[Closed] Economic Growth?*

Again - unemployment has [b]not[/b] gone up TJ

Which somewhat shoots through your hyperbole!

Hello eveyone, glad to see we've all moved on after last weeks long dark teatime of the soul.

70 miles round Anglesey on Sunday, Nantille Ridge on Monday, 40 odd miles round the Llyn yesterday and off up Tryfan and the Glyders this morning.

Eggs for brekkie too.

Carry on!

Someone stole Stoner's forum glitchy bumpy multiple of fortiness.

I got up early and did a nice long-way-round commute up a couple of big hills. I'm starving now though and it's another 10 mins until the canteen's doing breakfast.

Still it could be worse, I could be arguing the toss to no end on a cycling forum...

Still it could be worse, I could be arguing the toss to no end on a cycling forum...

Puhleeeassse.

Don't let us stop you not being here. 🙂

I'm really starting to get concerned about some of you lot.

You are aware that its summer outside and the weathers lovely? I went out for a nice sunny, hilly jaunt on the road bike last night, then met my beloved for a couple of pints sat outside the pub. It was a really nice evening. 15 mile sunny commute this morning too. Smashing!

Could I respectfully suggest that maybe some of you need to get out a bit more 😉

You are aware that its summer outside....

It is? Grey and bits of rain here.

+1 wot binners said.

I'm off to Scotland soon to visit my ancestors, going to unplug from the Matrix for a couple of weeks.

It's hot as bu99ery here humid too. Just as well I'm in an aircontastic airport lounge with a frosty Asahi. 🙂

See? People are out there doing great things whilst you lot fling metaphorical excrement at each other.

It's sadder than my mum's funeral on here at times, it really is.

As a great man once said, 'It's not like you've been captured by Barbary Corsairs'.

Going back to the OP. Everyone seems to be of the opinion that government needs to spend to get out of this mess but the previous government pumped £200bn into the economy with QE to create a 1.2% growth. If the government was to do that now they would either have to do more QE and risk creating yet more inflation that is already hitting businesses and creating redundancies as well as joe public with their static income worth less with each price increase.
They could increase taxes on businesses and the rich. The rich will move their money else where. SME businesses that create a third of GDP and over half of the UK employment are struggling to make a profit as it is so it will have little effect on the treasury income but will increase redundancies as the previous 1% on Corporation and NI had already done so. Those businesses that start to make a loss then carry their losses back to previous years and reclaim some of their taxes paid in previous years. The treasury income starts to decrease but it has committed to projects to increase employment so must borrow the money and pay interest on it to fund them.
It's a difficult task that goes way beyond you balancing your bank account. I think we will have years of slow growth ahead of us but trying to spend our way of it is a short term fix creating longer term problems. If it was me I would be looking at changing the future industries of the UK away from retail to more hi-tech manufacturing creating tax breaks for those industries and subsidies for students studying those fields to create investment into the UK with a skilled workforce ready to call on. When the tax breaks end for these industries a percentage of their taxes should be earmarked for investment into new technolgy markets creating more investment into the country as the next wave of technology is realised.

As a great man once said, 'It's not like you've been captured by Barbary Corsairs'.

HMHB FTW! 😉

craigxxl - don't be coming around these parts with your thought-through, well-reasoned and rational posts!!! 😉

Summer? It's rained almost continuously for the last three days. Stopped now though!

I think all arguments about economics are summed up by this little gem:

[img] [/img]

Binners, Sorry I'll not do it again 🙁

They could increase taxes on businesses and the rich. The rich will move their money else where

Is there any evidence to show that the rich will move overseas if they are taxed more heavily? Perhaps the super-rich without businesses here will, but how can a doctor or an accountant or corporate lawyer up sticks away from their clients?

50% tax on the top slice of top incomes doesn't seem too much, especially as the richest 10% of earners are earning proportionally much more than the rest of us, than was the case 20 years ago.

