0:00 Hey guys, it's Sasha. This week we found out that the UK government borrowed 15 billion pounds more than expected in the fiscal year that just ended in March. Less than one month ago, on the 26th of March, the Office for Budget Responsibility printed this report that said that the UK will end up borrowing 137.3 billion in that year. This forecast by the OBR was published 5 days before the end of the year for which it was doing the forecast and the borrowing came in at 151.9 billion pounds about 11% higher than the OBR forecast and this is a huge problem because the UK government is using the OBR to publish these fake forecast to support their tax
0:46 policies. When Rachel Ree delivered the spring statement, she proudly stated that in 2030, the UK will bring in more tax than the government will be spending if you exclude investment according to the OBR. So the OBR have told us that in 2030, the UK government will have a 15 billion pound surplus excluding investment in things like public infrastructure. So in 5 years time they think there will be a£15 billion surplus. The great minds at the OBR thought long and hard about it and that is what they came up with. But their forecast for the last year, the one that's just happened was out by 15 billion pounds. And that forecast was published with 5 days of the year
1:33 remaining. So they already had most of the data. So, excuse me if I dare suggest that the people who work at the OBR have absolutely no idea what they are doing. This is beyond incompetent. This is pathetic. In the modern age with modern data to publish that and be so far out, the UK government could probably get about as much use out of a sack of potatoes. How would anyone listen to a forecast for what the UK spending is going to be like in 5 years time when the error on the forecast for the year that's just happened is so absurdly high? What is the point in these forecasts if they are so wildly out? The OBR has become a government propaganda machine which prints whatever
2:19 data the government wants it to print to support their policies. It is completely worthless. It should just be deleted and abolished because it doesn't do anything of any value. I really cannot understand how the borrowing forecast could have been out 11% for the year with only 5 days of the year remaining. At the same time, standard and pause published their flash UK PMI report. This report shows the activity and health of private businesses in the UK. And you can see that the chart has started to head straight down and is now below 50, which means that private businesses in the UK are busy contracting. They are not doing well. We are now at the same level as the two recent wobbles that were achieved by the previous government. And the question is whether this is another one of those wobbles or if we're
3:06 watching the start of another major economic crisis like back during the financial crash. Rachel Reeves has gone to Washington this week today to attend the annual meetings of the IMF and the World Bank. And apparently while she's there, she's going to try and do a trade deal with the United States. Good luck with that one. I guess we'll soon find out how well that goes. I hope it actually goes well. I'm not holding out my hope. Make sure you go and subscribe to my free newsletter below in the description and the pin comment. I'm going to be sending one shortly, so make sure you get on the list. Now, in the financial year to March, the UK government collected just over a trillion pounds worth in tax receipts, which was 33.6 billion more than in the previous year. That's an increase of 3.3%. But the current spending by the
3:54 government, not all of the spending, just the current portion of it increased by 48.5 billion, which is almost 5%. So at the moment the rate at which spending is increasing is actually faster than the rate at which tax income is increasing. And if the data that we are seeing on how businesses are feeling is correct, then that gap might continue increasing. And we now have a new wave of rumors that Rachel Ree will have to go and then increase taxes again in the budget in October to plug this new gap. You see, last time she increased taxes, the economy began tanking and the gap between tax receipts and spending went up. So obviously the solution to fix this problem is to go and increase taxes
4:39 a bit more. Right? The IMF has just released an updated forecast for the UK economy which says that this year instead of growing by 1.6%, UK GDP will grow by just 1.1%. And to be fair, the IMF is slashing the growth forecast for all major economies because of Donald Trump's tariff war. The US has had their economy growth downgraded from 2.7 to 1.8% as well. So in this respect, the UK is not special. But a lot of data is pointing to the start of an economic slump in the UK and a lot of those issues are specific to the UK because of the policies of the UK government. UK consumer confidence fell in April and the current level is significantly lower than at any point before the pandemic.
