Ransos – I don’t know whether you just like a bit of internet banter or whether you are simple economically niaive. But when you throw up charts of public sector debt and suggest that current levels of debt are not high or that all governments need to borrow, you really need to step back and think.

1. Increased levels of government debt stunt economic growth (although economists will argue as to the exact level)

2. If you go back to the history on your graph. What happened after the periods of high public sector debt?

Answer a combination of default and/or major financial repression. After WWI most economies simply defaulted on their debt to the US (jncluding the UK) . After WW2 we had a combination of either inflation or financial repression to bring down the levels of debt. Financial repression is where interest rates are kept artificially below inflation and below the levels that would normally apply and therefore money is simply taken from savers to the government. The same thing happened in the 1980s/90s ie a combination of FR and/or inflation.

Governments like FR because it is a hidden tax but it cripples us all and it takes a long time to work.

So where are we now….we are faced with very likely defaults and or many years of financial repression. Do your really want to lend to the UK gov for 10 years at just over 2% FFS?!?!?!? Your savings and pensions are being forced to do this, so dont weep when the returns are eroded and you lose the real value of your money.

So enjoy the posturing on internet forums and prepare yourself for a long period where conventional savings/financial assets can no longer be relied on. And when your pension is screwed remember what you said back in 2011.

Elfinsafety – your kneejerk reaction to a cut in fuel duty is all too common in today’s society…but tell me is it fair to continue making fuel (and by default mobility) the reserve of the wealthy?

Once the oil is gone then a different source of energy will power the world….if this cant be found then a different kind of society will emerge….none of this is rocket science, humans have shown their adaptability thoughout the ages but dont that stop you from letting Green issues be the stick the government uses to get more tax from you!

FYI between 1945-80, real interest rates were negative for almost half of the period. We lived in the biggest bear market for lenders to the governments, but I guess you think that is a good thing.

It is better to rent than have a mortgage ?

Many French folk seem to think so.

I’m simply stunned by the number of people I’ve spoken to who’ve ‘bought’ a house in London in the last few years, who will probbly have kids, and work in jobs with very little if any long-term security. Jobs which simply won’t be available here when everything moves to the East…

Which will mean there will be increasing numbers of people with huge mortgages to pay off, and not enough income to do so. What will happen then?

Unless you can pay a massive chunk of the cost of your house off initially, or buy a place well within your means, or have a job which is guaranteed for life (yeah, like they exist…), you’re insane getting a mortgage. So many people have bought at the top of the market, but cannot guarantee that they wil always be in a position to be able to pay it off. They may boast that it’s ‘cheaper than renting’, but hey, that debt’s with you for the next 25 years or more, what about when your kids are wanting to go to university? What happens if you have to leave your job to look after a family member who needs 24 hour care which the State will no longer provide because the Tories will have abolished it?

Too much short-termism. People are just so blinkered and seduced by the status of property ownership and material wealth.

Oh well.

Elfinsafety:

Which will mean there will be increasing numbers of people with huge mortgages to pay off, and not enough income to do so. What will happen then?

You get a household debt crisis which becomes a banking sector crisis which becomes a sovereign crisis which becomes a global economic/political crisis….[watch this space]

is it fair to continue making fuel (and by default mobility) the reserve of the wealthy?

Fags cost loads but plenty of poor people still smoke….

Most journeys by private vehicles are ultimately unnecessary; there are alternatives, people just love up their cars too much and won’t ‘lower’ themselves to riding a bike or using public transport (here we go…). And people choose to live further from work, as they prefer quiet rural areas to the big smelly cities where their jobs are.

Too many business centres in too few places. Move stuff around, spread stuff out around the country. Huge areas of Scotland for example; no-one lives there, they could bung loads of stuff there and then other places would be less overcrowded. 🙂

Elfinsafety – to help move stuff around, should we abolish stamp duty to encourage labour mobility? 😉

Well this thread has got so much more “interesting”. Can’t we go back to discussing the greedy high earning tube drivers?

