the stock market is absolutely raging off the back of people buying into the AI hype. What's happened is we are now being warned that there is a bubble and that there is a bubble that is potentially set to burst and could burst in a quite spectacular way. What you have to detach from this is the technology and the financial stuff so technologically ai probably going to prove to be useful probably going to prove to be a technology that is here to stay you could say the same about the internet which was responsible for the dot-com boom railways i mean as much as we get annoyed by delays trains are pretty useful uh and they were definitely a technology that stuck around however we also had a railway boom and bust so just because something works and is actually useful and is going to stick around and could in fact trigger you know another form of sort of shift in how we live industrial revolution all of those things does not mean that it cannot be responsible for a bubble that goes pop and what's going on with ai is that there are a number of of red flags so just to cover off some of those red flags the sheer concentration of investor interest in ai influence stuff or ai influence stories if you cast your mind back as far as march which wasn't actually that long ago uh and remember donald trump's tariffs that had people seriously worried it was catastrophic as far as investors were concerned markets were absolutely tanking now wasn't just the tariffs it was also the thing of like he's not going to back down he backed down the taco trade was on trump all his chickens out people brought back into markets.

4:55But the rebound since then has been absolutely astonishing. The S &P 500 has gone from looking like it was going to have a bad year with investors being worried to looking like it's going to have another double digit good year. It's up about 14 % this year and it's up 35 % from its April lows. This is being driven largely by the AI belief and the AI hype. What's also going on in terms of the red flags is there are a number of deals that have been announced that you just look at them right and however much the people do in the deals try to explain them you can't get over the bit where it looks like i'm going to give you some money and then you're going to buy my stuff to me any deal that involves i'm going to give you some money you're going to buy my stuff this is going to be great for everyone you always need to look at that a bit closely it's a bit of a red flag it's like those deals that ceos do that mean that at some point in the future the share price hits a certain amount and they make absolute squillions quite often and not always but probably in 90 of those occasions something goes wrong and it's a red flag that something is going to go wrong in the future so we've had open ai and open ai sits out in the middle of this open ai is the chat gpt maker open ai unlike the big tech companies that we talk about generally isn't making any money it's losing money it's having to basically keep going and raising money to keep spending and it's spending vast amounts of money um to desperately try to improve ai it's locked in this race to try and create you know artificially uh artificial general intelligence where basically computer can think for itself can think can reason as well as a human nobody has stopped to question whether that is actually a good idea and whether we should be doing this um but you know we're on that path and when we all end up in the terminator terminator 2 i think could be good because at least then we get guns and roses right but anyway back to the point so open ai has struck a number of deals uh massive deals so it struck this huge deal with oracle u.s tech company that sent oracle shares rocketing uh and oracle then made larry ellison the second richest man in the world it was a good deal for larry ellison uh open ai also struck a deal with nvidia uh nvidia uh the world's largest company uh chip maker and nvidia which has four and a half trillion dollar company again maybe slight red flag there is going to invest 100 billion dollars in open ai and open ai is going to buy its chips and a video might get a stake in open ai and then open ai struck another deal that was announced this week with amd another chip maker this time around it's not just striking just one chip maker striking yeah more than one tens of billions of chips um that it's going to buy from AMD that could then see OpenAI take a 10 % stake in AMD.

8:01So what's going on here? Where's the regulator in all this, Simon? I thought there were sort of competition issues. No, is that not a problem? The US is committed to being a global leader in AI. And it is a global leader in AI. And there is a concern over what's China doing, right? Yeah, yeah. So there is a headlong rush into this. open ai sits kind of at the center of this and is is actively and deliberately trying to create a web a web of kind of influence a web of these vendor financing style agreements a web where basically everyone is everyone has a stake in open ai succeeding that it's quite a clever move when you think about it because it's like right we've all got to work together on this guys because we're all now interdependent on each other what's going on with this though is that there are a lot of this money is going into building these huge data centers in the u.s often in the middle of nowhere and these data centers are there for computer processing because like the computer processing power required by you know this rush for generative ai is phenomenal we're talking the kind of power that you know people are saying you'd need a nuclear reactor to power one of these things right this is absolutely astonishing right when you think about it and there's this building rush going into these places right i mean it appetites for power are measured in gigawatts right and and the costs can run up to 50 billion pounds 50 billion dollars per gigawatt now the concern is that there is this this gold rush going on with these data centers and actually these data centers the end point of this is that nobody's actually quite sure there's the demand there for the ai itself like these large language models these generative ai models in terms of businesses actually using them i read a statistic the other day that said only 15 of businesses have actually discovered that they were worth using you know that they were actually getting anything you know out of it like it was increasing their profits so there isn't necessarily the demand there is a kind of like if we build it they will come kind of scenario and there is a great deal of concern about all of this stuff that's going on how are we going to power these things right these data centers because they're talking about you know actually just having to build the power there because the the grid in the us and the us is you know it's got a lot more energy than the uk and generates a lot more energy in the UK, doesn't have enough energy to power this.