Plenty of companies have moved their head offices to over countries that offer better tax rates cutting off our revenue stream. Gambling businesses moved to low rate tax havens and they now need a licence to operate in the UK which is much lower than the taxes we would have collected.

craig - and there are plenty of ways of dealing with that. We have very soft regulations and enforcement of tax avoidance / dodging. tighten up on that would stop a lot of this.

I dont want to pay any more tax and I'm not going to vote for it.

Is there any evidence to show that the rich will move overseas if they are taxed more heavily?

Did this not happen in the UK in the 70s? Brain drain?

When Lawson dropped the 60% top rate to 40% in 1988, the total tax take went up, and the share paid by higher-rate taxpayers actually increased as a result.

QE was having a positive effect on the economy, and there was always the option (Darling's 'trap door' oo-er) to cut should this not work. Slasher Osborne has taken a route with no way out, and it's not working. IMF research has also shown that cutting is bad for growth.

The IMF estimate that if other countries are cutting at the same time, if interest rates cannot fall and if the currency does not depreciate, then spending cuts of 1% of GDP subtract 2% from growth.

[url= http://duncanseconomicblog.wordpress.com/2011/02/15/the-dangers-of-spending-cuts-some-advice-from-the-imf/ ]The dangers of spending cuts[/url]

Importantly (and something you never hear about) our debt maturity profile is longer than almost every other developed country:

[url= http://duncanseconomicblog.wordpress.com/2011/04/07/britain-is-not-portugal-the-importance-of-debt-maturity/ ]The Importance of Debt Maturity[/url]

According to the Debt Management Office, the average maturity of UK sovereign debt is 14 years. In the US, it’s about four years. In France and Germany it’s six or seven. Greek debt has an average maturity of just under 8 years. As I mentioned yesterday, they have about 10% of their debt coming due in the next few months.

That makes an enormous difference to the amount of gilts we need to ask the debt markets to buy in a given year. It also means that even fairly large increases in funding costs will only have a gradual effect on the cost of servicing UK debt. That burden is still lower today, as a share of total spending, than it was for most of the 1980s and 1990s.

For Greece, debt servicing costs now account for just under 12% of GDP. In the UK, it’s costing less than 3% of GDP.

This means that while we have to get into more debt to fund the deficit, we have to refinance much less existing debt. The long debt profile means that less of the old debt is due each year so cutting to reduce the deficit in 5 years is farkin stupid from an economical point of view, but not from and ideological one...

The Adam Smith Institute stated in a 2010 report that "The 1997 Budget in Ireland halved the rate of taxation of realized capital gains from 40% to 20%. The then Minister for Finance, Charlie McCreevy, was heavily criticized on the grounds that this change would reduce revenues. He countered by predicting that revenues would rise substantially as a result of the lower tax rate. Revenues rose considerably, almost trebling in fact, and greatly exceeded official predictions."[24]

However: "[b]The effects of the credit bubble in the Republic of Ireland have not been included in this research,[/b]"

Dull as it might sound, I think the subject of tax rates is quite interesting 😳

Research, quantification and empirical data

A possible non-symmetric Laffer Curve with a maximum revenue point at around a 70% tax rate.
[edit]Research on revenue maximising tax rate
Economist Paul Pecorino argued in 1995 that the peak of the Laffer curve occurred at tax rates around 65%.[19] A 1996 study by Y. Hsing of the United States economy between 1959 and 1991 placed the revenue-maximizing tax rate (the point at which another marginal tax rate increase would decrease tax revenue) between 32.67% and 35.21%.[20] A 1981 empirical study published in the Journal of Political Economy found that the point of maximum tax revenue in Sweden in the 1970s would have been 70%.[21] A recent paper by Trabandt and Uhlig of the NBER found that the US and most European economies are on the left of the Laffer curve (in other words, that raising taxes would raise further revenue).[22] The New Palgrave Dictionary of Economics reports that for academic studies, the mid-range for the revenue maximizing rate is around 70%.[23]
However, a study by Teather and Young of the Adam Smith Institute using evidence from the Republic of Ireland has suggested that the optimal rate for capital gains tax, as opposed to income tax, may be around 20%, but this is at least partly due to savvy taxpayers holding onto assets in anticipation of tax rates being lowered in the future.[24] A 2007 study by the American Enterprise Institute, a right leaning think tank, found that the revenue maximizing rate for corporate taxes in OECD countries was about 26%, down from about 34% in the 1980s.[25]

http://en.wikipedia.org/wiki/Laffer_curve

[img] [/img]

Stoner, I find it hard to believe that all the different factors in different economies would mean they'd all follow that curve closely!

