the new, weird world of AI accidents is here

We find that the net fiscal impact is neutral. The cost of the intervention (up to £24 billion) would be recouped through lower debt servicing costs & higher tax receipts. If we assume less look-through by the BoE or more economic scaring, the intervention turns net fiscally beneficial. (3/5)

NEW: faced with the ongoing Iran war energy shock, temporarily capping energy costs can be the optimal macro management tool. We did some in depth modelling, showing how this can lower inflation and interest rates, protect growth and be fiscally neutral. (1/5)

The all important question on how the Bank will react to a supply shock this time. This is one crucial aspect to decide whether universal & temporary energy price caps can be the right tool to manage this shock.

The @bankofengland.bsky.social 's downside scenario is eerily close to where oil markets currently are.

One more reason why obsessing about headroom against a highly volatile (and revision-prone) numbers is a not an ideal fiscal framework. Big IPPR report on an alternative approach coming out soon. www.ft.com/content/c6f2...

New forecast: Over the next 4 years, the Treasury will be transferring £18 billion per year to reimburse the Bank of England for its losses from QE. Down slightly but still huge. Neither the ECB nor the Fed do this. Undoing this could free up £5bn per year for the rest of this parliament.

Good news for wages: OBR expects economic growth to be driven relatively more by productivity increases & investment, and less reliant on low wage labour.

Really excited to see the government announcing a cap on ground rents. As recommended in @samalvis.bsky.social and my "war on bills" piece. As we argue, the government should leave no stone on unturned to lower the cost of living in ways that people can feel. www.ippr.org/articles/a-w...

The Bank of England must pull its weight, and be more open about the impact of its active QT on yields. www.ft.com/content/4137...

Slightly surprised the @economist.com joins the cakeists here - arguing for *both* fewer tax increases and much bigger headroom at this autumn budget. Agree with other bits of the article though - eg call for more pro-growth tax reform. www.economist.com/britain/2025...

No, welfare spending is not 'out of control'. (There is an underlying rise in health-related benfits, but this needs sensible reform - not knee jerk cuts.)

Worth noting that this budget confirms, borrowing will *more than half* over the course of this parliament. Should appease financial market worries that UK is not sticking to its fiscal plans. Should help reduce the UK borrowing cost premium.

Fantastic news that @RachelReevesMP has more than doubled fiscal headroom - a core recommendations of @IPPR . This will bring stability against shocks and hugely reduce market uncertainty.

NEW: The high cost of living is on the forefront of the public's mind. The government should launch 'a war on bills' - a multi-year policy campaign to bring costs down. There are no silver bullets, but there are lots of small things that the government can do to show that it's on people side. (1/4)

Really wild that UK bank shares are down by 3-4% this morning, apparently in response to my new report! Worth keeping in mind that share prices were up 60-140% since interest rates increased. To some degree thanks to the taxpayer subsidy, which we're proposing the government should reverse.

The UK is an international outlier here in making such gigantic taxpayer losses at the central bank. Even many in financial markets are puzzled as to why the BoE and Treasury are allowing this to happen. It's time to fix this leak now, saving us £20 billion yearly.

1) About half of the taxpayer losses currently go straight to commercial banks. And much of this straight to shareholders. Banks' share prices doubled. The government can stop this flow via a Thatcher-style targeted tax on commercial banks. This could save £7 billion in 2029/30.

'Wealth exodus'-gate continues. A cautionary tale for many (renowned) media outlets to next time be more critical of the numbers they cite. And to be more responsive to when anomalies are uncovered.

Plus all kinds of effects of people selling assets in anticipations of budget and as well as delaying sales going on. (2/2)

FT getting a bit ahead of itself here - slightly puzzled by this story. Release they’re referring to is pre budget as far as I can see, and the actual data will only come out with some delay. Time for a bit less tax sensationalism. (1/2)

Today's inflation figures came in higher than expected (3.6%), driven by transport costs. Driver is motor fuel (petrol & diesel) prices falling slower than expected. => Fossil fuel energy prices still causing inflation volatility. It's another reason to accelerate transition to electric vehicles.

Hmm the most recent HNWI number, according to your above definition, seems to be 2.7 million. So that matches the TJUK statement? holbornassets.com/blog/finance...

Interesting potential economic impact of AI agents - online platforms as we know them might be disrupted! HT @jackclarksf.bsky.social)

Feels like this FT article on UK tax is a bit too vibes-based. UK taxes are unremarkable in European context. Our tax wedge is in the lower third of OECD countries. Our 24% higher CGT rate is lower than many European countries. Where the UK does stand out is the cost of housing and childcare.

Interesting piece estimating fiscal costs of QT alone could sum to £19bn. Messy entanglement of monetary and fiscal policy. Neither in the interest of the Bank nor HMT for this to be the case. www.ft.com/content/0d0f...

To fill these gaps, AI policy needs to link more clearly to the government's objectives. We make 4 recommendations: (1) Establish an AI tracking unit (2) Break down missions into 'problems' (3) Link innovation grants to problem solving (4) Use procurement to boost innovation

And too few innovations are aimed at solving big societal problems, such as in public health and climate change. Eg only about 12 per cent of AI in health applications are focussed on the crucial prevention space. In transport, only 9 per cent focus on sustainable travel. (3/5)

Too many firms focus on improving existing businesses processes (eg back-office tasks such as marketing, customer management and administration). Only about 15 per cent focus on building something new and exciting, via product innovation and R&D. (2/5)

NEW: The government has said it wants to ‘shape the AI revolution’. But our new report finds that much of UK AI innovation is generic and not focussed on solving hard problems. Our detailed AI database shows only one in seven companies focus on solving a specific problem. (1/5)