10:39There was all kinds of things going on. We were worried about electric cars, weren't we, Simon? And if everyone drove an electric car, now this is another level of energy, isn't it? Yeah, they're going to build it. So they're building things in the middle of Texas, right, where it's windy and it's sunny. So it's all going to be renewable energy. That's the story that's being sold to people. Is that actually going to work? There's then also the question of whether these data centers, how long are they going to last? Because the companies are saying, well, they're going to last X amount of time, right?

11:12But the critics are saying, well, you know, NVIDIA is constantly releasing new chips and improved chips. And when it releases its next batch of chips, it's doing a yearly cycle, right? It releases its next batch of chips. those ones that you've just spent an absolute fortune putting in that data center that you've spent an absolute fortune building and you're spending an absolute fortune powering are now outdated and are they going to be good enough for where ai is going next and so on so there's concerns that you know these things aren't even going to you know particularly last there's been another couple of things going on you know that cause red flags um so i had a conversation with fund manager yesterday a guy called uh david coombs uh works for rathbones um now david is uh he's a fund manager who doesn't have the traditional background of a fund manager now he said that he he thinks he's seen reflags he thinks that you've got stuff going on here and this is the concern lots of people flagging similar to dot-com boom and the dot-com boom was actually it was more like the problem there was this infrastructure boom okay it was laying all these cables fiber optic cables and everything that basically like the technology wasn't there for yet and then you also had you know the the dot-com company stick the dot-com after your name share price goes up kind of thing there was a huge bubble going on there have been a number of people flagging concerns that it's similar to the dot-com boom another red flag actually that that david raised was this electronic arts deal um that's been done involving uh the saudis um like leverage to buy out sovereign wealth donald trump's uh son you know helping negotiate the deal all that kind of stuff and we were talking about this and i said well the other thing that this reminds me of as well is you know i wasn't working in financial journalism during the dot-com boom and bust right i was finishing university at that point but i was working during the credit crunch and this reminds me of the sort of spring and summer of 2007 just before the credit crunch hit and this sort of scenario where you had some people saying and there were people warning about the credit crunch right it's it's it's completely wrong to think that there weren't people warning about there people going this stuff this stuff doesn't look good and then there was lots of people on the other side going it's fine you know they like as long as the music's playing we'll keep dancing kind of attitude and you've got that going on at the moment you know you've got this this thing that's theoretically good nobody quite understands it's gonna change everything it's different this time i mean there have been a couple of people including jeff bezos who said it's the the ai thing is different this time because it's a good bubble no i mean a good bubble a good bubble is like it was the kind of like well we're building out the infrastructure people will make losses it always happens but it's a good bubble because we're building out the infrastructure but if if if the infrastructure is integral to the bubble that's happening which is you know what's going on here with the data centers then is that a good bubble how do you define a good bubble and even good bubbles when they burst have a habit of taking down people's investments and the big problem here is that ai investment a harvard economist jason firman did some number crunching he reckons that ai investment accounted for 92 percent of us gdp in the first half of 2025 right you take out ai investment and the u.s economy does not look anywhere near as good as people think it looks right so it's not growing anywhere near as much on top of that you look at the stock market u.s stock market in accounts for 60 to 70 percent of the global market now it is you know it's very concentrated the magnificent seven accounts for something like 36 percent of that market and then you know underneath that you've got a whole tier of stocks that have risen a lot off the back of kind of ai stuff stocks that aren't in the magnificent seven but have risen a lot off the back of the ai stuff and it has the ability that if it all comes crashing down right it will hit other stock markets you know it will hit the footsie 100 the footsie 100 is not an ai driven stock market okay people have been complaining about our lack of tech for a long time but the s &p 500 crashes it will hit the footsie footsie 100 you've got concerns over corporate credit as well the spread on bonds for example corporate bonds to the US treasuries, which are considered relatively risk-free, to corporate bonds, which are risky, is narrowest for a long time.