Ransos – I don’t know whether you just like a bit of internet banter or whether you are simple economically niaive. But when you throw up charts of public sector debt and suggest that current levels of debt are not high or that all governments need to borrow, you really need to step back and think.

Deary me. If you’re going to ignore simple facts, we’re not going to get very far.

1. It is a fact that our level of national debt is not high when compared with levels over the last 100 hundred years.
2. It is a fact that all governments need to borrow.

The desirable level of each is a matter for debate, but their existence is a matter of fact.

It’s interesting that you’re talking about defaults. Economists believe that defaults become likely when interest payments reach 12% of GDP. The UK’s interest payments are currently 2%, a lower level than at almost any point in the last 100 years. So why not quit with the scaremongering.

http://www.ukpublicspending.co.uk/downchart_ukgs.php?chart=90-total&year=1900_2011&units=p&state=UK

I think you’ll notice that the key point of having a mortgage is that you do everything you can to pay it off, transcending from owing people money, to not owing people money – not continuing the debt in perpetuity.

You owe the money for 25 years, and pay back perhaps twice what you borrowed. Yet we criticise governments for doing exactly the same thing.

So why not quit with the scaremongering.

Because its not scaremongering! Look at what you are saying – it’s OK because, “UK interest payments are currently 2% a lower level than at almost any point in the last 100 years.”

This is financial repression! Three things have happened historically to reduce the line in your beloved chart – default, inflation, financial repression – or a combination of two/all three. We have not simply grown our way out of the problem. We are not defaulting, nor are we using inflation to erode debt (at the moment). What we are doing is FR.

So, the government will now pay you (directly or indirectly) about 2.5% to borrow money for 10 years to finance these debts that you are happy to encourage. With inflation currently at 4.5%. Ummmh, I wonder what is happening to your savings there??????

Please do not be niaive – financial repression erodes your assets and is a stealth tax – this is not scaremongering, merely common sense. Your pension fund/savings is likely to be exposed to this folly. Of course it doesn’t seem as bad as default, but that is because it is a hidden effect. But if you are foolish enough to be conned by this, then so be it! Good luck to you.

You’ll have to point out where I said that the level of debt or interest payment is ok. What I am saying that our present situation is not half as serious as some would like you to believe, especially when placed in a historical context.

Now, I realise that you’re so taken in by right-wing ideology that you’re unable to see this, but it’s there for everyone else, anyway.

Edited to add: like many people, my debt (mortgage) is larger than my savings. So if the government is keeping base rates low for its own purposes, that suits me fine.

FFS – ransos, I really hope that you have someone who can give you some simple financial advice at some stage in your life. This has no ideological bias to it at all – it is basic maths. Maybe the government will include an element of basic financial education into the national curriculum – or then again perhaps not, because then it can fool people like you into losing your savings.

Anyway back to the tube drivers – I reckon the reason they are getting more money is that they are mutli-tasking. There is a guy on the W&C line who is obviously a vicar in disguise. He blesses everyone at the end of every journey. In these PC days, I am amazed that he gets away with it. 😉

financial repression erodes your assets and is a stealth tax

You assume I have assets to erode.
You both have a point
It is better to have no borrowing or to do it rarely we all know this.
However we are not about to fall off a financial cliff whatever the Tories and the press tell us- they just want to slash the public sector.

FFS – ransos, I really hope that you have someone who can give you some simple financial advice at some stage in your life. This has no ideological bias to it at all – it is basic maths. Maybe the government will include an element of basic financial education into the national curriculum – or then again perhaps not, because then it can fool people like you into losing your savings.

My debts are greater than my savings. Problem solved. In any case, there is nothing new about governments using inflation to erode their debt.

You really must try harder. Next!

However we are not about to fall off a financial cliff whatever the Tories and the press tell us- they just want to slash the public sector.

This is the key point. There is nothing out of the ordinary about the state of the public finances in historical terms. It’s a bit worse than it has been for a while, but that’s all. All this talk about debt levels, deficit levels and financial repression is simply what’s always happened, it’s just that people have swallowed the tory lie.