I've just had a lovely BBQ Pork Bun and some fried tofu noodles. Might have another beer now.

Indeed of course they dont.

That's a theoretical curve. And there's probably a curve for each tax in each country. If you read earlier in the article it refers to "infinite number of laffer curves".

The only real way of identifying a particular laffer curve is to experiment on the people and record what happens! 😉 hence why I quoted some empirical work.

Frankly, the issue of tax is a bit of a red herring particularly in the context of inequality of income. What is remarkable about income distribution in the UK is the fact that it has been so stable since the 1980's. Direct taxes have been broadly progressive but indirect taxes have worked in the opposite direction. Improvements in equality have tended to come from the benefits system - surely this can't be a good thing?

But anyone thinking that econ recovery is going to be quick will be mistaken and Ed Balls-up frankly needs to be told to STFU. The painful process of replacing excess government involvement in the economy with more sustainable private investment cannot happen overnight despite what any politician may claim.

The laffer curve vs reality:

[img] [/img]

[img] [/img]

[url= http://economistsview.typepad.com/economistsview/2007/07/yet-again-tax-c.html ]Tax cuts do not pay for themselves[/url]

[url= http://www.angrybearblog.com/2007/07/effective-corporate-tax-rates-for.html ]And more[/url]

Ah right, I didn't read your article 🙂

I suspect many of the contributors to our economy are fairly mobile, which would suggest we need somewhat lower taxes to keep them here, no?

Lifer - interesting that Norway, UK and Germany have much the same tax rate but vastly different corporate tax takes.

Isnt the left hand axis a bit misleading as surely it's a function of all the other taxes taken out of the economy as well as just the corporate one?

may not be the rich that leave the UK but the educated certainly are.........i have been in Australia for the past 7 yrs having left Bristol to start a new job in planning/urban design with a multinational.....the global recession did not hit us hard and the the number of poms arriving is going through the roof.

Seems to me that those countries that are blessed with abundance of natural resources are far better placed to ride out the tough times....

+ its data on one year (v small sample) with little actual correlation. Easy to argue that strip out the outliers and you have a flat trend line or a scatter with no correlation.

may not be the rich that leave the UK but the educated certainly are

Well I'm going back!

Anyway Australia is booming so you can't separate people who are leaving the UK cos they are haterz from people who are going there cos the pickings are good.

But all Stoner did was out argue you with facts?

No, he's simply quoted some figures being presented by a company with a vested interest in the Olympic site. We'll have to wait and see wether or not such claims will ever be realised.

Your argument seemed based on the fact that you live in East London and you don't believe the facts as quoted by the people doing the development?

I don't believe the [i]claims[/i] made by many developers simply based on the [i]fact[/i] that many have never materialised. I see little indication that the trend will be broken this time..

well in this case its elfin who's getting personal with insults aimed directly at stoner,

See Stoner's first response directed towards me. He called me a [b]****[/b]. I'm assuming it was not something very complimentary. In the past, Stoner has been extremely insulting towards myself and the East End, claiming such things as 'I woon't venture further east than Liverpool St' and other such ignorant rudeness.

It serves no purpose continuing this 'debate', as a) I'm right and b) it'll only descend into the usual stupid cowardly 'let's bait Elf' crap where folk try to get a rise out of me (oh look, a tag intended to insult me, how original), and quite frankly, youse lot ain't worth the hassle. There are some of you who I might see out on rides at some stage; we can discuss things then, perhaps? Y'know, face to face and that. Far less impersonal.

I will however answer Stoner's question, which was:

fred - hand on heart would you genuinely wish the olympics never happened to newham?