15:55Even junk bonds are trading very, very close to US treasuries. There's worries over this kind of shadow banking system where it's not bonds and it's not banks lending money, it's investors lending money to companies and so on. There's been a thing going on with the US auto parts maker that's cropped up recently. All of these things together have got people worried. How exposed are individual investors? And I'm thinking here, because a lot of people nowadays invest in sort of these global ETFs and we'll be thinking, well, it's global, it's around the world. I'm cushioned against, you know, any big drop.

16:34Is that right? The problem with a global tracker fund and a global ETF is essentially that fund keeps buying the companies that are doing best they get bigger in the stock market as a bigger proportion of the stock market as their share price rises and as their value rises and because the etf is meant to track the market and it holds all the stocks in that market then it buys more of the stuff that's bigger in there so it gets referred to as the ultimate momentum trade the problem with momentum trades is that they can a momentum trade is you're buying the stuff that's going up momentum trades can unwind really quite quickly and you can see really quite big falls you could say you know perhaps the market will rebound and actually we have seen recently every time the market has taken a tumble whether it's a correction or a crash as it did in covid it's rebounded incredibly quickly um you know covid considering the the size of the fall and what was going on market rebounded really quickly the tariff correction earlier this year market rebounded really quickly the worry is you look back to things like dot-com boom and many of those biggest companies are still around but it took them years decades even for their share price to get back to where it was it took a really long time for markets some markets to get back to where they were i mean you could argue that in that in this case maybe it is different this time information moves faster you've got social media you've got internet news you've got all that kind of stuff and it's like you know maybe stuff just as move quicker maybe markets do recover faster um but the the difficulty is is that like you know when the market starts selling if people start pulling money out of those etfs and out of those tracker funds then those funds are then going to have to sell the assets that they hold as well and you could have the reverse problem to what you have now when the funds are having to buy into companies that are going up.

18:34The key litmus test, Simon, as to whether we will have a crash. No, I'll chat with Ang in a sec. Thank you for being patient, Ang. Have you changed any of your investments, Simon? No, but I have thought about it, which is almost as good, isn't it? My ISA is not that exposed to the US, right? All right. S &P 500. It's got a lot. It's got lots of emerging markets. It's got some Japan. It's got quite a lot of UK in it, which, as I have said before on this podcast, I don't want to know how much money I've lost over the last 15 years by being contrarian and saying the US is too expensive, the US is too expensive, because the US has been the only party to be at in town.

19:21And I would be on paper a much richer person if I hadn't have made those decisions to try and beat the market. and that's the problem you try and make a decision to you know beat the market and you risk getting it wrong my work pension is probably way more exposed um due to the fact that most of it is in a global track fund and that's what i did think about oh well maybe i should maybe i should just do a bit of that i mean i i i don't know it's difficult to know what to do do i want to go to bonds i'm not sure i do want to go to bonds um do you want to shift the kind of focus of the shares you know the uk market doesn't necessarily have the same ai hype driven problem as i said companies is relatively cheap um it's been doing better recently maybe it'd be good to shift a little bit more towards that but as i said every decision you make to do this and if you're a long-term investor you can probably write this stuff out anyway so pension is a very long-term investment.

20:18But I have thought about it. I did, Simon. So I have a bit of a percentage of my portfolio for sort of educational purposes, I like to put it. So I did recently invest in a couple of AI stocks, and they went up so high. I think one doubled and one was up 50 % that I thought, if that's not a big red flag, that's something, why are you saying that now? Probably double again, But, you know, I thought I'll happily take my winnings. I mean, it's over three months. It was such a short amount of time as well. I felt like a trader. But I thought, no, I'm going to take my winnings and toodle off into the sunset with that one.

20:59I wonder if other people will think the same. And I have to ask about Alex Brummer's column piece. He mentions gold. Gold hitting record prices above$4 ,000. I think it dipped back down a little bit, but it's still hovering around that at the moment, isn't it? What does that tell us? Well, he says we'd be wise to prepare for catastrophe. Maybe. Yeah, it's not a great sign, it reaching its kind of record level. And to go back to what Simon said, I'm heavily invested in the US. I don't want to check my portfolio just because I think I will get overexcited. But actually, gold is something that I have been looking at.

