isn't this round of inflation due to supply side constraints so pumping in loads of cheap cash will just lead to more inflation?
That depends on what you define as ‘supply side constraints’
Probably best to retitle it ‘stuff that you need so you can stay alive’ as we’re referring to being able to heat your house during the winter, so as not to die of hypothermia.
Also food and clothes and medicine. Take your pick.
The point is whether a cash hose can fix it or make it worse.
Who's going to be the next PM ?.
It appears someone more useless than Johnson.
they'll need to be innovative, agile and bold. Unfortunately, we've got an end of the pier thatcher tribute act
One more week of Top Of The Plops left, before stuff hits the fan even harder than Boris.
The point is whether a cash hose can fix it or make it worse.
Money can be used for an energy crisis for the time it lasts. You don't need a 'cash hose' to 'fix' stuff like clothes and other non essential goods, if they are too expensive you don't buy them. Most people have enough clothes and crap to get them by for a year or two.
Truss now talking about a VAT cut of 5% to save us all, the Sun says it will be 10%!
I am no economist but how can that help poor people buy food and fuel?
Am I missing something or is she just absolutely deranged?
Am I missing something or is she just absolutely deranged?
Yes, the people she's wants to vote for her are starting to feel a little less flush, doing away with the NI rises and reducing vat also impacts them positively. The trouble being the narrative for years has been those with more can pay more, they can afford it which whilst true hasn't sat well with a lot of middle and higher income earners. Now however is not really the time to be redressing the ever increasing tax burden on the better off, this crisis is so big every penny of support should be goingvto lower income people to stave off bankruptcy or worse.
isn’t this round of inflation due to supply side constraints so pumping in loads of cheap cash will just lead to more inflation?
It's not cheap cash (do people still believe we're still on the gold standard?) - it's just government financing.
Also - whilst energy prices are ahead of the 'cheap cash' there is no inflation likely to be caused by this. Inflation like this occurs when there isn't things to spend the cash on. Given everything's gone up - any new cash would be absorbed in the short term.
There is no growth - and expensive costs of living - so therefore no inflation from cash. Don't forget this likely to be short term fix to stop things imploding - any measure of inflation is less important in the short term than people being homeless.
Anything else is Spectator rubbish.
Truss now talking about a VAT cut of 5% to save us all, the Sun says it will be 10%!
I am no economist but how can that help poor people buy food and fuel?
Am I missing something or is she just absolutely deranged?
Cutting VAT has pros and cons. Some economists like it some don't. Brown did it too.
It's not that extreme and is a start.
Cutting VAT is more likely targeted to help re-grow the economy / high street (in terms of goods - remember we rely on cheap imports) than aimed at cost of living.
And as I said too @binners earlier there are now plenty of murmurs of Truss giving direct help.
Although I do think we're simply going to have to wait and see on this one.
Removing VAT from energy costs (-5%) vs a 54% rise in energy prices from last March, and an 80% rise coming in October, with further rises expected in January and later in 2023.
As you say, it's a start, but a very slow and inadequate one.
A lot of basic essential stuff like food is already zero-rated, so a global VAT cut is not going to help people who are most vulnerable this winter.
Burial or cremation is also already zero-rated, so at least that's a silver lining for families with elderly relatives in poorly insulated homes.
A lot of basic essential stuff like food is already zero-rated, so a global VAT cut is not going to help people who are most vulnerable this winter.
I'm not absolutely sure on this but I don't think it's aimed at vulnerable people - it's more a retail thing. Because of the low growth we have. (This is different from the energy bill VAT cut.)
And they damn well need to move it more than the limit imposed by the EU if they want to offer a Brexit dividend. (although I think the EU has ajdusted this to reflect current economic circumstances.)
Think my wood burner would be a tad too small for that.
so pumping in loads of cheap cash will just lead to more inflation?
