How to protect your assets under a Corbyn government

zagfles

grey_gym_sock wrote: »

[a delayed reply, to various points made ...]

1) is a small fall in the real value of earnings over 10+ years an acceptable outcome, given the hit the economy took from the GFC?

first, the economy has grown (slowly) over that time, which was partly to due population growth, but it's also grown per capita. but earnings have declined, even as GDP-per-capita has risen: see the first graph in this article: http://www.taxresearch.org.uk/Blog/2017/09/07/growth-but-not-as-weve-known-it-is-an-issue-we-have-to-face/ ... so we have a distribution problem: all benefit of the growth (plus a bit more) has gone in profits (to the richest few percent), not to workers.

You realise that most private sector workers are now in DC pension schemes, invested heavily in equities, so they will also benefit from company profits, not just the "richest few percent".

secondly, it is a lot worse when you take into account house prices. these are excluded from all inflation measures, and have risen much more than any inflation measure.

Only in the south-east. In the rest of the country house prices have gone down over the last 10 years in real terms. http://www.bbc.co.uk/news/business-41582755 . However...

nearly everybody wants to buy a house at some stage in their life. as a result, we have effectively seen a huge wealth transfer from people who haven't yet bought a house to people who own (or inherit) more than 1 house. this is a big part of why so many younger people are (rightly) angry.

Yes indeed. Personally I'd like to see the investment driven demand for housing reduced though govt policy, but done carefully to avoid a crash which would cause far worse problems.

2) but does growth matter anyway?

no, it doesn't. what matters is that

- austerity is literally killing people ( http://www.independent.co.uk/news/health/tory-austerity-deaths-study-report-people-die-social-care-government-policy-a8057306.html ) mainly due to underfunding social care and health care;

That report, or rather the hysterical conclusions drawn from it, have been widely discredited. The 120k figure is based on the speculative assumption that mortality rates would continue to reduce had spending increased at the unsustainable rates leading up to the the peak of the boom in 2007.

If you look at mortality rate changes in other EU counties, they are very similar, from a wide range of types of govt, life expectancy has seen a recent decrease in most countries. See http://ec.europa.eu/eurostat/statistics-explained/index.php/Mortality_and_life_expectancy_statistics

The UK is not out of line with other similar countries.

- not enough housing is being built (and what's being built is too expensive: we need to built lots of council houses - which hasn't been done for many decades, including by the last labour government);

People don't necessarliy need council houses, they just need houses they can afford. I think a lot could be done to reduce demand. Loads of houses in London are owned by dodgy foreign investors using them as a safe haven for their money. Loads of second home owners have destroyed comminities in areas like the south west where the houseprice/earnings ratio is massive, resulting in locals kids having to move away to somewhere cheaper or where they can earn more.

- many people can't afford to feed themselves or heat their homes;

Generally a myth, takeaways flourish in poorer parts of towns, some councils are trying to prevent takeaways opening in some poor areas due to health concerns, obesity is higher amongst the poor (and yes you can be obese and malnourished, but you don't get obese by not eating, and contrary to popular belief healthy food is often cheaper than unhealthy).

- public investment in clean energy (especially tidal power - which is reliable, and the UK is exceptionally well placed for), and electrification (of railways, but also a commitment from the government to a comprehensive network of recharging stations, to encourage electric cars), and other areas, is far too low

Some would say we should be reducing traffic on the roads, but the obsession with growth means things like traffic and consequent problems are growing.

and while i don't care about growth per se, directing resources at all the above things will, both directly and indirectly, happen to increase GDP. so right now, to address various specific needs, we do need some more growth.

Till when? Why not try to consume less, rather that be obsessed with getting richer all the time. How about letting the poor countries of the world catch us up? If you think (like the hysterical conculsions drawn from the above report) that a very slight increase in mortality rates is a scandal then try looking a the difference between us and sub-saharan Africa. That's a real scandal.

3) but don't we need to raise taxes to pay for that?

not necessarily; and definitely not pound-for-pound (i.e. not as much as £1 extra tax raised for every £1 extra public spending).

because public spending can, under some conditions, pay for itself. see http://touchstoneblog.org.uk/2017/07/can-increased-public-spending-pay/

Lots of guesswork and speculation admitted to there. What if it doesn't work? Then we'll have increased debt, probably reduced our credit rating, meaning interest paid on govt debt will increase, meaning more borrowing required to stay afloat...basically down the Greek spiral to economic ruin. Or the Venezuelan if we try to solve it by printing money.

the economy is a dynamic system: changes in both public spending or in taxes will affect what households and businesses do. when higher public spending gives households more income, they will spend most of it, in the private sector, which gives other households and businesses more income again. all this extra household expenditure will hopefully also encourage businesses to invest more. so £1 of extra public expenditure typically increase GDP by more than £1; this is the "multiplier" - e.g. if the increase in GDP is £1.50, then the multiplier is 1.5. as a result, a large proportion of the extra public spending ends up coming back to the State in extra tax revenue. and if it doesn't all come back, that may be perfectly OK: public debt will have risen, but so will GDP, hence the debt-to-GDP ratio may even have fallen.

an important qualification is that this wouldn't work if the economy were already operating at full capacity. in that case, if we wanted to spend more on some things, we'd have to spend less on others, either by directly cutting other areas of public spending, or by raising taxes (which would cause households to cut their spending). but there is every reason (from under-employment, precarious employment, and low productivity growth) to think we're nowhere near that point.

i'm sure the general idea in many people's minds is: isn't this getting something for nothing? well, no: it's getting something by getting people to work for more of the time (i.e. not zero-hours, or part-time when they want full-time) and more productively.