My answer is I would much rather have seen the billions of pounds spent across Britain in areas where the money could be put to much more effective use than building a handful of incredibly expensive and inaccessible (to most people) sports stadia and a huge shiny corporate office and shopping centre, yes.

We cooduv let the French have it, popped across on the Eurostar to watch it (or just stayed in in front of the telly like we mostly will be doing anyway), and let them suffer the ridiculous expense.

And one last question to Stoner:

Would you like a Westfield shopping centre built next to your village?

Looks like someone's been drawing their graphs in Paint

Isnt the left hand axis a bit misleading as surely it's a function of all the other taxes taken out of the economy as well as just the corporate one?

The top graph was used by the WSJ to support the laffer curve so any fudging was done by pro-lafferites(?)

Easy to argue that strip out the outliers and you have a flat trend line or a scatter with no correlation.

So when outliers support your theory you include them?

I would much rather have seen the billions of pounds spent across Britain in areas where the money could be put to much more effective use than building a handful of incredibly expensive and inaccessible (to most people) sports stadia and a huge shiny corporate office and shopping centre, yes

Do you think that would have actually happened though? Would any govt have been able to raise the funding and popular support?

Sadly, I think not.

Would you like a Westfield shopping centre built next to your village?

Move to a better part of London?

I've never been to Newham but I've driven through it on the way out of Islington and it doesn't seem the most salubrious place. I'd guess a new shopping mall and certainly the Olympic development would be great for it. Can't make it any worse.

Lifer - interesting that Norway, UK and Germany have much the same tax rate but vastly different corporate tax takes.

It's not the tax rate, but the mix of taxes, deductions, credits etc that effect revenue. The Laffer curve can never take all these factors into account, it's only use is as propoganda for cutting taxes.

So when outliers support your theory you include them?

No, I am simply saying that it is dangerous to draw conclusions from this data either way.

A more interesting debate is whether taxation is morally justified in the first place?

A more interesting debate is whether taxation is morally justified in the first place?

Discussing that on here would destroy the internet!

As for the graphs I agree. Taxation and revenue are far too complex to be reduced to a simple scatter/line graph.

Phew. Lunch time. I'm hungry

It serves no purpose continuing this 'debate', as a) I'm right

and

quite frankly, youse lot ain't worth the hassle

are examples of the attitude that means some of us dont want to meet you on a ride to discuss things in person 🙄

Stoner has been extremely insulting towards myself and the East End, claiming such things as 'I woon't venture further east than Liverpool St' and other such ignorant rudeness

how on earth could stoner offend a geographical area? the concrete and tarmac dont have feelings, perhaps it could be a case of he's offended you and you're now presenting an opinion on behalf of inanimate objects, or shock-horror... other people?

i avoid the whole of london personally, i find it a horrible place to spend time.

One of the headaches in Europe is that governments compete to offer the most favourable conditions to rich people and businesses. Why do musicians choose to live in Holland? (Angus for example) Why did so many American companies choose Ireland? (Google) Why do the Tennis and Grand Prix set live in Monaco? ([url=

answer[/url])Why do so many of the stinking rich live in Switzerland? (check out income and property tax rules)

That is a good point Edukator, but I don't see a consensus on international taxation limits (lower and upper) happening anytime soon. Is there another way this could be achieved?

For me the ultimate point for us is a resource based economy but that would require global unity and complete transparency to work.

Edukator and Lifer - interesting to note that this was part of the debate on Newsnight last night with the Tory spokesman talking specifically about "globally competitive taxation schemes".

Lifer - why would the debate destroy the internet?

I refer you to the advertising/logo thread.

Some harmonisation of tax rules in EU member states would no doubt level the playing field a little. It's an anomally that countries that were so willing to sign up to a free trade zone now work so hard on distorting that free trade model using their tax systems. Given the veto rule I can't see any EU directives aimed at harmonisation getting passed any time soon.

So no, I can't think of a way it could be achieved without a complete revision of EU treaties and cutting off Swiss banks from the international sorting system.