In case you hadn't noticed, millions are about to be hit with crushing bills that they either can't pay or will swallow up all their disposable income. All this extra 'cheap cash' is not going to be spent into the economy to fuel inflation, it's going straight into the bank accounts of energy companies and their shareholders. The annihilation of consumer spending caused by energy bills, and the unemployment caused by millions of small businesses going under is going to rapidly turn inflation into deflation, even without the BoE pouring petrol on the fire with higher interest rates.
I’m not absolutely sure on this but I don’t think it’s aimed at vulnerable people – it’s more a retail thing. Because of the low growth we have. (This is different from the energy bill VAT cut.)
So what's the point?
No one is going to have any money to spend on luxuries. It's going to be a choice of heat or eat for millions of people.
The cost of living crisis is going to hit vulnerable people. The people who are having to go and find the money from cancelling holidays, not changing their 3 year old car etc. are not really a problem.
This government is going to be the worse bunch of far right loons we have ever had.
I honestly believe there are going to be mass riots this winter.
So what’s the point?
Well because we have two pressing issues: (lots more of course!)
1) Cost of living
2) No growth / low growth in the wider economy. They are trying to kick-start it without investment.
Well because we have two pressing issues: (lots more of course!)
1) Cost of living
2) No growth / low growth in the wider economy. They are trying to kick-start it without investment.
1) The cost of living crisis is effectively been supercharged by the fuel prices. A VAT reduction of 5% will not touch the sides.
2) Reducing VAT will not stop thousands of small businesses going under over the winter. The majority of people will not have disposal income to spend on VAT rated items to grow the economy. They will be keeping their money for fuel and food.
1) The cost of living crisis is effectively been supercharged by the fuel prices. A VAT reduction of 5% will not touch the sides.
2) Reducing VAT will not stop thousands of small businesses going under over the winter. The majority of people will not have disposal income to spend on VAT rated items to grow the economy. They will be keeping their money for fuel and food.
Agreed on all accounts - but it's the Tories we're talking about and that is their thinking, and they believe we can just tweak taxes and generate growth. Light touch stuff.
However 5% reduction would encourage someone like me with certain purchases. But I have cash - not so good for those without money.
Just to add to dazh's post, without massive intervention huge numbers of businesses will close.
The resulting increase in unemployment will drive welfare payments onwards and upwards at the same time that tax income will fall.
A small selection of business types which will probably see mass closures - pubs, take aways, restaurants, beauty salons.
Predictions that upto 70% of pubs will be at risk of closure; take out fish'n'chips at £15.
Then ask how schools, hospitals, care homes and nurseries will manage; all heavy energy users and all essential.
Against this backdrop truss is tinkering at the edges and avoiding any scrutiny by ducking all media interview requests.
Just to add to dazh’s post, without massive intervention huge numbers of businesses will close.
The resulting increase in unemployment will drive welfare payments onwards and upwards at the same time that tax income will fall.
I think we're starting to see it unfold.
One of the major cock-ups/ideological choices the Tories made on an economic level was to just pull covid support near the end. It was a diabolically stupid move to not see our economy needed rehabilitation. That made me furious.
The sooner we understand the government and BoE are props to the wider economy the better. They are central to it, and provide the financing and structure to generate commercial wealth.
A small selection of business types which will probably see mass closures – pubs, take aways, restaurants, beauty salons.
I disagree.
It will be a wide selection.
Any small business that has high energy consumption and has to renew their energy contract in the next few months is finished. Will include the above but add in butchers, bakers, small engineering workshops, (candlestick makers?), micro breweries, commercial laundries, I can think of loads.
Business electric deals are around 90p kWh at the moment.
I deliberately referred to '...a small selection...'
What I did not say or infer was that the impact would be limited to a small number of business types.
Those two are fundamentally different - hence my choice of words.
It's abundantly clear the effects of uncapped energy prices will be hugely destructive of many - possibly - most business sectors.
While I don't see this possible vat reduction as a cure for the energy cost crisis, I do see vat as a regressive tax impacting the poorest more than the wealthier members of society. So I would definitely like to see a permanent reduction in VAT.
rapidly turn inflation into deflation
Back to 30's Weimar Germany anyone? (And we know how well that ended)!