You realise a lot of people actually want to work less hours? A recent study in Sweden showed it was popular and resulted in health benefits.

so, whilst i (like some other posters) would be happy to pay higher taxes to get better public services, i don't believe it's necessary at the moment.

if you consider this process in reverse, you can see why austerity has failed to meet every target which osborne set for cutting the deficit (not that these were sensible targets, anyway: the point is just that it failed, even on its own terms). cutting public expenditure has made GDP lower than it would otherwise have been,

Yet the "double dip" recession, or even depression, that was widely predicted by exactly the same people who now argue increased public spending with borrowed money is the answer, never actually happened. They were wrong then. Why do you think they're right now?

The targets were missed because they didn't go through with the cuts they originally planned. The 2015 Tory manifesto for instance promised £12bn of welfare cuts. They weren't delivered, and then those who whinged about the cuts that were made also whinged that the deficit targets weren't met!

4) there is a need to tax the better off more, but this is more to counter the growing disparities in wealth,

By far the biggest disparities are between countries rather than within countries. But we still like to consider someone "poor" if they have less than the average UK person despite them having far more than most of the world's population.

and the related tendency for the richest to capture the political process. but can the rich just fiddle their way out of any tax rises?

It's an over-egged argument, most "rich" pay a lot in tax. But just like you get stories about benefit scoungers fiddling the system, you get stories about tax dodging rich fiddling the system.

In actual fact, and in terms of income, the richest 10% have lost the most in £ terms and more than average in % terms since 2010.

i think there is some agreement that the best way to tackle that is via international co-operation. this has been a slow process, but it's certainly not over (despite trump).

Lots could be done with international co-operation. But that is reducing, Trump, Brexit, walls going up, increased protectionism looming.

there is a lot that can be done more locally. e.g. it will only take 1 major economy to declare that global country-by-country reporting has to go on public record (for any company/corporate group that does business in that major economy) for it to happen. the EU may well do this. the UK could do it (the current government has blocked it so far, though, to be fair, some tory backbenchers have supported it).

the UK government could also, if it wanted to, force the UK crown dependencies and overseas territories to cease to be secrecy jurisdictions (i.e. providing a veil of secrecy which undermines the enforcement of laws in other jurisdictions). that would make a big difference: that covers a substantial proportion (perhaps 1/3?) of secrecy jurisdictions globally.

i didn't say the tories were evil (as somebody suggested): i made a specific claim that i don't believe they are genuine about cracking down on tax dodging. (and that i believe labour under corbyn & mcdonnell - unlike labour under blair & brown, incidentally - are genuine on this.)

This is the ridiculous left-wing consiparcy theory that politicians are in league with tax dodgers. It's utter rubbish, every govt of every colour wants to crack down on tax dodgers, just like they want to crack down on benefit cheats, because it means they can reduce headline rates of tax or increase spending with no pain. Every budget has a few initiatives to stop tax dodges. But others are found. The fact is, it's not easy.

does anybody believe the tories are genuine about tax avoidance? they are substantially funded by tax dodgers (e.g. lord ashcroft). all the right-wing newspapers who rabidly back them are owned by tax dodgers. they have introduced such laughable "anti-avoidance" measures as the "google tax" ... which turned out not to apply to google! that is pretty much self-satirizing.

So tell us how successful other countries have been then.

cracking down on tax cheating effectively may not be easy. but there is no good alternative path of cutting tax rates and expecting businesses to move to the UK as a result.

the results of cutting corporation tax show that clearly. there was some argument about the graph i referenced earlier in the thread. the graph showed that all the rise in CT collected was in the tax from smaller companies, so it's nothing to do with companies relocating (which would be big companies). the exact trend in CT collected from big companies looked like a shallow fall, but in case it showed little change; which makes sense, since corporate profits (unlike earnings) have risen, while CT rates have been cut; so those effects roughly offset one another. there is no sign of corporations relocating profits to the UK due to lower rates.

It showed a rise. And surely if tax dodging is so easy under the Tories, receipts should have started plummeting :rotfl:

and it would be very strange if they did. if they are relocating for low corporation tax rates, why come to the UK with 20% or 18%, when there are countries with 0%? the fact is: they can't always just relocate profits at will, though there has been a lot of fiddling going on. but companies know that country-by-country reporting is likely to be on public record some time soon, so it is very unlikely that they will be stepping up their dodgy profit-shifting now. they may even be (and as a shareholder, i certainly hope they are) becoming less aggressive about tax avoidance, now that they suspect the end of that road is near.

