Non-partisan mini-budget predictions thread

Ocelot

Millyonare said:

sevenhills said:

Millyonare said:

For balance, it is worth noting that the "lower income groups" in the UK already pay just about the least tax in the entire industrialised world.

How the tax system works is that richer people that own companies and get paid in dividends pay a lower percentage of their earnings in tax.
The poor also spend a higher percentage of their earnings on high tax products like fuel duty, alcohol and tobacco duty.

https://www.lse.ac.uk/research/research-for-the-world/economics/how-much-tax-do-the-rich-really-pay

The top 1% of earners pay nearly 30% of all UK income tax. They are among the most over-taxed groups on Earth. Envy politics is spiraling out of control in the UK, sadly.

But they probably pay a rate of far less than everyone else.

Ocelot

Nebulous2 said:

Ocelot said:

phillw said:

dunstonh said:

Bearing in mind the constant reminders that we must address the debt and that there will be lots of pain, my prediction is that there will be zero reductions in MP's salaries or lavish expenses.

MPs are woefully underpaid in this country. That is why you either get high net worth individuals at one end or low skilled people at the other.     

MPs aren't underpaid. It attracts rich people, because they like power and making even more money.

Indeed. The basic salary may not seem huge to some, but they can claim up to 250,000 each on expenses every year, including employing their spouses on huge salaries, and having two houses paid for.

Absolute rubbish. The expenses you are referring to are an allowance from which they need to rent an office and pay members of staff. 

I’d also appreciate it if you could elaborate on the ‘two houses.’ 

My understanding is that those who live some distance from London get their expenses paid to travel to and live in London during the week. There were some dodgy occurrences where they bought homes in London and got their mortgages paid rather than renting accommodation, but I understand that has been stopped. 

It's not absolute rubbish. Whereas they do run their office from this sum, I know of at least one MP who lives near her constituency (near London), claims it's too far to commute, so gets another house nearby and also a flat in London.

sevenhills

MK62 said:

 
As to the personal allowance freeze, while its true that it will increase income tax for all taxpayers, it will increase it for lower paid groups at a faster rate, at the very time when such groups are being hit harder by high inflation......but we'll have to wait and see what the chancellor's whole package is on Thursday.

It is illogical to tax lower paid workers, then give them that money back in benefits.
I would prefer to tax the lower paid less, but give them fewer benefits.

MattMattMattUK

sevenhills said:

MK62 said:

 
As to the personal allowance freeze, while its true that it will increase income tax for all taxpayers, it will increase it for lower paid groups at a faster rate, at the very time when such groups are being hit harder by high inflation......but we'll have to wait and see what the chancellor's whole package is on Thursday.

It is illogical to tax lower paid workers, then give them that money back in benefits.

That depends on the structure of the system in place. Properly run state systems can provide services cheaper than multiple private providers with a profit, in the right situation due to costs being spread (see childcare in many other European nations). If everyone pays £100 more a year in tax, but all childcare is state funded then economically that works out better over all.

sevenhills said:

I would prefer to tax the lower paid less, but give them fewer benefits.

I would prefer to tax everyone more and give them fewer benefits, but provide far better public services which is what is done in most of Europe.

Nebulous2

Ocelot said:

Nebulous2 said:

Ocelot said:

phillw said:

dunstonh said:

Bearing in mind the constant reminders that we must address the debt and that there will be lots of pain, my prediction is that there will be zero reductions in MP's salaries or lavish expenses.

MPs are woefully underpaid in this country. That is why you either get high net worth individuals at one end or low skilled people at the other.     

MPs aren't underpaid. It attracts rich people, because they like power and making even more money.

Indeed. The basic salary may not seem huge to some, but they can claim up to 250,000 each on expenses every year, including employing their spouses on huge salaries, and having two houses paid for.

Absolute rubbish. The expenses you are referring to are an allowance from which they need to rent an office and pay members of staff. 

I’d also appreciate it if you could elaborate on the ‘two houses.’ 