Back to 30’s Weimar Germany anyone? (And we know how well that ended)!
Debt denominated in a foreign currency so not comparative.
For those thinking this is going to be like the early 80's all over again it would be useful to consider the differences.
Mass unemployment and deprivation only affected the North back then, this time it will effect the whole country.
Thatcher stockpiled a winter's worth of coal in preparation of taking on the Miners and the Tories were prepared to pay the police massive bonuses to do their dirty work, (there were more police numbers then as well).
Welfare payments were funded by revenues from North Sea oil and they were more adequate and less sanctioned back then.
Utilities were yet to be privatised so government still had control of these things (water rates were included in council rates so were covered by housing benefit etc so weren't an extra cost) on the poor.
Housing supply wasn't the problem that it is now, there was a lot more council housing and rents were more affordable across the board.
Public transport was about half the cost in real terms compared to what it is now.
The revolution that Thatcher instituted is responsible for many of the problems we are facing now. The irony is that the actions of the Thatcher tribute act that is about to take office will likely undo much of what Thatcher 'achieved'.
The irony is that the actions of the Thatcher tribute act that is about to take office will likely undo much of what Thatcher ‘achieved’.
She won't. Tax cuts are her solution to everything.
People are going to die this winter due to the energy costs and lack of action from the right wing nut jobs.
Truss has shown that's she's willing to U-turn when suits got no choice, I'd expect a last minute chaotic 180 on tax cuts and direct support
I should have said likely to lead to the undoing of what Thatcher 'achieved'. Not by design but by default, as the country turns against the status quo.
But I think you knew that and chose instead to be a little pedantic, as the rest of my post was suggesting that Truss thinks she is acting in a Thatcherite manner but is unlikely to achieve a similar effect owing to very different underlying problems and conditions.
That and the fact that she is as thick as mince.
The irony is that the actions of the Thatcher tribute act that is about to take office will likely undo much of what Thatcher ‘achieved’.
She won’t. Tax cuts are her solution to everything.
Thatcher didn't cut taxes. The UK tax burden increased under Thatcher.
Thatcher was convinced that the public share of the economy must be reined in. Apparently unaware of the productive nature of much government spending (Mazzucato, 2013), the 1979 Conservative manifesto (Conservative Party, 1979) stated, where government ‘takes too much of the nation’s income’ and ‘spends and borrows too much’, in the long term there is ‘less wealth’. Yet, insofar as she set herself the goal of reducing these, she failed; neither taxation, borrowing nor spending declined over the course of her government.
The total value of central government receipts was 30.4% of GDP in 1979; by 1990, this proportion had risen to 30.9%. The highest ‘tax’ take of the 1980s, 33.5% of GDP in 1982, has only recently been surpassed in 2011 (ONS Online a, Online b). Neither did Thatcher’s policies reduce government spending. In real terms, the total managed expenditure rose by 7.7% from 1979 to 1990 (ONS Online c, Online d).
https://academic.oup.com/cje/article/44/2/319/5550923
Thatcher was clueless about the role of public money. "There is only tax-payers money." What a fool.
Tories always talk Tax cuts but they do everything by stealth. Insurance Premium Tax anyone?
If Truss wants to win the next election she will have to do something about energy prices.
Even if the Tories don't give a **** about people being able to heat their houses they do want to stay in power.
If ideology stops her acting god knows what'll happen to this country - in a way I'd like to find out.
NB I can't afford £5k a year heating, I will stop paying if there is nothing done.
Even if the Tories don’t give a **** about people being able to heat their houses they do want to stay in power.
And to stay in power they will need the support of small business owners, who are a critical cohort of their voting base. If they betray small businesses by not helping with bills they're finished. In fact I'd go as far as saying if Truss fails to do what is required then they could even face a canadian style wipeout.
https://en.wikipedia.org/wiki/1993_Canadian_federal_election
According to a YouGov poll in today's Times newspaper 47% of Tory voters want the energy companies to be renationalised, in contrast 28% of Tory voters want to maintain that Thatcher's legacy and keep them privatised.
