Personal Allowances - Ouch!

Reaper

I had heard speculation he might abolish capital gains and treat all profits when selling as income tax. That would have been radical. However freezing capital gains for years indicates there is no plan to do any such thing for the foreseeable future.

MaxiRobriguez

Well, that budget was one way to say austerity was a political choice I guess.

Lot's of spending, very little in the way of paying it off. Big assumptions that all that new money is going to lead to investment and productivity. 

lhsecons

The_Green_Hornet said:

Considering the personal allowance was only £6,475 in 2009, a rate of £12,570 in 2026 still outperforms inflation over that time period.

Can I ask how you know. Do you have the inflation figures up until 2026 available?

Alistair31

Were the cheap Nandos meals worth it?

thickasabrick

MaxiRobriguez said:

Well, that budget was one way to say austerity was a political choice I guess.

Lot's of spending, very little in the way of paying it off. Big assumptions that all that new money is going to lead to investment and productivity. 

Can't decide whether to post a link to Stefan Molyneux's Handbook of Human Ownership: A Manual for New Tax Farmers 
or to be a little bit more serious and post a link to Michael Hudson's presentation at Peking University’s School of Marxist Studies  "Creating Wealth Through Debt: the West’s Finance-Capitalist Road"  
Probably naughty to pull out a single paragraph but I think this is a pretty accurate description of where we're heading.
"Instead of creating a more productive economy and raising living standards, finance capitalism is imposing austerity by diverting wage income and also corporate income to pay rising debt service, health insurance and payments to privatized monopolies. Progressive income and wealth taxation has been reversed, siphoning off wages to subsidize privatization by the rentier class."

coastline

In the first link it reports a deficit of £355bn this year then falling to £234bn next year. Basically there's no way of repaying such figures without massive damage to the economy.
Budget 2021: How much will it cost the UK and how will we pay? - BBC News
Although the next two links aren't updated you get the picture of how the money is raised and spent.
 UK Central Government and Local Authority Spending in 2021 - Charts (ukpublicspending.co.uk)
UK Public Revenue Breakdown: Central Government and Local Authorities 1692-2024 - Charts
Interest on the national debt comes in at £45bn a year so is affordable even if increased. The latest Gilts were raised by the government at 0.8% so even if £300bn was issued it added around £2.5bn to the interest payments. Surely it's better to just add it to the national debt and forget it ? They didn't even cut £20bn a year after the GFC and that was classed as austerity. A one off event at the end of the day and now on to the road of recovery. 
Budget 2021: What you need to know - GOV.UK (www.gov.uk)

Thrugelmir

MaxiRobriguez said:

Well, that budget was one way to say austerity was a political choice I guess.

Lot's of spending, very little in the way of paying it off. Big assumptions that all that new money is going to lead to investment and productivity. 

In the middle of a pandemic. Little else that can be done.  Better to attract investment into new ideas than simply bid up stock markets to ever increasing levels of valuation. 

ivormonee

lhsecons said:

The_Green_Hornet said:

Considering the personal allowance was only £6,475 in 2009, a rate of £12,570 in 2026 still outperforms inflation over that time period.

Can I ask how you know. Do you have the inflation figures up until 2026 available?

Do we really need to look at the actual figures though? I think inflation over the past decade has generally ranged between 1% and 3%, so, very rough ballpark would be about 20%-25% over the period. Doesn't seem like it would be anywhere close to 100% which is roughly the increase of the SPA over the same period.

So, in this case, the increases in the SPA have been quite generous. I seem to remember it was a previous government manifesto pledge to increase it from c.£6.5k to £8k then to £10k. This was then further pledged to reach £12.5k and it did so in leaps and bounds.

Curiosity got the better of me. I've just searched for the inflation figures and, for the above period, it was a cumulative total of 20.65%. This, when applied to £6,475 would give an SPA today of + £1,335 = £7,810 ... £4,760 less than what we will actually have from April!

Obviously we don't know what inflation will be 2021 - 2026, but if we take a best guess-timate of say 2% then, add another 10% to the figure above would give an SPA in 2026 of £8,600, still better off with £12,570 by a long stretch.

Of course, if inflation rises to something like it did around thirty years or so ago to 15% per annum we have an altogether different case!

MaxiRobriguez

Thrugelmir said:

MaxiRobriguez said:

Well, that budget was one way to say austerity was a political choice I guess.

Lot's of spending, very little in the way of paying it off. Big assumptions that all that new money is going to lead to investment and productivity. 

In the middle of a pandemic. Little else that can be done.  Better to attract investment into new ideas than simply bid up stock markets to ever increasing levels of valuation. 

I don't disagree but it is counter to the endless stream of "debt bad" that has been used against Labour who racked it up to avert the worst of the GFC. 

Note too these new giveaways and spending will be happening *after* the pandemic subsides, not during. 

techwatcher

With the Covid-19 response costing such a large amount I suspect the plan will be to pay it off over multiple decades rather than in the short to medium term, rather like paying down the debts after WW2.