Lifer - why would the debate destroy the internet?

The world's mods would move as one and shut the entire system down. It'd be their only option, really. We'd all have to find something else to do 🙂

The world's mods would move as one and shut the entire system down. It'd be their only option, really. We'd all have to find something else to do

Genuine LOL! I mean, 1700 posts about funny little pitchers.... Tsk! 🙄

I'm really starting to get concerned about some of you lot.

You are aware that its summer outside and the weathers lovely? I went out for a nice sunny, hilly jaunt on the road bike last night, then met my beloved for a couple of pints sat outside the pub. It was a really nice evening. 15 mile sunny commute this morning too. Smashing!

Could I respectfully suggest that maybe some of you need to get out a bit more

I took today off work to go on a bike ride with my club (the site agent was most unimpressed when I told him yesterday that I was taking the day off to go on a bike ride 🙂 ) I've just got back. And yet I still managed to combine it with a quick pop at Flashheart and Zulu-Eleven. There's more to life than riding a bike, if you can't combine it with a good ol' political ruck then that's a tad tragic imo.

The Laffer curve can never take all these factors into account, it's only use is as propoganda for cutting taxes.

Indeed it has no basis in reality but is often quoted

A more interesting debate is whether taxation is morally justified in the first place

Don’t be silly now –. I doubt that anyone but a few right wing freedom zealots actually consider this to be wrong and even they probably want it [state] for defence of what they own.

CaptainFlashheart - Member

It's hot as bu99ery here

Having never experienced bu99ery, I have no idea how hot it is. 😐

Must be some sort of posh school Rugger thing...

Must be some sort of posh school Rugger thing...

Didn't you find out about it when you went to private school Elfie ?

I never went to [i]private[/i] school Ernie. 😐

😐

You look disappointed - did you want to ?

Fair enough though, I thought you went to a fee paying school, which explained why you're well posh. Mustov confused with someone else 😀

Interesting to look at growth - germany and france have higher growth than us - not just a bit higher but 3.6% in France and 6% in Germany. this is despite ( or because of) no massive cuts adn higher taxation than here.

The cuts are holding back UK growth and making the problem worse not better

3.6% in France and 6% in Germany

I believe those figures are incorrect in relation to the forecast for 2011. To be fair the UK suffered more than most as a result of the global credit crunch/recession, because of the UK economy's heavy reliance on the financial services industries, I blame Thatcher for that. I think both France and Germany rode the global crises much better than Britain.

Fair enough though, I thought you went to a fee paying school, which explained why you're well posh.

One of elfins previous persona's certainly claimed to have spent some time at an independent school.

I thought so too allthepies. I tried a quick search but it might have been on the old forum. He's gonna get away with this one I reckon 🙂

Yeah I went to a public school for a while, and then to a crappy state comprehensive. Which gives me a pretty unique insight into the relative merits of the two types of school, and also the huge disparity in educational resources available to the respective students I would say.

See I've moved about a bit in society, me. Small bubbles aren't my thing...

Ernie; I'm only 'posh' compared to you, because you're from Sarf London. 😐

to a crappy state comprehensive

You were unlucky mate.....I went to a brilliant ILEA comprehensive school. I still marvel at the fact that they managed to teach most of us anything - I honestly don't know how the teachers managed it, but they did.

Cameron's strategy director (they have a strategy?) has some great ideas to stimulate growth today.

Abolish maternity leave, suspend consumer rights, abolish job centres, ignore an EU directive on temporary and agency worker rights;

“Steve [Hilton] asked why the PM had to obey the law,” said one Whitehall insider. “Jeremy [Heywood, Mr Cameron's permanent secretary] had to explain that if David Cameron breaks the law he could be put in prison.”

Senior Downing Street sources last night said the ideas were examples of Mr Hilton's "blue sky thinking"* and had no chance of being introduced.