There is nothing out of the ordinary about the state of the public finances in historical terms.

You my friend are on that great, great african river ….

…

…

d’ Nile!

Income tax is only part of total taxation…the example i like is fuel…for a wealthy person to fill their car up with petrol costs the same as a poor person but who does it hit harder?…the rich person can afford the £50-£100 it costs to fill most cars these days but somebody earning £100 a week is being unfairly taxed in my opinion….didnt seem to stop Labour (party of the working man!) from ratcheting up tax on fuel though did it?!

It costs the same to provide public services paid for from tax receipts to rich people and poor people alike, so why should rich people pay proportionately more tax?

You my friend are on that great, great african river ….

…

…

d’ Nile!

Present your evidence.

Here you go Ransos it is un d’nile able

It costs the same to provide public services paid for from tax receipts to rich people and poor people alike, so why should rich people pay proportionately more tax?

This sums it up quite nicely:

The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.

From that well-known communist, Adam Smith.

so i have scaled back and now work about 3 days a week

The substitution effect happily ignored by the high tax rate apologists

I dont really understand what the author’s are trying to say here.

Are they just suggesting that the government doesnt actually get the 50% off the worker ?

To me this shows one of the benefits of the higher rate of tax ?

The worker has cut back to 3 days a week allowing some one else to work. Which leads to a more equal society. It also might mean some one further down the line isnt been paid benefits.

which would be financially advantageous to the state.

I don’t know whether you’re agreeing with me or not. Smith says that people should pay tax in proportion to their wealth. So a flat tax of say 25% on all earnings would be fair, whereas 20%, then 40%, then 50% strata are unfair.

That’s not to say Adam Smith is always right; his labour models are completely broken in the face of modern outsourcing, thanks to technology innovations!

, in proportion to the revenue which they respectively enjoy under the protection of the state.

Glad you agree with me Ransos – flat tax it is – everyone pays the same, proportionately, as each other.

25% of 10,000 – 2.5k tax bill
25% of 100,000 – 25k Tax bill

The rich pay more than the poor, everyone pays the same proportion of their wage – fair taxes for all!

Smith was generally considered to be in favour of a progressive tax system, e.g.

“The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”

Smith recognised that the rich have significantly more disposable income than the poor, and so a contribution in proportion to that disposable income would not be achieved with flat-rate taxation.

Yeah, they’re patently overpaid, but if they can get it, good luck to them.
Unions are obviously a good thing, but what the RMT are doing is creating a negative view (perpetuated by the media) of unions in general.
As an aside, I’ve always thought of myself as a lefty. However the smug arguments in favour of the pay rise on this thread are almost making the arguments I’m naturally inclined to disagree with seem reasonable. Please don’t make me agree with Tories.

Glad you agree with me Ransos – flat tax it is – everyone pays the same, proportionately, as each other.

You seem to be forgetting that income tax is only one part of the picture. The tax system we have now means that the poor pay proportionately more of their income in total tax, than the rich. In order to address this imbalance, and achieve the flat rate you propose, taxes for the rich need to go up.

So we’re agreed?

It is odd , though not very surprising, that all the ultra right think it is fair that we should all pay the same proportion of tax. Oddly you dont think it is unfair that we all dont have the same percentage if the countires wealth.

I would agree if we all had the same money.

Zulu-Eleven

I love the flat tax rate idea….but i feel that a politician in this country espousing the idea of it would ruin his career in the same way that being found guilty of paedophilia might impinge on their career!

The masses have long ago decided that high earners should be punished for their endeavours….and still socialists would have you believe that theirs is not the politics of envy!

The masses have long ago decided that high earners should be punished for their endeavours….and still socialists would have you believe that theirs is not the politics of envy!

High earners pay a lower percentage in total taxes than the poor. It is the poor that are punished. Tories would have you believe that theirs is not the politics of I’m all right jack, screw the rest of you.

Yeah, but what about that Bob Crow bloke – hasn’t he just got a face you’d like to thump?