21:46I think it's not a great sign because it's obviously seen as a bit of a safe haven in sort of times of turmoil. So I think people piling into it suggest that, you know, they want something that's steady. I'd be interested to see you know with this AI bubble happening whether we start to see you know funds looking at buying up more gold if we see the kind of 60 % equities 40 % bond split changing you know we might see 50 30 20 or 60 20 20 and I do wonder if if gold kind of becomes something that people look at but it's not I don't think it's a great sign um it's also probably not a great idea to buy at the top but yeah it could also go even higher I mean I think there was one of the big investment banks that it could reach 5 ,000 at some point so yeah I mean it depends you know where you are in your investment journey as well if you're nearing retirement it could be quite a good way to to protect yourself you know with more uncertainty and the middle east inflation that sort of thing um but I think general consensus is it's good as part of this sort of diversified portfolio, not just buy loads of gold and hope for the best.

23:00I mean, it's been an interesting one, hasn't it, Simon? I think Ray Dalio, the veteran American investor, saying that you should hold about 15 % in your portfolio, which is rather a large amount, it seems. But we've seen central banks buy it up over the last few years, from normal investors, all the way to institutional investors as well. And it's the purpose of gold, because it doesn't provide an income does it it's sort of that um what i hear it described as an umbrella that you carry in your portfolio bag should you need it for when markets drop a bit of security is that correct yes and arguably the best time to buy gold as a security umbrella would have been 2 000 years ago um when and if you've done that you've done very nicely indeed or last year for example would also have been equally uh you know a good idea buying it now at its peak obviously if you buy anything at its peak you are working on the basis that other people are going to keep buying it and make it go up right and you don't want to be the last person who thinks that because the last person who thinks that is the person who buys at the absolute peak and then sees it fall gold is a sentiment driven investment it doesn't do anything right you can't earn an income from it it can't make can't make you a profit it can't do anything like that you can make some jewelry out of it it has some industrial uses and it is a long-term store of value that has been proven as evidenced by my joke about the best time to buy it would have been 2 000 years ago right and and in that sense it has proven its metal no pun intended in a way that bitcoin has not because you couldn't buy bitcoin 2 ,000 years ago.

