Non-partisan mini-budget predictions thread

Millyonare

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.

Snatching money from people, then deciding for them how they spend it, is about control, ego, and power. I know best, not you. Spending other people's money (OPM) is an incredibly seductive job. Once you get a thirst for it, it becomes extremely hard to stop. That's why we're seeing this relentless hockey-stick surge in UK tax and spend. I get giddy with excitement when my department budget leaps up every year.

MattMattMattUK

MK62 said:

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?

Food is more expensive in most other comparable European nations, but not "considerably more", just somewhat, reflective of the 7% VAT on food in Germany for example. Tobacco is more expensive in the European nations that tax it more than us, alcohol is the same. It is not misleading as the point is in the UK the vast majority of people pay much less tax than in other European nations, we have the lowest percentage of tax as GDP of any EU nation which is why our public services are so badly funded.

MK62 said:

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.

That was my general point, I used £125k as a rough point, the point was high earners do not benefit from increases in the personal allowance, certainly those who pay the additional rate. 

MK62 said:

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 is somewhat of a variance, but again some of that is avoidable lifestyle choices, other parts are unavoidable, one of the reasons that inflation is calculated as lower on high earners in that they save and invest a proportion of their income, which means it is not impacted by inflation, if one saves 25% of one's income then automatically reduces the direct impact of inflation as a percentage of income, even if it does not impact the inflation one experiences buying petrol for example. Middle earners are the ones expected to be hit the hardest in the coming year as they will be mortgage payers and they will face much higher mortgage payments when their fixes expire, low earners do not generally have mortgages and the upper quintile generally live in properties that they own outright. The chancellor will be very much aware, but the reality is that everyone will have to tough it out all the same.

MK62 said:

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?

I do not think fairness should really come into the equation because the concept of fairness is subjective, the reality needs to be pragmatic and based on economics and finance. Everyone in employment has to tighten their belts, so those on benefits and pensions should have to do the same, however we also have to account for the fact that benefits for some (although not all) are also very low and for some further erosion by inflation would make it very difficult to function financially. Personally I would prefer no rise in in-work benefits, but an above inflation rise in the NLW, raising disability benefits in line with (or ahead of) inflation and pensions should probably rise with average earnings. 

MK62 said:

He has some tough decisions.......and no matter what he does, at least some people are going to be unhappy.......

I agree he probably cannot win. We are going to enter, if we are not already in what is likely to be the worst recession since the 1970s, after a period where the government borrowed and handed out money on such a scale that would have been entirely unimaginable at any point in history previously, after twenty years of living well beyond our means. There was always going to be a reckoning and the next few years will be part of that, living standards will fall and we all need to suck that up, however it seems the majority of people still believe that "someone else" can pay for everything and they can be handed money by the government and/or not pay for the services they use. Until the electorate grow up and realise that there is no free lunch then we will never be able to fix the economy. 

Millyonare

MattMattMattUK said:

MK62 said:

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?

Food is more expensive in most other comparable European nations, but not "considerably more", just somewhat, reflective of the 7% VAT on food in Germany for example. Tobacco is more expensive in the European nations that tax it more than us, alcohol is the same. It is not misleading as the point is in the UK the vast majority of people pay much less tax than in other European nations, we have the lowest percentage of tax as GDP of any EU nation which is why our public services are so badly funded.

MK62 said:

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.

That was my general point, I used £125k as a rough point, the point was high earners do not benefit from increases in the personal allowance, certainly those who pay the additional rate. 

MK62 said:

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 is somewhat of a variance, but again some of that is avoidable lifestyle choices, other parts are unavoidable, one of the reasons that inflation is calculated as lower on high earners in that they save and invest a proportion of their income, which means it is not impacted by inflation, if one saves 25% of one's income then automatically reduces the direct impact of inflation as a percentage of income, even if it does not impact the inflation one experiences buying petrol for example. Middle earners are the ones expected to be hit the hardest in the coming year as they will be mortgage payers and they will face much higher mortgage payments when their fixes expire, low earners do not generally have mortgages and the upper quintile generally live in properties that they own outright. The chancellor will be very much aware, but the reality is that everyone will have to tough it out all the same.

MK62 said:

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?

I do not think fairness should really come into the equation because the concept of fairness is subjective, the reality needs to be pragmatic and based on economics and finance. Everyone in employment has to tighten their belts, so those on benefits and pensions should have to do the same, however we also have to account for the fact that benefits for some (although not all) are also very low and for some further erosion by inflation would make it very difficult to function financially. Personally I would prefer no rise in in-work benefits, but an above inflation rise in the NLW, raising disability benefits in line with (or ahead of) inflation and pensions should probably rise with average earnings. 

MK62 said:

He has some tough decisions.......and no matter what he does, at least some people are going to be unhappy.......

I agree he probably cannot win. We are going to enter, if we are not already in what is likely to be the worst recession since the 1970s, after a period where the government borrowed and handed out money on such a scale that would have been entirely unimaginable at any point in history previously, after twenty years of living well beyond our means. There was always going to be a reckoning and the next few years will be part of that, living standards will fall and we all need to suck that up, however it seems the majority of people still believe that "someone else" can pay for everything and they can be handed money by the government and/or not pay for the services they use. Until the electorate grow up and realise that there is no free lunch then we will never be able to fix the economy. 

It's important not to get too carried-away with the hysterical doom-loop of UK forecasting culture. We are always desperate to talk down the UK and agitate self-inflicted misery.

The UK economy grew +2.4% YoY in Q3 2022, way above consensus expectations. The UK has outgrown the G7 now for 2 years straight. The UK has outgrown the EU3 collectively since 2016. UK state debt is among the lowest in the G7. UK state debt payments are relatively near a record low. Everyone who wants one has a job. Unemployment is near a record low. Wages are trending up. House prices are growing. Lots of good economic signs out there.

It's important not to get dragged into the hysterical doom-loop of propaganda that is swamping the country.

MK62

MattMattMattUK said:

MK62 said:

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?

Food is more expensive in most other comparable European nations, but not "considerably more", just somewhat, reflective of the 7% VAT on food in Germany for example. Tobacco is more expensive in the European nations that tax it more than us, alcohol is the same. It is not misleading as the point is in the UK the vast majority of people pay much less tax than in other European nations, we have the lowest percentage of tax as GDP of any EU nation which is why our public services are so badly funded.

You'd need to reveal your source for the claim that food is more expensive in Europe/Germany.......but even if so, in general it's far more involved than just the level of VAT ......how much do German supermarkets pay in rent, salaries, pensions, energy, corporation tax, social security taxes and so on.....compared to similar UK operations?

As for the rest, just comparing tax levels is far too simplistic a view tbh........the overall cost of living is lower in Germany, for example.

There is somewhat of a variance, but again some of that is avoidable lifestyle choices, other parts are unavoidable, one of the reasons that inflation is calculated as lower on high earners in that they save and invest a proportion of their income, which means it is not impacted by inflation, if one saves 25% of one's income then automatically reduces the direct impact of inflation as a percentage of income, even if it does not impact the inflation one experiences buying petrol for example. Middle earners are the ones expected to be hit the hardest in the coming year as they will be mortgage payers and they will face much higher mortgage payments when their fixes expire, low earners do not generally have mortgages and the upper quintile generally live in properties that they own outright. The chancellor will be very much aware, but the reality is that everyone will have to tough it out all the same.

The why is interesting, but not directly relevant to the cost of living pressure..........the fact is that the lowest quintile currently face higher inflation than the the upper quintile.......the fact that they have very little to save doesn't change that.