[url] http://www.telegraph.co.uk/news/politics/david-cameron/8667058/David-Camerons-senior-adviser-Steve-Hilton-suggests-UK-should-abolish-maternity-leave.html [/url]

*urgh

Senior Downing Street sources last night said the ideas were examples of Mr Hilton's "blue sky thinking"*

Its actually the polar opposite of "Blue Sky Thinking" isn't it really? Its "Default Tory" in a nutshell

You'd think that after Andy Coulson, that Call-me-Dave would have learnt his lesson about surrounding himself with utter ****s!!! Steve Hilton is an absolute stroker!!

[url= http://www.telegraph.co.uk/news/politics/georgeosborne/8666799/Boris-Johnson-steps-up-pressure-on-Chancellor-over-50p-tax-rate.html ]Boris calls for 50p tax rate to be scrapped[/url]

mcboo calls for 50p tax rate to be scrapped

Except it isnt 50p, its 62p because for some reason we still have separate NI.

How much more does it raise than when it was at 40%? Mmmmmm?

10% more? I'm just guessing though. Maths was never really my strong point

mcboo - there is an upper earnings limit for NI at 40 000 a year ish. so actually all the 50% band does is make sure that the rich pay a similar amount of tax as the folk in the middle - and to pay 50% tax rate you have to be amongst the richest few % of the country.

and its utter bobbins that raising taxes reduces tax take. Lawyers, bankers, doctors etc cannot take themselves abroad

This lack of growth is because of reduced demand - there is plenty of surplus capacity. If you want to stimulate demand you need to put more money in poor peoples pockets not rich ones as poor people spend a greater % of their money on stuff

mcboo - Member
mcboo calls for 50p tax rate to be scrapped

Except it isnt 50p, its 62p because for some reason we still have separate NI.

How much more does it raise than when it was at 40%? Mmmmmm?

Why don't you have a look and provide some figures?

If you want to stimulate demand you need to put more money in poor peoples pockets not rich ones as poor people spend a greater % of their money on stuff

You are right, which is why I took my hat right off when the LibDems got a healthy bottom rate tax cut into the Coalition Agreement. Tory's missed a trick there, that should always be a Conservative policy, get people off benefits and into work and make it worth their while by letting them keep most all of it. I'd do that again in a heartbeat.

Cutting the top rate is incredibly difficult to justify politically because its so easy for the likes of your good self to point and say "Same old Tories". That doesnt make it the wrong thing to do, the 50% rate is only justifiable on idealogical grounds. You never hear anyone in Labour claiming it raises much extra cash and they are super-sensitive the the charge that is makes us uncompetitive. It appeals to the Labour base just as a cut appeals to shire Tories.

TandemJeremy - Member

mcboo - there is an upper earnings limit for NI at 40 000 a year ish.

Or do you think rich people should be taxed less than middle earners?

Or do you think rich people should be taxed less than middle earners?

Nope. I'm a flat taxer.

Ah - a flat earther. No wonder you have such an understanding fail on this. Upper earnings limit on NI remember. 🙄

Why don't you have a look and provide some figures?

Honestly fella, if you can show me that raising income tax to 50% has raised a significant amount and isnt harming the recovery then I will hold up my hands. As per above, I'd be taking the lowest paid out of income tax picture altogether as my first priority, I dont particularly need a tax cut right now. But if it makes no sense and harms the country I hope the Tories have the balls to say so and do something about it.

If you look at Mr Hiltons proposals you'll notice they all have one thing in common. They'll hammer the people who can least afford it. Mothers just about to have children, Agency workers. I don't see any equivelent proposals for the rich to share any of this pain

Could you please tell me how this deviates from the standard Tory policies we've all come to know and hate

Upper earning limit on NI? all teh 50% tax rate does is counter that.

abolish the 50% rate and people earning over 100 000 pa have a lower tax rate than people earning 25 - 40 000 taxable income

and its utter bobbins that raising taxes reduces tax take. Lawyers, bankers, doctors etc cannot take themselves abroad

They can and they do, I know GP off to Aus the end of the year. I have no idea what a banker or a lawyer does day to day but I doubt it'd be beyond them to adjust either.

Ok - tehy cannot ake the earnings - someone is still doing that job. You cannot be a UK GP while in Aus