5) but do rich people just leave the country when taxes rise?

if we're now talking about people with very high earnings (i.e. ordinarily wealthy people), as opposed to the super-rich (i.e. people who make money from their capital), then no. almost nobody leaves due to higher taxes.

Oh really? Evidence for this?

Most British born people aren't going to leave, however foreigners that came here might and it's not only those who leave, it's those who might have otherwise come here.

The other point is it only takes a very small proportion of them to leave, retire etc (like doctors are doing now due to LTA) for the effect of a tax rate rise to be negative.

consider doctors. if they were going to leave because of higher taxes, then why haven't they gone to the USA already, where they could earn a lot more (before tax)? that fact is: people (and this applies to doctors more than most occupations) are not just motivated by money. and it's very far from simple to move to another country and get an equivalent job there. and people have family ties, and other reasons, to stay.

They retire instead. Like is actually happening now.

i'm not at all convinced that the higher tax on large pension pots is causing doctors to retire. at most, it might be an additional factor for some doctors. the much bigger reasons are that being a doctor can be a difficult, stressful job at the best of times; and that the strain the government is putting the NHS under is making that worse; and in any case, some people want/need to retire from many jobs before the usual retirement age. all these are factors which affect older doctors, which is why there's some chance that it might combine with the pension issue. but a general rise in tax on higher earners isn't going to drive younger doctors away.

6) re the IFS: this is a bit of a distraction. but if you want a critique of their methods of assessing the manifestos, see: http://www.primeeconomics.org/articles/assessing-the-manifestos-the-ifs-fails-the-test

7) examples of a successful socialist government? the nearest example to home is the 1945-51 labour government.

Good example. They ran a budget surplus :rotfl:

zagfles

BananaRepublic wrote: »

Your argument is confused. You are now saying there is no shortage of housing because people can share a home. Well, fair enough. Move those selfish old people out of their homes and into shared ones. Have those selfish young couples with a baby into shared housing. Why should these people have their own home?

What do you find confusing? It's a simple enough point. I think demand for housing is driven by two main factors

1) Need for a roof over your head
2) Desire to invest and make money

And a mixture, obviously.

By reducing the amount of money people can make though owning a house, you will reduce 2).

People who want to invest will find something else to invest in.

People who want a roof over their head but also to invest will prioritise 1) over 2), eg they'll be less likely to buy a house bigger/more expensive than they need just because they can afford it.

Demand will more be skewed towards those who want somewhere to live and away from those who want to make money.

If you look at London, which has had the biggest rises over the last decade, there's been loads of investment in top end property from foreign investors who want a safe haven for their money rather than a place to live. This has a knock on effect down the chain and smaller houses therefore become more expensive.

Alternatively, recognise that there is a shortage.

I do agree that we should tax second homes, and remove the tax advantages of BTL. I find it invidious that some people can create fat pension funds from BTL while those less fortunate are forced to rent.

That sort of thing. Also apply CGT at a high rate on further increases in house prices.

The great thing is though - if this doesn't work, we can go to plan B, build more houses. Plus the govt will have more in tax revenues from higher taxes.

But if we just build more houses without stemming investment led demand, most of these new houses we build might just get snapped up by speculators wanting to make a profit rather than by those who want a roof over their head.

System

The UK Conservative party has no interest in lowering or even stabilising house prices - their voter demographic is older & therefore more likely to have suitable housing or own other property.

The fact the property is a non-productive asset and high property prices are a drag on the whole economy is unimportant to them.

zagfles

Heng_Leng wrote: »

The UK Conservative party has no interest in lowering or even stabilising house prices - their voter demographic is older & therefore more likely to have suitable housing or own other property.

The fact the property is a non-productive asset and high property prices are a drag on the whole economy is unimportant to them.

You're probably right, but new Labour were even worse as they presided over the massive increases in house prices 1997-2007, despite Gordon Brown's 1997 promise not to let prices get out of control.

But he soon realised that rising house prices were politically very advantageous, both in fiscally (all that lovely extra stamp duty, IHT etc), and in terms of votes, so he didn't seem to care when prices starting shooting up, quite the opposite.

When he gave the BoE indpendance, he set them an inflation target (initially RPIX then CPI) which specifically excluded house prices. So rising house prices were of no concern to the BoE interest rate setting committee.

Labour adverts in the 2005 election even boasted about it.

So will Corbyn have the guts to actually propose policies which could curtail rising house prices? There was nothing in their last manifesto AIRI.

kidmugsy

I don't see what's difficult about predicting what a Corbyn government would do. Just study the policies of the Bulgarian government in the 1970s.

buglawton

I think the Bulgarians were just beginning to liberalise their economy by introducing some market economy reforms in the 70s. Corbin's direction of travel is the opposite!

kidmugsy

buglawton wrote: »

I think the Bulgarians were just beginning to liberalise their economy by introducing some market economy reforms in the 70s. Corbin's direction of travel is the opposite!

I stand corrected. Just study the policies of the Bulgarian government in the 1960s.