24:47It's not Bitcoin's fault. You just couldn't buy it 2 ,000 years ago. Couldn't buy it 20 years ago either. We've had this conversation before. You've asked me if Bitcoin is a new gold and I have used exactly the same line, but in reverse, ask me in 2 ,000 years time. And this is your early sort of nod that we will be doing the 2011 year celebration of the podcast in 2000 years time um and inviting you to email in for time might be um would be having our voices over you know it could be could be don't joke simon yeah it'd be like abba voyage but better because it doesn't have any abba songs in it my point is 15 is punchy but you might think if gold is going to keep going up and that you you're unlikely to be the last person who's going to think it's going to keep going up i don't think that somebody who buys gold now is going to be the last person to think it's going to keep going up right okay i think it is going to keep going up but the opportunity for that is limited you know there's a lot of fear around at the moment um you know this kind of fomo fear isn't there um so in fact it got referred to as the fomo gold rally things could change around you know and this is the problem with the ai bubble stuff it's like you can shift your investments but you could be too soon bubbles have a habit of like running for quite a while it could be another year to run on this thing right you could you could miss out on 20 returns 30 returns or you could actually be right it could be good news now to go back to that conversation with david that i had yesterday he's a multi-asset manager and he has shifted the you know the makeup of his funds the more cautious one he's just cautious ones he's shifted them more the more adventurous ones he's shifted them less and he has shifted away from you know magnificent at seven uh us tech um he has dialed down the equities he's bought more uh he's not buying corporate bonds but he has bought government bonds um and uh you know he's holding some more cash that is the other option you can do is you can hold some more cash because if you've got cash right when the market does slump you can buy in and often this is a great i always thought this is a great line this is something that henry prior the buying agent always says about buying properties is you make the money when you buy not when you sell it's like if the market falls 30 and you can then buy in then you're probably going to do pretty well off that in the future right because like you know 30 is 30 40 is like almost always maximum full kind of thing i'm the super crash it'll be more but you know then you get the rebound and you've bought in cheap bonds is an interesting one because also people are worried about the bond market yields on uk government bonds for example are pretty high because people are worried about the uk's finances uh yields on us bonds aren't as high but people are still quite concerned about the us finances uh france its finances don't look amazing most rich countries bonds um you are saying okay well i'm just going to hold my nose about the state of their finances but if something bad does happen if there is a crash if there is you know financial apocalypse okay i'm not predicting financial apocalypse here i'm just giving examples of things then you're going to see a scenario where central banks are going to have to cut interest rates um and that is going to see bond prices which move in the opposite direction to yields or the interest rates on bonds go up so all those bonds that have been issued now at higher interest rates are going to look more attractive if central banks are forced to cut interest rates at the moment people are saying i don't want those bonds um i want bonds with higher interest rates they're demanding higher interest rates but that could flip around and you could find that bonds do create the kind of ballast in people's portfolios ring just a quick one crashes well they don't sound great is there anything that just we can do for our everyday finances to prepare no they they're not great um i think one of one of the worrying things that i've noticed more and more is people referring to things as you know the lowest since 2009 which is not great great to hear um because we definitely don't want a rerun of that but i think there are some obvious things you can do i mean as simon says the it when it comes to investments a lot of those trackers are market value weighted rather than equal weighted so it could be worth looking to see if you can swap some of those um the main one that when i speak to people about this is is don't panic which is easier said than done but I think the main the main point is don't put out all of your money we're not quite at that stage yet it's hard to predict if when we will get to that point but there are some basic things you know budgeting making sure you have a kind of financial buffer so looking at your savings if you can put more into you know your rainy day fund then that's great and and also making sure that they've got you know you're earning you're beating inflation um with that so chase is paying a decent rate on their easy access um there are some good deals to be had there um and then elsewhere i think with mortgages if you've got a fixed deal coming to an end and i think there will be millions sort of coming to the end of this year or next you can secure a rate you know up to six months before it ends so you can move on to one and then if you know if interest rates are cut and then we see mortgage rates being cut as a result then you can then move on to a better rate if if they do emerge and then finally pensions as we've spoken about it obviously depends where you are if you're close to retirement it's obviously going to be a bit more worrying um but i think experts generally say it's best to probably dial back withdrawals from your pot for now um it might be worth moving a portion into cash or bonds or something less risky.

30:50All right, then. We'll leave that to one side. I'm sure it will come up again. But another return to the past moment this week, and that came in the form of the car finance saga. The City Watchdog released details of compensation scheme, which could see millions get hundreds of pounds in payouts. Is it fair compensation for bad practices, Simon Lambert? Or is it PPI all over again of which i got nothing simon if you would because i know that you came out rather speedily with this story when it broke on tuesday was it reminders of the car finance scandal and what's the latest right it's not the new ppi that's what you need to know it's not going to be as big as ppi there were concerns that it was going to be as big as ppi and they have been uh just a one liner on the ppi payment protection insurance payment protection insurance was a product that was sold by banks alongside loans credit cards um and even mortgages mortgage payment protection insurance often they didn't tell people um how much it was going to cost them often it was sold to people who weren't going to be able to claim on it anyway because they were excluded in some way most uh obviously the self-employed uh but also lots of other people often people weren't even being told that they were sold it.