The masses have long ago decided that high earners should be punished for their endeavours….and still socialists would have you believe that theirs is not the politics of envy!

Much as you’d like to think you’re in their gang, the real high earners pay very little tax as a proportion of their income, leaving suckers like you to get angry about 50% tax rates. 😉

Ransos: please explain this:

The tax system we have now means that the poor pay proportionately more of their income in total tax, than the rich.

I am struggling to understand this point when:

1. The UK tax and benefits system as a whole redistributes significantly from high-income to low-income households.
2. Benefits net of taxes (including indirect taxes) make up nearly 40% of the disposable incomes of households in the bottom tenth of the income distribution.
3. This proportion falls over the next three deciles. The fifth decile pays slightly more in tax than it receives in benefits. Thereafter, net contributions rise rapidly such that what the richest tenth of the population pay in taxes (net of benefits) amounts to more than 60% of their disposable income.
4. In terms of numbers, the bottom 50% of earners earn 23% of total income and pay 10% of total taxes. The top 50% of earners earn 77% of total income and pay 90% of total tax.

Poor people in some cases pay more indirect taxes but are overall beneficiaries of the tax system.

Before you jump down my throat, this is not to say that income inequality is fair or getting better (it isn’t, it’s getting worse even under a Labour government).

You seem to be forgetting that income tax is only one part of the picture. The tax system we have now means that the poor pay proportionately more of their income in total tax, than the rich. In order to address this imbalance, and achieve the flat rate you propose, taxes for the rich need to go up.

This totally ignores the state handouts available to the poor, but not the rich.

I think this thread goes some way to explaining why this Country is experiencing some problems.

If the intelligentsia of STW are unable to converge their widely opposing views and agree on a working plan as to how things can be improved, what possible chance have the incumbents of The Houses of Parliament got ? 8)

Ransos – only one simple problem withe the critique you laid against flat tax… you prefaced it with the words

The tax system we have now

Well, fine, lets start again, create a new paradigm

flat tax – everyone pays the same % proportion of their income (income, not earnings, so includes money from investments or share dividends and capital gains)
no tax relief at either end of the scale
single rate of VAT on luxury items,
no VAT on essential food items, domestic fuel, books or “green” items.

Thats your lot, simple and cheap to administer.

I go on holiday with old friends each year. We range in incomes from 250k pa to on the dole. When we go the rich fella pays for us to go out to a swanky restaurant for a great meal and he pays. Why? Only way we can all enjoy the food is if the rich fella pays. If not he would eat alone and the rest would be having a chippy tea.
This method makes sure we all get the nice food.
We pay for all the drinks.
Obviously at the end of the meal the rich fella has paid most but he still has the most.
HTH

It is daftto say we all have different incomes but we should all pay the same percentage of our income in tax. Rich people have more money and can afford more. Fundamentally you think this is unfair. This is fine, but a minority view, as most people think it is fairer that the burden should also be based on ability to pay, even if you disagree.

Rich people have more money and can afford more

Junky – They would pay more, thats how percentages work 🙄

Someone with twice as much money, pays twice as much tax, someone with ten times as much money, pays ten times as much tax – how is that unfair?

Your own example of going for the meal is a great example – what happens if one of you said “well, you still have more money than me, so why should I buy the drinks?

most people think it is fairer that the burden should also be based on ability to pay, even if you disagree.

That’s only because most people aren’t rich. I guess if most people think rape is ok, it’s fine right 🙄

What every argumentdiscussion about tax boils down to is that everyone thinks that people richer than them should pay more tax. /thread

No, maybe people just think everyone should pay a proportionate amount of tax. If you earn far more than you actually, need, you’re effectively taking it away from some other poor bugger, so maybe you should pay loads more tax to make up for the shortfall suffered by the poor bugger.

Society would be a better place if the gap between top and bottom earners was a lot, lot narrower. This is obvious.

I don’t think anyone in their right mind would argue that the World would be a far better place if this mayn was a lot poorer: