George Osborne MUST now U-Turn 'Granny Tax'!

hugheskevi

The flaw with this is that so many young people can't find work, would it be possible that if people could afford to retire they would free their job up for a younger person.

Lump of labour fallacy relevant here.

Although in the short-run I think that 'job-blocking' is a valid argument, it isn't in the medium to long-term.

For example I am delaying my retirement, I intended to retire this year at 59 but as my state pension has now been delayed again and I don't know how much I will lose on my S2P, I will probably work for another year or two until my 2 youngest have finished at university.

In economic terms, you are remaining a productive member of society, rather than retiring and becoming a burden (by which I simply mean unproductive, it is not a pejorative term - it doesn't matter whether people have saved or not for their retirement, when they are not producing anything they are consuming resources without producing any, and hence are unproductive to society).

Ultimately once unemployment returns to normal levels, people working longer will mean more production and higher GDP.

Things such as changing State Pension Age take a long time to implement - even the increase to 66 was done at 6 years notice, which was remarkably quick. No-one will ever have any idea how the economy will look a few years down the line, so policy changes such as that have to look to medium and long-term rather than short-term, as there is never a good time to make the change (eg, high unemployment in recession, so not a good time to change, but buoyant revenues in boom, so not a good time either as there is no immediate need with which to counter lobby group resistance and so on.)

It is all very complicated and the sums are simple.

I'd disagree it is simple.

Macroeconomics is frequently butchered in the name of simplicity, most frequently by erroneous analogies between running a household and running a large open economy.

In your example about what would happen if you retired, assume that there are 3 folk involved (i) someone currently unemployed and hence unproductive currently (ii) the younger worker and (iii) you

If you carry on working, there are 2 workers and one unproductive individual (the unemployer individual). If you retire, there are 2 workers and one unproductive individual (you). The claims on resources (ie income and capital) have changed around a bit, but the overall size of the pie hasn't changed. There has been a beneficial impact on Govt expenditure in all of that, but the same effect could be achieved through the tax and benefits system by taking and giving from the 3 people if that is what we want to do, as ultimately the same output is being produced so it is just a question of who gets what share of it.

However, if you did not retire and the economy recovered a bit [the medium term] and the unemployed worker were able to find a job, then there would be 3 productive individuals. Whereas if you had retired you are far less likely to return to the workplace and the likely outcome is 2 productive workers and 1 unproductive, and an overall smaller output.

Which somewhat illustrates the arguments about the need to stimulate growth vs the need to reduce Govt expenditure - they are complicated issues

gadgetmind

hugheskevi wrote: »

Which somewhat illustrates the arguments about the need to stimulate growth vs the need to reduce Govt expenditure - they are complicated issues

The kind of growth that's dependent on the government taxing, borrowing, and spending is rarely the kind of growth we want as isn't worth the immense cost to future generations. The one exception to this is growth that comes from key infrastructure spending as this can provide long-term GDP growth and (if done correctly!) can make people lives more pleasant.

Sadly, our government usually borrows just to cover day-to-day ongoing expenses rather than for real investment.

srcandas

Just wanted to throw in that assuming someone not formally working is non productive is not always true. In my village I can think of three people who are not formally employed but their contribution to society and wealth of the country is greater than your average employee.

I can also think of retirees who support workers. Without them the employed person would not be employed.

I can also think of people who work but you cannot say they contribute a great deal

Perhaps the world needs to rethink and as some posts here suggested start thinking about contribution outside the work/non-work box.

But interesting discussion :beer:

hugheskevi

Just wanted to throw in that assuming someone not formally working is non productive is not always true. In my village I can think of three people who are not formally employed but their contribution to society and wealth of the country is greater than your average employee.

Indeed - a good example would be a retired person looking after their grandchildren who would otherwise be looked after by a child-minder. And there is huge economic value in the informal care given to elderly relatives by their families, who would otherwise fall on the State to support and lead to financial transactions (ie paying carers).

In reality I think most folk will be productive to some extent or another, especially the recently retired. Ideally you would measure this contribution, but statistically the best you are probably going to get on a robust basis is measured financial transactions (ie wages). The general theories still in general hold though - just replacing productive/unproductive with more productive/less productive - once folk leave full-time employment they will usually produce less.

It is difficult to measure productive but non-financial contributions such as those above, so many won't be captured in GDP measures. And of course, what is measured is managed, so not surprisingly the headline measures get most attention.

Which then leads to debates about well-being and happiness being the measures that should matter most, rather than a purely financial measure such as GDP or salary being the key measure of success. Further showing that the whole thing is fiendishly complicated to even try to balance, let alone manage in any structured way.

I can also think of people who work but you cannot say they contribute a great deal

I put myself firmly in that category

Not least as I'm currently nursing a broken arm from a road traffic accident last week - already very bored from not being able to do that much...I think the last thing I would want when I retire many years from now is to spend 7 days a week being unproductive!

atush

You could make an argument that unpaid child care by grandparents actually reduces GDP as if the child went to a nursery that would mean fees, income and taxes which are removed fromt he economy if they do the work unpaid.

This would assume the parent would work in either case, but there are cases that this is the only way a parent can afford to return to work in which case GDP would be unaffected.

mumps

hugheskevi wrote: »

Lump of labour fallacy relevant here.

Although in the short-run I think that 'job-blocking' is a valid argument, it isn't in the medium to long-term.



In economic terms, you are remaining a productive member of society, rather than retiring and becoming a burden (by which I simply mean unproductive, it is not a pejorative term - it doesn't matter whether people have saved or not for their retirement, when they are not producing anything they are consuming resources without producing any, and hence are unproductive to society).

Ultimately once unemployment returns to normal levels, people working longer will mean more production and higher GDP.

Things such as changing State Pension Age take a long time to implement - even the increase to 66 was done at 6 years notice, which was remarkably quick. No-one will ever have any idea how the economy will look a few years down the line, so policy changes such as that have to look to medium and long-term rather than short-term, as there is never a good time to make the change (eg, high unemployment in recession, so not a good time to change, but buoyant revenues in boom, so not a good time either as there is no immediate need with which to counter lobby group resistance and so on.)



I'd disagree it is simple.

Macroeconomics is frequently butchered in the name of simplicity, most frequently by erroneous analogies between running a household and running a large open economy.

In your example about what would happen if you retired, assume that there are 3 folk involved (i) someone currently unemployed and hence unproductive currently (ii) the younger worker and (iii) you

If you carry on working, there are 2 workers and one unproductive individual (the unemployer individual). If you retire, there are 2 workers and one unproductive individual (you). The claims on resources (ie income and capital) have changed around a bit, but the overall size of the pie hasn't changed. There has been a beneficial impact on Govt expenditure in all of that, but the same effect could be achieved through the tax and benefits system by taking and giving from the 3 people if that is what we want to do, as ultimately the same output is being produced so it is just a question of who gets what share of it.

However, if you did not retire and the economy recovered a bit [the medium term] and the unemployed worker were able to find a job, then there would be 3 productive individuals. Whereas if you had retired you are far less likely to return to the workplace and the likely outcome is 2 productive workers and 1 unproductive, and an overall smaller output.

Which somewhat illustrates the arguments about the need to stimulate growth vs the need to reduce Govt expenditure - they are complicated issues

Sorry, the sums are simple was a typo, I meant they aren't simple.

What would you class as medium term, just wondered as I think I am job blocking now and will end up retiring when things might be picking up. The worst of all worlds I think.

I understand what you mean about me becoming unproductive but without a doubt in the short term it would cost the government less to give me a pension than to give my younger colleague CB CTC etc. For my employer the risk is my younger colleague might move on. Frustrating for us all, I have been training her, and she has been doing some courses, she needs the extra pay and extra hours. It had all been planned out but I don't feel I can jump this year. For our employer the risk is she will decide to move on, then I go and who takes over?

I can see me being in a position where I decide it is the right time to go and they want me to stay and train someone else. Why do I feel I am going to work till I drop? I'm not being paranoid am I? It is a global conspiracy to make sure Mumps can never retire. I think everyone should have a whip round to let me retire and then the whole conspiracy could stop and it would be better for everyone. Maybe we should put it to George Osborne.

browniej

mumps wrote: »

Speaking as a mother of four who currently has 43 years contributions and nearly 7 years to go until I get my state pension, can I point out that many women have managed to get 39 years contributions. In my experience it is many years since it was a given that women gave up paid work when they became mothers.

I would agree. Many women today are choosing to continue with work, prpbably out of need - large mortgages etc.

However some still choose to take time off whilst the children are at school so it will help there although HRP did also help.

CLAPTON

atush wrote: »

You could make an argument that unpaid child care by grandparents actually reduces GDP as if the child went to a nursery that would mean fees, income and taxes which are removed fromt he economy if they do the work unpaid.

This would assume the parent would work in either case, but there are cases that this is the only way a parent can afford to return to work in which case GDP would be unaffected.

to some extent, that shows that measures of gdp are a little meaningless

zygurat789

gadgetmind wrote: »

No, not really. Removing the age allowance claw back by providing the same allowance to (nearly!) everyone makes my retirement projection spreadsheets much simpler. Some complex tax calc equations just disappear and the overall effect is close to neutral.

The recent (last 304 years) changes to the caps on pension contributions are byzantine and my spreadsheet is thus stunningly complex. It cost me £1500+ in accountant's fees just to sanity check it all. And next year, it might all change.

Tax and pensions *must* all keep getting simpler, with streamlined changes that can be understood by all, or no-one will know where they're going to stand.

But you miss the point.
If abolishing a clawback is simplifying the tax system what is introducing one if not complicating it. And it isn't a complicated calculation, that accountant must have seen you coming.

zygurat789

browniej wrote: »

Everyone is finding life difficult at the moment and today's pensioners have to take a bit of that too.

.

Even those who've had their tax rate cut from 50% to 45%?