I have to ask, where do you think the lowest quintile live? Do these people not have mortgages or rent to pay - and if they pay rent, do the landlord's not have a mortgage to pay?......(fair enough, maybe not.... )

For those who live in social housing this is relevant from gov.uk "From 1 April 2020 rents have been regulated through RSH’s rent standard where the limit on annual increases is CPI + 1%. The Government consultation focusing on the introduction of a rent ceiling for 2023/24 closed on 12 October 2022".......so they'll have to await the results of that, but let's not pretend that the lower quintile face no housing cost pressures.......they are facing it just the same, at least for now.

I do not think fairness should really come into the equation because the concept of fairness is subjective, the reality needs to be pragmatic and based on economics and finance. Everyone in employment has to tighten their belts, so those on benefits and pensions should have to do the same, however we also have to account for the fact that benefits for some (although not all) are also very low and for some further erosion by inflation would make it very difficult to function financially. Personally I would prefer no rise in in-work benefits, but an above inflation rise in the NLW, raising disability benefits in line with (or ahead of) inflation and pensions should probably rise with average earnings.

It may be subjective, and open to disagreement, but once you remove any concept of fairness from the equation, then we may as well give up.......that's only a step away from the law of the jungle, financially speaking at least. I don't disagree about everyone having to tighten their belts - as long as everyone is asked to tighten their belts to the same degree, or even perhaps those with broader shoulders being asked to tighten a little bit more (within reason).......maybe only save 23% of that income you mentioned earlier, rather than 25%........but those at or near the bottom who simply cannot tighten any more, shouldn't be expected to.

sevenhills

MattMattMattUK said:

That article is an LSE opinion piece, light on facts, using unconnected figures to try to make a political point, finishing with a demand that "millionaire couples" are taxed on wealth rather than income. 

https://www.whitehouse.gov/omb/briefing-room/2021/09/23/new-omb-cea-report-billionaires-pay-an-average-federal-individual-income-tax-rate-of-just-8-2/

The above link looks better. It is based on USA tax, but it's probably similar.
I know very little about how millionaires are taxed, just what I read. The Telegraph and co wouldn't want to scare their readership with facts about UK tax. It's very complex.

Ocelot

Nebulous2 said:

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. 

Actually what you are posting is absolute rubbish. You don't seem to have done the research.

sammyjammy

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.

The buyout of the existing contracts would costs hundreds of billions alone.

julicorn

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. 

The bit in bold doesn't sound right. 
I just found some comparisons from 2019, and looked up how much tax is charged for a 330ml bottle of beer, 5% ABV - seems to be 35c in the UK, only 3c in Germany. For a 70cl bottle of a 40% spirit, you're looking at 9.05 Euros in the UK, compared to 3.65 Euros in Germany.
For a 20-pack of cigarettes, UK tax was 6.57 Euros, Germany 3.19 Euros. 
Tax on gas seems to be the same in the UK and Germany (65c per litre). 

Let me know if I'm missing something, it's been a long day. 

MattMattMattUK

MK62 said:

MattMattMattUK said:

MK62 said:

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?

Food is more expensive in most other comparable European nations, but not "considerably more", just somewhat, reflective of the 7% VAT on food in Germany for example. Tobacco is more expensive in the European nations that tax it more than us, alcohol is the same. It is not misleading as the point is in the UK the vast majority of people pay much less tax than in other European nations, we have the lowest percentage of tax as GDP of any EU nation which is why our public services are so badly funded.

You'd need to reveal your source for the claim that food is more expensive in Europe/Germany.......but even if so, in general it's far more involved than just the level of VAT ......how much do German supermarkets pay in rent, salaries, pensions, energy, corporation tax, social security taxes and so on.....compared to similar UK operations?

As for the rest, just comparing tax levels is far too simplistic a view tbh........the overall cost of living is lower in Germany, for example.

Have a look online at German food retailers, or Norwegian food retailers, or French food retailers, or Dutch food retailers, or observationally whilst in those countries. 

