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The long run up to Britain’s next Budget on November 26 is littered with pratfalls. Not least are the deep fractures over welfare on Labour benches and the panic unleashed among savers over assaults on UK pensions. Yet when compared to several of the nation’s G7 partners, the UK’s fiscal position, as dire as it has become, is less scary.
Our nearest neighbours in France face the worst of all worlds. The frequent changes in prime minister – with Francois Bayrou the latest for the scrapheap – is a reminder of the post-Brexit Tories . French public finances are in a horrendous state. If President Macron fails to gain a grip, the threat to EU stability and the hurdles to Europeans delivering a commitment to raise defence spending to at least 3.5 per cent of output (from the current 2.1 per cent) by 2035 could be insurmountable.
On present trend, France’s fiscal deficit this year is set to hit 5.5 per cent of total output, against a Brussels target of 3 per cent. The country’s debt is on course to hit 130 per cent of the size of the whole economy by 2030. The yield on French bonds is higher than those of Greece and Spain. The problems in Paris particularly are pressing as the option of whacking up taxes is very constrained. OECD data shows that at 45.6 per cent of gross domestic product (GDP), France is top of the European list for high taxation. That places it ahead of the high-tax Nordic nations of Denmark, Finland and Sweden.
The UK has its highest tax burden since the Second World War, but at 38 per cent it still thankfully lags Europe’s worst offenders. The other big outlier among the G7 is Japan where prime minister Shigeru Ishiba, a budgetary hawk, has just resigned. Japan’s debt at 250 per cent of GDP is out of sight. Yields on Japanese bonds are at unprecedented levels.
Yet the prospect of a return to Abenomics – and an intense focus on fiscal and monetary stimulus – has lifted the Nikkei to new heights. It would be terrific if Keir Starmer’s government would recognise it could soon join the doom loop. That means better understanding the perils of higher taxes on business and wealth, and the inflation costs of the sprint toward renewables. The Bank of England needs to pull back from its dotty rush to unwind the gilts it has taken on to its balance sheet since the great financial crisis. Don’t hold your breath.
Raising the standard
Policyholders with the Phoenix Group have endured the most dizzying experience. The list of insurers swallowed, such as Scottish Mutual, Pearl and, significantly, Resolution, means that over the last couple of decades consumers could be forgiven for not having a clue as to the name on the letterhead. Any connection between policyholder and provider disappeared long ago. Now, it is at it again. Phoenix is to adopt the venerated brand of Standard Life next year, having acquired it from Aberdeen-Standard Life in 2018.
Understanding what goes on under the bonnet of Phoenix is tricky. Total cash generation tumbled in the first half of 2025 from £950million to £784million. The shares were among the FTSE 100’s biggest fallers despite a handsome 8.5 per cent dividend yield. The new Standard Life offers a neat home for stranded and orphan insurers. Under successive management it has engaged in ruthless cost-cutting. The underlying performance of savings under its command, one fears, is less impressive.
Chief executive Andy Briggs, who is fearful of new attacks on pensions savings in the Budget, should be loudly heard in Whitehall. Downing Street is peppered with think-tank Resolution Foundation alumni, including Torsten Bell and Minouche Shafik, due to the generosity of Sir Clive Cowdery. He is the entrepreneur behind Resolution Life. Cowdery came up with the idea of buying and selling insurance firms and their policyholders.
Bad taste
Among the best performing London shares in latest trading was food flavourings minnow Treatt, snapped up for £156.6million by Natara, a company controlled by Exponent Private Equity. It represents a departure from transparent listed markets into the black box of private capital. One wonders what new investment minister, Grimsby Town co-owner Jason Stockwood, makes of such exits?