My understanding is that those who live some distance from London get their expenses paid to travel to and live in London during the week. There were some dodgy occurrences where they bought homes in London and got their mortgages paid rather than renting accommodation, but I understand that has been stopped. 

It's not absolute rubbish. Whereas they do run their office from this sum, I know of at least one MP who lives near her constituency (near London), claims it's too far to commute, so gets another house nearby and also a flat in London.

What you posted was absolute rubbish. They don’t get that sum. They get the cost of an office and staff costs refunded, up to that sum, with receipts needed. 

One example of of someone who appears to be breaking the rules doesn’t mean that it is common. Have you tried reporting them?

They don’t get a flat in London either they get rent paid up to a certain limit, generally not enough to live close to Westminster. Some choose to live in hotels during the week, rather than have a flat. 

Personally I think MPs should live in their constituency, and the idea of parachuting people into safe seats annoys me, but if the local party puts up with that, then more fool them. 

I don’t envy them their lifestyle or expenses. I was never a high earner, but had a management role in care for 10 years which required living away from home overnight regularly. For about 3 months it was quite a novelty getting a hotel room paid and an allowance towards an evening meal. From then on it was simply a drag. I would rather have been home with my family and walking my dog than sitting in a hotel room on my own. 

NedS

sevenhills said:

MK62 said:

 
As to the personal allowance freeze, while its true that it will increase income tax for all taxpayers, it will increase it for lower paid groups at a faster rate, at the very time when such groups are being hit harder by high inflation......but we'll have to wait and see what the chancellor's whole package is on Thursday.

It is illogical to tax lower paid workers, then give them that money back in benefits.
I would prefer to tax the lower paid less, but give them fewer benefits.

But in doing so, the state can target support where it is needed most. Little Johnny, living at home with mum and dad and paying £50/month towards rent/bills can afford to pay 20% income tax on his shifts in McDonald's, whilst Annie who is a lone parent with rent and bills and childcare costs, working hard on minimum wage trying to make ends meet, is in far greater need of support. But Annie must pay the same rate of tax as Johnny, so if we cut the income tax rate for one, we must do so for both, whereas the benefits system can aim to give Annie a little extra support that Johnny would not be entitled to.

sevenhills

NedS said:

sevenhills said:

MK62 said:

 
As to the personal allowance freeze, while its true that it will increase income tax for all taxpayers, it will increase it for lower paid groups at a faster rate, at the very time when such groups are being hit harder by high inflation......but we'll have to wait and see what the chancellor's whole package is on Thursday.

It is illogical to tax lower paid workers, then give them that money back in benefits.
I would prefer to tax the lower paid less, but give them fewer benefits.

But in doing so, the state can target support where it is needed most. Little Johnny, living at home with mum and dad and paying £50/month towards rent/bills can afford to pay 20% income tax on his shifts in McDonald's, whilst Annie who is a lone parent with rent and bills and childcare costs, working hard on minimum wage trying to make ends meet, is in far greater need of support. But Annie must pay the same rate of tax as Johnny, so if we cut the income tax rate for one, we must do so for both, whereas the benefits system can aim to give Annie a little extra support that Johnny would not be entitled to.

The state should not chose to support one lifestyle, but not the other one. 

mebu60

Staying with friends in Bucks last weekend, we went for a walk in the Chilterns on Sunday to 'admire' (once the mist cleared) the HS2 scars.
Remembering this thread made me wonder if they could can the whole thing on Thursday?! Yes, a lot of money (£8bn I believe) has been spent already but this would be reduced by selling the land that has been bought. And considerably more £bns would be saved and could be redirected.

MK62

MattMattMattUK said:

MK62 said:

Millyonare said:

MK62 said:

kinger101 said:

MK62 said:

In the end, no matter what they do, some are going to be saying "ouch".......but  the government need to remember that there is a cost-of-living issue at the moment, coupled with an impending recession and many are already feeling the squeeze - the chancellor has little room for any more tax rises on the majority at this time.......which is why he might go more for spending cuts and other money saving measures, such as reliefs and allowances, which won't hit the majority directly in the pocket now.