That is how serious the situation is - far more Tory voters now support what we are told is a "hard left" policy than the moderate status quo.
However with none of the three major UK parties supporting renationalisation they might as well carry on voting Tory.
The other thing is, they keep pitching tax cuts as "helping the poorest and most needy in our society"- but generally teh tax cuts they're talking about, don't help the poorest. Petrol tax cuts that don't help people that don't own cars, income tax or ni for people that are below the thresholds, inheritance tax, capital gains tax, etc etc.
Both candidates promised 1p cut on income tax will cost £5bn and over half of that goes to the 20% wealthiest taxpayers in the country. None of it goes to anyone earning under £12000. Someone earning £20000 gets a £74 tax cut, someone earning £50000 gets a £374 tax cut.
And Truss's rumoued 5% vat cut that would cost £38bn a year won't be reliably passed on to the consumer, and disproportionately benefits wealthier people since it's obviously no benefit for 0 rated and 5% rated purchase which make up more of the spending of lower income people.
Their biggest cuts are corporation taxes. The cost of increasing the inheritance tax levels is £770m and it's entirely a bribe for people with expensive houses, when "the poorest and most needy" of course are not inheriting £325000.
Do people really pay attention to apparent policy differences between candidates? After years of Johnsonian lies and obfuscation, I think people are expecting U-turns are making judgements on who they like the look of, who is white, who's got upper class mannerisms etc ie it's becoming presidential.
There are already alarm bells ringing in the Tory party about Thick Lizzie's 'manifesto', the lady is for turning.
Both candidates promised 1p cut on income tax will cost £5bn and over half of that goes to the 20% wealthiest taxpayers in the country. None of it goes to anyone earning under £12000. Someone earning £20000 gets a £74 tax cut, someone earning £50000 gets a £374 tax cut.
Yep it’s a total farce, it’s like a free Costa coffee a month for most people.
(With a cake for the lucky few).
Oh and a vat cuts fine if you’ve got disposable income but the energy prices will soon put paid to that and that’s before the other price rises due to the cost of energy get passed on.
Some way smarter thinking is required,it’s yet another U.K. slow motion car crash in action.
There are already alarm bells ringing in the Tory party about Thick Lizzie’s ‘manifesto’, the lady is for turning.
You can’t call Liz ‘thick’,she lives in a grace and favour mansion soon to move to an apartment with real gold wallpaper and will have a car an driver and will not be cold this winter.
Now the people who facilitated this mess,getting more fair game the longer the farce plays out.
If Truss wants to win the next election she will have to do something about energy prices.
She could just wait until the Russia/Ukraine thing sorts itself out, and then declare Victory, while also telling everyone that a vote for Labour is a vote for the breakup of the United Kingdom, etc, etc, etc.
Job done. Greatest PM Since Thatcher! Five More Years! The headlines practically write themselves.
Well, there's a surprise...truss has just pulled out of an interview with Nick Robinson scheduled for tomorrow.
Continuing to avoid any form of scrutiny.
She's, apparently,'too busy'; scared of being asked questions to which she has no clear or convincing answer is the real reason.
Prime ministerial?
No, cowardly.
The more I look at this, the more I'm actually wondering if the Tories actually want to lose the next election. The comfy (ERG) majorities won't give a toss as they'll keep their seats. The red wall seats will be a sacrifice, and a few pals they know will be unfortunate casualties. Truss will get kicked out too so, meh, unlucky.
The important thing is they'll leave this country in an absolute shambles (albeit with a few rich pals getting some perks) and Labour will have no money or time to sort it out.
Then they can blame it all on Labour for the short of memory blue rinse brigade for the next election and, voila, another 12 years plus in power again.
Continuing to avoid any form of scrutiny.
So why did she agree to the interview in the first place then? Agreeing to an interview when you don't want to be scrutinized makes no sense.