5:27 Businesses in the UK are suffering because the increased national insurance contributions from the employers together with the increase in minimum wage comes at the same time as energy prices continue being extremely high. Our business electricity costs 34 and 39 per kowatt hour depending on the time of usage. large industry pays around 26 p. In the United States, that same number is more like 6 to 7. So, electricity in the US for business is something like four times cheaper. And Ed Milliban went on Sky to explain that the reason UK prices are so high is because the UK uses a lot of natural gas for energy generation. It's now our exposure to
6:12 natural gas, to the fluctuations of natural gas prices and the fact that gas sets the price a large percentage of the time in the UK and these prices tend to be higher which is driving these higher prices. And then he had a massive argument, a big verbal spat with the Sky News host arguing that UK energy prices are high and they are only high because they are set by global market rates and nothing else. Another point for why this country has unbelievably high energy prices is that we tax our energy. No, you're wrong. I'm I'm really sorry, but you're wrong about that because the price is set internationally. I'm really sorry, but that but that's not correct. Well, let's take a look at the numbers, shall we? According to Energy UK, 30% of the electricity generated in the UK comes from natural gas. So, according to
7:00 Ed Milliband, this is the reason why UK energy is so expensive. We use so much natural gas and the price of that natural gas is set by global commodity prices and after what happened in 2022 with Russia's invasion of Ukraine, the commodity prices on gas exploded. So let's look at the United States. You know, the country that pays four times less than we do for industrial energy. Well, according to the US Energy Information Administration, 43% of the electricity generated in the United States comes from natural gas, more than in the UK. How strange. They are even more dependent on natural gas than the UK is. And their energy prices are 75% cheaper. But I thought it's just commodity prices. And here is the chart
7:46 of the UK natural gas futures from the past few years. This is basically showing you the wholesale price of gas. Over the last few years, natural gas has been sitting at or around 100 p per therm. So about£1 per therm. You can see that right now it's a bit cheaper about 77p. And one therm is about 29 kwatt hours. So the cost of natural gas, the commodity has been sitting at around 3.3 per kilowatt hour. Then you can count on the fact that the efficiency of gas turbines is only about 55%. Sorry 45% of the gas gets essentially wasted in the process of generating electricity. So about 20% then of the cost of electricity for a business for a large business more it's a smaller percentage
8:32 for small businesses like ours is natural gas about 20%. The rest of the cost 80% is the cost of energy companies providing you the electricity and their profits and taxes. Uh that's it. So the operational cost, you know, maintaining the network, things like that, and taxes, like for example, the 20% VAT that applies to energy use for businesses. So unfortunately, the math just doesn't stack up. The reason UK energy prices are insane is not because of global gas prices. Unfortunately, Ed Milliban chose to bring political to a numbers fight. The reason UK energy prices are so obscenely high is because of the very high levels of taxation and because of the marginal pricing used on electricity generation.
9:19 Which means that even if other ways of making electricity are cheaper, all electricity produced at any moment is charged at the highest price. The price of the highest source of electricity at that point. This policy exists by the way because it was set up in the 80s before computers existed. And it was much easier to do it that way. It was operationally something that they could do because that's the systems that they had in place. Now 50 years later, we do still we do have computers, right? But we still use the same antiquated system. It's like trying to do calculus by using an abacus. It is so incredibly stupid. Everyone in the industry knows it's incredibly stupid. Everyone who understands the system knows it's stupid. Consumers and businesses are paying much higher rates for electricity for no reason. And the only winners are
10:04 the companies that charge the higher electricity rates. At the moment, we have no data for April. And everything that you hear is anecdotal. So, we haven't finished the month yet. But from the stuff that I am hearing, from the stuff that a lot of you are hearing, from the stuff that people are saying, businesses are saying, a large number of companies have stopped hiring and many are making layoffs. The cost of hiring low-wage staff has gone up over 10% this month for those businesses. And for businesses with a low margin, a 10% increase to the biggest business cost that they have is a very big deal. The most frustrating thing with all of this is that Rachel Reeves already knew that all of this was going to happen back in October because thousands upon thousands of businesses in the UK specifically told her that the budget announcements
10:51 that they made were going to screw the economy. And they explained precisely how that's going to happen. Even random guys on YouTube went and made videos explaining what the massive problem is with the policies that they came up with. In the spring statement, 6 months later, Rachel Ree had the opportunity to make some adjustments, to make some changes. She didn't really have to wait until the spring statement. If she wanted to put things right, she could have literally done it on any other day. There is no legal obligation to only go and make these announcements twice a year. But the spring statement did come and there was zero new policy announcements like nothing. Not a single major change. Nothing on the taxation, nothing. As we're seeing the UK economy implode, this government should be held
11:38 accountable because none of this was unexpected. We all knew it was coming. And when the numbers finally come in, you know what they are going to do? They'll just blame everything on Donald Trump and tariffs. You already know it, right? You know it. Tariffs are going to be felt by some of the UK, by the car industry in the UK, a few select others, but the US tariffs don't really impact a very large part of the UK economy. The UK GDP is at around 2.7 trillion. And exports to the US in total make up about 180 billion out of that, about 7%, less than 7%, 6 and a half%. The tariff on the UK, the tariff on the UK at the moment is just 10% and there is the 25% tariff on cars. But those cars are generally in the super premium segment
12:24 which is significantly less price sensitive and people buy them not necessarily because of the specific sticker price. So it probably will have an impact but it's not going to be a massive impact on the UK economy. So when we get the numbers finally and Rachel Ree comes out and says that it's all because of the tariffs. It will of course be Anyway, go and sign up to my newsletter if you haven't done it already. Go to my website sashyansin.com. Type in your email and I'll send you an update soon.