I feel that's a circular argument though.  Freezing allowances will mean tax rises for the majority via fiscal drag.  E.g someone earning £15,000 getting a 5% pay rise from April would be paying £486 income tax this year (3.24 % overall) compared to £636 next year (which is 4.04%).  They're paying more tax, despite the fact their income has declined in real terms.

 

I wasn't really referring to the Personal allowance - it's already frozen until 2026, so all he can do is extend the freeze, which won't affect anyone's pocket now, at least not more than was already planned (unless he actually reduces it - but that would be unexpected and a major surprise).

I totally agree about this freeze though......and it's disproportionate effect on lower income groups.

For balance, it is worth noting that the "lower income groups" in the UK already pay just about the least tax in the entire industrialised world. It is possible to earn £1000+ per month and not pay a bean in tax. The UK tax system is already incredibly favourable to entry-level workers. By some international standards, believe it or not, UK entry workers are very under-taxed (not over-taxed).

It can be quite misleading comparing single aspects of life in various countries.....the cost of living (inc housing), benefit entitlement, healthcare provision, state pension provision/entitlement, indirect taxes, direct taxes and a host of other aspects can all vary widely.
A bit like saying the minimum wage is higher in eg Germany.....tells you very little on its own, unless you also take a host of other factors into account.

Whilst I somewhat agree, in the UK the lowest two thirds of earners have the lowest effective rate of income taxation in the EU (the top third have the fifth highest), this is largely due to the extremely large personal allowance (the largest of any advanced economy). Our VAT rate is around the EU average as a headline rate, although Germany for example has a headline rate of 19% which is lower than our 20%, they also have nearly no zero rated products and charge VAT at 7% on all food so the effective rate of taxation is actually higher than ours, their tobacco, alcohol and fuel taxes are all higher than ours. Most of the rest of Europe (ignoring tax havens like Monaco an Luxembourg) has considerably higher tax rates on all income levels and all parts of life than we do in the UK, our tax revenue as a percentage of GDP is the lowest in the EU etc. 

So would you not then expect all those things to be considerably more expensive in Europe?.....or is simply comparing tax rates alone somewhat misleading?

Freezing the personal allowance does not increase the amount for anyone earning more than £125k as they do not get a personal allowance. Everyone is being hit by higher inflation

Actually it does, as if the PA was not frozen, then they would only have lost their PA once their income reached £127670 (assuming the PA was index linked at 10.1%, and assuming the 100k threshold for starting the PA's withdrawal was not also index linked).....but I take your point that at some point the freezing of the PA alone has no effect on those who don't have one.

As for inflation at this time, while it does affect everyone, it's not affecting different income groups equally.......those at the low end spend a higher proportion of their income on the very things driving inflation the most......the IFS have studied this and written about it.......IIRC the latest CPI estimate is about 12% for the lowest quintile, and about 8% for the highest quintile.......on average......the middle quintile is around the headline rate of 10%.
I find it hard to believe the chancellor is not aware of this tbh......so we'll see.

There are competing issues though which are tough to square.....eg is it fair to raise pensions and benefits by less than inflation?......but then is it fair to raise pensions and benefits by more than the wages of those who effectively pay them?
He has some tough decisions.......and no matter what he does, at least some people are going to be unhappy.......

MK62

mebu60 said:

Staying with friends in Bucks last weekend, we went for a walk in the Chilterns on Sunday to 'admire' (once the mist cleared) the HS2 scars.
Remembering this thread made me wonder if they could can the whole thing on Thursday?! Yes, a lot of money (£8bn I believe) has been spent already but this would be reduced by selling the land that has been bought. And considerably more £bns would be saved and could be redirected.

Whether it's scrapped, shelved or continued remains to be seen, but I'd be very surprised if that hasn't at least been considered......