Gilty Pleasures
By Holly Mackay, Founder & CEO
5 Sep, 2025

Welcome back, everyone. The rain is here, meteorological summer has ended, school’s back and someone’s emailed me looking for sponsorship for the Ideal Home Christmas show. Nooooo!
Despite my flip-flops still being on the bedroom floor, the Budget rumour mill has already started and 26th November is the date when the Chancellor will reveal how she is squaring an almost-impossible seeming circle.
The bottom line is that there is not enough money in the British pot. And the Government is paying the highest interest rate on its debt since 1998.
Gilty pleasures
Government gilts are in the news, as are Government Guilts over stamp duty shenanigans as Angela Rayner resigns (at 12pm, just as we were about to press 'Send').
Gilts are a type of investment known collectively as ‘bonds'. These are effectively IOUs where the Government borrows money from investors, and pays them interest in return. We can buy and sell these IOUs to others so we can also make a profit (or Capital Gain) on these bonds. Currently, the ‘interest rate’ (known as a ‘yield’) on 30-year Government gilts is at a 27 year high – it’s about 5.7%. For a so-called risk-free investment, this is pretty good.
Higher rate taxpayers and those holding a lot of cash should read up on gilts as a tax efficient way to hold larger sums of cash. For example, you can buy a gilt which matures in October next year – you will pay 96.4p today and you know you will get £1 back next October. So, you get a certain return of about 3.7% and pay no tax on this Capital Gain.
Many larger platforms, including Hargreaves Lansdown, AJ Bell and interactive investor, now offer these gilts as well as shares and funds.
The “Moron Premium”
These higher rates may be good news for individuals with cash. But it’s bad news for the Government because the cost of servicing these loans becomes crippling. It’s also a bad reflection on how professional investors see the UK. They think it’s a bit of a dicey bet at the moment, so they have to be offered higher interest rates to lend the UK Government money. 10 year bonds in the UK are paying around 4.7% - that’s 2% more than in Germany - which basically means we’re seen as a bit ’scheisse’.
Some economists have rather brutally called this a “moron premium” – paying higher rates to persuade investors because of previous and perceived policy missteps. And before any of you shout at me for political bias, this has been aptly demonstrated by both sides (hello, Liz Truss).
The “So What” to all of this can be summed up in two words. Higher taxes. Almost inevitably coming our way soon. We have to plug the gap somehow and most MPs who fancy retaining their seats are not going to vote for austerity.
Second-guessing the Budget is not a great idea, but next week I’ll look at sensible things we might be able to do now to legitimately minimise tax.
And the big technology question – stick, twist or run?
No-one can have a view on investing in 2025 without having a view on technology. This week we’ve written a piece with Polar Capital on the question of the moment – what is the outlook for this most hyped of sectors? Ben Rogoff, manager of their Technology Trust, reminds us that there were seven corrections of more than 15% between 1995 and 1998, before the massive returns seen by tech in 1999. So, volatility in this sector is nothing new although it’s being compounded by “exogenous macro and political volatility.” (I had to read this sentence 3 times and Google ‘exogenous’ to make sure I understood it – but it’s a very good read!)
Anyone wanting to diversify away from tech will also enjoy this piece from the Baillie Gifford’s Managed Fund team on their most exciting 7 growth picks – I wasn’t expecting to see Australian Government Bonds and something about nuclear submarines in there.
Have a great weekend, everyone. If Keir Starmer is reading this, he could copy Tony Blair’s Spotify list. “Things Can Only Get Better” is probably a good tune to take him into the weekend.
Holly
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