32:12Often there was people who had it added to their loan, which it bumped up the cost from, and the person selling them the loan got lots of commission and potentially a bonus off the back of selling enough PPI, and banks made tons of money out of it, and people didn't even know they had PPI. This was first flagged as a problem in the early 2000s. By the time I started at This Is Money, at the end of October 2005, the eagle-eyed, or the eagle-eared, so to speak we'll notice that's nearly 20 years ago uh we were already writing about ppi being a ripoff and banks scamming people and telling and then soon after that we were writing about how to like get it back but the banks continued to sell ppi on an industrial scale uh it should be said for a good few years after that then there was um the sort of court cases that meant that people could reclaim their ppi and it cost the banks an absolute fortune i think it was something like 50 billion or something like that it was a lot of money right okay and in a sense you know it helped to boost the economy because people were given money for ppi which they went out and spent interestingly they reckon quite a lot of that money went into putting down deposits on buying cars which were bought on finance agreements usually pcp deals personal contract purchase deals or sometimes higher purchase but pcps are cheaper you put down a deposit you pay a monthly amount for a set period of time for example three years then you have the option to either pay a balloon payment at the end which gives you ownership of the car or you hand the car back and then put down a deposit and start again this is how most new cars are bought in this country and has been for quite some time and there was a big boom in this industry some of it fueled by people using their ppi payments to buy said cars effectively you're just basically funding the depreciation over a three-year period many of those people were buying those cars from car dealers who were arranging the finance for them now potential red flag car dealer finance advance arranging it for you i don't know you know you might think as a court recently found that you wouldn't expect the car dealer to be acting for your benefit but people didn't really question this and some of the car dealers were indulged in a practice where they could basically bump up the rate on the loans in order to get more commission known as a discretionary commission arrangement um also there were some absolutely humongous commissions being paid um and also people who who didn't have commissions disclosed themselves uh unsurprisingly this blew back up in the faces of the uh car finance companies and the banks and the car dealers who were indulging in this stuff uh there was a court case in august the supreme court which followed on from earlier court cases and the supreme court found that basically it wasn't enough to just not be aware that there was commission for you to have been missold right and for you to claim money back but he did say you know identified these discretionary commission arrangements as a problem and said that some of those people should be able to claim money back the fca had been looking at these discretionary commission arrangements immediately came out this was announced on a friday after the market closed because it was considered so market sensitive you know it could really sink bank share prices the fca had the weekend to come up with what it was going to do announced on the sunday night that it was going to have a consultation on a redress scheme for people to have compensation that was what was announced this week the consultation on that the upshot of this is that millions of motorists who took out car loans from dealerships are in line for compensation worth an average 700 pounds um if you took out a car loan from dealership between 6th of april 2007 and 1st of November 2024 you could be covered um the FCA estimates that 44 percent of cases where people bought cars on finance over that period there could be a payout if 85 percent of those people claim uh it will cost something like eight billion pounds uh to the banking industry on average people will uh get a payout of about 700 pounds obviously that depends on the amount of commission and the loan that you took out and everything like that now there's some people who might get more than one of these because we're talking here about a period that covers you know 2007 to 2024 and many people were on a kind of like three-year cycle with these cars so you could find people who had three or even five of these and got mugged off five times by dealers over that period um and the fca is basically announced this consultation into the scheme and in sorry announced this consultation into the compensation it has produced a template complaint letter to give to your motor finance provider which you can find on the fca website the provider must then respond explaining details of any commission arrangement if it was a DCA or commission accounted for at least 35 % of the cost of credit which is another one of the benchmarks the FCA's put in or there was a contractual tie between the lender and the broker and if one of those is in place you could get compensation what you shouldn't do is use a claims company though claims companies are absolutely bombarding people with messages about that this there's adverts all over the place on the radio on the internet but don't use the claims company use the fca's um letter that he has got there and do it yourself people are going to start getting their money probably from the end of next year people who've already put in complaints are going to be at the front of the queue um but if you think that this affects you go to thisismoney.co.uk forward slash cars you can find our guide that explains a lot more that's it for part one

38:36I'm joined now by Lisa Kaplan for our weekly Investing Explained feature. Lisa, got a question here for you from a listener. Can a stocks and shares or cash ISA be inherited and keep its tax-free wrapper, or is that lost at death? We have to distinguish between where a spouse or a civil partner inherits and where it's anybody else. Where a spouse or civil partner inherits, essentially they inherit that ISA allowance. There's some little technical bits about that, but that's what it comes down to. They inherit enough ISA allowance to cover the value of the money that's in an ISA, so it all passes very nicely and tax efficiently.

39:19Where it's somebody else, the ISA status isn't lost on death. It stays for a while, sort of waiting until the money is sorted out. And when the money is sorted out, that's when the ISA status is lost. So that's going to happen where the assets are distributed. If the ISA account is closed, it'll lose the ISA status. And there's also a time limit of, I think, three years on that. It's really helpful because, of course, we know there's no capital gains on death. But if between death and the assets being distributed, there can be capital gains and also there can be income, which doesn't apply in an ISA.

