Tom Williams

@isnit0 @DannyBee595 The public sector pension spend appears in departmental spend. Also devolved spending has large chunks of welfare/NHS

@DannyBee595 Less than one third of all pensioner benefit spend.

PSA: Pensioner Spending is the single largest line item here - *£160bn*. More than half of all benefit spending. More than NHS England, or all NHS Providers. Want to pay less tax? Reduce the benefits we give to people who’ve had an entire life to prepare and save.

@Benpagelondon @jamesdmorris Time of year matters though for that chart. Probably best showed as Jan to Dec with each year overlayed

Same data, two different charts! A reminder that context - and proper explanation etc is vital!

@PJTheEconomist See also VAT on private schools

President Trump is levying taxes on imports into the US. Geniuses that we are, we are levying taxes on exports. (Providing higher education services to overseas students is an export). thetimes.com/article/9e7169…

@Frencheconomics 100% we’ve learnt there is a nasty reinforcement mechanism for inflation shocks in the UK economy

Key point from Wilf. This is not a gotcha for either political party - it’s a failure on the watch of both. Embedding inflationary shocks through widely-used regulated prices (for labour, transfer payments, key services) has made the energy price ratchet even more pronounced throughout the economy.

Only four in ten UK households make a net contribution to the state The richest households contribute £57k, the ninth decile £17k, and the eighth £11k. The poorest decile receives about £24k 1/4

@Frencheconomics You sure about that? 10yr gilts had rallied 30bps whilst US yields were flat to small up.

No. The vast majority of the move down of Gilt yields in mid October was a synchronous downward move in global bond yields.

@Frencheconomics As long as the bonds expiring in the APF are replaced are refined by short-dated debt the impact on the gilt market should be muted as the banking sector will just swap the O/N reserves destroyed for new sub-5yr gilts. QT imho isn’t what is driving higher UK rates.

And at a time when market speculation is rife that the Fed will end its QT program it is instructive to compare the BoE divestment pace, with that of the Fed and ECB. Synchronised until this year, then a divergence. IMHO there is insufficient discussion on whether this is part of the emergent Gilt spread.

@ClausVistesen @julianHjessop The curve is pretty flat from 20yrs to 35yrs - nevertheless the duration risk you run dwarfs the incremental yield/roll that would dribble into your return every day. 30yr bonds are a law onto themselves and are more about supply/demand dynamics than about economics.

@TomW100 @julianHjessop Steep roll on the curve no? The point I am getting at is simply that if 2s and 10s are "well-behaved", which I am not sure they are, and 30s are bear steepening, that eventually should bring in real money. So are 30s driven by something that the 10s aren't?

Just a bit of pushback on the focus on 30-year gilt yields, which is largely media driven (these yields are the ones that are good for headlines about multi-decade highs), or just clickbait ("the UK's bond market is collapsing" - which it isn't) However, the 10-year is more representative of where the government is actually borrowing money - this yield is uncomfortable high but hasn't really broken out of the range it has been in for most of 2025.

@ClausVistesen @julianHjessop ☝️You don’t buy a 30yr bond for carry. You can lose a year of carry in an afternoon if the yield moves a few bps…….

@julianHjessop Yes, but then you're buying the 30y no on the roll and carry? I.e if it is not selling off on fiscal fears, it's a buying opp?

@julianHjessop This is fair. The move in the 10yr is more important but regardless of the smaller move there the level of the 10yr asks very uncomfortable questions fiscally. The move in the 30yr matters because it puts more pressure on the 10yr as 30yr debt is now seemingly not an easy option.

@julianHjessop @SteveBakerFRSA The article on the right sort of explains the fiscal problem on the left… can’t make even small changes to pension/benefit/health spending without howls of protests…

Ouch... 👇 IMHO, talk of an IMF bailout is wide of the mark - we borrow in our currency and are not facing a balance of payments crisis (at least, not yet). But there's little doubt that the UK public finances are on the road to ruin - and that current policies are not helping.

This is bleak. Not a single new home was started in two-thirds of London's 33 boroughs. We need an urgent rewrite of the London Plan.

@rcolvile That’s not fair - they basically saturated the full market demand for very long dated (and index linked debt) from 2011-2020

If there is one chart that damns our fiscal establishment it is this. During a period of historically low interest rates we utterly failed to lock them in when issuing our national debt. Basically zero shift even when rates started rising again...

@benjaminbarnard @rcolvile When you do the sums reserves tiering or HMT not repaying realised QT losses are functionally very similar to just forcing the MPC to cut base rate. Feels like an invasion of monetary policy independence.

I agree. There is an important discussion to be had about the trade‐offs around reserves. QE has left the banking system holding large quantities of central‐bank reserves. These reserves earn interest at or near the Bank’s policy rate, so as rates rise, the public sector’s outlay on interest also rises. If the Bank chose to pay less interest on some or all reserves (or changed the structure of reserve remuneration—e.g., via tiering), it could reduce immediate costs to the Treasury. But that would effectively impose a “tax” on banks, potentially disrupting money markets, and undermining the transmission of monetary policy. Conversely, accelerating the unwinding of QE (thus shrinking reserves) reduces the total paid on reserves, but crystallises valuation losses on the gilts’ sale. In each scenario, costs merely shift in timing or locus. A serious policy discussion should weigh these competing considerations—operational independence of the Bank, the health of the banking system, and the broader goal of maintaining credible monetary policy.

A really easy way for Reeves to save approx £20bn a year would be to politely ask the Bank of England to stop selling the QE bonds at a loss

@tomhfh A big chunk of devolved govt is health too

Where does it all go? Welfare, the NHS, and debt interest are the three largest slices of the state spending pie. Together, these three areas cover almost 50% of where your taxes go.

@OneHotCode1 @salr_nyc @saeedamenfx @donnelly_brent I enjoyed it more than the euro swaps curve inversion exotics blow up - buying great big clips of USDJPY felt more glamorous to my young self than scrambling around to give 5mm clips of 10s30s to whoever would take it.

@TomW100 @salr_nyc @saeedamenfx @donnelly_brent Did you enjoy the experience? I remember that as enjoyable as a root canal treatment

Ok.. this is, by far, my all-time favorite structured product/derivatives blowup story ever... This blowup left some decent scars at the large banks, caused quite a headache to exotic/hybrid desks, broke volatility models, and taught an important lesson about cross-gamma...

@OneHotCode1 @salr_nyc @saeedamenfx @donnelly_brent I had the joy of having to gamma hedge two PRDC books in London hours in my first trading job. It was definitely an abrupt lesson in second order risks.

CCing here a few FX folks who would appreciate a good FX-related story and still live to remember the fun times of 2008-2009 @salr_nyc @saeedamenfx @donnelly_brent

I don't know do I. Lots get said that doesn't actually matter. But if I'm in a Labour MP run jng for reeelection in four years time and my opponent on the doorstep can just say "they sent £18bn to Mauritius instead of fixing that pothole" isn't it just isn't game over?

@EdConwaySky This is daft - it’s a function of the capital gains tax treatment far more than the underlying liquidity.

Interesting chart