MK62 said:

There is somewhat of a variance, but again some of that is avoidable lifestyle choices, other parts are unavoidable, one of the reasons that inflation is calculated as lower on high earners in that they save and invest a proportion of their income, which means it is not impacted by inflation, if one saves 25% of one's income then automatically reduces the direct impact of inflation as a percentage of income, even if it does not impact the inflation one experiences buying petrol for example. Middle earners are the ones expected to be hit the hardest in the coming year as they will be mortgage payers and they will face much higher mortgage payments when their fixes expire, low earners do not generally have mortgages and the upper quintile generally live in properties that they own outright. The chancellor will be very much aware, but the reality is that everyone will have to tough it out all the same.

The why is interesting, but not directly relevant to the cost of living pressure..........the fact is that the lowest quintile currently face higher inflation than the the upper quintile.......the fact that they have very little to save doesn't change that.

I have to ask, where do you think the lowest quintile live? Do these people not have mortgages or rent to pay - and if they pay rent, do the landlord's not have a mortgage to pay?......(fair enough, maybe not.... )

For those who live in social housing this is relevant from gov.uk "From 1 April 2020 rents have been regulated through RSH’s rent standard where the limit on annual increases is CPI + 1%. The Government consultation focusing on the introduction of a rent ceiling for 2023/24 closed on 12 October 2022".......so they'll have to await the results of that, but let's not pretend that the lower quintile face no housing cost pressures.......they are facing it just the same, at least for now.

Most of the lowest quintile do not live in mortgaged properties, so whilst rents are rising they have not been rising at the same rates as mortgages have been rising. Rents have been rising on renewal around 6-10% depending on the area, mortgage payments have been rising 40-100% depending previous and new fix rates, total balance etc.. I am not pretending that the lowest quintile are facing not housing pressure costs, that is a straw man, I am saying that the rise is nowhere near as significant as the rise being faced by people with mortgages. 

MK62 said:

I do not think fairness should really come into the equation because the concept of fairness is subjective, the reality needs to be pragmatic and based on economics and finance. Everyone in employment has to tighten their belts, so those on benefits and pensions should have to do the same, however we also have to account for the fact that benefits for some (although not all) are also very low and for some further erosion by inflation would make it very difficult to function financially. Personally I would prefer no rise in in-work benefits, but an above inflation rise in the NLW, raising disability benefits in line with (or ahead of) inflation and pensions should probably rise with average earnings.

It may be subjective, and open to disagreement, but once you remove any concept of fairness from the equation, then we may as well give up.......that's only a step away from the law of the jungle, financially speaking at least. I don't disagree about everyone having to tighten their belts - as long as everyone is asked to tighten their belts to the same degree, or even perhaps those with broader shoulders being asked to tighten a little bit more (within reason).......maybe only save 23% of that income you mentioned earlier, rather than 25%........but those at or near the bottom who simply cannot tighten any more, shouldn't be expected to.

The problem is our fiscal system is unbalanced, we have very low levels of net contributors. Higher earners already make a disproportionate contribution compared to any other advanced economy and the problem is that taxing them a bit more raises comparatively little compared to taxing everyone a bit more. I am a middle ish earner, I have been a higher rate taxpayer (Covid smashed my business) and I expect to be again next year and going forward, I have been a low earner (both early in my working live and during Covid). I am prepared to pay tax, I think that I should pay more tax, but I think that everyone should pay more tax across the board. We should look to the tax systems in Germany and Scandinavia where everyone pays more, but that means high quality and sustainable public services can be funded from that tax revenue. Taxation as a social contract only works if we all contribute, if a shrinking minority of people are forced to everyone else then the social contract starts to break down, of course those with the broadest shoulders should carry more of the burden, but the issues we have in this country is we have a huge proportion of the population who barely carry any burden at all. 

mebu60

sammyjammy said:

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.

The buyout of the existing contracts would costs hundreds of billions alone.

A non-partisan time-constrained high-level review of the financial pros and cons of continuing would be interesting to see. But that won't happen.