40:02So that's quite useful. Thank you very much. My pleasure. Welcome back. Could stamp duty be scrapped? That's what Conservative leader Kemi Badnock wants to do. In her speech to the party conference this week, she promised the Tories would get rid of the bad tax in order to improve social mobility. Now, economists say stamp duty, which can run into tens of thousands of pounds, hampers the housing market and the economy as it discourages people moving. Ang! Firstly, stamp duty. How does it work? Why does it become so toxic? So stamp duty is what you pay when you buy property. So it's only paid over, if the property is worth over£125 ,000 or£300 ,000 if you're a first-time buyer.

40:48I mean, what has been quite a fairly lapluster conference season, lots of people got very excited about Kemi Badnock's announcement because it's become such a hated tax. I mean, probably as hated as inheritance tax, because it just adds on thousands and thousands to how much you pay and what is already an expensive thing to buy a house. And the argument is that stamp duty prevents people from moving or downsizing. so you've got a situation where people are sat in huge homes it's too expensive to move because they you know they may want to move to a bungalow lee boyce's favorite thing to talk about but they can't because it's going to cost them it's five percent up to 925 grand and then 10 percent to 1.5 million then 12 percent so it is a lot of money so we've kind of got a situation where we've got a kind of dwindling housing stock for first-time buyers or young families who you know want to move but we've got older people maybe sat in big homes because it's too expensive so I think the argument is that if we scrap stamp duty it becomes less expensive to move it's great for first-time buyers but there is a risk that it then pushes property prices up like it did before when we had a stamp duty holiday and it's also it's not a cheap policy it I think the OBR expects it to bring in 10 billion, but then that doubles to, you know, over 20 billion by 2030.

42:16So that's a pretty big black hole to fill. It was just one of those things, isn't it, though, that it's sort of short term pain could equal long term gain and wasn't one of the issues with the stamp duty holiday was the fact that everyone was trying to buy in that short amount of time. And it was that sort of window that was causing the problem, not necessarily getting rid of stamp duty. So if we got rid of it altogether then it might not have the same impact or got it back down to what was it one percent when it was under gordon brown or he was the one that started to change that is that fair wasn't look this is a kemi bad knock i take my hat off to her on this one because when i saw this i was like oh thank god like someone like some common sense for once on a tax i'm not a massive kemi badenoch fan but the stamp duty thing is like it's a terrible tax and it's a tax that has got worse and worse over the years every time a chancellor has meddled with it and my god have chancellors meddled with this tax and yeah it's like well we can't afford it now it's nine billion nine billion a year well until 1997 when gordon brown started meddling with it we got on perfectly fine with stamp duty being a flat one percent above 60 000 pounds and he could buy a lot more house for 60 000 pounds in 1997 than he can do now right and then he started cashing in on rising house prices by introducing upper bands and at this point stamp duty was this weird slab style system so once you went through a threshold you paid that that higher amount above that threshold on the entire purchase price right and this was fine roughly up until the credit crunch we were talking about earlier um because the housing market was just going up house prices were just going up people were remortgaging homes and pulling money out people were taking out interest only mortgages with no idea of how they were going to pay them back and nobody was worried music was playing people were dancing and then all of a sudden that stopped and stamp duty became a problem and then george osborne decided to cash in a bit more on stamp duty then he decided to reform stamp duty to in to make it a normal style threshold tax like income tax so you pay a certain amount up to a threshold and a certain amount more above it but because he didn't want to be seen to be favoring rich people we've made so many bad decisions in this country on tax over the last 20 years because people were terrified of being seen to be favoring rich people so they introduced bad taxes or bad elements of taxes off the back of it right he made it really expensive at the upper end then he also introduced the three percent surcharge to um affect second home buyers and buy to let landlords and you just got this point where you just kind of ratcheted up to be this tax that is even worse than it was it stops people moving for work economic benefit from that it stops people buying homes you don't get the economic effect of that and when people move home as ang said they buy stuff they buy furniture they buy white goods they pay for decorators they do renovations they do all this kind of stuff economists are widely in agreement that stamp duty is a really bad tax but the best time to get rid of it is when you're not making any money from it and that was the huge mistake that Rishi Sunak made literally stamp duty revenues had fallen to almost nothing at that point because the property market had been frozen in that early bit of lockdown you couldn't view homes you couldn't send a survey around a home you couldn't do all of these things and then when it reopened Rishi Sunak announced this stamp duty holiday a few months later in order to get things going and getting rid of stamp duty is a good idea stamp duty holidays are a terrible idea because they create this window when people rush and we've got a wonderful chart in our story about stamp duty that shows this amazing spike you know as people rush to do it and they pay higher prices um but if you just got rid of it you wouldn't have that that same rush you arguably you'd need to replace it with something we're not exactly flush with cash at the moment but there were some figures institute of economic affairs which said this was the single best reform any government could make to britain's tax system reckoned that we get three quarters of the lost revenue back by removing the wider social and economic harms that stamp duty causes.

46:28Obviously, that's a bit back of the fag packet. But I think arguably this would be a good idea. And what do you reckon? The Labour Party might steal a march on the authorities on this one and borrow that idea? Absolutely no chance. Well, they'd have to listen to Economist for a style, which they don't seem to have been doing for the last year. But I think also, you know, the idea that it would, if we scrap stamp duty, it would benefit the rich in more expensive homes. I think they would just avoid that at all costs. They've really distanced themselves from a wealth tax. I just don't see it happening.

47:06I think they'll blame it on cost. But actually, I think, you know, if you scrap it, you kind of need a reform property, they probably have to look at council tax, you know replace stamp duty they probably end up replacing stamp duty with higher taxes on owners of more expensive homes so i think it's something that they don't want to touch because it becomes as simon says it becomes too complicated i think that it optics wise i think that they will avoid it finally ang energy prices went up again at the start of this month but some people paid nothing for their energy last weekend. Who are these people?

47:45What is this about? Yeah, so during Storm Amy last weekend, wind generation, I think it was 50 % of electricity was wind. So it basically meant that the renewable supply onto the grid outstripped demand. So that in turn turned energy prices negative for the full day. So that was the first time it had happened in two years which is great sounds great but it's actually it wasn't that useful for you know the normal consumer that is either on a fixed tariff suppliers have already hedged and bought that energy did it months ago or even those on that haven't fixed and are on a variable tariff there you know they're stuck on the price cap because that that was that's already been set but there There are some savvier households, usually people with electric vehicles, or as one energy supplier that I spoke to said, energy nerds that are on tariffs, agile tariffs.

48:42So there's Oxfam Energy have got one. They essentially track the wholesale market sort of the day behind. So the idea of these tariffs is basically to shift your usage for things like laundry, dishwashing, that sort of thing, to outside of peak times. In theory, you get a lower rate. So for people that were tracking their energy and saw that prices were going negative, they were actually getting paid to use their energy because prices were minus 3p or something like that. So it's great for those people. But I mean, it's such a tiny minority. I think in theory, we'll probably get to a point where we'll all move on to these sort of tariffs because the national grid is very outdated.

49:28We need to get to a situation where, you know, not everyone is kind of doing everything at 4pm till 7pm and that sort of thing. It's going to take a while. I think that the most frustrating thing when I was writing this story is I thought it's probably quite a basic question is, well, can't we just save some of that energy? some of that negative energy and then just use it at a later date and actually it costs billions to do that because essentially the power lines that we use are so outdated there aren't enough of them to get them that energy from scotland down to london or wherever and we just do not have the infrastructure to deal with it so some people really benefited from it but the rest of us point all right then simon stat of the week 17 pounds that is the smallest premium bond holding ever to land the one million pound jackpot it was in july 2004 by a saver based in newham east london and this statistic comes from our fantastic do you have what it takes to be a premium bonds millionaire piece that our reporter helen graham wrote for us this week where we've got some exclusive data from ns and i on the million pound winners going back 31 years and we have analyzed the past 378 premium bond prize draws and 564 millionaires to see who won with the smallest amount who had to wait the longest how much they had to hold and so on and you can go and look up how many people have won near you.

51:06So go to thisismoney.co.uk forward slash saving to find that one. All right, Simon, thank you. And thank you and thank you for listening. You can keep up to date with all the latest breaking money news. Just go to thisismoney.co.uk or download the app. And if you have any comments or questions for the team or anything you'd like them to look into, Simon. You can email us at podcast at thisismoney.co.uk. And if you're an energy nerd, this week we want to hear from energy nerds. are you one of those people who basically isn't paying anything for your electricity you've got solar panels you've got batteries you've got an electric car you are absolutely nerding out on electricity in a way that ed milliband could only dream of that's you email us at podcast at this is money.co.uk ang wants to hear from you uh come to this is money.co.uk forward slash podcast to join the debate and read the comments and if you like our podcast why not rate us wherever you found us it helps other people find us too